C-134/83

R E F E R E N C E to the C o u r t u n d e r Article 177 of the E E C T r e a t y by the Arrondissementsrechtbank [District C o u r t ] , A r n h e m , for a preliminary ruling in the criminal proceedings pending before that court against

J A N G E R R I T ABBINK, Rijnsburg, N e t h e r l a n d s ,

1 — Language of the Case: Dutch.

JUDGMENT OF 11. 12. 1984 — CASE 134/83

on the interpretation of provisions of the EEC Treaty relating to the free movement of goods with regard to national legislation making it an offence for persons resident in the territory of a Member State to use motor vehicles covered by temporary import rules and consequently imported free of import duty, even if such temporary use is made without any intention of evading tax,

T H E C O U R T (Fifth Chamber)

A large proportion of the flower and plant supplies of his son's business are obtained at the auction market in I — Facts and written procedure Aalsmeer in the Netherlands.

1. According to the order for reference Flowers bought at the auction are sold and the case file, the defendant in the and delivered by the defendant who main proceedings, a Netherlands pass- transports them from Aalsmeer to port holder and resident at Rijnsburg in Saarbrücken.

ABBINK

He was reported for contravening the The Arrondissementsrechtbank further relevant customs provisions and the referred to the judgment of the Court of competent Inspector of Customs and Justice delivered on 9 October 1980 in Excise demanded from him the import Case 823/79, Carciati [1980] ECR 2773 duty payable, which was HFL 8 508. in which the Court ruled that the rules of the EEC Treaty relating to the free Mr Abbink appealed to the Taxation movement of goods do not preclude Chamber of the Gerechtshof [Regional national legislation from imposing on Court of Appeal], Arnhem, against the persons residing in the territory of a Inspector's decision rejecting his ob- Member State a prohibition, subject to jection. criminal penalties, on the use of motor vehicles admitted under temporary importation arrangements and thus Mr Abbink was the subject of concurrent exempt from payment of value-added criminal proceedings before the Po- tax. litierechter [Magistrate] at the Arron- dissementsrechtbank [District Court], Arnhem, for having infringed provisions The Arrondissementsrechtbank then re- and rules of Netherlands legislation ferred to the Commission's answer to governing the temporary importation of written question No 22/82 submitted on certain means of transport within the 17 March 1982 by Mr Rogalla, a Community. Member of the European Parliament, on the use of properly licensed and taxed motor vehicles in the Member Stales The Arrondissementsrechtbank, Arnhem, of the European Community. In that referring to the second subparagraph of answer (Official Journal 1982, C 262, Article 7 (1) of Council Directive p. 1) the Commission representative, 83/182/EEC of 28 March 1983 on tax referring to the judgment in Cardati exemptions within the Community for stated that the temporary use of a

Having decided that there was no intention to evade tax in this case and II — W r i t t e n o b s e r v a t i o n s s u b - in view of that answer the Arron- m i t t e d u n d e r A r t i c l e 20 of dissementsrechtbank, Arnhem, by order t h e P r o t o c o l on t h e S t a t u t e of 30 May 1983, stayed the proceedings of t h e C o u r t and requested the Court of Justice to rule on the question whether, in view of the Commission's answer to written question No 22/82, national legislation 1. The Netherlands Government believes making it a criminal offence for persons that its national legislation is not resident in the territory of a Member contrary to Community law. In this State to use motor vehicles covered regard it refers first to the judgment by temporary importation rules and delivered by the Court on 9 October consequently exempt from import duty is 1980 in Case 823/79 Carciati. compatible with the provisions of the EEC Treaty on the free movement of goods if such temporary use is made It points out that the Court stated first of without any intention of evading tax. all that under the Community legislation on value-added tax the Member States retained broad powers to regulate temporary importation in order, in particular, to prevent tax evasion, 2. The order of the Arrondisse- provided that excessive use was not made mentsrechtbank, Arnhem, was received of that power. at the Court Registry on 11 July 1983. In accordance with Article 20 of the Protocol on the Statute of the Court of The Court then held that: Justice of the European Communities, written observations were lodged on 6 September 1983 by the Commission of the European Communities, represented "As regards the prohibition imposed by a by A. Haagsma and R. D. Gilmour, Member State on persons resident in its acting as Agents, by the defendant in territory on the use of vehicles imported the main proceedings, represented by temporarily tax-free, it is an effective B. Coops, Advocate, and by the way of preventing tax frauds and Netherlands Government, represented by ensuring that taxes are paid in the I. Verkade, Secretary General at the country of destination of the goods" Ministry for Foreign Affairs. (paragraph 10).

Support for that view is to be found in stated in Case 823/79 that: "As for the Council Directive 83/182/EEC. Based prohibition imposed by a Member State on the principle that tax must be paid in on persons residing therein against using the Member State of residence, that vehicles which have been temporarily directive establishes that the tax imported free of tax, that constitutes — exemption to be granted upon temporary as is rightly observed in the Com- imports into a Member State is to be mission's observations — the only truly available only to the residents of other effective way of preventing tax evasion Member States (Article 3). and of ensuring that the tax is paid in the country of destination of the goods." He went on "It is clear that if persons resident in the importing State were also The Netherlands Government states two allowed to use motor vehicles imported reasons why it cannot agree with the temporarily tax-free, it would be interpretation placed upon the judgment exceedingly difficult to identify cases of in Case 823/79 to the effect that the use fraud" ([1980] ECR at p. 2784). by residents of vehicles exempt from tax on account of their temporary import- ation cannot be prohibited if the users of the vehicles have no intention to evade The Netherlands Government ac- tax. cordingly submits that a prohibition such as that laid down in Article 25 of the Beschikking Vrijstellingen Tarifbesluit 1960 cannot be considered contrary to The first reason is that such an interpret- the principles of the free movement of ation introduces a subjective element (the goods and for that reason the intention of the person concerned) which Netherlands authorities also have the is not to be found in the Court's power to impose criminal penalities for judgment in Cardati in which it was any breach of that prohibition in held (in paragraph 10) that a general accordance with paragraph 11 of the prohibition imposed on residents on Court's judgment in Case 823/79. using motor vehicles imported tem- porarily free of tax is in itself an effective way of preventing fraud.

neither he nor his employer had any the power to demand turnover tax and intention of importing a vehicle without special consumption tax from the driver paying tax. in person and the national authorities responsible for prosecuting criminal offences the power to commence He observes that if the Netherlands criminal proceedings against the driver is legislation governing the temporary clearly contrary to and incompatible with importation of certain means of transport the Community provisions on the free were applied strictly, a car with German movement of goods within the EEC. number plates driven by a person who also resides in the Netherlands would have to be cleared through customs each time it passed over the frontier between 3. The Commission of the European the Federal Republic of Germany and Communities discusses the practical the Netherlands and a special con- significance of the problems raised by sumption tax would have to be paid. this case and makes a legal analysis of the effect which the relevant legislation and practices of the Member States have on the free movement of goods and As the taxes paid in the Netherlands are workers and on the right of not refunded upon the re-importation of establishment. a vehicle into the Federal Republic of Germany, the result is that the taxes must be paid twice for the use of such a vehicle within the EEC. As regards the practical aspect of the problem, the Commission points out that the establishment of the common market Such legislation is unreasonable and in has the effect of creating an increasing flagrant breach of the Community number of "trans-frontier" ties of a provisions on the free movement of family and business nature involving the goods within the EEC. use of road vehicles.

It then sets out the annoying problems (a) Where a non-resident temporarily which are thus created for the individuals imports a private vehicle or various and the businesses concerned which, other means of transport for a without having any intention of evading limited period of time (Article 3); tax, are subject to such an outright prohibition. It cites by way of example a number of cases concerning the private use of cars, the business use of (b) Where a private vehicle is tem- commercial vehicles, the private and porarily imported for business use business use of vehicles belonging to a provided also that the person business and the particular case of a importing it normally resides outside national of the Federal Republic of the State of importation (Article 4) Germany who was prohibited from using and in his country a car which he had rented in another Member State until his own car, which had been damaged in an accident abroad, was repaired. (c) Where a vehicle is used to travel to and return from work and the driver's residence and place of work Individuals affected by the absolute are located in different countries, prohibition must often either give up provided that the vehicle is registered their job in order to maintain their in the countiy of residence. family life or give up their family life in order to keep their job. In some situations the nationality of the driver of a goods vehicle prevents goods from In the Commission's view, those tax being delivered since a lorry may be exemptions, which moreover do not seized if the driver does not have the cover "commercial" vehicles (that is to "right" nationality. Lastly, the economic say, according to Article 2 (a) of the ability of an individual to exercise his directive, vehicles intended for trans- freedom of establishment is impaired by porting persons and goods or for special the fact that problems of this kind arise use), are not sufficient for resolving the at frontiers unless the "right" national is problems which have to be faced by employed to drive one's vehicle and the individuals whose circumstances are not vehicle is registered in the "right" covered by the directive and who, being

obliged to travel between their place of The Commission observes, however, that residence and the place of work located the facts in Cardati were different from in different countries, fall under the those of the present case because they aforementioned prohibition. concerned an Italian resident driving in Italy a vehicle registered in Germany whose owner had left it behind in order It points out that, in order to resolve to be able to use it when he came to stay those problems, the Community is in Italy. endeavouring to bring about gradual harmonization in accordance with the principles laid down in Directive 83/182/EEC. The Commission therefore takes the view that the question still remains The main problem arises from the whether the relevant national fiscal original definition of the term "impor- provisions hinder the free movement of tation" in the Sixth Council Directive goods inasmuch as they constitute a (77/388/EEC) of 17 May 1977 on the quantitative restriction on exports or a harmonization of the laws of the measure having equivalent effect which is Member States relating to turnover taxes contrary to Article 34. In this regard it (Official Journal 1977, L 145, 13. 6. considers that the relevant national 1977). The mere crossing of a frontier by provisions are in fact designed to prevent a motor vehicle is considered an import- tax evasion and have no purposes which ation of goods, whether or not the the Court, in a consistent line of vehicle was used for a purpose other decisions (for example in Case 15/79, than to take the driver on an errand or Groenveld v Produktschap voor Vee en to deliver goods. Vlees, [1979] ECR 3409), has held to be contrary to Article 34 of the Treaty. The Commission makes the following observations on the question whether national legislation making it an offence However, the Commission raises the for residents in the territory of a question whether such an interpretation Member State to use motor vehicles of Article 34 of the Treaty takes covered by temporary importation rules sufficient account of the facts of the and consequently imported free of present case. It accordingly considers import duty is compatible with the that an outright prohibition imposed on provisions of the EEC Treaty if such a person residing in the Netherlands temporary use is made without any against driving a vehicle registered in intention of evading tax. another Member State, even if this is done in order to export goods from the Dealing first with the free movement of Netherlands to another Member State, is goods, it points out that a similar an obstacle to normal trade and thus question was submitted to the Court in constitutes a measure having an effect Case 823/79 Cardati in which the Court equivalent to a restriction on imports held that Member States retain broad prohibited by Article 34. powers to take action in respect of temporary importation specificially for the purpose of preventing tax evasion and that if the measures adopted for that In the Commission's view, despite the purpose are not excessive they are wide powers which Member States have compatible with the principle of the free in fiscal matters, such an outright movement of goods. prohibition is excessive. Where a vehicle

"Freedom of movement for workers shall The Commission also refers to the be secured within the Community by the Broekmeulen case which mainly turned end of the transitional period at the on the interpretation of Directive latest." 75/362/EEC even if it is stated in a passage in paragraph 20 of the decision that Articles 48, 52 and 59 may be relied upon by a national as against the government of his country. In the It points out that Article 48 was Saunders case Mr Advocate General implemented by Regulation (EEC) No Warner, commenting on the Knoors 1612/68 of 15 October 1968 on freedom case, expressed the opinion that nothing of movement for workers within the that the Court had stated thereto could Community (Official Journal, English be considered as stating a sweeping Special Edition 1968 (II), p. 475) and principle that no provision of the Treaty, that therefore the crucial question in the or no provision of it about the free present case is whether the rights movement of persons, could apply in a conferred by Article 48 and Regulation case wholly internal to a Member State. No 1612/68 may be invoked by a national of State A against restrictions imposed by that State if such measures affect his right to take up employment in State B. The Commission considers that it is a question of "reverse discrimi- The Commission considers that, ir- nation" which as such has apparently still respective of the ratio decidendi of the not been decided by the Court. This judgments in the Knoors, Auer and question has been raised in connection Broekmeulen cases — for this case is not with Article 52 in Case 115/78, Knoors, one wholly internal to a Member State [1979] ECR 399, Case 136/78, Auer, but one directly affecting the possibility [1979] ECR 437, and in Case 246/80, for workers to find employment in Broekmeulen V Huisarts Registratie another Member State — if the

defendant in this case had been resident such restrictions arising from the in Germany, the prohibition laid down unlimited exercise by Member States of by the national legislation in question their sovereign powers in fiscal matters would undoubtedly not have applied to indirectly affect the actual exercise of the him. right of establishment as provided for in the Treaty since they influence the choice of employees. The effect of that prohibition is that a Netherlands national may not take up employment in another country, in this In conclusion the Commission observes case Germany, if the employment that it might be argued that the most that requires him to drive his employer's may be required of Member States in vehicles on lawful business to and from this regard is that they should allow the Netherlands. Such a restriction vehicles to be used on their roads for therefore constitutes an infringement of business purposes but should be entitled Article 48 of the EEC Treaty. to maintain an absolute prohibition where the carrying on of a business involves problems such as employees' travelling to and from work or visiting The question also arises whether the their families on the other side of the provisions in question constitute a frontier. However, in the Commission's restriction upon the freedom of view, such a narrow view of fiscal establishment provided for in Article 52. sovereignty seems to take no account of For reasons similar to those stated by Mr the reality of daily business and private Advocate General Warner in the life. Saunders case, the Commission believes that in an appropriate case the rights conferred by Article 52 may also be relied upon by the person concerned in The Commission acknowledges that it is his own Member State. necessary to base fiscal control in this field on a presumption that some fraud will take place. However, it considers No Member State may adopt laws or that such a presumption must not lead to practices to prevent its own nationals results entirely out of proportion to the from freely exercising the right of problem in question or contrary to other establishment in another Member State. relevant rules of Community law. In this regard it refers to the judgment of the Court in the Gaston Schul case ([1982] ECR 1409, paragraph 33 at p. 1431) in The Treaty requires that a national of a which it was held that: Member State, such as the defendant's employer established in the Federal Republic of Germany, must not be restricted, when carrying on his business, "The concept of a common market as in his choice of employees by problems defined by the Court in a consistent line concerning nationality required for of decisions involves the elimination of driving his business vehicles; in the all obstacles to intra-Community trade in present case a German undertaking order to merge the national markets employing a German driver would not into a single market bringing about encounter the same difficulties. The conditions as close as possible to those of Commission therefore considers that a genuine internal market. It is important

Decision

1 By o r d e r of 30 M a y 1983, received at the C o u r t on 11 July 1983, the A r r o n - dissementsrechtbank [District C o u r t ] , A r n h e m , referred to the C o u r t for a preliminary ruling u n d e r Article 177 of the E E C T r e a t y a question on the interpretation of the provisions of the E E C T r e a t y on the free movement of goods.

JUDGMENT OF 11. 12. 1984 — CASE 134/83

2 That question was raised in the course of criminal proceedings brought against the defendant in the main proceedings for offending against the provisions of Netherlands law regarding the temporary importation of certain means of transport within the Community.

3 According to the order of the national court and the documents in the case, the offence with which the defendant in the main proceedings was charged was that, contrary to the provisions of Article 25 of the Beschikking Vrijstellingen-Tariefbesluit [Tariff (Exemption) Order] 1960, he drove in the Netherlands a passenger car registered in the Federal Republic of Germany belonging to his employer — a flower wholesaler established in Saarbrücken — without having paid import duties on the car, although he was normally resident in the Netherlands. The car was used for purchasing flowers in the Netherlands for delivery in the Federal Republic of Germany.

4 Before the Arrondissementsrechtbank, Arnhem, the defendant in the main proceedings relied on the provisions of the EEC Treaty, arguing that the relevant national legislation making it an offence for Netherlands residents to use a vehicle registered in another Member State without providing for any exception in cases in which such a vehicle is used for the purposes of the driver's employment without any intention of evading tax is contrary to Community law.

"In view of the Commission's answer is national legislation making it a criminal offence for persons resident in the territory of a Member State to use motor vehicles covered by temporary importation rules and consequently exempt from import duty compatible with the provisions of the EEC Treaty on the free movement of goods if such temporary use is made without any intention of evading tax?"

9 The Netherlands Government suggests that the Court should follow its decision in the Cardati case cited above and give an answer in this case consistent with that decision without taking into account subjective factors such as whether or not there is an intention of evading tax. Not only did that decision contain no proviso to that effect but, since it is virtually impossible for the national authorities of the importing State to detect an intention of evading tax, such an exception would lead to widespread tax evasion Therefore, according to the Netherlands Government, a general prohibition imposed on persons resident in the importing State against using vehicles imported free of tax is necessary, because it is in itself an effective means of preventing tax evasion.

10 At the hearing the Danish Government also expressed the view that in practice it would be very difficult to determine whether or not a foreign

JUDGMENT OF 11. 12. 1984 — CASE 134/83

vehicle was being used in the importing State with the intention of evading tax and that it would also be difficult to arrive at a precise definition of such an intention. It therefore suggested that the Court should confirm its decision in Cardati by stating, as it did in that judgment, that national legislation which prohibits residents without exception from using a vehicle registered in another Member State accords with the principle of proportion- ality and that it is therefore compatible with Community law. According to the Danish Government, support for such an interpretation is to be found in the subsequent Council Directive 83/182/EEC of 28 March 1983, which makes tax exemptions on temporary imports conditional on the exempted vehicle not being disposed of, hired out or lent in the Member State into which it is temporarily imported.

1 4 Those statements are not invalidated by the fact that the national legislation does not provide for any exception in cases in which vehicles are used without the intention of evading tax. Indeed, legislation designed to prevent tax evasion must inevitably be based on objective, verifiable criteria. That is not the case with a criterion based on the intention of the person concerned.

15 Such legislation must not however lead to double taxation. As the Court held in its judgment of 5 May 1982 in Case 15/81, Schul V Inspecteur der Invoerrechten en Accijnzen, [1982] ECR 1409, "value-added tax which a Member State levies on the importation of products from another Member State supplied by a private person where no such tax is levied on the supply of similar products by a private person within the territory of the Member State of importation constitutes internal taxation in excess of that imposed on similar domestic products within the meaning of Article 95 of the Treaty, to the extent to which the residual part of the value-added tax paid in the Member State of exportation which is still contained in the value of the product on importation is not taken into account."

16 The reply to the question put by the Arrondissementsrechtbank, Arnhem must therefore be that the rules of the EEC Treaty relating to the free movement of goods do not preclude national legislation from imposing on persons residing in the territory of a Member State a prohibition, subject to criminal penalties, on the use of motor vehicles admitted under temporary importation arrangements and thus exempt from payment of value-added tax, even if that legislation makes no exception for cases in which such vehicles are used without any intention of evading tax.

The rules of the EEC Treaty relating to the free movement of goods do not preclude national legislation from imposing on persons residing in the territory of a Member State a prohibition, subject to criminal penalties, on the use of motor vehicles admitted under temporary impor- tation arrangements and thus exempt from payment of value added tax, even if that legislation makes no exception for cases in which such vehicles are used without any intention of evading tax.

Due Kakouris

Everling Galmot Joliét

Delivered in open court in Luxembourg on 11 December 1984.

The Registrar by order

H. A. Rühi O. Due Principal Administrator President of the Fifth Chamber