Excise duties are indirect taxes on the consumption or the use of certain products. In contrast to Value Added Tax (VAT), they are mainly specific taxes, i.e. expressed as a monetary amount per quantity of the product.
The most commonly applied excise duties are those on
· alcoholic beverages,
· manufactured tobacco products and
· energy products (motor fuels and heating fuels, such as petrol and gasoline, electricity, natural gas, coal and coke).
All EU Member States apply excise duties to these three product categories. The revenue from excise duties accrues entirely to the Member States.
EU legislation in the area of excise duties on these products was mainly adopted in the context of the establishment of the Internal Market on 1 January 1993 , which involved the abolition of controls of a fiscal nature at internal borders between Member States.
This legislation, which has been further developed since, can be divided into three main categories:
· The structure of the tax to be applied to a particular group of products. The structure of taxation means the definition of the product categories, the way in which the excise duty is calculated (e.g. per hl; per degree alcohol; per 1000 pieces, etc.), the scope of possible exemptions, etc.
· The minimum rates of duty that Member States have to respect for each type of product. Above those minimum rates, Member States can freely fix their own rate levels.
· General provisions that apply across the product categories. These provisions concern in particular the production, storage and movement between Member States of excse products.
More detailed information on excise duties is available on the thematic pages concerning alcoholic beverages, tobacco products, energy products and common provisions.
A project has been launched to computerise the system concerning the intra-Community movement of excise products. More information on this project is available on the thematic page "Circulation and control (EMCS)".
Recent Commission proposals in the area of excise duties can be consulted on EUR-Lex. More information on the proposal of the Commission to create a specific legal framework for mutual assistance and administrative cooperation between Member States can be found on the thematic page "Excise duty proposal for Regulation".
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* Introduction
In the run up to the completion of the Internal Market on 1 January 1993 certain rules regarding the excise duty rates and structures applied to alcohol and alcoholic beverages were established in order to ensure a common approach among the Member States.
The rates and structures of the excise duty system applicable to alcohol and alcoholic beverages is set down in Community
legislation.
Council Directive 92/83/EEC, which deals with the structures of excise duties on alcohol and alcoholic beverages, defines the categories of alcohol and alcoholic beverages, which are subject to excise duty, and the basis on which the excise duty is calculated. The categories are
· beer,
· wine,
· fermented beverages other than beer and wine (for example, cider and perry), intermediate products (for example, port and sherry) and
· ethyl alcohol (i.e. spirit drinks).
It also includes special provisions relating, for example, to reduced rates for small breweries and distilleries, certain products and geographical regions.
Included within the term "ethyl alcohol" is alcohol which is not necessarily intended as a beverage, for example, alcohol intended for industrial purposes, in the production of foodstuffs, medicines and so on. The general principle is that excise duty is only due on alcohol intended for human consumption as a beverage and, therefore, the Directive provides exemptions from excise duty, subject to rules, for these particular purposes.
Although full harmonisation of the excise duty rates throughout the European Union was not considered necessary by the Council of Ministers for the proper functioning of the Internal Market, a series of minimum rates were agreed. Above these minimum rates Member States retain sovereignty to set excise duty rates at levels they consider appropriate according to their own national circumstances. Council Directive 92/84/EEC on the approximation of the rates of excise duty on alcohol and alcoholic beverages sets down these minimum rates.
This Directive requires that the Commission review these minimum rates periodically. The Commission's current report (COM (2004) 223) was presented to Council on 26 May 2004 (see press release
IP/04/669 and FAQ
MEMO/04/126).
The control, holding and movement of duty-suspended alcohol and alcoholic beverages are subject to common provisions laid down in Council Directive 92/12/EEC.
* Legislation
The basic legislation is contained in:
· Council Directive 92/83/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on alcohol and
alcoholic beverages. This Directive:
· defines the various categories of alcoholic beverage (beer, wine, fermented beverages other than beer and wine, intermediate products and ethyl alcohol).
· Prescribes the basis on which the excise duty is calculated.
· Introduces reduced rates for small breweries, small distilleries, certain drinks (ouzo and rum produced in the French Overseas Departments).
· Introduces special provisions for certain regions of Spain .
· Grants derogations to exempt, in the UK , "black" beer and angostura bitters.
· Provides general exemption to alcohol which is not intended for consumption as a beverage.
· Council Directive 92/84/EEC of 19 October 1992 on the approximation of the rates of excise duty on alcohol and alcoholic beverages. This Directive sets down the minimum rates which are as follows:
· For alcohol (spirits), 550€ per hectolitre of pure alcohol
· For intermediate products, 45€ per hectolitre of product.
· For wine and sparkling wine, zero rate.
· For beer, 0.748 € per hectolitre per degree Plato, or 1.87€ per hectolitre per degree alcohol, of finished product.
It also provides for reduced rates for certain departments and islands of the Hellenic Republic , certain regions of Italy and, for Portugal , Madeira and the Azores.
· Commission Regulation (EC) No 3199/93 of 22 November 1993 on the mutual recognition of procedures for the complete denaturing of alcohol for the purposes of exemption from excise duty. This Regulation implements Article 27(1)(a) of Council Directive 92/83/EEC for the complete denaturing of alcohol and sets down the various formulations of denaturants in the Member States.
In addition, there is legislation relating to specific matters:
· Council Decision 2002/166/EC of 18 February 2002 authorising France to extend the application of a reduced rate of excise duty on "traditional" rum produced in its overseas departments.
· Council Decision 2002/167/EC of 18 February 2002 authorising Portugal to apply a reduced rate of excise duty in the autonomous region of Madeira on locally produced and consumed rum and liqueurs and in the autonomous region of the Azores on locally produced and consumed liqueurs and eaux-de-vie.
* Excise duty rates
The excise duty rates applicable in the European Union and the two Candidate Countries (Bulgaria and Romania) as at 1 July 2005.
On this website you may also find the excise duty rates on energy products and electricity as well as on manufactured tobacco.
Please find further information on tax receipts from alcoholic beverages
here
* Studies and Reports
Under Article 8 of Council Directive 92/84/EEC on the approximation of the rates of excise duty on alcohol and alcoholic beverages, the Commission is required to produce a report and, where appropriate, a proposal on the minimum rates of excise duty, taking into account
· the proper functioning of the internal market,
· competition between the different categories of alcoholic drinks,
· the real value of the rates of duty and
· the wider objectives of the Treaty.
On 26 May 2004 the Commission presented its report on the rates of excise duty applied on alcohol and alcoholic beverages (COM (2004) 223, press release IP/04/669 and frequently asked questions MEMO/04/126). In the report t he Commission concludes that more convergence of the rates of excise duty in the different Member States is needed so as to reduce distortions of competition and fraud.
However, given the widely differing views in the Member States about the appropriate levels of the minimum rates, and given that any change would require unanimous agreement, the Commission is not making a proposal at this time. Instead the Commission wishes to launch a broad debate in the Council, the European Parliament and the Economic and Social Committee.
On the basis of the outcome of this debate the Commission will decide whether or not to submit proposals on all or some of the issues raised in the report.
To help inform the above-mentioned report, and in line with the remit set down in Article 8, a study on the competition between alcohol drinks was undertaken which was finalised in 2001.
The full version of this document is available on CD-ROM and can be obtained via:
European Commission
Directorate-General for Taxation & Customs Union
Unit E-4 (Economic aspects of taxation)
On this site you can find Chapter 1 of the report - which is an introduction and overview, including an executive summary in English, French and German. This document was prepared for the Commission by Customs Associates Ltd.
* Introduction
The arrangements for the taxation of tobacco products were introduced on 1 January 1993 . They are the outcome of discussions which started in 1985 with the White Paper on completing the internal market, in which the Commission proposed full harmonisation of excise duties on manufactured tobacco. However, the Council chose not to take this approach and did not consider a harmonisation of the excise duty rates throughout the European Union necessary for the proper functioning of the Internal Market.
The current Community framework for the taxation of tobacco products provides for
· a common structure (product definitions and means of taxation) for excise duty on tobacco products as well as
· minimum rate levels, above which Member States are free to set their national rates at levels they consider appropriate according to their own national circumstances.
In addition, the Community legislation provides at present for a review of the structure and rates of excise duties on tobacco every four years. The Commission is obliged to make regular reports on tobacco taxation and the next report - most probably accompanied by a proposal - has to be submitted to the Council in 2006.
The 2006 report will take into account all relevant factors. Although excise duty is primarily an instrument for generating revenue at national level, policy-making in this area has to take the wider objectives of the Treaty into account. Given the characteristics of manufactured tobacco products, the report will pay particular attention to health considerations, taking stock of the Framework Convention on Tobacco Control, recently agreed within the World Health Organisation.
The control, holding and movement by businesses of duty-suspended manufactured tobacco are subject to common provisions laid down in Council Directive 92/12/EEC. In accordance with the principles of the single market, private individuals enjoy greater freedom to purchase duty-paid goods for their own use in the Member State of their choice and to transport them to another Member State without having to pay duty again.
However, most of the Member States that joined the EU on 1 May 2004 have not reached the minimum levels of taxation and have been granted transition periods until 2010. Therefore, Member States may maintain the same quantitative limits for tobacco products brought into their territories from certain new Member States as those applied to imports from third countries. More information is available on the page "travelers".
* Legislation
The basic legislative acts are:
· Council Directive 95/59/EC of 27 November 1995 on taxes other than turnover taxes which affect the consumption of manufactured tobacco.
This Directive:
· defines the various categories of manufactured tobacco (cigarettes, fine cut tobacco intended for the rolling of cigarettes, cigars and cigarillos, other smoking tobacco);
· lays down the general principles governing taxation of manufactured tobacco.
· Council Directive 92/79/EEC of 19 October 1992 on the approximation of taxes on cigarettes.
Member States have to apply to cigarettes a specific excise duty per unit of the product and a proportional excise duty calculated on the basis of the maximum retail selling price.
In order to guarantee a minimum level of excise duties on cigarettes in all Member States and to achieve more rate convergence, this Directive provides for:
· an overall minimum excise duty of 57% of the retail price for cigarettes of the price category most in demand;
· for a minimum amount of excise duty of 60 Euro (64 Euro as of 1 July 2006) per 1000 cigarettes of the price category most in demand.
· Council Directive 92/80/EEC of 19 October 1992 on the approximation of taxes on manufactured tobacco other than cigarettes.
According to this Directive, Member States may choose between either an ad valorem duty, or a specific duty or a mixture of both. The minimum rates for these duties are as follows:
· for fine-cut smoking tobacco intended for the rolling of cigarettes, 36% of the retail selling price inclusive of all taxes or 32 Euro per kilogram;
· for cigars and cigarillos, 5% of the retail selling price inclusive of all taxes or 11 Euro per 100 items or per kilogram;
· for other smoking tobaccos 20% of the retail selling price inclusive of all taxes, or 20 Euro per kilogram.
These Directives were last amended by Council Directive 2002/10/EC of 12 February 2002 amending Directives 92/79/EEC, 92/80/EEC and 95/59/EC as regards the structure and rates of excise duty applied on manufactured tobacco and by Council Directive 2003/117/EC of 5 December 2003, authorising the French Republic to prolong the application of lower rates of excise duty to tobacco products released for consumption in Corsica, from 1 January 2003 to 31 December 2009.
* Manufactured tobacco: Excise duty rates
The excise duty rates applicable in the European Union and the two Candidate Countries (Bulgaria and Romania) as at 1 July 2005.
On this website you may also find the excise duty rates on energy products and electricity as well as on alcoholic beverages.
Please find further information on tax receipts from manufactured tobacco
here
* Reports
Reports on the structure and rates of excise duty applied on cigarettes and other manufactured tobacco products.
The Directives on the approximation of excise duties stipulate that the rates and structure of excise duty are to be reviewed every three years and from 2002 onwards every four years. The Commission is required to present a report, which may or may not be accompanied by proposals for revising the Directives. Until now the Commission has made three reports.
In September 1995 the Commission presented its first report, which, in addition to tobacco, dealt with alcoholic beverage9s and mineral oils (COM(95) 285 of 13/09/1995).
A second report (COM(1998) 320-2) was presented by the Commission in May 1998, and was accompanied by a proposal for a directive amending the existing tobacco legislation to incorporate a number of technical adjustments (COM(98) 320-1 of 15/05/1998). The proposal was adopted by the Council on 29 July 1999 as Council Directive 1999/81/EC.
The
third report (COM(2001) 133-1) was published in March 2001 together with a proposal introducing significant revisions to the rates and structure of excise duties on manufactured tobacco (COM(2001) 133-2 of 14/03/2001 ). The Commission issued a press release (
IP/01/368) together with a list of frequently asked questions
(MEMO/01/87) on the occasion of the adoption of this report and proposal.
The proposal was adopted by the Council on 12 February 2002 as Council Directive 2002/10/EC amending Directives 92/79/EEC, 92/80/EEC and 95/59/EC as regards the structure and rates of excise duty applied on manufactured tobacco.
The Commission has to submit to the Council in 2006 a fourth report on the structure and rates of excise duty applied on cigarettes and other manufactured tobacco products. In order to prepare this report a study has been launched to assess the need to adapt the structure of excise duties and to evaluate the impact of the new requirement for the minimum excise duty on cigarettes.
Although e xcise duty is primarily an instrument for generating revenue at national level, policy-making in this area has to take the wider objectives of the Treaty into account. Given the characteristics of manufactured tobacco products, the 2006 report will pay particular attention to health policy considerations, taking stock of the Framework Convention on Tobacco Control, recently agreed within the World Health Organisation.
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* Introduction
The use of tax to achieve environmental goals (by means of ‘green taxes’, CO2 tax, vehicle taxes, tax incentives…) has been at the centre of discussions since the early 1990s.
The June 1992 UN Conference on the Environment and Development in Rio (the ‘Earth Summit’) called for a global strategy to reduce greenhouse gases, including the use of economic instruments. At the time, the Commission had proposed a new harmonised carbon and energy tax aimed at stabilising CO2 emissions in the Community in the medium term. Even after amendment, however, the proposal met consistent opposition and the Council of Economics and Finance Ministers (ECOFIN), considering that unanimous agreement was out of reach, asked the Commission to table another proposal based on the current system of excise duty for mineral oils.
The proposal submitted in 1997 (COM(97) 30 - for more detailed information see press release) reflected environmental concerns but was essentially shaped by the need to ensure that the internal market operated correctly. It eventually paved the way for agreement in the Council of Ministers on 27 October 2003 on a Directive which widens the coverage of the Community framework, previously limited to mineral oils, to all energy products including coal, natural gas and electricity and increases the relevant Community minimum rates of taxation.
In particular, the Directive is designed to
· reduce distortions of competition that currently exist between Member States as a result of divergent rates of tax;
· reduce distortions of competition between mineral oils and the other energy products that have not been subject to Community tax legislation up to now;
· increase the incentive to use energy more efficiently (so as to reduce dependency on imported energy and cut carbon dioxide emissions); and
· allow Member States to offer companies tax incentives in return for specific undertakings to reduce emissions.
The Directive entered into force on 1st January 2004 – for more detailed information see press release.
You will also find on this website an overview of the excise duty rates currently applicable to energy products and electricity along with background information in our "Studies and reports" section.
You will find an overview of the current state of EU legislation and proposals regarding alternative energy as well as on aircraft fuel on the respective web pages.
For legislative provisions allowing individual Member States to apply reduced rates of excise duty to mineral oils for limited periods of time in view of specific policy considerations see also Directives 2004/74/EC and 2004/75/EC.
More information on energy taxation and the environment can be found:
· under the 'Energy and environmental taxation' section of the Communication from the Commission on "Tax policy in the European Union - Priorities for the years ahead" (COM(2001) 260 final)
On 27 October 2003 , the European Union's Council of Ministers adopted Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and electricity. This was published in the Official Journal L 283 of 31.10.2003.
The Directive widens the scope of the EU's minimum rate system for energy products, previously limited to mineral oils, to all energy products including coal, natural gas and electricity.
In particular, the Directive will:
· reduce distortions of competition that currently exist between Member States as a result of divergent rates of tax on energy products;
· reduce distortions of competition between mineral oils and the other energy products that have not been subject to Community tax legislation up to now;
· increase incentives to use energy more efficiently (to reduce dependency on imported energy and to cut carbon dioxide emissions); and
· allow Member States to offer companies tax incentives in return for specific undertakings to reduce emissions.
The Directive entered into force on 1st January 2004.
The Commission proposed appropriate transitional arrangements for Accession Countries that were subsequently adopted by the Council of ministers (see press release
IP/04/575) in the form of two directives amending Directive 2003/96/EC of 1 May 2004. These are Council Directive 2004/74/EC and Council Directive 2004/75/EC, published in the Official Journal L157 of 30 April 2004.
Background
In 1997, the Commission put forward a proposal for a Community framework for the taxation of all competing sources of energy, including minimum tax levels (see
IP/97/211). This was debated in the EU's Council of Ministers and was extensively changed before being adopted as Directive 2003/96/EC of 27 October 2003 .
On 20 th March 2003 , EU-Economics and Finance Ministers gave their political agreement to the proposed Directive on a Community framework for the taxation of energy products. Further details on this draft Directive can be found here:
MEMO/03/64.
The aim of this initiative is to:
· improve the functioning of the Internal Market,
· ensure greater respect for the environment, and
· combat unemployment by allowing Member States to compensate increased revenues from energy taxation with lower taxation of labour.
More information on energy taxation and the environment can be found:
· under the 'Energy and environmental taxation' section of the Communication from the Commission on Tax policy in the European Union - Priorities for the years ahead: (COM(2001) 260 final)
The other legal instruments regarding energy products are
· Council Directive 95/60/EC of 27 November 1995 on fiscal marking of gas oils and kerosene
· 2001/574/EC: Commission Decision of 13 July 2001 establishing a common fiscal marker for gas oils and kerosene (notified under document number C(2001) 1728)
For the proper functioning of the internal market and to prevent tax evasion, Directive 95/60/EC provided for a common marking system to identify gas oil and kerosene which have not borne duty at the full rate applicable to such mineral oils used as propellant, without prejudice to national provisions on fiscal marking.
Commission Decision 2001/574/EC established the Solvent Yellow 124 as the common fiscal marker and fixed the marking level of at least 6 mg and not more than 9 mg of marker per litre of mineral oil
Currently, an Ad-Hoc Working Group on Euromarker, in collaboration with the Joint Research Centre, is looking at ways to establish a harmonised Community reference method of analysis for the Euromarker (Solvent Yellow 124) for laboratory tests. This method will improve the comparability of the results of tests by determining reference materials, certified and provided by the Institute for Reference Materials and Measurements (IRMM).
* Excise duty rates
The excise duty rates applicable in the European Union and the two Candidate Countries (Bulgaria and Romania) as at 1 July 2005.
On this website you may also find the excise duty rates on alcoholic beverages as well as on manufactured tobacco.
Please find further information on tax receipts from mineral oils
here
* Studies & Reports
Detection of the Euromarker A study is in the process of being finalised which will look to determine a harmonised Community reference method of analysis for laboratory tests for the detection of the Euromarker (Solvent Yellow 124), and to determine certified reference materials to use in order to ensure precision performance in line with the principles of ISO 4259.
As soon as this study has been finalised the report will be produced and will be available on this web-page.
Energy Taxation
The European Commission on 25 July published an external study on "The impacts of energy taxation in the enlarged European Union".
The objective of the study is twofold: first to analyse how the implementation of the EU energy tax policies will affect the EU and its Member States and secondly to analyse how energy tax policies can contribute to climate policy objectives in the enlarged EU. The study evaluates the economic and environmental impact of alternative energy tax policies in the EU in the context of an applied general equilibrium model (GEM-E3).
The results are given for the EU as a whole (see final report) and separately for each EU-22 Member State (the economic model used does not cover three smaller Member States).
The results indicate that Member States would benefit from common energy/ carbon tax policies in the form of higher employment and welfare if they used tax revenues to reduce employers' social security contributions. A common EU carbon tax would be the most cost-efficient way of reaching the EU climate policy objectives. However, it would have a somewhat negative impact on competitiveness in some energy-intensive sectors. These effects would be alleviated only slightly by exempting energy-intensive sectors form energy taxation.
* Encouraging the use of alternative fuels
In November 2001 the European Commission adopted an action plan and two proposals for Directives to foster the use of alternative fuels for transport, starting with the regulatory and fiscal promotion of biofuels.
The Commission considers that the use of fuels (such as vegetable oils) derived from agricultural sources (i.e. biofuels) is the technology with the greatest potential in the short to medium term. The action plan outlines a strategy to achieve a 20% substitution of diesel and gasoline fuels by alternative fuels in the road transport sector by 2020.
The Commission concludes that only three options would have the potential to achieve individually more than 5% of total transport fuel consumption over the next 20 years: biofuels which are already available, natural gas in the medium term and hydrogen and fuel cells in the long term.
The first proposed Directive was adopted on 8 May 2003 . The objective of Directive 2003/30/EC is the promotion of the use of biofuels or other renewable fuels for transport purposes. Member States must ensure that the minimum share of biofuels sold on their markets is 2% by 31 December 2005 at the latest, and 5.75% by December 2010. Any Member State setting lower objectives will have to justify this on the basis of objective criteria.
The second proposed Directive has been incorporated mainly within Article 16 of Directive 2003/96 and provides Member States with the option of applying a reduced rate of excise duty to pure or blended biofuels, when used as heating or motor fuel.
Background information:
· Communication (COM(2001) 547) from the Commission on alternative fuels for road transportation and on a set of measures to promote the use of biofuels.
Proposal for a Council Directive amending Directive 92/81/EEC with regard to the possibility of applying a reduced rate of excise duty on certain mineral oils containing biofuels and on biofuels.
· See also "Harmonisations of duty on commercial diesel fuel" (COM(2002) 410 final).
Further information:
· Directive 2003/30/EC on the promotion of the use of biofuels and other renewable fuels for transport.
· Directive 2003/96/EC restructuring the Community framework for the taxation of energy products and electricity.
· Links to additional European Commission biofuels and renewable fuels webpages:
· DG Energy New and Renewable Energies
· DG Transport Biofuels
· DG Environment – Transport Renewable Fuels
* Taxation of aircraft fuel
Council Directive 2003/96/EC provides for a mandatory exemption from the harmonised excise duty for energy products supplied for use as fuel for the purpose of air navigation other than in private pleasure-flying. However, it introduced for the first time provisions which allow Member States to tax aviation fuel for domestic flights and, by means of bilateral agreements, fuel used for intra-Community flights. In such cases, Member States may apply a level of taxation below the minimum level set out in this Directive.
Tax exemption of aircraft fuel contained in the tanks of an aircraft arriving at a Community airport is based on the provisions of the 1944 Chicago Convention. However, the exemptions granted to aircraft fuel, loaded to a carrier at an EC airport, are granted on the basis of bilateral Air Service Agreements concluded between Member States and third Countries and among Member States themselves.
The Commission favours taxation of aircraft fuel, as is the case for fuel used by other means of transport. The Commission presented a Communication on taxation of aircraft fuel in 2000 (COM(2000) 110 of 02/03/2000 ) and brought this issue for discussion at the ICAO's 33 rd Assembly in September 2001. It appeared from the discussions that it will be very difficult, if not impossible, to reach an agreement on this issue at ICAO level.
During the discussions, which preceded the adoption of Directive 2003/96/EC, all but two Member States agreed that as a matter of principle commercial aircraft fuel should be taxed on the same basis as any other fuel. However, the question of competition with third countries needs to be taken into account and any distortion of competition with socio-economic implications has to be avoided.
The issue of taxation of aircraft fuel has attracted particular attention in connection with the assistance to developing countries. In the context of its drive to enhance development aid's effectiveness (see
IP/05/423) the Commission services put forward, among other things, a working paper on "New Sources of Financing for Development: A Review of Options" (
SEC(2005) 467 of 5 April 2005 ). This paper also deals with tax instruments such as kerosene and flight departure taxes and is expected to fuel debate at European and national levels. More...
The basic principles applicable to all products subject to excise duties have been laid down in Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products.
Products subject to excise duties are generally produced, and can afterwards be held under duty suspension, in tax warehouses. The establishment and operation of tax warehouses is subject to the authorization of the Member States. They should respect the principles laid down in Commission Recommendation 2000/789/EC of 29 November 2000 setting out guidelines for the authorisation of warehousekeepers under Council Directive 92/12/EEC in relation to products subject to excise duty.
The products can be sent under duty-suspension from a tax warehouse in one Member State to a tax warehouse or to a registered or non-registered trader in another Member State . They can also be released for consumption in which case excise duties have to be paid.
For the transport of excisable goods between Member States the documents laid down in
· Commission Regulation (EEC) No 2719/92 of 11 September 1992 on the accompanying administrative document for the movement under duty-suspension arrangements of products subject to excise duty or
· Commission Regulation (EEC) No 3649/92 of 17 December 1992 on a simplified accompanying document for the intra-Community movement of products subject to excise duty which have been released for consumption in the Member State of dispatch have to be used.
A distinction has to be made between commercial traffic and transport of goods by private people.
· For commercial traffic, the principle of taxation in the Member State of destination applies. Therefore, products which have already been released for consumption and which are transported to another Member State will be subject to excise duty in the Member State of destination. To avoid double taxation, Directive 92/12/EEC provides for a system of reimbursement of the excise duty paid in the first Member State , subject to conditions to be determined by that Member State .
· For excise products purchased by private travellers for their own use and transported by themselves from one Member State to another, the principle of taxation in the Member State of origin applies. This means that excise duty will only be due in the Member State of purchase and that no further excise duty applies in any other Member State to which the products are transported. More information is available on the page "travellers".
* Legislation
The basic legislative instruments are
· Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products
· Commission Regulation (EEC) No 2719/92 of 11 September 1992 on the accompanying administrative document for the movement under duty-suspension arrangements of products subject to excise duty
· Commission Regulation (EEC) No 3649/92 of 17 December 1992 on a simplified accompanying document for the intra-Community movement of products subject to excise duty which have been released for consumption in the Member State of dispatch
· Commission Regulation (EC) No 31/96 of 10 January 1996 on the excise duty exemption certificate
These instruments have been supplemented by Commission Recommendation 2000/789/EC of 29 November 2000 setting out guidelines for the authorisation of warehousekeepers under Council Directive 92/12/EEC in relation to products subject to excise duty.
* Reports
Report on the application of Articles 7 to 10 of Directive 92/12/EEC (for example, distance sales)
Article 27 of the Directive 92/12/EEC on the general arrangements for products subject to excise duties and on the holding, movement, and monitoring of such products obliged the Council to examine Articles 7 to 10 of the aforementioned Directive on the basis of a report from the Commission and to adopt any necessary amendments, before 1997.
For different reasons (inter alia complaints from the public which had to be evaluated and a pending court case concerning one of the articles) the Commission was not able to provide the report within the foreseen time limit but has since adopted it, on 2 April 2004 .
The report identifies the main problems concerning the application of these provisions, provides appropriate solutions in the proposal for a Council Directive amending Directive 92/12/EEC (COM(2004) 227-2), attached to the report. The Commission issued a press release (
IP/04/452) together with a list of frequently asked questions (
MEMO/04/80) on the occasion of the adoption of this report and proposal.
* Proposals
Proposal for a Council directive amending Directive 92/12/EEC
Article 27 of Directive 92/12EEC on the general arrangements for products subject to excise duties and on the holding, movement, and monitoring of such products obliged the Council to examine Articles 7 to 10 of the aforementioned Directive on the basis of a report from the Commission and to adopt any necessary amendments.
Both a report (COM(2004) 227-1) and a proposal (COM(2004) 227-2) were adopted by the Commission on 2 April 2004 . The Commission issued a press release (
IP/04/452) together with a list of frequently asked questions (
MEMO/04/80) on the occasion of the adoption of this report and proposal.
The proposal aims to ease the procedure for individuals and companies as follows:
Private movements
The Commission proposal:
· Liberalises the system applying to distance purchases by a private individual , i.e. purchases made by an individual for which transport or shipment to the Member State of destination is organised entirely by that individual. Under the proposed Directive, alcoholic beverages transported from one Member State to another on behalf of private individuals (but not by the seller), for their own use, would be taxed only in the Member State of acquisition, at the rate applicable there. This change would not apply to tobacco products transported on behalf of a private individual due to public health reasons.
· Clarifies that the general principle of taxation in the country of acquisition also applies when sending gifts or moving house. In those cases, the restriction for tobacco products was considered unnecessary.
· Abolishes the "indicative" limits (800 cigarettes, 10 litres of spirits, 90 litres of wine, 110 litres of beer) currently provided for in EU law as possible evidence of whether products are intended for commercial purposes or for private use. The public now often perceives these limits as real quantitative limits, when the quantity of goods transported is only one factor among others to be taken into account by the authorities in distinguishing products intended for commercial purposes from products intended for private use.
Commercial movements
The Commission proposes:
· To simplify the procedures that apply when traders transport goods which have already been subject to excise duty in one Member State to another Member State for commercial purposes, while ensuring that excise duty is paid in the Member State of destination and repaid to the trader in the Member State of departure. Such movements mainly involve small traders (such as small-scale wine producers) who find it difficult to comply with the current administrative procedures.
· To harmonise the procedure, by providing for single identification in a central office in each Member State of destination, at which foreign vendors must periodically pay excise duties on the basis of an overall declaration. Member States would no longer have the option of requiring that a tax representative be appointed. These simplified procedures would apply, notably, to distance selling, i.e. sales to private individuals in which the goods are transported or dispatched to the Member State of destination by or on behalf of the seller. The new rules would be favourable to distance selling on the internet, for example.
· To change the rules for the transfer of products to another Member State for presentation or sale to clients at trade fairs. The aim of the proposed changes is to see to it that the person best placed to complete the formalities in the Member State of destination becomes the person liable for excise duty. Where that person is not established in the Member State concerned, the simplified procedures applicable to distance selling could be applied and use of the simplified administrative accompanying document, an administrative document which must normally accompany such movements, would no longer be required.
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* Introduction
The Commission and the Member States are developing a trader-to-trader link via the National Administrations of the Member States called EMCS (Excise Movement and Control System). The objective is to replace the current paper-based system for the follow-up of every intra-community movement of excise duty products on which the payment of excise duties has been suspended between authorised economic operators.
Such a system will improve the functioning of the Internal Market by:
· Simplifying movements of goods under duty-suspension by an electronic transmission of the accompanying document instead of the paper document;
· Securing movements of goods by checking the traders' data before the goods are dispatched and a quicker and safer return of the evidence that the goods arrived at their destination;
· Monitoring the movement of excisable goods by allowing real time information and checks during movements.
Therefore, the Commission has launched the drafting of the Excise System Specification, both functional and technical, which the Member States will have to implement before the 30 th June 2009,
· in all excise sectors (alcohol and alcoholic beverages, tobacco products, mineral oils and energy taxation),
· for all operators concerned,
· operating under the duty-suspension arrangements.
This has been made possible due to the adoption, by the European Parliament and the Council of a Decision to computerise the current paper-based system.
In addition, the Council is discussing a draft proposal on administrative cooperation that will also have an impact on EMCS.
Since the 1 st January 1993, the circulation and control of intra-community movements of excise duty goods in duty-suspension can only take place between authorised economic operators and must be accompanied by a paper-based document- the Accompanying Administrative Document (AAD) - and a guarantee financially securing the movement, both of which can only be discharged when the goods arrive at their destination. Please find further information here.
Due to the increasing level of fraud in the Member States and the corresponding loss of national revenues, especially in the field of tobacco and alcohol, the Council of Economic and Finance Ministers (ECOFIN) endorsed, on 19 May 1998, a High Level Group report recommending the setting up a computerised trader-to-trader link via the national Member States administrations, which has now become known as EMCS (Excise Movement and Control System).
In order to consider the implications of introducing such a wide and complex system, the Commission initiated a Feasibility Study conducted in 1999 and 2000, supplemented by an Addendum in 2003.
* Legislation
On 16 June 2003 , the European Parliament and the Council of the EU adopted the Decision to computerise the system under which excise duty goods are moved between authorised traders in the Community under duty-suspension arrangements (see press release
IP/03/788 and Decision N° 1152/2003/EC).
Around 80.000 individuals or firms will need to be connected to the system and the developments and running costs are expected to be high, both for the Commission (in respect of whom a € 35 millions budget has been allocated by the Decision) and the Member States.
Even so, the cost to Member States respective budgets will probably amount to no more than 5 % of the revenue lost to tax evasion in a given year; in 1996 alone, tobacco and alcohol fraud was responsible for an estimated € 4.8 billion in lost revenue.
A full modification of the current Regulation (EEC) 2719/92 will also have to be undertaken in order to accommodate the exchange of electronic messages between all those involved in the system (Commission, national administrations of the Member States, economic operators). In addition, some modifications will have to be made to Directive 92/12/EEC.
The Decision, based on a proposal put forward by the Commission on 19 November 2001 (see press release
IP/01/1804), introduces a system which will provide Member States with real-time information about consignments in transit, enabling them to plan checks and inspections in advance.
* Studies and reports
The Commission is developing the Excise Movement and Control System (EMCS) and has launched the excise system specification (ESS) for the design of the functional specifications of the system, including security aspects. This task should be completed at the end of 2005. Also, in 2005, it is intended to start work on the technical specification which should be completed in 2006.
The first exchanges via electronic messages should take place in 2007 between certain Member States and certain economic operators, who are ready to start using the computerised system.
In parallel, the Commission has initiated a series of actions aimed at improving the current, paper based, system, pending the computerised system becoming fully operational. To this end, the Commission intends to improve the functioning of the national systems of exchange of excise data (SEED) directories that list all authorised economic operators moving goods under the duty-suspension arrangements.
An accompanying programme providing information is also being set up, which will include training activities for all users (national administrations and economic operators). This website will become a regular forum for publication of newsletters and other tools in order to ensure that the information is regularly updated.
The Commission has also set up an Excise Contact Group comprising representatives of the European Federations of economic operators and representatives of the Member States. It will meet around twice a year in order to keep abreast of the most recent developments and to provide a forum for the exchange of views on the development of the system.
Background
These actions result from the main recommendations of the Feasibility Study conducted by the Commission in 1999-2000. This
Feasibility Study concluded that the system is technically feasible but will be complex and will require high commitments from the Member States and the Commission, both as regards budget and development constraints.
In 2003 the Commission completed an
Addendum to this Feasibility Study and launched a series of discussions with Member States in order to refine the requirements of the system.
In May 2005 the Commission published the draft version of the Functional Excise System Specification (FESS)
which lays in detail the proposed business processes and information exchanges which will be the basis of the EMCS system, and the
Fallback and Recovery Specification (FRS) , which explains how the system should react in the case of problems.
At the same time, the Commission published the EMCS Business Prototype . (Please note that the prototype requires the installation of Macromedia Flash 7 or the Macromedia Flash 7 plugin.) This is a simulator that shows what the system will do and, as such, assists the readers of the FESS. Before using it, it is recommended to read the
Prototype User Manual as well as the
Prototype Installation Guide.
The origin of the computerised system can be found in the
report of the High Level Group on fraud in the tobacco and alcohol sectors endorsed by the Directors General of Customs and Taxation on 26 April 1998 and approved by the Council of Economic and Finance Ministers (ECOFIN) on 19 May 1998, which identified the setting-up of a computerised system as being a long-term response to the identified weaknesses of the current-paper based system.