Ireland - EC requests modification of tax regime for certain motor vehicles

January 27: The European Commission formally requested Ireland to modify how motor vehicles less than three months old are taxed so that the Irish rules comply with EU law.

According to an EC release (IP/12/62, 26 January 2012), the European Court of Justice (ECJ) established that a vehicle starts to lose its value as soon as it is bought or brought into use. Also, under EU case law on car taxation, the amount of tax due cannot exceed the amount of tax supported by similar vehicles that are already registered in the national territory and are incorporated in their value. EU rules prohibit Member States from imposing higher taxes on products of other Member States than imposed on similar domestic products. The intention is to allow for complete neutrality of internal taxation regarding competition between products already on the domestic market and imported products.

Under Irish law, vehicles that are less than three months old or cars that have travelled less than 3,000 km are taxed the same as new vehicles. The EC views this treatment as a “discrimination” of these vehicles because they are proportionally subject to more tax than new vehicles purchased in Ireland.

The request made by the EC of Ireland, to modify its taxation of vehicles, is in the form of “a reasoned opinion” (the second stage of an infringement procedure). If the Irish rules are not brought into compliance within two months, the EC may refer the matter to the European Court of Justice.

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