The importance of 'residual VRT' when calculating VRT on a used car import

14.5psi

Sharing my research on how the VRT system currently works in Ireland and potential areas it falls short of the EU's Article 110 of the TFEU (concerning member states using internal taxation as trade barriers).

Exec. summary: Revenue is required, per European Commission guidance, to limit its VRT charge to the 'residual' VRT of the same car previously registered in Ireland. But in practice it charges well above this on certain cars.

Some facts as I know it:
1. The open market selling price (OMSP) is the price inclusive of VRT and taxes.

2. VRT is not applied like VAT. It is simply a percentage of the OMSP, i.e., OMSP*VRT rate. Oddly, neither the Finance Act 1992 nor any amendments state how exactly VRT was to be applied. It seems it was left to Revenue to decide. The lay explanation is, Revenue asks motor distributors 'how much you reckon dealers will sell this car for?' The distributor replies 'around [€50,000]'. Revenue says 'OK, we'll take X% of that €50,000 OMSP as VRT'. (An interesting side note is that while the same car in Germany sells for 20%-30% less than in Ireland, the net price of the car in Ireland is less than the net German price. Presumably German manufactures discount cars sold to Ireland to account for the higher taxation and justify it by including fewer features.)

3. The European Commission states that the member state cannot charge more in VRT than the residual value of said tax in the same or similar vehicle previously sold in the state.

4. Revenue applies the newer and more stringent CO2 and NOx pricing to cars manufactured before these rules/rates (and hence before newer emissions tech) were introduced. For example, a 2014 Euro 5 car which wasn't charged a NOx tax when sold new in Ireland is now being charged a NOx tax when imported as a used vehicle.

Example of the above in practice:

When I input the following details into the VRT calculator: June 2014 BMW 535 3.0 Diesel Automatic, D F11 M SPORT TOURING 5DR AUTO DIESEL ESTATE 154, 216000 km, 80 mg per km Nox.

The Current OMSP determined by Revenue is 13049 euro.

The residual VRT in this vehicle is 13049 multiplied by 23 percent (which was the VRT rate of a car emitting 154g per km CO2 in 2014) equals 3001 euro.

Compare this to the VRT estimate if I were to import the same used car from, say, Germany. The VRT estimator is saying the VRT is 5367 euro. That is greater than the residual VRT in the same car sold in Ireland when new.

EU primary law (e.g., Article 110 TFEU) does not allow this to be the case. Revenue, to my knowledge, cannot overtax a used EU vehicle import relative to the residual tax in the same or similar vehicle sold in Ireland when new.

Search for "Frequently asked questions on: Passenger car taxation" and take a read of the answer to question 7 on this European Commission questionnaire which clearly states: "According to the settled case-law the Court of Justice, when tax is charged in relation to a motor vehicle's registration in that territory, and is hence applicable to both used and new motor vehicles, the amount of tax levied on a used motor vehicle must not exceed the residual tax in the value of a similar car registered on the domestic market as new. This means that the tax which was paid in a particular Member State on a similar car when it was new must be reduced by the percentage of depreciation that car has undergone on that domestic market."

Interim conclusion: If Revenue's VRT charge/estimate is greater than the residual VRT in the same or similar vehicle that was previously sold and registered in Ireland, then this is a strong case to appeal.

I have raised the above concern with Revenue and await their opinion. Perhaps I am missing some other piece of EU legislation that throws cold water on the European Commission's requirement that tax cannot exceed the residual tax in the same vehicle previously sold in the member state.

I also have sources/links to support all of the above, but am unable to include them as I am a new Boards member.

colm_mcm

Are you addressing the fact that the NoX charge wasn’t in place in 2014, and is now?

Are you including NoX charge in your VRT figure for bringing the 2014 car in from Germany?

14.5psi

https://www.boards.ie/discussion/comment/123577148#Comment_123577148

Regarding both questions, it appears to me that the NOx component of VRT is applied to cars imported from other EU member states that were first registered in the other EU member state before Ireland introduced NOx charges. From my research of ECJ case law, preliminary opinions and European Commission communications to member state governments, this is not allowed under Article 110 TFEU. The reason is because the tax charged on a second hand vehicle from an EU member state cannot exceed the residual tax contained in the value of the same or similar cars currently registered in Ireland.

The same applies for higher CO2 rates. This is not allowed.

For clarity, I am only talking about imported cars from other EU member states. I am not referring to UK imports.

User1998

https://www.boards.ie/discussion/comment/123638424#Comment_123638424

And what about the fact that that NEDC emissions are now converted to WLTP emissions to calculate VRT?

14.5psi

https://www.boards.ie/discussion/comment/123638695#Comment_123638695

This is not allowed under Article 110 TFEU as it results in a higher tax than the 'residual tax' incorporated in similar competing vehicles already registered in Ireland from new.

Again, I am referring only to EU imports. Revenue can do as they wish with UK or NI imports.

Dirty Nails

https://www.boards.ie/discussion/comment/123666194#Comment_123666194

Unless I've missed the point, all I've taken from this is that your research is pretty much irrelevant. Given the number of LHD cars imported in to Ireland.