Returned goods relief

Case

On 12 June 2025, the Court of Justice of the European Union ruled on the exemption from VAT under the VAT Directive and the DWU. It concerned a case where a Swedish owner made his horses available for horse races abroad. This case involved horse racing in Norway. As Norway was outside the Union customs territory, the owner should have declared his horses to the Swedish customs authorities on their return to Sweden. However, he had not done this. During a check, the Swedish customs authorities subsequently found this out.

As this was a re-importation within three years, the customs authorities had not levied import duties (also in view of section 203 of the DWU on duty-free returned goods). However, the customs authorities did find there that an amount of VAT had become due under the Swedish VAT Act.

Law

The dispute then laid in the interpretation of the VAT Directive. Under Swedish law, the owner was in principle eligible for VAT exemption only if no Customs debt had arisen. Failure to declare the goods gives rise to a Customs debt under section 79 DWU. However, there is an exception to this. If there is an exemption from import duties that follows in certain cases determined by law, then no Customs debt arises even if the formal requirements of Customs duty are not met. Since, according to Article 143 of the VAT Directive, goods are exempted from VAT if they are reimported and thereby qualify for an exemption from import duties as so-called returned goods, the question then arose whether non-compliance with formal requirements precludes the exemption from VAT on reimportation. Indeed, the exemption from the article technically requires the formal requirements to be met. Can the goods still be said to qualify for exemption if the filing requirements are not met?

Conclusion

According to the CJEU, the answer to that question is negative. The provision from the DWU exempting from import duties, even if a customs debt has arisen due to non-compliance with the formal requirements, does not prevent exemption from VAT on reimportation. That is, if a trader or owner imports his horses back into the Union customs territory, the exemption can still be granted even though a customs debt has technically arisen due to formal defects.

The reason for this is that the very purpose of the Article 86(6) exemption is that it can still be used even in cases of some formal defects. The only condition is that the Article 86(6) exemption still applies. Failure to comply with formal requirements may not constitute an attempt to defraud, but a simple failure to indicate or comply with all formal requirements is not enough for this.

This implies that the Swedish authorities are still free to grant exemption from VAT under these arrangements, and thus the Court of Justice concludes in this judgment.

By its general wording, this judgment seems to apply not only to schemes of reimportation, but to all schemes that an importer could normally use to obtain exemption from import duties and VAT, even if not all the formal requirements are met.

Want to know more?

If you are challenged by customs authorities when importing, it is wise to get assistance from a specialist lawyer who can help you with how to deal with customs authorities.

Have you been told that you have been issued with a VAT or customs debt? Or do you have another legal question regarding customs law? If so, please feel free to contact Wolfs Advocaten. We will be happy to help you further.