ECJ judgments

The negligent breach of customs formalities may not preclude the application of the relevant import VAT-exemption

C‑125/24. – Palmstråle

Unless the importer is acting with fraudulent intent, a mere breach of customs formalities cannot, in itself, justify the denial of import VAT exemption for the re-importation of previously exported goods.

The plaintiff in this case temporarily exported racehorses from Sweden to Norway for competition purposes. On the return trip, the plaintiff failed to present the animals to customs and did not request their re-release into free circulation—this came to light during a roadside check shortly after crossing the border. The Swedish customs authority did not dispute that the re-importation of the horses qualified for customs duty exemption under Article 203 of the Union Customs Code. However, it concluded that since the plaintiff did not apply for the customs exemption, the corresponding VAT exemption on importation could not be provided either. The plaintiff contested the VAT liability. The case ultimately reached the Swedish Supreme Administrative Court, which referred the case to the Court of Justice of the European Union (CJEU) for a preliminary ruling.

In its judgment in Case C-125/24, the CJEU held that EU customs law protects good-faith debtors. Accordingly, where an economic operator acting in good faith breaches customs formalities negligently, and does not deliberately mislead the customs authority, an irregular importation in itsels cannot lead to the consequence that the importer is denied the VAT exemption associated with a customs-exempt re-importation.

This judgment is not only instructive for racehorse owners but also for all businesses engaged in exporting goods to third countries, as the same rules apply to returned goods.

Full English text of the judgement

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