Report for the Hearing in Case C-297/89
I — Facts and procedure
1. Legal background
1.1. The Community legislation
1. Council Directive 77/3 8 8/EEC of 17 May 1977 (Official Journal 1977 No L 145, p. 1) is the sixth directive on the harmonization of the laws of the Member States relating to turnover taxes (hereinafter referred to as the Sixth Directive). It lays down a uniform basis of value added tax (hereinafter referred to as VAT). Article 2 subjects to VAT the supply of goods or services effected for consideration within the territory of the country by a taxable person, and the importation of goods.
2. Title X sets out a common list of exemptions. Article 14 contains the exemptions on importation. Article 14(1) provides, inter alia, that:
3. There has been limited harmonization at Community level of the tax systems applicable to temporary imports. On 28 March 1983 the Council adopted Directive 83/182/EEC on tax exemptions within the Community for certain means of transport temporarily imported into one Member State from another (Official Journal L 105, p. 59). That directive requires Member States from 1 January 1984 to exempt such items from turnover tax, excise duties and any other consumption tax and the taxes listed in the annex thereto. Its scope is confined to temporary imports of certain non-commercial means of transport which have been acquired or imported in accordance with the general conditions of taxation in force on the domestic market of a Member State.
4. Article 3 concerns the temporary importation of certain means of transport for private use:
5. Article 5 provides specific rules for cases of temporary importation of private vehicles:
6. Article 7 sets out the general rules for determining normal residence as follows:
7. Article 9 contains certain special rules. One of those rules, which is contained in Article 9(3), concerns Denmark:
8. Article 10 contains final provisions. Article 10(2) provides:
9. On 4 February 1987 the Commission submitted a proposal to the Council for a directive amending Directive 83/182/EEC (Official Journal 1987 C 40, p. 7). The proposal sought to extend the exemptions provided for in Directive 83/182/EEC to include certain well-defined cases, notably where residents of a Member State have personal or occupational relations in other Member States and where there is clearly no intention of tax evasion or avoidance. The Council has not yet adopted that proposal.
1.2. The Danish legislation
10. The importation and temporary use of certain means of transport are governed by Ministerial Order No 24 of 30 January 1984 (Lovtidende A, 1984, p. 173), which transposes Directive 83/182/EEC into Danish law. Article 1 provides that persons nonresident within the Danish customs territory may import and use duty-free certain means of transport provided that such means does not belong to persons resident therein, is not used by them and is not used for the transport of third parties between places within the territory. Article 2(2) defines residence within the territory to mean that a person is considered to have established his residence therein when he has stayed there for a year. A person who has interrupted his stay within the territory is considered to have stayed there for a year if during the previous 24 months or less he has stayed there for a total of 365 days.
11. Although the importation of a means of transport does not fall within the scope of Order No 24 it is subject to the payment of VAT. Where that has already been paid for such means of transport in another Member State only the difference between the foreign VAT and the Danish VAT must be paid on importation. That is provided for by Ministerial Order No 367 of 29 June 1988 (Lovtidende A, 1988, p. 254). In addition to the requirement to pay VAT Danish law requires the registration of vehicles which are or will be used on Danish public roads within a period of 14 days after importation and at the same time payment of the registration tax.
2. Facts and main proceedings
12. On 6 April 1973 Nicolai Christian Ryborg, a Danish national, emigrated to the Federal Republic of Germany where he had obtained work and an apartment. In the following years he travelled frequently to Denmark in a German-registered motor car. The use of the vehicle in Denmark however did not mean, according to a letter from the Danish Ministry of Justice of 6 April 1982, that he had to register it in Denmark. The letter informed him that he should make a fresh application to the competent Danish authorities if he should change his residence or work.
13. In October 1982 he bought a new car which he registered in Germany. In the period from 12 November 1982 and 17 January 1984 he used the car to visit a woman friend resident in Denmark with whom he regularly stayed for the night. The Danish authorities took the view that Mr Ryborg's relationship with his friend was such that he must be regarded as normally residing at her home. On 17 January 1984 they confiscated the car on the ground that it ought to have been registered in Denmark.
14. Subsequently, by an information dated 9 August 1984, Ryborg was charged with the offence of intentionally smuggling, in that he imported the motor car in question into Denmark on 12 November 1982 without declaring it to the customs authonu for the purpose of payment of customs duties and of tax, and with the offence of using the car in Denmark between 12 November 1982 and 17 January 19M without having paid tax. He was further charged with having failed to have the motor car registered in Denmark and with having evaded the tax on motor vehicles Mr Ryborg was required to appear before the Kriminalret (Criminal Court) Sønderborg to answer those charges.
15. Before the Kriminalret the accused denied having taken up residence at his Danish friend's home. He acknowledged, however, that since the autumn of 1981 he had frequently spent the night at her home, that since July/August 1982 he had done so every weekday and some weekends and that the\had spent other weekends together in his apartment at Flensburg. They had also been on holiday together. When, one night even three weeks, he was on night duty at his place of work in Flensburg, he spent the night in his apartment there.
16. B\ļudgment of 6 September 1984 the Kriminalret found on the basis of his statements that Ryborg had been resident in Denmark for the purposes of the tax law from July/August 1982 and that he was guilt) on all the charges, save that the facts were not regarded as constituting intentional smuggling. He was fined DKR 30000 and ordered to pay a sum of DKR 31324 as Y AT
17. The prosecuting authority appealed against the judgment to the Vestre Landsret (Western division of the High Court) which, by judgment of 24 October 1984, found Ryborg guilty of all the charges in the information including intentional smuggling and increased the fine to DKR 66000. As regards the intentional nature of the smuggling the Landsret found that Ryborg had admitted that he had spent all the nights of the week at the home of his friend in Denmark since July/August 1982 and that he had been informed by the letter from the Ministry of Justice of 6 April 1982 of the contents of the rules on the duty of registration.
18. Ryborg appealed to the Højesteret for the judgment of 24 October 1984 to be quashed. The prosecuting authority claimed that the judgment should be upheld, save that the fine should be reduced to DKR 47000 and that the sum due by wav of VAT should be reduced to DKR 12054, in both cases in order to take account of the VAT paid on the car in Germany.
19. Since 17 January 1984, the date of its confiscation, the car has been in the police pound because Ryborg refused to lodge a guarantee for the taxes due. Since that date he has no longer been able to visit his friend daily. They meet only at weekends. Finally, it is necessary to point out that on 13 March 1989 Ryborg obtained German nationality.
3. The questions referred to the Court for a preliminary ruling
20. Before the Højesteret Ryborg argued, in support of his submission that his conviction should be quashed, that it was contrary to the EEC Treaty and Directive 83/182/EEC to require the registration of the vehicle and payment of the taxes in question. The prosecuting authority, on the other hand, considered that the administration was entitled to require registration and payment, since Ryborg was to be regarded as having his normal residence within the meaning of the second paragraph of Article 7(1) of the directive in Denmark.
21. The accused also claimed that the Danish authorities had required registration of his vehicle and the payment of the additional taxes without previously discussing or negotiating with the German authorities and that that failure was contrary to Article 10 of Directive 83/182/EEC. The prosecuting authority, on the other hand, took the view that Article 10 did not require the national authorities to seek contact with the authorities of another country in specific cases and that it did not confer on citizens rights on which they could rely before national courts.
22. In view of the different interpretations of Community law the Højesteret decided by order of 22 August 1989 to refer the following questions to the Court of Justice for a preliminary ruling under Article 177 of the EEC Treaty:
23. The Højesteret observed that it considered it necessary to put the first question in the form of alternatives; alternative 1 is based on the facts as found by the Sønderborg criminal court, whilst alternative 2 is solely based on the facts expressly referred to in the judgment of the Landsret. The Højesteret stated that its decision must be taken on the basis of the facts underlying the judgment of the Landsret, but that it was not wholly clear whether the Landsret came to its decision solely on certain admissions of Ryborg before the Kriminalret or whether it also relied on his explanations with regard to his relationship with his friend in Denmark.
4. The proceedings before the Court
24. The order of reference was received at the Court Registry on 28 September 1989.
25. Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice written observations were lodged:
26. Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General the Court decided to open the oral procedure without any preparatory inquiry.
27. Pursuant to Article 95(1) and (2) of the Rules of Procedure, the Court, by decision of 22 May 1990, assigned the case to the Sixth Chamber.
II — Summary of the observations submitted to the Court
1. The temporal scope of Directive 83/182/EEC
28. Mr Ryborg observes that facts which gave rise to the main proceedings took place in the period between 12 November 1982 and 17 January 1984, whereas Directive 83/182/EEC was to have entered into force no later than 1 January 1984. In his opinion that partial temporary lack of overlapping does not mean, however, that the contested period cannot be considered on the basis of the directive, since the prosecuting authority stated in the main proceedings that the national legislation satisfied the requirements of the directive in relation to residence between 1 January 1984.
2. The definition of normal residence
29. Mr Ryborg observes that the rules concerning normal residence in Article 7(1) of Directive 83/182/EEC place the accent on the place of the personal ties where the individual concerned regularly stays. The directive does not define what is to be understood by such ties. In a reply to a Parliamentary Question the Commission nevertheless stated that the personal ties of an unmarried couple are determined according to the same criteria as those applied to determine the personal ties of other persons, namely: common household, frequency of visits, shared expenses and the like (Official Journal 1987 C 351, p. 16). Mr Ryborg considers that in the present case the application of those criteria does not permit the conclusion that his relationship with his Danish friend was to be equated with a married or unmarried relationship. There is no evidence of a common household or any shared expenses. It is on the other hand common ground that he had kept, during the period in question, his employment and apartment in Flensburg and since the confiscation of his car he visited his friend only at weekends.
30. Mr Ryborg states, moreover, that the argument put forward by the Danish authorities is paradoxical: if he had in fact registered his car in Denmark and paid the taxes due he would probably have satisfied their requirements, but that would have given him no guarantee of the attitude of the German authorities, who might in their turn have confiscated his car. In that paradoxical situation the question also arose of the period within which Mr Ryborg ought to have registered his car in Denmark. The Danish authorities simply considered that Mr Ryborg had changed his residence because of the frequency of his visits to Denmark, without stating from what date he was required to register it. It may also be asked what would happen if his relationship with his friend became less intense so that the frequency of his visits was reduced to weekends.
31. The result of that paradoxical and imprecise attitude on the part of the Danish authorities is, in Mr Ryborg's view, that a car is not a suitable means of transport for persons who have ties in two States on either side of the frontier. That would be incompatible with the objective of Directive 83/182, which is to ensure free movement of persons within the Community. The Court of Justice has also stressed the importance of that objective in its case-law concerning factual situations prior to the entry into force of the directive (judgment of 3 October 1985 in Case 249/84 Ministère Public v Profant [1985] ECR 3237, 3250 and judgment of 6 July 1988 in Case 127/86 Ministère Public and Another v Ledoitx [1988] ECR 3741).
32. In the view of the Danish Government Article 7(1) of Directive 83/182/EEC does not expressly cover those who cross the frontier daily to their work and back. It is, however, necessary to refer to that provision for it contains the general rules on the definition of normal residence. Those rules attach decisive importance to the place where the individual has his personal ties. The declaration made by the Council and the Commission on the adoption of Directive 83/182/EEC in relation to Article 7(1) sets out a basic principle which should apply in determining personal ties in situations such as the present. That principle is based on the family or social ties of the person concerned. In that respect it is necessary to know where he spends his free time. Free time covers not only holiday periods but also the nights of the week.
33. In that respect it is necessary above all to attach importance to marital ties or relationships similar to marriage. In the latter case it is in particular very important to know when the relationship began, how the parties are organized from the practical and economic point of view and what proportion of their free time they spend together. Apart from such personal ties it is necessary to consider the relationships which the person concerned has with other members of his family and his social relations at his place of leisure.
34. According to the United Kingdom the application of Article 7 of Directive 83/182/EEC is essentially a question of fact for the national court to determine. In making an assessment the national court must however observe the fundamental objectives of the harmonization of VAT, which include facilitating the free movement of persons and goods and preventing double taxation. Although the Court stressed the importance of those objectives in cases relating to temporary importation prior to the entry into force of Directive 83/182/EEC, the principle established in those cases should not be departed from in the present case. Mere findings of fact are not subject to the restrictions generally placed by Community law on the national court's discretion. It would not be appropriate for the Court to lay down the number of nights per week as the criterion to establish residence or personal ties.
35. The United Kingdom considers that the problem raised by the Højesteret in the first question should be viewed from another angle: it should be asked whether the German authorities could have confiscated Mr Ryborg's car if he had registered it in Denmark. The answer to that hypothetical question would have been in the negative.
36. The United Kingdom proposes several criteria to determine residence within the meaning of Article 7 of Directive 83/182/EEC. The formalities of declaration of departure and arrival from one country to another are not necessarily decisive on their own but nevertheless provide useful prima facie evidence. It is clear from the wording of Article 7 that actual physical presence is important in determining the personal ties of an individual. Mere ownership of property in one Member State cannot constitute personal ties without reasonably permanent presence in that property. Finally, the United Kingdom observes that the general rule in Article 3 of Directive 83/182/EEC that an individual may not import his car duty-free into the Member State of his normal residence must, for purposes of legal certainty, remain the general rule in spite of the exception which the Court made to it in the judgment of 6 July 1988 mentioned above. The large variations in relation to the taxation of vehicles in the Community and the possibilities of fraud in relation thereto necessitate the existence of such a rule.
37. The French Government observes that the fact that Mr Ryborg spent almost all the nights of the week and a large part of his free time and holidays at the home of his friend in Denmark should suffice to regard him as resident in Denmark within the meaning of Directive 83/182/EEC. In 1983 he stayed more than 185 days in Denmark and had his personal ties there. The fact that he had accommodation in Flensburg does not affect the main aspect in determining his residence, which must be the place of his regular and long-term personal ties.
38. The Commission states in the first place that Article 9(3) of Directive 83/182/EEC gives in relation to Denmark a special definition of normal residence. That definition refers to the spouse and children of the person concerned whereas Article 7 relies on his personal ties. The Commission observes that spouse means solely the person with whom a marriage has been contracted (judgment of 17 April 1986 in Case 59/85 State of the Netherlands v Reed [1986] ECR 1283).
39. Because the contested facts mainly took place before Directive 83/182/EEC entered into force the Commission considers that the case-law of the Court relating to temporary importation cases prior to that date is still of interest. According to that case-law a reasonable degree of freedom of movement for owners of vehicles was already guaranteed by the provisions of the EEC Treaty, in particular Article 5. It also requires Member States to avoid double taxation (judgment of 11 December 1984 in Case 134/83 Abbink [1984] ECR 4097). Directive 83/182/EEC must be interpreted in the light of that case-law since the aim of the directive is to consolidate the provisions of Community law which already governed free movement of Community residents using their car.
40. The judgment of 11 December 1984 referred to above also stated the requirement that there be objective and ascertainable criteria in relation to rules intended to avoid tax fraud. That requirement also applies to the interpretation of normal residence. The Commission considers that the definition the Court gave it in a social security case (judgment of 12 July 1973 in Case 13/73 Angenieux v Hakenberg [1973] ECR 935) satisfies that requirement. According to that definition residence is where the person concerned has established the permanent centre of his interests.
41. The definition of normal residence must satisfy not only that requirement of objectivity but also the requirement of uniform acceptance throughout the Community. It is apparent from the case-law of the Court (judgment of 14 July 1988 in Case 284/87 Schäflein v Commission [1988] ECR 4475) that by reason of the latter requirement normal residence cannot be determined on the basis solely of the number of nights which the individual spent during a particular period in a country other than where he has had his work and home for several years. There must also be other factors establishing a special link between Mr Ryborg and the place in Denmark where he has regularly spent the night. Those other factors must be considered specifically in each particular case and must show a certain stability, continuity, intention and appearance. Evidence may be supplied in that respect by the fact of having contracted financial obligations such as the payment of rent or the purchase of goods and normal services (food, heating, telephone and so forth).
3. Cooperation between national administrations
42. Mr Ryborg considers that Article 10 of Directive 83/182/EEC must have direct effect. Without such effect individuals are without protection against arbitrariness by national authorities in tax matters. That applies especially in relation to a flagrant lack of collaboration in a case such as the present where the tax authorities of two Member States risk competing in relation to the obligations to register and tax a vehicle.
43. The Danish Government considers on the other hand that a provision of a directive can have direct effect only if it is unconditional and sufficiently precise. Article 10(2) of Directive 83/182/EEC does not satisfy those conditions. It leaves the Member States considerable discretion. It is a procedural provision, and cannot therefore create individual rights. The Danish Government observes moreover that Article 10(2) applies only if there are difficulties in the practical application of the directive. In the present case there were no such difficulties.
44. The United Kingdom observes that Article 10(2) of Directive 83/182 is intended simply to establish a procedure for administrative cooperation in relation to the communication and exchange of information between Member States with the aim of facilitating the task of a Member State in conducting an enquiry. It is possible to give a broader reading to Article 10(2) and argue that difficulties can mean any problems which arise, including questions of interpretation. But even so, the obligation to cooperate applies only if two Member States are involved. It does not cover the situation, such as the present, in which only the authorities of one Member State are concerned with the interpretation of the directive and that interpretation relates on the facts to a purely internal problem. The failure to consult before reaching a decision cannot affect the validity of that decision.
45. In the view of the French Government Article 10(2) of Directive 83/182/EEC does not have direct effect because it is clearly conditional and leaves it to the Member States to determine whether the application of the directive causes them difficulties. If a Member State can resolve a problem by simply reading the directive there is no obligation to consult. The Danish authorities would have had to contact the German administration only if they had been unable on their own to resolve the difficulties connected with the application of the directive or if the German authorities had taken the initiative in challenging the Danish interpretation.
46. The Commission observes that Article 10(2) of Directive 83/182/EEC imposes an unconditional obligation on Member States to cooperate to avoid double taxation on motor vehicles where two Member States require the registration of the same vehicle. The directive, which Article 189 of the EEC Treaty makes binding, would be deprived of its effectiveness if individuals were prevented from relying in court on the specific obligation to consult.
1 Language of the case: Danish.