German Court to Clarify Fundamental Difference Between Customs Duty and Import VAT

In a case referred to the CJEU, a Swiss resident brought a sailboat to Germany for repair without a customs declaration. This formal error triggered an immediate customs debt. However, the court questioned if import VAT was also due, revealing a fundamental difference:

Customs duty acts like a “border guard”. It is triggered by a formal breach of rules at the border itself - in this case, the failure to declare the boat.

In contrast, import VAT is a consumption tax, acting like a “market supervisor”. It is only triggered if goods enter the “economic cycle” and have the potential to be consumed in the internal market.

The German Court must now clarify if a simple repair is sufficient to constitute such an entry into the economic cycle.

Key takeaway

This case is a stark reminder that minor customs errors can lead to major costs. The distinction between customs duty and import VAT is crucial for risk management in all temporary import, repair, or processing scenarios. Businesses should review their special customs procedures to ensure they are correctly applied and to mitigate the risk of unforeseen tax liabilities.

Reference

GC Case T-383/25 (referral from German Federal Fiscal Court, VII R 17/22)