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An analysis by Flick Gocke Schaumburg, Taxand Germany
The European Court of Justice (ECJ) has further restricted the criteria for denying transport responsibility in distance sales involving excise duties. In a recent case (C-596/23), the Court ruled that even indirect involvement in the transport process—such as recommending service providers and transmitting order details—constitutes participation by the seller.
This ruling reinforces that sellers cannot circumvent distance selling rules by structuring transactions to appear as if buyers arrange transport independently. The ECJ emphasised that objective circumstances, rather than formal legal arrangements, determine liability for excise duties in the destination country. Although based on an older directive, the judgment remains relevant under current excise duty regulations and could influence VAT treatment in similar cases. It aligns with previous ECJ rulings, affirming that mere facilitation of transport can trigger tax obligations.
Rainald Vobbe and Charlotte Pötters from our German member firm Flick Gocke Schaumburg have analysed this decision in more detail below, which underscores the increasing scrutiny of e-commerce logistics and tax compliance across the EU.
Distance sale in the area of excise duties- Transport responsibility
ECJ further restricts criteria for a lack of participation!
The ability to easily order goods online from abroad has led to a steady increase in cross-border trade. This is reflected in both the business-to-business (B2B) and business-to-consumer (B2C) sectors. To avoid competitive disadvantages for local suppliers, German VAT law and excise duty law provide for regulations for “distance selling”. It has led to taxation at the place of destination, at least in the B2C sector.
To take advantage of the often more favourable taxation regime of the country of departure, there are often arrangements in practice that allow the customer to receive goods from another (EU member) state without the seller applying the distance selling directives and taking the lower tax rate as a basis. This can significantly improve the margin for the seller. This is especially so in the B2C sector, as gross prices are deemed to have been agreed and the tax is therefore borne by the seller.
The key factor in determining is transport responsibility.
In a recent case (judgement of 19 December 2024 [C-596/23]), the European Court of Justice (“ECJ”) was faced with the question of the criteria according to which a distance sale or sales shipment also exists in special borderline cases and in doing so once again clarified its previous case law.
Background to distance selling
The excise duty regulations on distance selling were contained in Art. 36 of the Excise Duty Directive (Directive 2008/118/EC). This directive was repealed with effect from 13 February 2023. However, a corresponding provision can be found in Art. 44 of the (new) Excise Duty Directive (Directive 2020/262). In this respect, nothing has changed in the system of distance selling. This means that the ECJ’s decision is still relevant from today’s perspective (in all Member States) despite the outdated regulatory basis.
It regulates the excise tax treatment of cross-border deliveries of excisable goods. The aim is to simplify and harmonise cross-border online and mail-order trade.
Under these regulations, a distance sale exists if goods that have already been released for consumption in a Member State are acquired by a person established in another Member State who is not an authorised warehousekeeper or registered consignee and does not carry out an independent economic activity (i.e. private individuals). The goods are dispatched or transported directly or indirectly by or on behalf of the seller to another Member State. They are then subject to excise duty in the country of destination, i.e. the country in which the dispatch or transport ends. This leads to extensive legal consequences, such as the need to register in various countries as well as an increased administrative burden.
This often results in the desire to avoid participation in shipping or transport directly or indirectly and still support the consumer in the ordering process. The characteristic of participation in the dispatch or transport indirectly in particular often leads to difficulties in determining who bears the tax.
Comparable regulations can also be found in Art. 14(4) and Art. 33 of the VAT Directive (VAT System Directive – implemented in Germany by Sec. 3c of the German VAT Act [Umsatzsteuergesetz – UStG]), meaning that principles of jurisdiction are also regularly applied to VAT.
ECJ referral
In this context, the ECJ has now also had to comment on an enquiry by the Helsinki Administrative Court. Specifically, the issue was when the criterion of dispatch or transport indirectly by the seller is met.
The plaintiff before the Helsinki Administrative Court was a German company operating an online beverage trade. Customers were able to purchase alcoholic drinks via the website, which was also available in Finnish. During the ordering process, adverts for transport services from selected companies appeared, showing the current freight price for the total weight of the goods. After paying for the goods, the customer received a link that led to the selected transport service provider’s website. Only the contact details had to be entered there, but no more order data.
Payment for the transport was then made by the customer directly to the respective transport company. In addition, the plaintiff expressly notified its customers of a tax liability in Finland.
The plaintiff was therefore of the opinion that it neither performed dispatch or transport directly nor indirectly to Finland. Instead, the plaintiff was merely offering the option of collecting the order from a warehouse located in Germany or selecting a transport service for this purpose. Only a few transport service providers are mentioned on the website. However, dispatch and transport are ultimately carried out by the customers themselves.
The Finnish tax authorities took a different view. The plaintiff dispatched or transported the drinks directly or indirectly to Finland, meaning that it acted as a distance seller and was liable for excise duty in Finland. The German company appealed against the decision to the administrative court.
The court doubted whether at least in this particular constellation, there was an dispatch or transport indirectly by the seller.
Judgement of the ECJ
The ECJ states comparatively succinctly that the present constellation does indeed constitute dispatch or transport indirectly by the seller. According to the ECJ, the use of the term “indirectly” in Art. 36(1) of Directive 2008/108 means that not only cases in which the seller provides the transport or dispatch service itself are to be covered. Instead, it should also cover cases in which the seller indirectly controls the transport or dispatch, for example by offering the customer a choice of transport service providers recommended by the seller.
The provision makes it clear that it is not so much the legal characterisation of the processes that is important as the objective circumstances. Through the advertisements on the website and the links to the respective websites of the transport service providers as well as the automatic transmission of the order data to the selected service provider, the plaintiff controlled the selection of the buyer and performed a dispatch or transport indirectly. Due to the objective approach, the conclusion of two separate contracts by the customer is also irrelevant.
Conclusion
Even if the judgement relates to an old regulatory situation, the principles are transferable to the current legal situation and are also an indication as to how decisions could be made for the area of VAT beyond excise duties.
In any case, in conjunction with the judgement in the KrakVet case, the ECJ has now defined very narrow limits within which (indirect) transport responsibility can still be denied.
Until now, it was already clear that civil law agreements alone are not decisive for transport responsibility (see ECJ C-278/18 case KrakVet; C-296/95 case EMU Tabac). The regulations on distance selling cannot be circumvented if the circumstances are considered objectively. The ECJ has now also ruled that even the naming of the service provider and the transmission of the order data by the seller should suffice as co-operation. The regulations can therefore only be excluded if the seller withdraws completely from the transport process.
Especially in e-commerce, however, the customer will not want to take care of the transport itself, meaning that the distance selling rules will regularly apply.
The judgement is also likely to have relevance beyond the scope of excise duties because, as already mentioned, the VAT Directive also recognises the criterion of participation indirectly in dispatch or transport and assumes corresponding consequences for the seller in the case of distance sales.
In any case, the comparable wording of the directives suggests that the ECJ’s statements are also relevant for VAT classification.
Rainald Vobbe (Tax Advisor, Diplom-Finanzwirt, Expert advisor on customs and excise; Partner)
Charlotte Pötters (Lawyer, Associated Partner)
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