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VAT must be levied on road tolls in France, Ireland and the UK, as it is already in the majority of member states w...
VAT must be levied on road tolls in France, Ireland and the UK, as it is already in the majority of member states which operate road tolls, the European Court of Justice has ruled.

To bring themselves into line with those member states they must repay VAT own rsources going back several years, with interest for late payment

The supply of services is subject to VAT under the terms laid down by community legislation (the 1977 'Sixth VAT Directive'), which covers all economic activities carried out for the purpose of obtaining income on a continuing basis.

Bodies governed by public law are exempt: they do not pay VAT if they carry out the economic activities concerned, under a special legal regime applicable to them, as public authorities (even where they collect dues, fees, contributions or payments in connection with such activities).

The commission has asked the court to declare that France, the Netherlands, Greece, Ireland and the United Kingdom are breaching community law by not levying VAT on road and motorway tolls.

The court firstly stresses the very wide scope of this legislation, which is applicable regardless of the purpose or results of the economic activity in question. Accordingly, it considers that motorway operators are carrying out an economic activity within the meaning of the community legislation: they supply users with access to roads in return for payment.

Whether they are public or private, they thus supply a service for consideration. The court therefore considers that there is a direct link between the services rendered - supply of access to roads - and the monetary consideration received - payment of a toll.

The court goes on to consider whether the five member States are eligible for the exemption by virtue of which bodies governed by public law are not considered to be taxable persons in transactions carried out as public authorities.

The court has held that two conditions must be satisfied for the exemption to apply:

the tolls must be operated directly by public bodies

AND under conditions different from those applying to private traders

The court finds that in France, Ireland and the United Kingdom, the activity of providing access to roads on payment of a toll is carried out, at least partly, by traders governed by private law. Therefore, the VAT exemption is not applicable.

Having declared that these three States have infringed community law, the court has to decide whether France, Ireland and the United Kingdom must repay the VAT which should have been levied so as not to cause financial loss to the community. VAT is one of the community's own resources, the rules relating to which provide for interest to be charged for late payment.

As regards the financial consequences of its decision, the Court has held that the three States must pay VAT own resources retrospectively with interest for late payment:

in the case of France, from the 1993 budgetary year only,

in the case of Ireland and the United Kingdom, from the 1994 budgetary year only,

in light of the different dates on which the actions were brought.

On the other hand, the collection of tolls was or still is carried out by bodies governed by public law in the Netherlands (Wejschap Tunel Dordtse Kil) and in Greece (National Road Construction Fund); the commission has not established that that activity is carried out under the same conditions as those governing a private trader. Accordingly, the Netherlands and Greece have not been held to have failed to fulfil their obligations.

N.B. Cases concerning tolls in Portugal (C-276/98) and Spain (C-83/99) are pending before the Court.

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