The Court of Justice of the European Union (CJEU) has delivered its judgment in Case C-596/23, Pohjanri, referred to it by the Administrative Court of Helsinki (Helsingin hallinto-oikeus), Finland.
In its judgment, the Court interpreted Article 36(1) of the now-repealed Excise Duty Directive (Directive 2008/118), holding that a seller established in one EU Member State may be liable for excise duty in the EU Member State of destination if they play an active role in the transport process such as by recommending specific transport companies on their website or facilitating the logistics. Such involvement qualifies the transaction as ‘distance selling’ under EU law.
In this case, the Court found that an undertaking in Germany had indirectly arranged the transport of alcoholic goods to Finland by integrating transport options into its online sales process. Even though the buyer paid the transporter directly, the seller’s role in suggesting and enabling the transport meant that the transaction qualified as ‘distance selling’ under EU law, making the seller liable for Finnish excise duties.
Background and Facts
When purchasing the goods from a seller’s online store, that offers goods for sale from Germany, customers in Finland are offered a choice of transport goods. They are the distant ‘seller’ of the alcoholic goods. In line with Rosengren (Case C-170/04) and Commission v Sweden (Private imports) (Case C-186/05), the seller does not transport the alcoholic goods themselves, but offers potential buyers the option at the online checkout to arrange the transport of the goods from the seller in Germany to their home in Finland.
The private import of alcoholic goods can be subject to excise duties. The referring court in this case is trying to decipher who is to handle the levying of the excise duties in this case: the seller? or the transport?
The case involves an undertaking’s website, which recommended specific transport companies to customers, provided information on transport costs, and facilitated the transport process through direct links to the transport companies’ websites.
In other words, when purchasing the goods from a seller’s online store (goods for sale from Germany), customers in Finland are offered a choice of transport goods. The seller does not transport the goods themselves but offers potential buyers the option at the online checkout to arrange the transport of the goods from the seller in Germany to their home in Finland.
The dispute is between a German company, B UG, and the Finnish Tax Authority (Verohallinto), over the liability for excise duties on alcohol sold online and delivered to a private individual in Finland.
The Finnish Tax Authority argued that this level of involvement constituted ‘distance selling’, as in its view, had effectively arranged for the transport, thus making that undertaking in Germany liable for excise duty in Finland.
The undertaking in Germany contested this, claiming it merely facilitated access to transport providers, and did not organise the shipment itself.
The Administrative Court of Helsinki (Helsingin hallinto-oikeus) made a reference for a preliminary ruling to the Court of Justice of the European Union (CJEU), wanting to know ‘who’ is to handle the levying of the excise duties in this case: the seller? or the transporter?
In legal terms, this was phrased as:
- Does merely recommending transport companies on a seller’s website make the seller liable for excise duties in the destination Member State?
- If the seller’s website transmits order information to the transport company without the buyer’s intervention, does this constitute indirect transport by the seller?
Applicable law
The case concerns the interpretation of Article 36(1) of the Excuse Duty Directive (Directive 2008/118).
The core issue revolves around the interpretation of ‘distance selling’ under Article 36(1) of Directive 2008/118. It stipulated that,
‘1. Excise goods already released for consumption in one Member State, which are purchased by a person, other than an authorised warehousekeeper or a registered consignee, established in another Member State who does not carry out an independent economic activity, and which are dispatched or transported to another Member State directly or indirectly by the vendor or on his behalf shall be subject to excise duty in the Member State of destination.
For the purposes of this Article, ‘Member State of destination’ shall mean the Member State of arrival of the consignment or of transport.’
Note, however, the Excise Duty Directive has been repealed and replaced by the Excise Duty Recast Directive (Directive 2020/262).
Opinion of the Advocate General
The Opinion of Advocate General Pikamäe was delivered on 26 September 2024 (it can read here).
He commenced by noting that the case offers the Court the first opportunity to rule on the scope of that provision of Directive 2008/118, by indicating the degree of involvement of the seller in the transport of excise goods that makes it possible to identify ‘distance selling’, and thus, to conclude that the seller is liable to pay excise duty in the Member State of destination of those goods.
The Advocate General analysis drew on the principles established in previous case-law, particularly the judgment in EMU Tabac and Others (C-296/95), which emphasised the importance of the seller’s role in the transport of goods. The Advocate General also considers the judgment in KrakVet Marek Batko (C-276/18), which dealt with similar issues in the context of value-added tax (VAT).
From this, he drew the criteria for determining the seller’s involvement include the significance of delivery in the seller’s commercial practices, the attribution of choices related to transport methods, the burden of risk in transport, and the payment arrangements for the goods and their transport.
Advocate General Pikamäe proposed that the Court interpret Article 36(1) of Directive 2008/118/EC to mean that excise goods should be considered ‘dispatched or transported to another Member State directly or indirectly by the vendor or on his behalf’, if the seller guides the purchaser’s choice of the transport company.
This includes situations where the seller’s website recommends specific transport companies, provides information about transport costs, and contains links to the transport companies’ websites, which transmit information about the goods to be transported without further intervention by the purchaser.
He emphasised that such actions by the seller constitute sufficient involvement to classify the transaction as ‘distance selling’, making the seller liable for excise duties in the Member State of destination. For him, he argued that this interpretation aligns with the economic and commercial realities of the transactions and prevents sellers from evading excise duty liabilities through indirect means.
In other words, the Finnish tax authority should win the case given that for him, the undertaking’s actions amount to sufficient involvement to classify such transactions as ‘distance selling’.
Judgment of the Court
The Court began by situating Article 36(1) of the Excise Duty Directive (the Directive) within the broader framework of the Directive, which aims to ensure that excise goods are taxed in the Member State of consumption. Article 36(1) of the Directive specifically governed distance selling, where excise goods released for consumption in one EU Member State are sold to private individuals in another EU Member States and transported by or on behalf of the seller. For the Court, Article 36(1) of the Directive ensures that such goods are taxed in the EU Member State of destination, and it assigns liability to the seller or, in some cases, a tax representative.
The central issue was whether the actions of the undertaking in Germany, recommending transport companies and transmitting order data, constituted indirect transport by the seller.
The Court emphasised that the term ‘indirectly’ in Article 36(1) of the Directive must be interpreted broadly to reflect the economic reality of the transaction. The Court rejected a formalistic approach that would allow sellers to avoid liability by outsourcing logistics, whilst at the same time still orchestrating the transport process.
In this case, according to the website of the undertaking, it displayed transport options during the checkout process, provided links to specific transport companies, and automatically transmitted order information to the selected transporter’s website. These features, the Court held, demonstrated that the undertaking guided the purchaser’s choice and facilitated the transport, even if the buyer paid the transporter directly and entered into a separate contract. Thus, according to the Court, the undertaking in Germany was indirectly involved in the transport, and fell within the scope of Article 36(1) of the Directive.
The Court reiterated that economic substance must prevail over legal form. The fact that the buyer and transporter had a separate contract was not decisive. What mattered was the seller’s role in enabling and directing the transport. This interpretation, according to the Court, aligned with its earlier case law (e.g., Case C-296/95, EMU Tabac), which had emphasised that excise duty liability should reflect the true nature of the transaction, not merely its contractual structure.
The Court acknowledged that EU Member States may impose procedural measures for collecting excise duties, but these must not undermine the effectiveness of EU law. In this case, national law in Finland had correctly transposed Article 36(1) of the Directive.
For the undertaking in question, it left it to the referring national court to verify the factual details, such as the extent of the seller’s involvement in transport, but provided a clear legal standard: if the seller facilitates or influences the transport process, it is liable.
Operative part of the judgment
The Court thus ruled that Article 36 of the Excise Duty Directive:
‘must be interpreted as meaning that in the situations referred to in that provision, excise goods must be regarded as ‘dispatched or transported to another Member State directly or indirectly by the vendor or on his behalf’, such that that vendor is liable for excise duty in that other Member State, where he or she acts in such a way as to guide the purchaser’s choice of the company responsible for the dispatch and/or transport of those goods by suggesting and facilitating the use of certain companies that can be responsible for that.’
Analysis
This Pohjanri judgment has implications for cross-border e-commerce in sectors where goods are subject to excise duties (e.g., alcohol and tobacco). Sellers can no longer avoid liability by outsourcing transport, while maintaining control over the logistics process. If a seller’s website recommends transporters, automates data transfer, or integrates shipping options, it may be deemed to have indirectly arranged transport.
Read the judgment
The judgment of the Court of Justice of the European Union in Case C-596/23, Pohjanri, referred to it by the Administrative Court of Helsinki (Helsingin hallinto-oikeus), delivered in December 2024, can be read here.