To ensure that the tax due on a second-hand vehicle transferred from another Member State does not exceed the amount of the residual tax incorporated in the value of similar vehicles already registered in the national territory, Member States, when levying a registration tax on second-hand vehicles, must take into account the loss of value due to the use that the vehicle has suffered over the years.
Some Member States perform an individual assessment or expert examination of each single vehicle (for example Denmark). However, the Court has accepted that a Member State may establish the value of a second-hand vehicle by means of fixed scales determined by regulation or administrative provisions and calculated on the basis of objective criteria. Such scales and criteria must ensure that the value of the second-hand vehicle is established at an amount very close to its actual value. In this respect, the Court has highlighted that a system of taxation of imported second-hand vehicles which takes into account the actual depreciation of the vehicles on the basis of general criteria should be structured in such a way, making allowance for the "reasonable approximations" inherent in any system of that type, as to exclude any discriminatory effect.
The case law of the Court has set out useful principles on the degree of precision that fixed scales and criteria should afford in order to reflect the actual loss of value of a second-hand vehicle that is transferred from another Member State.
For example, the Court[21] has decided that a system where the depreciation of either the value of the second-hand vehicle, or of the tax, stops at 10% of the initial value of the vehicle as new does not guarantee that the amount of tax does not exceed the "residual tax" incorporated in the value of a similar vehicle already registered in the national territory. In other words a depreciation that stops at 10% while typically the value of a vehicle depreciates further is not enough to reflect the real loss of value and ends up in over taxation of second-hand vehicles.
The Court[22] has also found that the annual depreciation in the value of cars is in general considerably more than 5%, that depreciation is not linear, especially in the first years when it is much more marked than subsequently, and that vehicles continue to depreciate more than four years after being put into circulation. A vehicle starts to depreciate as soon as it is bought or brought into use.
Moreover, the Court[23] has pronounced on a taxation scale for imported second-hand cars, which was based on a single criterion of depreciation, holding that it was not sufficient to ensure that the value of the second-hand vehicle is established at an amount close to the actual value of the second-hand vehicle. Other factors of depreciation have to be taken into account, such as the make, the model, the kilometres driven, the method of propulsion, the mechanical state or the state of maintenance of the vehicle.
A tax on a second-hand vehicle may be determined by means of a differentiated tax rate depending on e.g. the capacity, horse power, CO2 emission, applied to the value of a second-hand vehicle, or may consist in a specific amount per horse capacity, CO2 emissions etc. The fairness of the system is guaranteed not only by a correct determination of depreciation scales but also by a correct determination of the taxable value of second hand vehicles on which the tax is calculated[24].
