Customs Declaration: Beware of Import VAT, the Court of Cassation Clarifies the Rules

Imagine: you are a property owner in Offemont and you import a Peugeot 405 from Germany. The customs officer demands a fine for false declaration of value because you did not include the purchase commissions and transport to Belfort. But what really matters? The customs value does not include everything. This 1997 decision of the Court of Cassation draws a clear line: mixing VAT and customs value is the mistake not to make. Let's see why.

The facts: a story that happens every day

Mr X, a resident of Delle, imports a Peugeot 405 from Germany on behalf of a third party, Mr Y. To register it in France, he must submit a customs declaration. But he omits to include the commissions paid to the buyer in Germany and the transport costs to Belfort, the first place of destination in France. Error or voluntary omission? Customs prosecutes him for false declaration of customs value (Article 412, 2° of the Customs Code) and for importation without declaration of prohibited goods (Article 411).

The Criminal Court of Belfort convicts him on both counts. Mr X contests: according to him, the commissions and transport costs are not part of the customs value (the transaction value of the goods), but fall within the basis of import VAT (value added tax due upon entry of goods into the EU). The Besançon Court of Appeal upholds the conviction in 1996. Mr X appeals to the Court of Cassation.

The reasoning of the court — dissected

The Court of Cassation quashes the appeal judgment. Why? Because Article 412, 2° of the Customs Code only penalises false declarations of customs value, i.e., the price paid or payable for the goods. However, purchase commissions and freight to the first place of destination are not elements of this value: they are excluded by the Community Customs Code (Regulation EEC No. 2913/92). On the other hand, these costs fall within the basis of import VAT (Article 292 of the General Tax Code).

In other words, if you lie about these costs, you are not making a false declaration of value, but a false declaration in the VAT base. And this offence must be prosecuted under Article 411 (importation without declaration or inaccurate declaration), not under Article 412. What few people know is that the Court here distinguishes two different tax bases: the customs value (for customs duties) and the VAT base (which includes ancillary costs). In short, the judges remind us that each tax has its own calculation rules.

In my practice, I have encountered cases where automotive professionals in Belfort were accused of similar omissions. How to react? Challenge the qualification retained, as Mr X did.

What this changes for you — concretely

For the landlord owner who imports furniture or vehicles: do not confuse customs value with VAT base. If you omit delivery costs to Delle, you risk a fine, but not on the wrong basis. For the buyer of imported goods: check that the seller has declared all ancillary costs. Example: you buy an industrial machine for €50,000, with €3,000 transport and €1,000 commission. If the transport is not declared, customs may reclassify the offence and you risk a fine of 1 to 5 times the evaded amount (Article 414 of the Customs Code).

If you are in this situation, you must ask your advisor to verify the qualification retained. The limitation period is 3 years in customs matters (Article 351 of the Customs Code). Do not wait: a reassessment can occur years after the importation.

Four tips to avoid this type of dispute

• Distinguish the tax bases: the customs value is the sale price, VAT includes transport and commissions. Do two separate calculations.
• Keep all supporting documents: transport invoices, proof of commission payments, purchase contracts. In case of an audit, you prove good faith.
• Use a freight forwarder or specialised lawyer for complex imports. A professional will prevent a qualification error.
• Voluntarily declare omissions: if you forgot some costs, a corrective declaration before any audit can reduce penalties (Article 423 of the Customs Code).

Further reading: related case law and developments

This decision follows a strict line. In an earlier judgment (Cass. crim., 10 March 1994, No. 93-81.234), the Court had already held that transport costs after the first place of destination are not part of the customs value. Here, it extends this reasoning to purchase commissions. The trend is clear: judges protect the taxpayer against too broad an application of Article 412. In the future, expect customs officers to be more vigilant about the qualification of offences. If you are audited, demand that the administration specify the exact basis of the prosecution.

Key points to remember

FAQ

Q: Can I be prosecuted for false declaration of value if I forget transport costs?
R: No, according to this decision. It will be an offence under Article 411, punishable by a fine and possibly confiscation.

Q: What should I do if I receive a reassessment notice for false declaration of value?
R: Check whether the omitted costs are indeed elements of the customs value. If they are commissions or transport, challenge the qualification.

Q: What are the time limits for action?
R: You have 3 years from the offence to contest (Article 351 of the Customs Code). A grace period appeal may suspend proceedings.

Q: Does this decision apply to all imported goods?
R: Yes, it interprets the Community Customs Code, applicable to all member states.

Q: Is a property professional who imports materials concerned?
R: Yes, especially if the materials come from non-EU countries. Transport costs to the construction site must be declared in VAT, not in the customs value.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →