The transition from CCC to UCC with regard to royalties and license fees, and necessary consequences for the VAT-Directive

Abstract: As the Union Customs Code will replace the Community Customs Code with effect from 1 May 2016, the thesis focuses on the new treatment of royalty payments for customs purposes and its legal consequences. In a first step, a comparison between the Community Customs Code and the Union Customs Code reveals that importers will have to face a significant increase in the customs liability of royalty payments. Secondly, with the European Union being a member of the World Trade Organization, it is investigated whether the topic-related provisions of the Union Customs Code comply with the provisions of the General Agreement on Tariffs and Trade. A survey of the advisory opinions and commentaries of the World Customs Organization indicates that the European customs law will follow the interpretation of the World Customs Organization to a great extent. Due to the fact that the taxable amount for import value added tax purposes corresponds with the customs value, the validity of this rule under the Union Customs Code is explored: an examination of the case law on the direct linkage between a supply and its consideration proves this rule as being justified. On the basis of these findings, then, the thesis discloses the considerable problem of double taxation of royalties and license fees in the case of taxable persons being exempt from the value added tax, as the royalty payment for the imported goods establishes a second taxable transaction, namely the supply of a service. Therefore, it is submitted to exclude the supply of services rendered in relation to the importation of goods from the taxable amount for import value added tax purposes.