EU VAT law and shipping – recent ECJ case law

The role of taxation, especially value added tax, in international maritime transport has become a highly controversial subject in the EU – disagreement as to how taxation should be used to regulate the environmental and social cost of international shipping while ensuring the economic advantage of a highly efficient international transportation system is rife. This wider debate clearly envisions changes to the current tax regime but, at a more down-to-earth level, another contest is taking place – how current VAT law should be applied to international shipping. At the heart of both debates is the exemption from VAT in the Sixth VAT Directive (Directive 77/388/EEC) which has now been ‘recast’ in Directive 2006/112/EC (which came into force on 1 January 2007).