Rule makers in Brussels have been busy trying to streamline customs procedures within the European Union (EU). But ham-fisted drafting of the new rules, which came into force on 1 May 2016, has made it risky for EU residents to rent cars in Switzerland and drive them in the EU. In addition, an article on the British news site, The Guardian, has added to the confusion.
The latest EU rules, like many before them are designed to prevent car smuggling. With a few exceptions, you must pay local VAT in the country where you live on the things you buy, regardless of where you shop. If someone living in Germany buys a car in Switzerland, they must pay German VAT on the purchase. Likewise if a Swiss resident buys a car in Germany, they must pay Swiss VAT and any other import duties on it.
One way a German resident could get around paying German VAT would be to have a friend, who resides in Switzerland, buy a car for them. This way they could drive the car, tell customs they borrowed it whenever asked, and never pay German VAT. Customs know this trick and have created rules that thwart it by allowing them to extract VAT and other import duties from the person driving the car rather than the owner.
The problem is, the same rules designed to catch VAT and customs cheats, are catching people who have innocently borrowed a car from a friend or family member.
The latest rule changes introduced on 1 May 2016, have added to the confusion and made it dangerous for EU residents to hire cars in Switzerland and drive them in the EU.
It is where you live that matters
A recent Guardian article says: “The rule bans EU citizens from driving non-EU registered hire cars in the EU”. This is incorrect. The rules refer to “habitual residence”, not citizenship. It is where you live that matters, not what passport you carry. If you are a British citizen living in Switzerland, driving a Swiss registered car into the EU for no longer than six months, then no duty is payable. If on the other hand you are a Swiss citizen, who lives in Britain, driving a Swiss registered car in the EU, then you could encounter serious problems.
- Drivers beware of hefty fines when crossing Swiss borders (Le News)
- Cross border car fines: lousy information (Le News)
In 2014, a German resident visiting his daughter in Switzerland drove his son-in-law’s Swiss-registered car across the border to go to his daughter’s holiday home in Austria. Stopped by Austrian customs, and unable to provide appropriate documentation, 73-year old pensioner Dieter Johann von der Heide was hit with a whopping fine of CHF 17,900 – 10% of the value of the car in customs costs and 19% import tax.
The new rules. Some detail.
The new rules on cross-border car movement are contained in a 557 page tome, which contains everything from rules on banana weighing certificates to the forming of sugar lumps. For those interested in the detail, the relevant text can be found in Article 215 (page 95) of Commission Delegated Regulation (EU) 2015/2446.
The relevant part of the document says:
1. Natural persons who have their habitual residence in the customs territory of the Union shall benefit from total relief from import duty in respect of means of transport which they use privately and occasionally, at the request of the registration holder, provided that the registration holder is in the customs territory of the Union at the time of use.
2. Natural persons who have their habitual residence in the customs territory of the Union shall benefit from total relief from import duty in respect of means of transport which they have hired under a written contract and use privately for one of the following purposes:
(a) to return to their place of residence in the customs territory of the Union;
(b) to leave the customs territory of the Union.
In plain English, the first paragraph means, if you live in the EU and borrow someone’s car, no duty is payable if the registered owner is in the EU while you are driving it. So an EU resident borrowing a Swiss-registered car from a Swiss resident and driving it in the EU, only works if the registered owner is in the EU at the same time as the driver. Someone living in Switzerland, who lends their Swiss-registered car to a British resident to hop over the border to get some sausages in Germany while they stay at home to get the barbecue ready, could expect a panicked call from their friend at German customs.
The second paragraph says that if you live in the EU and hire a car, no duty is payable if you are driving home or leaving the EU. So an EU resident hiring a car in Switzerland can only drive it home or out of the EU. The wording seems to exclude a British resident driving a Swiss registered rental car around Germany on holiday – they are neither on their way home nor leaving the EU.
Customs advice inconsistent
Germany’s customs website says EU residents may in exceptional circumstances be permitted to import a vehicle that has been registered in a non-EU country into the EU and use it temporarily if the person under whose name it is registered is in the EU at the time it is being used. This is consistent, however two further exceptions go beyond the rules above. German customs says a non-EU registered car can be imported into the EU in an emergency, or if the car is rented and re-exported within five days – the five day period can be extended to eight days with consent from German customs.
It is not clear where the emergency or five and eight day exemptions come from. The combined 1,428 pages of the two documents (EU 2015/2446 and EU 2015/2447), which implement the recent rules make no mention of them.
Austria’s customs website refers specifically to Swiss rental cars and says that EU residents may enter Austria in a Swiss rental car for eight days from the start date of the rental contract or from the date entry was declared to and endorsed by Austrian customs.
3 June 2016 update: the Austrian customs website has been updated. The eight day rule has been removed. The page now says: “When using a foreign rental car, you may only return to the EU country that is your normal place of residence. You may not, for example, undertake a trip to another EU country.”
France’s customs website yielded no useful information.
Confusion reigns at car rental companies
Numerous travelers have reported being asked by car rental companies in Switzerland to sign waivers that make them liable for any taxes, fines, or charges levied by customs related to driving hire cars out of the country. Others have reportedly had Swiss-registered cars swapped for EU-registered ones after paying large surcharges.
Given the lack of clarity, some car hire companies seem to be taking no risks.
Le News called Avis in Switzerland and was told that a German resident could not drive a car rented in Switzerland in the EU.
Limiting the risk
One general rule of thumb to limit the risk is to only drive cars registered in the country or customs block (i.e. the EU) where you live. Every time you borrow or lend a car, ask yourself whether there is a mismatch between the car’s country of registration and the driver’s place of residence.
If you are renting a car, the same question should be asked.
For EU residents, the mismatch between a driver’s place of residence and the car’s can be avoided in Geneva. Geneva airport has a French side, where French registered cars can be hired. If you hire one of these cars make sure you avoid Swiss motorways when returning it – see how to avoid Swiss motorways. Switzerland charges CHF 40 for a sticker to use its motorways. French registered rental cars usually don’t have this sticker and you will be stopped by Swiss border staff and required to buy one if you cross at a border connected by a motorway.
If in doubt, declare
You are only considered a car smuggler if you cross the border. If you stop at the border and explain your situation to customs, the worst case scenario is you’ll be told that duty would be payable. You can then turn around and head back to arrange an alternative means of transport – a holiday spoiler, but not nearly as painful as a hefty customs bill.