Taxation after duty-free ends

The European Commission has announced that existing rules on VAT and excise duty will apply after July 1 1999 when the duty-free allowance is abolished. The system, according to taxation commissioner Mario Monti is `clear, simple and easily enforceable.`

Sales of goods onboard ships operating within the EU will be subject to excise duty at the rate applied by the country where the goods are loaded, allowing ferry operators to buy goods in the destination country with the lower duty rates. VAT will be applied at the rate of the country of departure.

The Commission says that trips from one EU member state to another are considered to be intra-EU journeys and are therefore subject to the rules, even where international waters are crossed. Duty-free goods such as alcohol or tobacco may be sold for immediate consumption onboard ferries provided that the national legislation of the member state grants such tax exemptions for stores on ferries.