No customs duties and Import VAT for returned goods despite incorrect customs handling – Just in Time for Summer Holidays

With summer holiday season just around the corner, the European Court of Justice (ECJ) has delivered a traveller-friendly ruling. In its judgment of June 12, 2025 (C125/24 – -Palmstråle), the ECJ clarified that individuals returning to the EU from non-EU countries – such as Norway – are not automatically liable for import VAT if they fail to complete certain customs formalities, provided they acted in good faith and the goods were originally exported from the EU and thus fulfilling all prerequisites for a duty free import as “returned goods”.¹

What happened?

After exporting two of her horses to Norway to participate in Horse Races, a Swedish horse owner brought the horses back into the European Union through a border crossing between Norway and Sweden, without presenting them to customs. Shortly after passing the customs post, she was stopped by a road patrol of the Tullverket (Customs Authority, Sweden). The Swedish customs authorities took the standpoint that in the light of Article 203 of the Union Customs Code, the horses were not subject to import duty in respect of that reimportation transaction, but the Customs Authority took the view that the horse owner was liable for VAT in the amount of 41.178 kronor (SEK) (approximately EUR 3.750). According to that authority, although Paragraph 5 of Chapter 2 of the Law on exemption from tax on importation, transposing Article 143(1)(e) of the VAT Directive into Swedish law, provides for an exemption from VAT in the event of the reimportation of goods, that exemption could not be granted to the horse owner, who had not declared the horses for release for free circulation or applied for exemption from import duty. The ECJ overruled this, stating that mere formal errors are not enough to trigger taxation if the person’s conduct was acting in good faith.

What does this mean?

• Relief from import duties applies even when customs formalities are missed, if the substantive conditions for the relief are satisfied.
• The answer to the question of when there is an “attempt to deceive” within the meaning of Art. 86 (6) UCC is further clarified by the ECJ. Ignorance, negligence or simple laziness to comply with formalities does not necessarily constitute an attempt to deceive.
• This should make it difficult for customs administrations to collect duties retrospectively if, apart from the fulfillment of certain formalities, all requirements for exemption from the import duties are met.
• The ruling covers not only horses, but any movable goods – including mobile phones, laptops or other high-value personal items often taken on international trips.

But be aware: Generally, it cannot be recommended not to fulfill customs formalities properly.

Firstly, the exemption only applies if it can be proven that the goods fulfill the prerequisites for the duty exemption.

For import under the returned goods scheme, this would mean that e.g., receipts, customs declarations, travel documentation or, an official proof of the previous export of the goods from the EU's customs territory (export notice), should be available.

Furthermore, it should be clear that the incurrence of customs or import VAT debt should not have a punitive character. It is therefore up to the Member States to ensure compliance with customs formalities on imports by imposing appropriate fines for non-compliance.

Conclusion: 

A well-timed decision for holidaymakers – the ECJ confirms that formal mistakes in customs handling won’t automatically lead to VAT charges. However, it is also not a carte blanche that would allow customs formalities to be disregarded. Just remember: keep your receipts and travel docs handy, especially this summer. And be informed about customs handling of the goods you are taking with you, even if you are not traveling with horses.

1 ECJ , judgment dated 12 June 2025 – case C-125/24 – Palmstråle, ECLI:EU:C:2025:431, link to judgment: https://curia.europa.eu/juris/document/document.jsf?text=&docid=301165&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=4072037