The Norwegian value-added tax exemption for low-value goods imported by consumers does not constitute state aid, according to a decision taken by the European Free Trade Association Surveillance Authority (ESA).
The ESA came to this conclusion after investigating a complaint from the Enterprise Federation of Norway (Virke) that the VAT exemption on imports into Norway with a value not exceeding NOK350 (USD41.50) unfairly discriminates against domestic retailers.
Virke argued that the VAT exemption provided for in Section 5-9-1 of the Norwegian Customs Regulation constitutes a form of state aid within the meaning of Article 61(1) of the European Economic Area (EEA) Agreement because it deprives the Norwegian Government of tax revenue.
According to Virke, foreign vendors benefit from this aid indirectly because under normal circumstances they have the right to deduct the VAT initially levied on them, passing the effective taxation burden on to final consumers.
Virke cited a previous case involving state aid measure in favor of electric vehicles (Decision No 150/15/COL), in which the ESA found that a zero-rating VAT scheme for electric vehicles and batteries indirectly favored manufacturers and dealers of electric vehicles or batteries for electric vehicles. Virke said this decision supports its own case because the VAT exemption for imported goods of lesser value will increase demand for the products eligible for exemption. Thus, an indirect advantage will be provided for dealers and manufacturers of such goods.
However, in a statement summarizing its decision (Decision 155/16/COL), published on July 13, the ESA said that the measure in question "does not favor certain undertakings or the production of certain goods, as required by Article 61(1) of the EEA Agreement."
"ESA found that the exemption has the effect of expediting and simplifying the customs clearance process. It is thus necessary for the functioning and effectiveness of the Norwegian custom system. Consequently it must be considered as justified by the nature and general scheme of the system."