Tax disputes over the customs value of goods: can mistakes be avoided?
Tax disputes over the customs value of goods: can mistakes be avoided?
Tax dispute practice shows that close ties with the seller (exporter), an excessively low price of imported goods, and an improperly described product are circumstances that can lead to additional challenges and import taxes.
This autumn, the Supreme Administrative Court of Lithuania (LVAT) concluded a decade-long dispute over the determination of the customs value of imported goods (decision of 28 September 2022 in case A-926-968/2022). This case examined a situation where goods (air conditioning parts) were purchased and imported from a third country at a total price that was significantly, i.e., 3-4 times lower than that of similar goods purchased by other importers. The buyer (importer) and the seller (exporter) had a close relationship (the transactions were concluded and executed under conditions that were not typical of normal (commercial) practice, and there were no other objective circumstances that could justify the economic logic of such transactions). Lithuanian customs did not recognize the transaction value of the imported goods and, in order to determine their customs value, relied on the data accumulated in the customs clearance information system (PREMI DB) based on the general description of the goods provided by the declarant and the unit of measurement – kg, i.e. based on the specified weight of these goods and the TARIC code. This means that a uniform price per kilogram was calculated for all parts, even though the market price of each type of part is different.
The importer in this case used virtually all possible legal remedies to prove its case. After the first stage in the Supreme Administrative Court of Lithuania, the company appealed to the European Court of Human Rights, which recognized that its right to a fair trial had been violated: The Lithuanian court did not sufficiently justify its refusal to refer the case to the Court of Justice, nor did it cite examples of the Court of Justice's practice in similar situations.
The Supreme Administrative Court of Lithuania, having resumed proceedings in this administrative case, decided to refer the matter to the Court of Justice, asking whether, given the diversity of the parts covered by this TARIC code and the lack of a detailed description of the imported goods, it is possible to rely on the transaction value of similar goods, when the very concept of "similar goods" presupposes the homogeneity of the goods being assessed, which is difficult to reconcile with the diversity of goods covered by the TARIC code in question. The Court of Justice has explained that the Union Customs Code is based on a system of declarations designed to minimize formalities and customs controls and to prevent fraud or irregularities that could cause damage to the Union budget. Therefore, where a company has not provided sufficiently accurate or reliable data on the customs value of the goods in question, it is possible to rely on information in the national database on goods covered by the same TARIC code and purchased from the same seller. Thus, the final decision in this case was not favorable to the taxpayer – it was decided that the additional taxes imposed on the importer were calculated correctly.
We would like to point out that in tax dispute practice, the declared transaction value is usually not recognized if customs has reasonable doubts as to whether the declared transaction value reflects the total amount paid or payable, and the importer's explanations regarding the value differences do not dispel the customs authorities' doubts. Both in the case examined by the Supreme Administrative Court of Lithuania and in other cases, the Court of Justice has clarified that this ground is independent and that it alone is sufficient to disregard the declared transaction value (for more details, see the judgment of the Court of Justice of 16 June 2016 in Case C-291/15; the judgment of 9 June 2022 in Case C-599/20; the Supreme Administrative Court's
judgment of 28 September 2022 in Case A-926-968/2022). The Court of Justice has recognized that a transaction value of imported goods that is exceptionally low compared to average statistical purchase prices is indicated by a situation where it is more than 50% lower than the average statistical value. This is sufficient to justify the customs authorities' doubts and their decision not to confirm the declared customs value of the goods.
Comment by Commission member Andrius Venius:
What can we learn from this situation?
First of all, an incomplete description of the goods in the import declaration and invoice may result in higher import duties. For example, in the case under consideration, the imported goods are described as "air conditioning parts" and the unit of measurement is kg. Such a description of goods may cover a wide variety of air conditioning system parts for different purposes (plastic motor covers, metal rings, pipes, transmission cables, switches, pressure sensors, vortex diffusers, electronic circuits, etc.), which may obviously vary in value. Therefore, in the event of a dispute over the customs value of the goods, the specific goods imported were not taken into account, and the customs value was determined on the basis of a very general description of the goods, which covers all goods classified under a specific TARIC subheading. The main advice is that it is important to describe the goods correctly. A more accurate description of the goods or more detailed information about the imported goods could have resulted in a more accurate and lower customs value, bringing it closer to reality.
Secondly, the low price of imported goods, compared to the transaction values of similar goods declared by other importers, can become a serious challenge in justifying the accuracy of the declared transaction value and avoiding additional tax calculations.
A taxpayer importing goods from third countries may naturally and reasonably ask what constitutes a low price compared to the values declared by other importers. Can only a difference of the amount examined and confirmed by the Court of Justice (50% lower than the average statistical value) justify customs doubts about the acceptability of the declared price? It should be noted here that various factors are important in determining whether the declared value is close to another value, such as the nature of the imported goods, the characteristics of the industry producing the goods, the time of year when the goods are imported, the method of sale, the type of goods, and therefore the price difference confirmed by the Court of Justice in a specific case should not be taken as absolute. However, in all cases where customs authorities have doubts about the accuracy of the declared transaction value, it is advisable for the taxpayer to be patient and provide all available documents related to the purchase of the goods and detailed explanations that the declared transaction value reflects the full price paid (payable) for the imported goods and leaves no room for doubt.
We would like to remind you that the Union Customs Code provides for a number of methods for determining customs value (transaction value, customs value of identical or similar goods, unit price of goods, deductive or estimated value method, and the so-called alternative method, i.e. calculation of customs value based on available data), but it is the transaction value method, which reflects the actual price, that is considered the most appropriate and most commonly used for determining customs value. Under this method, the transaction value of imported goods is calculated on the basis of documents relating to the purchase and sale of goods, i.e. invoices, contracts, transport service invoices, etc. However, it cannot be applied in all cases, for example, when it is determined that the buyer is subject to restrictions on the disposal or use of the goods; the sale of the goods or their price is influenced by certain conditions or circumstances whose impact on the goods being valued cannot be assessed; when the relationship between the buyer and the seller has influenced the price, etc.
Last updated: 21-11-2025
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