Article 110 of the Treaty on the Functioning of the European Union (EU)

This essay shall explore several aspects of Article 110 of the Treaty on the Functioning of the European Union (EU),^[1] which reads as follows:

[(1)] No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

[(2)] Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.^[2]

This essay shall explore Article 110 in three parts. First, it shall examine the political and historical context of Article 110 and its predecessors in earlier Treaties. Second, the legislative intention of the Article shall be discussed; namely, what effect it was intended to have, and what principles the Article was intended to promote as part of the EU, formerly the European Economic Community (EEC). Third, the effect of the legislation will be examined by way of how it was interpreted and applied in case law.

Both Article 110(1) and 110(2) are directed to the same purpose, namely the prevention of protectionism measures which take effect against goods inside an EU Member State’s borders.^[3] For this reason, the writer submits that the reader can accept the political context and the legislative intent are the same for both Article 110(1) and Article 110(2). Only in terms of how the legislation is applied will there be separate discussions of Article 110(1) and Article 110(2).

(It should also be made clear what this portion of legislation applies to: goods, which are characterised as ‘products which can be valued in money and which are capable, as such, of forming the subject of commercial transactions.’^[4])

Political context

Article 110’s predecessor, Article 95 EEC, was first enshrined as a provision in the Treaty of Rome. This Treaty came after the Council of Europe was established in 1949.^[5] This Council was created in order to bring about a ‘lasting peace’ between the signatories, all of whom had suffered devastating losses of life, limb, and property in the Second World War.^[6] The six founding states of the EEC were also determined to prevent such a catastrophic event from happening again, and sought to do so by committing to an economic community.^[7] This commitment eventually led to the signing of the Treaty of Rome in 1957. This Treaty established the EEC, a separate organisation from the Council of Europe, and its common market, the idea of which was to allow people, goods, services and capital to move freely across borders.^[8]

The aim of the legislation

As with all other aspects of EU law, it was the intention of the EEC and EU lawmakers that the free movement of those goods would be based on the ‘rule of law, inasmuch as neither its Member States nor its institutions can avoid a review of the question whether the measures adopted by them are in conformity with the basic constitutional charter, the [EEC] Treaty.’^[9] This meant the principles and the effects of free movement of goods were to have the force of law behind them.^[10]

Article 110(1) of the Treaty on the Functioning of the European Union, in its 2012 consolidated version,^[11] was formerly Article 95 EEC, subsequently Article 95 EC and then Article 90 EC. The 1992 Treaty on European Union amended the EEC Treaty to establish the European Community.^[12] In that latter treaty, with a view to establishing the European Community, the free movement of goods was already a fundamental and entrenched principle of the EU.^[13]

Returning to the 1992 Treaty, at Title II, Article G(2), which replaced Article 2 of the EEC Treaty, the aim of instituting the free movement of goods was part of a larger task: ‘by establishing a common market and an economic and monetary union and by implementing the common policies or activities [such as free movement of goods]… to promote throughout the Community a harmonious and balanced development of economic activities, sustainable and non-inflationary growth respecting the environment, a high degree of convergence of economic performance, a high level of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States.’^[14] Therefore, free movement of goods was seen as a central element for promoting these wide-ranging principles of an economically harmonious and vibrant Community.^[15]

The free movement of goods was to be achieved by the ‘elimination, as between Member States, of customs duties and quantitative restrictions on the import and export of goods.’^[16] Article 110 can be distinguished from Article 30 TFEU, the latter of which prohibits customs duties on imports and exports and ‘charges having equivalent effect’^[17] imposed because goods cross a border between Member States. Article 110 was intended to prevent discriminatory or protective internal taxation of goods from other Member States. The distinction depends on the nature of the charge, not simply where it is collected: a charge forming part of a general system of internal taxation applied systematically by objective criteria regardless of origin falls under Article 110. Articles 30 and 110 are mutually exclusive.^[18]

In summary, Article 110 was part of a wide-ranging effort by the EU, formerly EEC, to bring about the goals set out in the 1992 Treaty and the Treaty of Rome. The free movement of goods was seen as essential for achieving these goals. For its part, Article 110 was to sit alongside other provisions relating to free movement of goods in order to give a complete protection of the principle of freedom of movement.^[19]

The changes to the law: Article 110(1) and (2)

Article 110 first had to be rendered enforceable. The writer submits it should, therefore, be seen in light of the jurisprudence of the Court of Justice of the European Union (CJEU). After it was determined that Article 12 of the Treaty of Rome had direct effect in the ‘forceful… vigorous’^[20] ruling of Van Gend en Loos^[21], the direct effect of Article 110’s predecessor was confirmed in Lütticke (57/65), EU:C:1966:34. Taxpayers could therefore rely on its prohibition of discriminatory internal taxation before national courts. By contrast, Peureux confirmed that Article 95 did not prohibit a Member State from taxing its own products more heavily than imported products.^[22] The separate rule concerning non-fiscal barriers to trade was set out in Dassonville,^[23] in which the court said ‘All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade’ were measures having an effect equivalent to quantitative restrictions under what is now Article 34 TFEU, subject to possible justification.^[24] It has been suggested the aim was to promote market access (though others have submitted this goal adds nothing to the Dassonville ‘formula’^[25]).  Article 110 governs internal taxation separately from that Article 34 case law.

The CJEU has determined Article 110(1) was drafted to prohibit taxation of two forms; first, any taxation that is directly discriminatory against imported goods when set against similar domestic goods, meaning any distinct tax banding based on the origin of goods.^[26] The second form was indirectly discriminatory taxation against similar imported products; this meant the prohibition of any criteria used for determining tax which result, even if only in some cases, in imported goods being taxed more heavily.^[27] Arguably, the latter imposes a significant onus on Member State legislatures, and neither direct nor indirect discrimination is permissible.^[28] Member State legislatures may nevertheless differentiate taxes by objective criteria, such as raw materials or production processes, where this pursues economic policy compatible with EU law and avoids any direct or indirect discrimination or protection of competing domestic products.^[29]

Article 110(2) has been explained as a means of prohibiting internal taxation that protects domestic goods against imported goods which, although not ‘similar’, are nevertheless in competition with them.^[30] As has been observed, whether goods are ‘in competition’ will depend on whether they are perceived by the consumer to be interchangeable. One indication is whether the price of one product rises in relation to another, and subsequently consumers switch to the lower-priced product. Competition may be partial or potential; existing consumer habits are not conclusive.^[31]

A problem that has been observed in the drafting of Articles 110(1) and (2) is that it is not always obvious whether certain goods are similar, or are ‘merely’ in competition.^[32] Products are similar where their characteristics and uses meet the same needs from the consumer’s point of view; they need not be identical. It is submitted the problem is significant because a breach of either (1) or (2) will bring about a different response: a breach of Article 110(1) requires the importing Member State to remove the excess tax on similar imported goods, whilst a breach of Article 110(2) means the protective effect enjoyed by the domestic goods must be removed, without necessarily equalising the tax rates.^[33]

Friedbacher suggests that the CJEU was motivated by ‘a sense of waning faith in the Court’s institutional legitimacy’^[34] in the case of Keck and Mithouard^[35], where hitherto the CJEU had been questioned for its right and ability to enforce EU legislation on free movement of goods.^[36] The case concerned what is now Article 34, not Article 110. It excluded certain selling arrangements from Article 34 where they apply to all relevant traders operating within the national territory and affect domestic and imported goods in the same manner in law and in fact.

Conclusion

Article 110 has its roots in the pan-European project of economic prosperity and peaceful competition. The Article is a formulation of the free movement of goods, and that principle was seen as essential in promoting the various goals of the European Community. Article 110 was intended to achieve the objective of free movement of goods by preventing discriminatory or protective internal taxation measures. It has been able to do so not just through the application of Articles 110(1) and (2), but also the case law which affirms the Article has direct effect. The Article itself has problems about similarity versus competing; nevertheless Article 110 is a necessary part of free movement of goods.

2026 update

Article 110 TFEU remains part of the Treaty on the Functioning of the European Union and continues to regulate internal taxation within the EU internal market. The provision prohibits Member States from imposing internal taxes that discriminate against products from other Member States or that indirectly protect domestic production.

However, the United Kingdom left the European Union on 31 January 2020, and the transition period ended on 31 December 2020. Article 110 no longer binds the UK generally as a Member State. The general retention of directly effective EU rights under section 4 of the European Union (Withdrawal) Act 2018 ended at the end of 2023. Section 28(3) of the Finance Act 2024 also expressly excludes Articles 110 and 111 from the special rules preserving EU rights for interpreting UK VAT and excise law, with effect from 1 January 2024.^[37]

Historical UK disputes remain subject to the law and transitional provisions applicable to them. In Northern Ireland, Article 5(5) of the Windsor Framework expressly applies Article 110 TFEU to and in the UK in respect of Northern Ireland. Specified EU rules on VAT and excise concerning goods also continue to apply under Article 8 and Annex 3.^[38] Article 110 TFEU should now be understood primarily as a rule of EU internal market law governing taxation between EU Member States, alongside those distinct post-Brexit arrangements.

Last updated: 11 November 2026

Cases

• Chemial Farmaceutici SpA v DAF SpA (140/79) [1981] E.C.R. 1
• Commission of the European Communities v Italy (7/68) [1968] E.C.R. 423
• Commission of the European Communities v Italy (24/68) [1969] E.C.R. 193
• Criminal Proceedings against Bernard Keck and Daniel Mithouard [1993] ECR I-6097
• H Hansen Jun & OC Balle GmbH & Co v Hauptzollamt Flensburg (148/77) [1978] E.C.R. 1787
• Humblot v Directeur des Services Fiscaux (112/84) [1985] E.C.R. 1367
• Alfons Lütticke GmbH v Hauptzollamt Saarlouis (57/65), EU:C:1966:34
• Les Verts v Parliament (294/83) [1986] E.C.R. 1357
• Procureur du Roi v Dassonville (8/74) [1974] E.C.R. 837 (ECJ)
• SA des Grandes Distilleries Peureux v Directeur des Services Fiscaux de la Haute-Saone et du Territoire de Belfort (86/78) [1979] E.C.R. 897
• Van Gend en Loos v Nederlandse Administratie der Belastingen (26/62) [1963] E.C.R. 1

Treaties

• Treaty on European Union [1992] OJ C 191/1
• Consolidated Version of the Treaty on the Functioning of the European Union [2012] OJ C 326

Journal Articles

• Scott Crosby, ‘The single market and the rule of law’ (1991) E.L.R. 458
• Todd J. Friedbacher, ‘Motive unmasked: the European Court of Justice, the Free Movement of Goods, and the Search for Legitimacy’ (1996) E.L.J. 226
• Pierre Pescatore, ‘The doctrine of ‘direct effect’: an infant disease of Community Law’ (2015) E.L.Rev 135

Websites

• Alina Tryfonidou, ‘Free movement of goods’ accessed at http://login.westlaw.co.uk/maf/wluk/app/document?docguid=I9BE67280860F11E4ADF190901621701C&context=32&crumb-action=replace&crumb-label=Free movement of goods
• ‘The history of the European Union: 1945-1959’ accessed at https://european-union.europa.eu/principles-countries-history/history-eu/1945-59_en

Footnotes