European Union

ŠKO-ENERGO, s.r.o. v. Czech Appellate Financial Directorate (European Court of Justice, 2015)

Jurisdiction: European Union

Principle law(s): EU Emission Trading Scheme (EU ETS) (Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC)

Side A: ŠKO-ENERGO, s.r.o. (Corporation)

Side B: Czech Appellate Financial Directorate (Government)

Core objectives:

Challenged imposition of a gift tax to GHG emissions allowances granted free of charge under EU law

ŠKO-ENERGO, s.r.o. acquired free greenhouse gas (“GHG”) emission allowances pursuant to Article 10 of Directive 2003/87 (“Article 10”), which provided that EU Member states must allocate at least 90% of allowances free of charge from 2008 through 2012. The Czech Republic Tax Office levied a 32% gift tax on the allowances pursuant to Czech Law No. 357/1992, which had been amended in 2010 to impose gift taxes on free GHG emissions allowances. A court of appeal in the Czech Republic requested a preliminary ruling from the European Court of Justice on the question of whether Article 10 precludes application of the Czech gift tax to emissions allowances obtained free of charge. The Court concluded that the gift tax was inconsistent with Article 10, because it undermined the directive’s objective to temporarily reduce the economic impact of the EU GHG emission allowances market. The Court directed to the referring court the question of whether the gift tax “respect[s] the 10% ceiling on the allocation of emissions allowances.”
Case documents

Related laws and policies
  • This law implements European Union legislation
    EU Emission Trading Scheme (EU ETS) (Directive 2003/87/EC establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC)

    Passed in 2003 Legislative

    This Directive establishes a Community GHG emissions trading scheme from 2005, to enable the Community and the Member States to meet their Kyoto Protocol commitments. Directive 2004/101/EC reinforces the link between the EU's emission allowance trading scheme and the Kyoto Protocol by making the latter's 'project-based' mechanisms (Joint Implementation and the Clean Development Mechanism) compatible with the scheme. From 2005, all installations in the energy sector, iron and steel production and processing, the mineral industry, and the wood pulp, paper and board industry, and emitting the specific GHG associated with that activity, must possess a permit issued by the appropriate authorities. Each Member State must draw up a national plan indicating the allowances it intends to allocate for the relevant period and how it proposes to allocate them to each installation. The Directive also provides for flights that arrive or depart from a Member State's territory to be subject to the EU ETS (from 2012), measure that so far applies to intra-EU flights. Any operator failing to surrender the quantity of allowances commensurate with the emissions from his/her installation during the previous year will have to pay EUR100 (USD 125) per tCO2e and buy allowances for the excess emissions. The 2003 Directive was amended by Directive 2004/101/EC, Directive 2008/101/EC, Regulation (EC) No 219/2009, Directive 2009/29/EC, Decision No 1359/2013/EU, Commission Regulation (EU) No 389/2013, Regulation (EU) No 421/2014 and Regulation (EC) 2017/2392. Directive 2009/29/EC amends Directive 2003/87/EC so as to improve and extend the greenhouse gas emission allowance trading scheme of the Community. Directive (EU) 2018/410 was adopted in March 2018 to enhance cost-effective emission reductions and low-carbon investments.

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