The European Commission may refer Ireland and Spain to the EU's Court of Justice if they do not modify the way in which they tax leased or rented vehicles from another Member State, as well as company cars in the case of Spain, so as to ensure their rules comply with EU legislation.

The European Commission has formally requested Ireland and Spain to change their rules on vehicles from other Member States. According to EU rules a Member State can only levy a registration tax on a leased or rented vehicle from another Member State in proportion to the use in its own territory. In addition, a vehicle that is registered by a company in one Member State and used by an employee resident in another Member State cannot be taxed unless the vehicle is used on a permanent basis in the resident's country.

With regard to the Irish case, under its law, an Irish resident who rents or leases a vehicle in another Member State is obliged to pay the full amount of the registration tax. An exemption or refund is therefore not possible if a car is used in Ireland only for a short period. This discriminatory tax treatment is contrary to EU rules. Spain also levies the full amount of registration tax on a leased or rented vehicle by a Spanish resident in another Member State (unless the leasing period is shorter than three months in any twelve months). Moreover, regarding company cars, under Spanish law, the registration tax on a car can be levied in full if an employee who works for a company established in another Member State uses a car in Spain and is resident in Spain. This is also in breach of EU rules.

The Commission may refer Ireland and/or Spain to the EU's Court of Justice in the absence of compliance with EU law within two months. The provisions written above are contrary to EU rules on free movement of workers and on freedom of establishment, fundamental principles of the EU's Single Market.