# C_2005257EN.01000402.xml

| 15.10.2005 | EN | Official Journal of the European Union | C 257/4 |
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15.10.2005

EN

Official Journal of the European Union

C 257/4

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Action brought on 17 August 2005 by the Commission of the European Communities against the Federal Republic of Germany

(Case C-318/05)

(2005/C 257/08)

Language of the case: German

An action against the Federal Republic of Germany was brought before the Court of Justice of the European Communities on 17 August 2005 by the Commission of the European Communities, represented by Richard Lyal and Kilian Gross, acting as Agents, with an address for service in Luxembourg.

The Commission of the European Communities claims that the Court should:

| 1. | declare that, by excluding school fees in respect of education abroad without exception from the tax-deductible special expenses provided for in Article 10(1)(9) of the Einkommensteuergesetzes (EStG) (German Law on income tax), the Federal Republic of Germany has failed to fulfil its obligations under Articles 18, 39, 43 and 49 EC; |
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1.

declare that, by excluding school fees in respect of education abroad without exception from the tax-deductible special expenses provided for in Article 10(1)(9) of the Einkommensteuergesetzes (EStG) (German Law on income tax), the Federal Republic of Germany has failed to fulfil its obligations under Articles 18, 39, 43 and 49 EC;

| 2. | order the Federal Republic of Germany to pay the costs. |
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2.

order the Federal Republic of Germany to pay the costs.

Pleas in law and main arguments

According to the European Commission, the rule laid down in Article 10(1)(9) of the EStG is incompatible with the freedom to provide services and the rights to freedom of movement provided for in the EC Treaty.

Under Article 10(1)(9) of the EStG, taxable persons in Germany are able to deduct from their taxable income 30 % of the fees paid to state-approved or recognised private schools as special expenses from the overall amount of their taxable income. It is not possible to deduct tax in respect of school fees paid to private schools established in another Member State.

The Commission considers that the general exclusion of foreign private schools from that tax reduction is discriminatory. In its view, the tax disadvantage in respect of foreign private schools also infringes the freedom of foreign schools to provide services and the freedom of taxable persons established in Germany who wish to send their children to a foreign private school.

Foreign private schools are moreover required to set up in Germany if they wish to avoid a competitive disadvantage through the less favourable tax treatment of their customers. That constitutes an inadmissible restriction on freedom of establishment.

Finally, the restriction on the possibility of deduction tax infringes the right to freedom of movement of citizens from other EU Member States who wish to move to Germany, but who at the same time wish to continue having their children educated in their country of origin. The same applies in respect of German nationals who live in another Member State, but who are still subject to unlimited tax liability in Germany. They too are placed at a disadvantage if they wish to send their children to a private school outside Germany.

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