Opinion of the Advocate General — ECLI:EU:C:2007:389
Date: 2007-06-28
Language of the case: German
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Right of establishment;Freedom to provide services;Free movement of workers
Procedure: Action for failure to fulfil obligations - successful
Origin: Germany

summary of the complaints. There is therefore nothing to prevent the Commission from setting out in detail in the reasoned opinion the complaints which it has already made more generally in the letter of formal notice (Case C-365/97 Commission v Italy [1999] ECR I-7773, paragraph 26). 11 In this instance, contrary to the claims of the Federal Republic of Germany, it is not apparent from the letter of formal notice that the Commission intended to limit the subject-matter of the dispute to the situation of German nationals. 12 As a matter of fact, first, in the third paragraph of that letter the Commission makes particular reference to Paragraph 1(3) of the EStG which, for the purposes of liability to income tax, refers to natural persons having neither domicile nor habitual residence in Germany and who receive income in that State, irrespective of their nationality. Second, in the fifth paragraph of that letter the Commission states that, in its view, exclusion of persons making use of cross-border mobility from eligibility for the property subsidy is, under Articles 18 EC, 39 EC and 43 EC, incompatible with the principle of freedom of movement of persons. 13 The subject-matter of the dispute not having been altered or extended and the letter of formal notice having enabled the Federal Republic of Germany to be informed of the factors needed for the preparation of its defence, the objection to admissibility raised by that Member State must be rejected and the action introduced by the Commission declared admissible. Substance 14 A preliminary point to be noted here is that by letter of 4 January 2006 the Federal Republic of Germany informed the Court of the adoption on 22 December 2005 of the Law abolishing the subsidy for owner-occupied dwellings (Gesetz zur Abschaffung der Eigenheimzulage, BGBl. 2005 I, p. 76). 15 In this regard it is sufficient to observe that, according to settled case-law, the question whether a Member State has failed to fulfil its obligations must be determined by reference to the situation prevailing in the Member State at the end of the period laid down in the reasoned opinion and that the Court cannot take account of any subsequent changes (see, in particular, Case C-161/02 Commission v France [2003] ECR I‑6567, paragraph 6, and judgment of 18 July 2007 in Case C‑26/07 Commission v Greece, not published in the ECR, paragraph 6). Since it is established that the law abolishing the subsidy was adopted after the expiry of that period, it is not to be taken into consideration in these proceedings. 16 It is settled case-law that, although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with Community law (Case C‑446/03 Marks & Spencer [2005] ECR I‑10837, paragraph 29; Case C‑345/05 Commission v Portugal [2006] ECR I‑10633, paragraph 10; and Case C‑104/66 Commission v Sweden [2007] ECR I‑671, paragraph 12). 17 It is therefore necessary to consider whether, as the Commission maintains, the EigZulG, in particular the first sentence of Paragraph 2(1) thereof, constitutes a restriction of the freedom of movement and freedom of establishment enshrined in Articles 18 EC, 39 EC and 43 EC. 18 Article 18 EC, which sets out in general terms the right of every citizen of the European Union to move and reside freely within the territory of the Member States, finds specific expression in Article 39 EC with regard to freedom of movement for workers and in Article 43 EC with regard to freedom of establishment (Commission v Portugal, paragraph 13; Commission v Sweden, paragraph 15; and Case C‑318/05 Commission v Germany [2007] ECR I‑0000, paragraph 35). 19 The first question for consideration is therefore whether a provision of national law, such as the first sentence of Paragraph 2(1) of the EigZulG, that makes the grant of the subsidy for owner-occupied dwellings, to which persons liable to unlimited taxation of income in Germany are entitled by virtue of Paragraph 1 of that law, subject to the condition that the dwellings built or purchased by those persons for their own occupation should be situated in Germany, is contrary to Articles 39 EC and 43 EC. 20 In this connection it is to be borne in mind that any national of a Member State, irrespective of his place of residence and his nationality, who has exercised the right to freedom of movement for workers or freedom of establishment and who has been employed in a Member State other than that of residence falls within the ambit of Article 39 EC or of Article 43 EC, as the case may be (Case C‑152/03 Ritter-Coulais [2006] ECR I‑1711, paragraph 31; Case C‑470/04 N [2006] ECR I‑7409, paragraph 28; and Case C‑212/05 Hartmann [2007] ECR I‑0000, paragraph 17). 21 What is more, the provisions of the Treaty on freedom of movement for persons are intended to facilitate the pursuit by Community nationals of occupational activities of all kinds throughout the European Community, and they preclude measures which might place those nationals at a disadvantage when they wish to pursue an economic activity in the territory of another Member State (Case C‑464/02 Commission v Denmark [2005] ECR I‑7929, paragraph 34; Commission v Portugal, paragraph 15; Commission v Sweden, paragraph 17; and Case C‑318/05 Commission v Germany, paragraph 114). 22 Provisions preventing or deterring a national of a Member State from leaving his country of origin in order to exercise his right to freedom of movement constitute an obstacle to that freedom, even if they apply without regard to the nationality of the workers concerned (Commission v Denmark, paragraph 35; Commission v Portugal, paragraph 16; Commission v Sweden, paragraph 18; and Case C-318/05 Commission v Germany, paragraph 115). 23 In this case, the first sentence of Paragraph 2(1) of the EigZulG places at a disadvantage persons liable in Germany to unlimited taxation of income who build or purchase a dwelling for their own occupation in the territory of another Member State. That provision does not allow such persons to receive the property subsidy, whereas persons are entitled to it who are in the same situation with regard to income tax and who, when building or purchasing a dwelling, decide to maintain or establish domicile in Germany. 24 In those circumstances, as Advocate General Bot observes in point 64 of his Opinion, that provision has a deterrent effect on persons liable to unlimited taxation on income in Germany who have the right to freedom of movement under Articles 39 EC and 43 EC and who wish to build or purchase a dwelling for their own occupation in another Member State. 25 It follows that, by reserving entitlement to the subsidy for owner-occupied dwellings to persons liable in Germany to unlimited taxation of income on condition that the dwelling built or purchased for their own occupation is situated in German territory, the first sentence of Paragraph 2(1) of the EigZulG is capable of impeding freedom of movement for workers and freedom of establishment, as guaranteed by Articles 39 EC and 43 EC. 26 According to well-established case-law, however, national measures which are liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty may nevertheless be allowed provided that they pursue an objective in the public interest, are appropriate to ensuring the attainment of that objective and do not go beyond what is necessary to attain the objective pursued (Commission v Portugal, paragraph 24, and Commission v Sweden, paragraph 25). 27 In this case, the Federal Republic of Germany contends that the condition laid down in the first sentence of Paragraph 2(1) of the EigZulG is justified by the aim of encouraging the building of dwellings in its territory in order to ensure an adequate supply of housing. However, on any view that condition goes beyond what is necessary to attain the objective pursued. 28 In point of fact, the objective of satisfying demand for housing is just as easily attained if the person liable in Germany to unlimited taxation of income chooses to establish his residence in another Member State rather than in Germany (Commission v Portugal, paragraph 35). 29 It follows from the foregoing that the first sentence of Paragraph 2(1) of the EigZulG constitutes a restriction prohibited by Articles 39 EC and 43 EC and that the Commission’s claim alleging that the Member State concerned had failed to fulfil its obligations under the Treaty is well founded. 30 Second, with regard to persons liable in Germany to unlimited taxation of income who are not economically active, the same conclusion applies, for the same reasons, to the complaint relating to Article 18 EC. 31 It must therefore be declared that, by excluding in the first sentence of Paragraph 2(1) of the EigZulG dwellings in another Member State from eligibility for the subsidy for owner-occupied dwellings granted to persons liable to unlimited taxation on income, the Federal Republic of Germany has failed to fulfil its obligations under Articles 18 EC, 39 EC and 43 EC. Costs 32 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs, if they have been applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Federal Republic of Germany has been unsuccessful, the latter must be ordered to pay the costs. On those grounds, the Court (Second Chamber) hereby: 1. Declares that, by excluding in the first sentence of Paragraph 2(1) of the Law on subsidies for owner-occupied dwellings (Eigenheimzulagengesetz), in the version published in 1997, as amended by the ancillary budget law of 2004 (Haushaltsbegleitgesetz 2004) dwellings in another Member State from eligibility for the subsidy for owner-occupied dwellings granted to persons liable to unlimited taxation on income, the Federal Republic of Germany has failed to fulfil its obligations under Articles 18 EC, 39 EC and 43 EC; 2. Orders the Federal Republic of Germany to pay the costs. [Signatures] * Language of the case: German.