62013CC0053
OPINION OF ADVOCATE GENERAL
WATHELET
delivered on 13 February 2014 (
1
)
Joined Cases C‑53/13 and C‑80/13
Strojírny Prostějov a.s. (C‑53/13)
v
Odvolací finanční ředitelství(Request for a preliminary ruling from the Krajský soud v Ostravě (Czech Republic))
and
ACO Industries Tábor s.r.o. (C‑80/13)
v
Odvolací finanční ředitelství
(Request for a preliminary ruling from the Nejvyšší správní soud (Czech Republic))
‛Freedom to provide services — Secondment of workers — Restrictions — Deduction of income tax at source and payment to the State budget by the undertaking using the services of seconded workers — Absence of any such obligation in the case of workers seconded by a national undertaking’
I – Introduction
1.
The present requests for a preliminary ruling arise in the context of the international engagement of workers and concern the obligation on a Czech resident (the recipient of services) to pay a deduction at source from the salaries of workers supplied to him by a temporary employment agency established in another Member State (the supplier of services), an obligation which, if the temporary employment agency were a company resident in the Czech Republic, would instead rest on the agency.
2.
In the case of non-resident agencies, moreover, Czech law establishes a presumption that, where the invoice issued by a non-resident temporary employment agency to a Czech client makes no distinction between the intermediation fee and the sum attributed to the payment of the workers’ salaries, those salaries are deemed to represent 60% of the total amount invoiced.
3.
The disputes in the main proceedings involve two Czech companies which used the services of Slovak temporary employment agencies and which did not make the deduction at source provided for by Czech law. The Czech tax authorities sent the companies adjustment notices claiming from them the sums which they ought to have deducted at source from the workers’ salaries. However, the Czech companies took the view that the sums representing the deductions at source had already been included in the fees which they had paid to the employment agencies. The tax adjustment notices therefore meant that they would have to pay those sums a second time and, moreover, that they would have to pay them by reference to a tax basis far higher than the actual salaries of the workers, because of the 60% flat rate.
4.
The present cases concern the compatibility of those provisions with EU law.
II – Legal framework
A – EU law
5.
These requests for a preliminary ruling concern the interpretation of Articles 18 TFEU, 45 TFEU, 49 TFEU and 56 TFEU.
B – Czech law
6.
The following provisions of Law No 586/1992 on income tax (‘the income tax law’), applicable at the relevant time, are relevant to the questions raised by the disputes in the main proceedings:
‘…
Paragraph 2
Persons liable to tax on the income of natural persons
1.   Persons liable to tax on the income of natural persons are natural persons (hereinafter referred to as “taxpayers”).
2.   Taxpayers who have their residence or habitual abode in the Czech Republic shall be liable to tax both on income from sources in the Czech Republic and on income from foreign sources.
3.   Taxpayers not referred to in subparagraph 2 and those in respect of whom international agreements so provide shall be liable to tax only on income from sources in the Czech Republic (Paragraph 22). Taxpayers staying in the Czech Republic solely for the purposes of study or receiving medical treatment shall be liable to tax only on income from sources in the Czech Republic even if their habitual abode is in the Czech Republic.
4.   Taxpayers having their habitual abode in the Czech Republic are taxpayers who stay there, either continuously or in several periods, for at least 183 days in any calendar year, the 183-day period including every day or part of a day of stay. For the purposes of this law a place of residence in the Czech Republic shall mean a place where the taxpayer has a stable dwelling in circumstances from which it may be inferred that he intends to stay permanently in that dwelling.
…
Paragraph 6
Income from non-independent employment and emoluments
…
2.   A taxpayer who derives income from non-independent activity and emoluments shall be referred to hereafter as an “employee” and the payer of that income as the “employer”. “Employer” shall also mean a taxpayer referred to in Paragraph 2(2) or Paragraph 17(3) for whom employees perform work under his instructions, even where the income for such work is paid, on the basis of a contractual relationship, through the intermediary of a person established or residing abroad. For the purposes of the other provisions of this law, income thus paid shall be regarded as income paid by a taxpayer referred to in Paragraph 2(2) or Paragraph 17(3). Where the employer’s payments to a person established or residing abroad include an amount for intermediation, at least 60% of the total sum paid shall be regarded as income of the employee.
…
Paragraph 38c
Foreign taxable persons
A taxable person in accordance with Paragraphs 38d, 38e and 38h shall also include a taxpayer referred to in Paragraph 2(3) and Paragraph 17(4) who has a fixed establishment in the Czech Republic (Paragraph 22(2)) or employs his employees there for longer than 183 days, except in cases of service provision within the meaning of Paragraph 22(1)(c) … . In the case referred to in the second and third sentences of Paragraph 6(2), a taxpayer referred to in Paragraph 2(3) and Paragraph 17(4) shall not be treated as a taxable person.’
7.
Paragraph 69 of Law No 337/1992 on the administration of taxes and duties (‘the tax administration law’), ‘Deduction of tax at source’, provides in subparagraph 1:
‘The tax or the sum guaranteeing payment of the tax which the taxable person is required to deduct or withhold from the basis of assessment shall be paid to the tax authority within the period prescribed by this law or by any special law. Where such amounts of tax have not been deducted or withheld at the specified rate or are not paid within the prescribed period, the tax authority shall order the taxable person to pay those sums directly. In justified cases, the tax authority may set the taxable person a different period within which to pay the tax deducted at source; any such decision shall be amenable to appeal. If the taxable person does not deduct the tax or does not withhold it at the specified rate, including on a supplementary basis, the basis for the calculation of the tax shall be the amount from which, following the deduction of tax, the sum paid by the taxpayer to the taxable person would have remained.’
8.
The Agreement between the Czech Republic and the Slovak Republic on the avoidance of double taxation and the prevention of tax avoidance with respect to taxes on income and wealth (‘the double taxation agreement’) provides in Article 14(1):
‘Salaries, wages and other similar forms of remuneration which a resident of one Contracting State receives in respect of employment shall be taxed … solely in that State, unless the employment in question is carried on in the other Contracting State. If the employment is carried on there, the remuneration received in respect of it may be taxed in that other State.’
III – The disputes in the main proceedings and the questions referred for a preliminary ruling
9.
The applicants in the main proceedings, Strojírny Prostějov a.s. (‘Strojírny Prostějov’) and ACO Industries Tábor s.r.o. (‘ACO Industries’), are companies established in the Czech Republic which used the services of temporary employment agencies established in Slovakia and carrying on business in the Czech Republic through a branch registered in the Czech commercial register.
10.
According to the orders for reference, the agencies in question made their employees available to Strojírny Prostějov and ACO Industries for a fixed period of time during which the employees carried out their work under the instructions of Strojírny Prostějov and ACO Industries. The temporary employment agencies invoiced Strojírny Prostějov and ACO Industries in the sums agreed for the temporary supply of the workers. The sums were calculated by reference to the number of hours worked by the employees supplied to the companies.
11.
ACO Industries paid one temporary employment agency 160 Czech crowns (CZK) or CZK 170 (the equivalent of approximately EUR 5.85 or EUR 6.21 at the current exchange rate) for each hour worked, although, under their agreement, the guaranteed hourly wage of the employees was CZK 50 (the equivalent of approximately EUR 1.82 at the current exchange rate). The difference of CZK 110 or CZK 120 (the equivalent of EUR 4.02 or EUR 4.38 at the current exchange rate) was gross income for the agency. The order for reference in Case C‑53/13 does not provide similar detailed figures.
12.
In the course of an inspection, the tax authorities found that Strojírny Prostějov and ACO Industries had made no payment on account of the income tax of the workers. The tax authorities therefore ordered Strojírny Prostějov and ACO Industries to pay the sums due directly.
13.
The order for reference in Case C‑80/13 states that, in accordance with the presumption established in Paragraph 6(2), in fine, of the income tax law, the tax authorities used as a tax basis a sum equivalent to 60% of the sums invoiced by the temporary employment agency. The order for reference in Case C‑53/13 contains no information in this regard.
14.
The appeals which Strojírny Prostějov and ACO Industries made to the competent tax authorities were dismissed. They thereupon brought their actions before the Czech courts, which took the view that the cases raised questions of interpretation of EU law and decided to refer questions to the Court for a preliminary ruling.
15.
In Case C‑53/13 the Krajský soud v Ostravě (Regional Court, Ostrava) referred the following question to the Court for a preliminary ruling:
‘Do Articles 56 [TFEU] and 57 [TFEU] preclude the application of national legislation which, where an undertaking (the supplier) supplying workers to another undertaking has its seat in the territory of another Member State, imposes on the undertaking using the workers an obligation to deduct income tax in respect of those workers and pay it into the State budget, whereas if the supplier is established in the territory of the Czech Republic that obligation is on the supplier?’
16.
In Case C‑80/13 the Nejvyšší správní soud (Supreme Administrative Court) referred the following three questions to the Court for a preliminary ruling:
‘1.
Do Articles 18 [TFEU], 45 [TFEU], 49 [TFEU] and 56 [TFEU] preclude legislation under which an employer established in one Member State is obliged to make advance payments on the income tax of workers (nationals of another Member State) made temporarily available to him by a temporary employment agency established in another Member State through a branch established in the first Member State?
2.
Do Articles 18 [TFEU], 45 [TFEU], 49 [TFEU] and 56 [TFEU] preclude legislation under which the basis of assessment of the income tax of such employees is a flat rate of at least 60% of the amount invoiced by the temporary employment agency in cases where an intermediation fee is also included in the amount invoiced?
3.
In the event that the first or second question is answered in the affirmative, in a situation such as that in the present case, may the said fundamental freedoms be restricted on grounds of public policy, public security or public health, or, where appropriate, the effectiveness of fiscal supervision?’
IV – The procedure before the Court
17.
The requests for preliminary rulings were lodged at the Court on 30 January 2013 in Case C‑53/13 and on 15 February 2013 in Case C‑80/13. By decision of 20 March 2013, the President of the Court joined the two cases.
18.
ACO Industries, the Odvolací finanční ředitelství (Tax Appeals Directorate), the Czech and Danish Governments and the European Commission lodged written submissions. A hearing took place on 11 December 2013, at which the Czech Government and the Commission presented oral submissions.
V – Analysis
19.
By the questions which they have referred, the national courts both ask the Court the same question, namely whether legislative provisions of a Member State, such as Paragraph 6(2) of the income tax law, under which residents of the Czech Republic must deduct a sum on account of tax from the income of workers temporarily assigned to them by a temporary employment agency established in another Member State, whereas, if the temporary employment agency were established in the first Member State, that obligation would instead rest on the agency, entail a restriction of fundamental freedoms and, if so, whether such a restriction may be justified.
A – The fundamental freedom at issue in the present cases
20.
Like the Commission, I take the view that application of the principle of non-discrimination laid down in Article 18 TFEU may be ruled out from the outset, since, according to the case-law of the Court, that provision applies independently only to situations for which the FEU Treaty lays down no specific rules of non-discrimination (
2
).
21.
It is therefore necessary to determine to which of the freedoms guaranteed by the FEU Treaty the national legislation at issue relates. In order to determine that, it is necessary to consider the purpose of the national legislation at issue. (
3
)
22.
In the present cases, the obligation to deduct a sum on account of the workers’ income tax rests on the recipient of the services resident in the Czech Republic if the temporary employment agency is established abroad and on the agency if the agency is resident in the Czech Republic.
23.
The Commission submits that the national legislation in issue should be examined in the light of the freedom to provide services, in so far as it determines the tax obligations of temporary work agencies where they provide services to companies operating in the Czech Republic, and in the light of freedom of establishment in so far as it determines the tax which foreign temporary employment agencies must pay where they have established in the Czech Republic a branch whose business relates to the supply of workers.
24.
In my view, the difference in treatment resulting from the application of Paragraph 6(2) of the income tax law is liable to have the effect of dissuading Czech residents from using the services of non-resident temporary employment agencies, so as not to have the burden of deducting sums on account of the income tax of the employees. It is also liable to have the effect of making it more difficult for such non-resident service providers to carry on their economic activity in the Czech Republic. For those reasons it solely concerns the freedom to provide services.
25.
The potential influence that the legislation might exert on the establishment of such non-resident agencies in the Czech Republic is merely a consequence of the potential restrictive effect of the national rules in question on the provision of their services.
B – The existence of a restriction on the freedom to provide services
1. Arguments of the parties
26.
In the view of ACO Industries and the Commission, Paragraph 6(2) of the income tax law creates a restriction on the freedom to provide services. According to ACO Industries, the obligation to deduct a sum on account of the income tax of employees gives rise to a more onerous tax treatment for Czech residents who use the services of foreign temporary employment agencies than that which applies to Czech residents who use the services of resident temporary employment agencies.
27.
In the view of ACO Industries, the same may be said of the national provision in issue which, where a non-resident temporary employment agency is used, stipulates a flat-rate tax basis of assessment of 60% of the sum invoiced by the temporary employment agency if the invoice also includes the intermediation fee, on the presumption that that flat rate represents the employee’s wages.
28.
ACO Industries suggests, therefore, that resident temporary employment agencies do not have to take any particular measures such as stating in their invoices the remuneration payable to employees separately from their travel costs and other administrative expenditure connected with the intermediation service. The Commission submits that the tax and administrative burden imposed on a Czech recipient of services renders the services offered by non-resident temporary employment agencies less attractive than those offered by agencies resident in the Czech Republic, and thus constitutes a restriction on the freedom to provide services. As regards the flat rate of 60%, the Commission, like ACO Industries, considers that this is a discriminatory measure in that it does not apply to the provision of services by resident temporary employment agencies.
29.
The Odvolací finanční ředitelství and the Czech and Danish Governments, on the other hand, submit that the national legislation in issue does not constitute a restriction on the freedom to provide services.
30.
In particular, the Odvolací finanční ředitelství and the Czech Government submit that temporary employment agencies established outside the Czech Republic are neither in a comparable situation to, nor in competition with agencies established in that Member State. Furthermore, the managerial tasks associated with calculating, deducting and withholding the income tax of seconded workers do not constitute an excessive burden for undertakings using the services of such workers. According to the Czech Government, the deduction is, in any event, authorised by Article 14(1) of the double taxation treaty.
31.
The Danish Government considers that there is, in this case, no difference in treatment between persons in comparable situations. The relevant point of comparison is, according to this government, the employee supplied by a resident temporary employment agency. The Danish Government maintains that, since the tax deduced at source from the income of workers supplied by a non-resident temporary employment agency is no higher than the income tax on the remuneration of workers supplied by a resident temporary employment agency, Paragraph 6(2) of the income tax law does not create a restriction on the freedom to provide services.
32.
The position adopted by the referring courts is that Paragraph 6(2) of the income tax law does constitute a restriction on the freedom to provide services inasmuch as its application gives rise to a more onerous tax treatment for Czech residents who use the services of non-resident temporary employment agencies than for those who use the services of temporary employment agencies resident in the Czech Republic.
2. Analysis
33.
Like ACO Industries, the Commission and the referring courts, I take the view that Paragraph 6(2) of the income tax law does entail a restriction on the freedom to provide services.
34.
The Court has previously examined a number of national provisions which require resident recipients of a supply of services who use the services of non-resident service providers to make a deduction at source from the sums which they owe the service provider. The parties cite the cases in FKP Scorpio Konzertproduktionen, Truck Center and X, to which I would also add Commission v Belgium. (
4
)
35.
In FKP Scorpio Konzertproduktionen the referring court asked whether ‘national legislation under which a procedure of retention of tax at source is applied to payments made to providers of services not resident in the Member State in which the services are provided, while payments made to providers of services resident in that Member State are not subject to such a retention’ (
5
) amounted to a restriction on the freedom to provide services and, if so, whether it could be justified.
36.
The Court found that there was a restriction on the freedom to provide services on the basis that ‘the obligation on the recipient of services to make a retention at source of the tax on the payment made to a provider of services residing in another Member State and the fact that that recipient [might] in certain cases incur liability [were] liable to deter companies such as Scorpio from calling on providers of services residing in other Member States’. (
6
)
37.
The Court’s judgment in Commission v Belgium also concerned retention at source. The Commission sought a declaration by the Court that, by obliging Belgian principals and contractors who had recourse to foreign contracting partners not registered in Belgium to withhold 15% of the sum payable for work carried out and by imposing on those principals and contractors joint and several liability for the tax debts of such contracting partners, the Kingdom of Belgium had failed to fulfil its obligations under Articles 49 EC and 50 EC (now Articles 56 TFEU and 57 TFEU).
38.
The Court held that there was a restriction on the freedom to provide services, given that, ‘under [the Belgian legislation], the principal or contractor [had to] withhold for the Belgian authorities a sum equivalent to 15% of the price charged by an unregistered service provider[, which] effectively [deprived] that provider of the ability immediately to have at his disposal a part of his income, which he [could] recover only at the conclusion of a specific administrative procedure. The disadvantages that the withholding obligation [represented] for service providers ... not registered and not established in Belgium [were], consequently, liable to deter them from accessing the Belgian market in order to provide services in the construction sector in that country’. (
7
)
39.
The Court was once again confronted with the same question in the case in Truck Center, in which the referring court asked whether ‘legislation of a Member State which [provided] for the retention of tax at source on interest paid by a company resident in that Member State to a recipient company resident in another Member State, while exempting from that retention interest paid to a recipient company resident in the first Member State’, (
8
) was consistent with the freedom of establishment.
40.
The Court decided that, ‘in order to determine whether [that] difference in tax treatment [was] discriminatory, it [was], however, necessary to consider whether, having regard to the national measure at issue, the companies concerned [were] in an objectively comparable situation’. (
9
) It held that the difference in treatment in issue related to situations that were not objectively comparable, for the following three main reasons:
—
first, ‘when both the company paying the interest and the company receiving that interest are resident in Belgium, the position of the Belgian State is different to that in which it finds itself when a company resident in Belgium pays interest to a non-resident company, because, in the first case, the Belgian State acts in its capacity as the State of residence of the companies concerned, while, in the second case, it acts in its capacity as the State in which the interest originates’; (
10
)
—
secondly, ‘the payment of interest by one resident company to another resident company and the payment of interest by a resident company to a non-resident company give rise to two distinct charges which rest on separate legal bases’, namely withholding tax in the case of interest paid by a resident company to a non-resident company and corporation tax in the case of the payment of interest by one resident company to another resident company, (
11
) and
—
thirdly, those different procedures for charging tax were regarded as reflecting ‘the difference in the situations in which those companies find themselves with regard to recovery of the tax’, that is to say, that ‘resident recipient companies are directly subject to the supervision of the Belgian tax authorities, which can ensure compulsory recovery of taxes’, whereas non-resident recipient companies are not, meaning that the assistance of the tax authorities of their State of residence is needed in order to recover the tax. (
12
)
41.
According to the Court, ‘the difference in treatment resulting from the tax legislation at issue in the main proceedings [did] not necessarily procure an advantage for resident recipient companies because, firstly, ... those companies [were] obliged to make advance payments of corporation tax and, secondly, the amount of withholding tax deducted from the interest paid to a non-resident company [was] significantly lower that the corporation tax charged on the income of resident companies which [received] interest’. (
13
)
42.
The Court concluded its analysis of the question whether the difference in treatment was discriminatory (
14
) by holding, in paragraph 50 of its judgment, that the difference in treatment did not constitute a restriction on the freedom of establishment.
43.
More recently, in X, the Court examined the question of the consistency with the freedom to provide services of the obligation imposed by Netherlands law on recipients of services to make a deduction at source of the tax on the remuneration paid to service providers established in another Member State where no such obligation existed in relation to remuneration paid to service providers established in the Netherlands.
44.
The Court held that, ‘irrespective of the effects that the withholding tax [might have had] on the tax situation of non-resident service providers, such an obligation to withhold tax, inasmuch as it [entailed] an additional administrative burden as well as the related risks concerning liability, [was] liable to render cross-border services less attractive for resident recipients of services than services provided by resident service providers and to deter those recipients from having recourse to non-resident service providers’. (
15
)
45.
The Court went on to observe that ‘[t]hat finding [was] not invalidated by the Netherlands Government’s arguments that the impact of the additional administrative burden imposed on the recipient of services, firstly, [was] negligible in so far as that person [was] already obliged to withhold other taxes at source and to transfer the amounts withheld to the tax authorities, and, secondly, [was] offset by the reduction of the administrative burden on the non-resident service provider, who [would] not have to submit a tax return in the Netherlands in addition to his administrative obligations vis-à-vis the tax authorities of the Member State in which he [was] established’. (
16
)
46.
The Court concluded that the Netherlands legislation at issue constituted a restriction on the freedom to provide services ‘in that it [entailed] an additional administrative burden and related liability risks’. (
17
)
47.
The difference between the Court’s conclusions in Truck Center, on the one hand, and FKP Scorpio Konzertproduktionen, Commission v Belgium and X on the other, is reflected in the positions expressed by the parties in the present cases. ACO Industries makes no mention of the judgment in Truck Centre, while the Commission mentions it only in passing, whereas the Czech and Danish Governments place fundamental reliance on that judgment in their attempt to establish the consistency of the legislation at issue with EU law.
48.
Two factors persuade me of the existence of a restriction in the present cases. The first relates to the judgment in Truck Center. In that case, the Court only concluded that there was no restriction because it found that the difference in treatment applied to taxpayers who were not in objectively comparable situations.
49.
Even though I might not be convinced by the findings of the Court in that judgment in relation to the three aspects of the situations which it regarded as not being comparable, (
18
) suffice it to observe, in the present matter, that Czech undertakings which use the services of non-resident temporary employment agencies are in a comparable situation to Czech undertakings which use the similar services of temporary employment agencies resident in the Czech Republic. The same may be said of the agencies which provide those services, since the double taxation treaty signed by the Czech Republic and the Slovak Republic provides, in Article 14(1), that the remuneration of workers supplied to a client resident in the Czech Republic are to be taxed in the Czech Republic, whether they are supplied by a resident agency or a non-resident agency.
50.
The fact that the Czech legislation treats the supplier of the services as the employer in one case and the recipient of the services as the employer in the other case does not affect the comparability of the tax situations.
51.
The second factor on which I base my conviction is the long line of judgments of the Court relating to the freedom of establishment and the free movement of capital in which the Court systematically held that a retention at source which applied only in the case of dividends leaving the country constituted a difference in treatment of comparable situations (as regards both shareholders and distributing companies) and, as such, a restriction of a fundamental freedom. (
19
)
C – Justification
52.
The Nejvyšší správní soud also asks whether any restriction on the freedom to provide services resulting from Paragraph 6(2) of the income tax law can be justified. In particular, it refers to public order, public security and public health and, if appropriate, the effectiveness of fiscal supervision. The Odvolací finanční ředitelství and the Czech Government also refer to the prevention of tax avoidance.
53.
As regards the need to ensure the effectiveness of fiscal supervision, I take the view that, as in FKP Scorpio Konzertproduktionen, what is concerned here is the need to ensure the effective collection of income tax. The obligation to deduct income tax at source is intended to ensure that income tax is collected, rather than to facilitate fiscal supervision.
1. Arguments of the parties
54.
While ACO Industries and the Commission do not deny the possibility of justifying a restriction by the need to ensure effective fiscal supervision and collection of tax, they dispute that Paragraph 6(2) of the income tax law complies with the principle of proportionality. They refer in particular to the irrebuttable nature of the presumption that the remuneration of the workers represents 60% of the total invoice, inasmuch as taxpayers are not permitted to prove that the actual basis of assessment, that is to say, the real remuneration of the workers, is less than that percentage.
55.
ACO Industries points out that that flat-rate percentage does not guarantee a uniform level of taxation, since it relates to elements other than the salaries of employees, such as their travel costs from Slovakia to the Czech Republic.
56.
The Odvolací finanční ředitelství and the Czech and Danish Governments, on the other hand, submit that Paragraph 6(2) of the income tax law is necessary in so far as the Czech Republic is the State in which the income has its source and it cannot, therefore, collect the tax from the taxpayer and must rely on the cooperation of the tax authorities of the State in which the taxpayer is resident.
57.
In this connection, the Czech Government considers that deduction at source is a very effective way of collecting the tax in that it enables the tax authorities to apprise themselves of the event giving rise to the tax for which the non-resident service provider is liable. Moreover, collecting the tax from a non-resident service provider would entail a significant burden on the non-resident service provider in that he would have to submit a tax return in a foreign language and to familiarise himself with the tax system of a Member State other than that in which he is established.
58.
As regards the flat rate of 60%, the Nejvyšší správní soud and the Czech Government emphasise that its application is restricted to cases where the invoice includes the intermediation fee and does not clearly indicate the sum charged in respect of the employees’ work.
2. Analysis
a) Public order, public security and public health
59.
The justifications based on public order, public security and public health may be dismissed immediately. Neither the referring courts nor the interested parties have put forward any evidence at all to support those justifications.
b) Effectiveness of fiscal supervision and effective tax collection
60.
The Court has held on a great many occasions that the need to ensure the effectiveness of fiscal supervision and the effective collection of income tax constitutes an overriding reason in the public interest capable of justifying a measure such as that provided for in Paragraph 6(2) of the income tax law.
61.
This was the case, inter alia, in FKP Scorpio Konzertproduktionen, Commission v Belgium, Santander Asset Management SGIIC and Others and X. (
20
)
62.
In FKP Scorpio Konzertproduktionen, the Court held that ‘the procedure of retention at source and the liability rules supporting it [constituted] a legitimate and appropriate means of ensuring the tax treatment of the income of a person established outside the State of taxation and ensuring that the income concerned [did] not escape taxation in the State of residence and the State where the services [were] provided. It [had to be] recalled that at the material time, in 1993, no [European Union] directive or any other instrument referred to in the case-file governed mutual administrative assistance concerning the recovery of tax debts between [the Member States in question]’. (
21
)
63.
In view of the importance which the Court attached to the absence of any directive or other instrument governing mutual administrative assistance concerning the recovery of tax debts, it seems entirely logical to me to assume that it would not have accepted that justification had such a directive or other instrument been available.
64.
In Commission v Belgium, while admitting that the need for effective fiscal supervision could justify a restriction on the exercise of fundamental freedoms, the Court held that ‘a less restrictive means than that of depriving service providers of a not inconsiderable portion of their earnings would have been to put in place a system, based on an exchange of information between principals and contractors, their contracting partners and the Belgian tax authorities, allowing, for example, principals and contractors to find out about any tax debts of their contracting partners or introducing an obligation to inform the Belgian tax authorities of any contract concluded with unregistered contracting partners or any payment made to them’. (
22
) As it applied in an automatic and unconditional manner, the withholding tax did not allow any account to be taken of the individual circumstances of service providers who were neither established nor registered in Belgium.
65.
In Santander Asset Management SGIIC and Others, the Court went further still, holding, in paragraph 49 of its judgment, that ‘the legislation at issue in the main proceedings [also could not] be justified by the need to guarantee the effectiveness of fiscal supervision. … [T]he effectiveness of fiscal supervision cannot justify taxation which affects solely and specifically non-residents’, as is the case with Paragraph 6(2) of the income tax law.
66.
The position expressed by the Court appears to have been different in X, in which, despite the existence of Directive 76/308/EEC (
23
) (now replaced by Directive 2008/55/EC (
24
)), the Court held that the withholding tax did not go beyond what was necessary to ensure the effective collection of tax, even taking account of the opportunities for mutual assistance in the recovery of taxes provided by Directive 76/308. The Court found that the renunciation of withholding tax at source would not necessarily eliminate all the formalities for which the service recipient was responsible. (
25
)
67.
According to the Court, in the absence of such a withholding tax, the tax authorities of the Member State concerned would be likely to be required to impose an obligation on the service recipient, established on the territory of that State, to declare the service carried out by the non-resident service provider (
26
). In addition, the renunciation of withholding tax would give rise to the need to collect the tax from the non-resident service provider, something which could lead to a serious burden on the foreign service provider in that he would have to submit a tax return in a foreign language and to familiarise himself with a tax system in a Member State other than that in which he is established. (
27
)
68.
However, that conclusion may be explained by the particular facts of X, which concerned the obligation imposed by Netherlands law on X, which was established in the Netherlands, to withhold part of the sums which it was to pay to two semi-professional football clubs established in the United Kingdom in respect of two friendly matches which took place in the Netherlands. In that context, and despite the existence of Directive 76/308, it seems logical to me not to require the State in which the income arose to collect the tax in the State in which the service provider is established where the service provider is present in the first State for no more than a few days, or even, perhaps, given the length of football matches, no more than a few hours.
69.
No comparison can be drawn with the present matter in which, as the Nejvyšší správní soud points out, the temporary employment agency has a branch in the Czech Republic registered in the Czech commercial register. As the Nejvyšší správní points out, given the existence of the branch, the Czech tax authorities are able to claim the tax directly from the temporary employment agency. The presence of the branch in the Czech Republic also means that the obligation to make the deduction at source does not entail any excessive administrative burden, such as a need to be familiar with Czech law, since the branch is in any event subject to administrative obligations and burdens, and possibly also fiscal obligations and burdens (such as value added tax) in that country.
70.
Furthermore, I would note that, by contrast with the X case, the activities in question, that is to say the supply of employees, appear to be of a sufficiently stable and recurring nature as to enable the Czech tax authorities to recover the tax due from the branch.
71.
I would add that the opportunity of relying on Directive 76/308, now replaced by Directive 2008/55, or on an international convention for the collection of tax between the Member States concerned should be sufficient to render a provision such as Paragraph 6(2) of the income tax law disproportionate.
72.
On the matter of the collection of tax in another Member State, I would mention the recent judgment in Sunico and Others, (
28
) which concerned a value added tax ‘carousel’ type fraud which had permitted the evasion of output value added tax to the detriment of the United Kingdom treasury. The Court held that an action whereby a public authority of one Member State claims, from natural and legal persons resident in another Member State, damages in respect of loss caused by a conspiracy to commit value added tax fraud in the first Member State fell within the scope of Regulation (EC) No 44/2001, (
29
) known as the ‘Brussels I Regulation’, which provides access to simplified procedures for the recognition and enforcement of judgments in civil and commercial matters.
73.
As regards the flat rate of 60%, I share the Commission’s view that its application, without the recipient of services being allowed the opportunity to show that the salaries received by the workers supplied to him are less than the calculated flat-rate amount, goes beyond what is necessary to attain the intended objective, namely the effective collection of income tax.
74.
According to the request for a preliminary ruling lodged by the Nejvyšší správní soud, ACO Industries and the Slovak temporary employment agency had agreed on a charge for the services supplied of CZK 160 or CZK 170 per hour. However, under their agreement, the guaranteed hourly wage of the employees was CZK 50. That being so, the application of the flat rate implies the imposition of a deduction at source by reference to a flat-rate tax basis which is almost twice the real taxable amount.
75.
As I stated in point 65 of my Opinion in van Caster, (
30
) it is clear from the case-law of the Court (
31
) that an absolute prohibition on the taxpayer providing the tax authorities with the necessary information cannot, in a situation which is internal to the European Union, be justified in the light of the fundamental freedoms.
76.
That is true even though, as the Nejvyšší správní soud states, the contracting parties could have avoided the 60% flat rate by stating separately in the invoice the amount of the employees’ salaries and the intermediation fee.
77.
I therefore take the view that the restrictions on the freedom to provide services resulting from the obligations imposed by Paragraph 6(2) of the income tax law on residents who use the services of non-resident service providers cannot be justified by the need to ensure the effective collection of tax.
c) Combating tax avoidance
78.
In order to justify the deduction at source required of the recipient of services, the Odvolací finanční ředitelství and the Czech Government also mention the prevention of tax avoidance.
79.
The Odvolací finanční ředitelství submits that Paragraph 6(2) of the income tax law offers a means of combating the abusive practice of Czech undertakings of hiring foreign workers and changing them every 183 days in order to circumvent the provisions of the income tax law which exempt from tax in the Czech Republic salaries paid by foreign companies that do not have a fixed establishment in the Czech Republic to employees who do not stay in the Czech Republic for more than 183 days.
80.
To the same end, the Czech Government maintains that the experience of the tax authorities proves that there have been numerous cases of tax evasion and tax avoidance in connection with the international engagement of workers, such as where they are swapped between a national undertaking and a foreign temporary employment agency. The Czech Government emphasises that such cases of tax avoidance escape, in practice, the attention of the tax authorities.
81.
I take the view that that justification must be rejected. While the Court has indeed held that the prevention of tax avoidance may be relied on to justify restrictions on the exercise of fundamental freedoms guaranteed by the Treaty, it has also stated that a general presumption of tax avoidance or evasion is not sufficient to justify a fiscal measure which compromises the objectives of the Treaty. (
32
)
82.
In the present matter, the claims which the Odvolací finanční ředitelství and the Czech Government make remain somewhat vague. Moreover, there is no indication in the documents before the Court that there would be any instances of abuse in the present cases, in which the temporary work agencies in question have a fixed establishment in the Czech Republic.
VI – Conclusion
83.
In the light of the foregoing considerations, I propose that the Court answer the questions asked by the Krajský soud v Ostravě and the Nejvyšší správní soud as follows:
Article 56 TFEU precludes national legislation, such as Paragraph 6(2) of Czech Law No 586/2002 on income tax, under which residents of the Czech Republic who use the services of workers supplied to them by a temporary employment agency resident in another Member State must deduct at source the tax on the income of those workers (by reference to a presumed basis of taxation of 60% of the total sum invoiced by the temporary employment agency), whereas that obligation would rest on the temporary employment agency if it were resident.
(
1
)	Original language: French.
(
2
)	See Case C-240/10 Schulz-Delzers and Schulz [2011] ECR I-8531, paragraph 29.
(
3
)	See Case C-196/04 Cadbury Schweppes and Cadbury Schweppes Overseas [2006] ECR I-7995, paragraphs 31 to 33; Case C-452/04 Fidium Finanz [2006] ECR I-9521, paragraphs 34 and 44 to 49; Case C-374/04 Test Claimants in Class IV of the ACT Group Litigation [2006] ECR I-11673, paragraphs 37 and 38; Case C-446/04 Test Claimants in the FII Group Litigation [2006] ECR I-11753, paragraph 36; and Case C-524/04 Test Claimants in the Thin Cap Group Litigation [2007] ECR I-2107, paragraphs 26 to 34. See also the order in Case C-492/04 Lasertec [2007] ECR I-3775, paragraph 19.
(
4
)	See Case C-290/04 FKP Scorpio Konzertproduktionen [2006] ECR I-9461, Case C-433/04 Commission v Belgium [2006] ECR I-10653, Case C-282/07 Truck Center [2008] ECR I-10767 and Case C‑498/10 X [2012] ECR.
(
5
)	Paragraph 28.
(
6
)	Ibidem, paragraph 33.
(
7
)	Commission v Belgium, paragraph 30.
(
8
)	Paragraph 21.
(
9
)	Ibidem, paragraph 36.
(
10
)	Ibidem, paragraph 42.
(
11
)	Ibidem, paragraphs 43 and 44.
(
12
)	Ibidem, paragraphs 47 and 48.
(
13
)	Ibidem, paragraph 49.
(
14
)	Ibidem, paragraph 36.
(
15
)	X, paragraph 28.
(
16
)	Ibidem, paragraph 29.
(
17
)	Ibidem, paragraph 32.
(
18
)	See point 39 of this Opinion.
(
19
)	See Case C-170/05 Denkavit Internationaal and Denkavit France [2006] ECR I-11949, paragraphs 29 and 30; Case C-379/05 Amurta [2007] ECR I-9569, paragraph 28; Case C-521/07 Commission v Netherlands [2009] ECR I-4873, paragraph 39; Case C-303/07 Aberdeen Property Fininvest Alpha [2009] ECR I-5145, paragraph 41; Case C-284/09 Commission v Germany [2011] ECR I-9879, paragraphs 51, 72 and 73; Joined Cases C‑338/11 to C‑347/11 Santander Asset Management SGIIC and Others [2012] ECR, paragraph 18; order in Case C‑38/11 Amorim Energia [2012] ECR, paragraphs 53 and 76 to 79; and order in Case C‑384/11 Tate & Lyle Investments [2012] ECR, paragraphs 21 to 25.
(
20
)	FKP Scorpio Konzertproduktionen, paragraph 35, Commission v Belgium, paragraph 35; Santander Asset Management SGIIC and Others, paragraph 46, and X, paragraph 35.
(
21
)	Paragraph 36.
(
22
)	Paragraph 39.
(
23
)	Council Directive 76/308/EEC of 15 March 1976 on mutual assistance for the recovery of claims resulting from operations forming part of the system of financing the European Agricultural Guidance and Guarantee Fund, and of agricultural levies and customs duties (OJ 1976 L 73, p. 18).
(
24
)	Council Directive 2008/55/EC of 26 May 2008 on mutual assistance for the recovery of claims relating to certain levies, duties, taxes and other measures (OJ 2008 L 150, p. 28).
(
25
)	X, paragraph 49.
(
26
)	Ibidem.
(
27
)	Ibidem, paragraph 50.
(
28
)	Case C‑49/12 Sunico and Others [2013] ECR.
(
29
)	Council Regulation (EC) No 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (OJ 2001 L 12, p. 1).
(
30
)	Case C‑326/12 pending before the Court.
(
31
)	See Case C-254/97 Baxter and Others [1999] ECR I-4809, paragraphs 19 and 20; Case C-39/04 Laboratoires Fournier [2005] ECR I-2057, paragraph 25; Case C-451/05 ELISA [2007] ECR I-8251, paragraph 96; Case C-318/07 Persche [2009] ECR I-359, paragraph 53; Case C-262/09 Meilicke and Others [2011] ECR I-5669, paragraphs 43 and 44; and Case C-493/09 Commission v Portugal [2011] ECR I-9247, paragraph 46.
(
32
)	See Case C-478/98 Commission v Belgium [2000] ECR I-7587, paragraph 45; Case C-334/02 Commission v France [2004] ECR I-2229, paragraph 27; and Case C‑433/04 Commission v Belgium, paragraph 35.