OPINION OF ADVOCATE GENERAL

CRUZ VILLALÓN

delivered on 13 June 2013 ( 1 )

Case C‑303/12

Guido Imfeld,

Nathalie Garcet

v

État belge

(Request for a preliminary ruling from the Tribunal de première instance de Liège (Belgium))

‛Freedom of movement for persons — Self-employed persons — Freedom of establishment — Income tax — Bilateral convention for the avoidance of double taxation — Exemption of income received in a Member State other than the Member State of residence — Joint taxation of married couples — Taking into account of the exempt income in the tax basis — Tax advantages connected with the personal and family circumstances of taxpayers — Restrictions on freedom of establishment’

1. In the present case, the Court is again seised of a question relating to the compatibility with EU law of income tax legislation of a Member State which has the effect of depriving a resident taxpaying couple of the benefit of some of the tax advantages which that legislation provides for families. The specific feature of this case lies in the fact that one of the members of that couple receives all his income in another Member State, where he is taxed separately and where he has benefited in part from equivalent tax advantages.

2. The Court is therefore faced for the first time with the question of whether a Member State may justify not granting a resident couple, one of whose members has exercised freedoms guaranteed by the TFEU, a specific tax advantage, in this case a tax exemption for dependent children, by the fact that the aforementioned member of the couple in question has benefited from an equivalent advantage in connection with his taxation in another Member State. The Court is called upon, more generally, to make clear the case-law according to which it is, in principle, the Member State of residence which must take into account the overall personal and family circumstances of the taxpayer, unless that taxpayer receives the main part of his income in another Member State.

I – Legal framework

A – The 1967 Bilateral Convention

3. Article 14 of the Convention between the Kingdom of Belgium and the Federal Republic of Germany for the avoidance of double taxation and for the settling of certain other questions with respect to taxes on income and wealth, including occupational taxes and land tax, signed in Brussels on 11 April 1967, ( 2 ) provides: ‘1. Income generated by a resident of a Contracting State from a liberal profession or other similar self-employed professional activities shall be taxable only in that State, unless the resident concerned has available to him in the other Contracting State, on a regular basis, a fixed base for the exercise of his activities. If he has such a fixed base, the income may be taxed in the other State but only in so far as it is attributable to the activities carried out through that fixed base. 2. The term ‘liberal profession’ includes, in particular, self-employed activities ... of doctors, lawyers, engineers, architects, dentists and accountants. ...’

4. Article 23(2)(1) of the 1967 Bilateral Convention, which governs the procedure according to which double taxation of residents of the Kingdom of Belgium is avoided, provides inter alia that income earned in Germany, which is taxable in that State under the Convention, is exempt from tax in Belgium. The same provision states, however, that that exemption does not limit the right of the Kingdom of Belgium to take the income thus exempted into account for the purposes of determining tax rates.

B – Belgian law

5. The main provisions of the code des impôts sur le revenu de 1992 (1992 Income Tax Code) ( 3 ) at issue in the main proceedings are Article 155, which sets out the rules according to which income which is exempt under conventions for the avoidance of dual taxation is exempt from income tax, ( 4 ) and Articles 132 to 134, which provides for a tax advantage for dependent children, granted to each taxpayer in the form of a tax-free income allowance.

6. Article 155 of the 1992 ITC provides: ‘Income exempted under international conventions for the prevention of double taxation shall be taken into account for the purposes of calculating tax, but the tax shall be reduced according to the proportion of the overall income represented by the exempted income.’ The same procedure shall apply to: — income exempt under other international treaties or agreements, in so far as they provide for a subject to progressivity clause; … Where joint taxation is determined, the reduction shall be calculated by reference to the total net income of each taxpayer.’

7. Article 134(1) of the 1992 ITC provides: ‘The tax-free income allowance shall be determined by reference to each taxpayer and shall include the total basic amount, increased as the case may be, and supplements as referred to in Articles 132 and 133. Where joint taxation is determined, the supplements referred to in Article 132 shall be set off against the income of the taxpayer who has the higher taxable income. ...’

8. Moreover, in order to comply with the judgment of 12 December 2002 in de Groot, ( 5 ) the Kingdom of Belgium adopted Circular No Ci.RH.331/575.420 of 12 March 2008 providing for a reduction in tax for income which is exempted under a convention, ( 6 ) paragraphs 3 and 4 of which provide: ‘3. A supplementary reduction for income which is exempted from tax under a convention may be granted only if the following conditions are met: — the taxpayer received income exempted from tax under a convention in one or more Member States of the [European Economic Area (EEA)]; — the personal or family circumstances of the taxpayer were not taken into account for the purposes of calculating the tax payable, in the States in question, on the income exempt from tax in Belgium; — the taxpayer has been unable, in Belgium, to qualify in full for the tax advantages linked to his personal or family circumstances; — the amount of tax payable in Belgium, together with the tax payable abroad, is higher than the amount of tax which would have been payable if the income had been entirely earned in Belgium and the related taxes had been payable in Belgium. 4. In order to claim the supplementary reduction, a taxpayer must produce proof that he meets the necessary conditions.’

II – The facts in the main proceedings

9. Mr Imfeld, a German national, and Ms Garcet, a Belgian national, are married with two children and live in Belgium. For the tax years 2003 and 2004, they completed separate tax returns in Belgium, without stating that they were married. Mr Imfeld, who practices as a lawyer in Germany, where he receives all his income, did not mention any taxable income or any dependants. In contrast, Ms Garcet, who is employed in Belgium, declared mortgage interest, two dependent children and childcare costs.

10. Those tax returns have given rise to three disputes brought before the national court which form the basis of its request to the Court of Justice for a preliminary ruling

11. The tax position of Mr Imfeld in Germany has also given rise to legal proceedings in that Member State.

A – The dispute arising from the tax treatment of the applicants in the main proceedings in Belgium

1. Disputes relating to the tax year 2003

12. On 5 April 2004, the Belgian tax authorities initially set the amount of tax payable for the tax year 2003 solely in the name of Ms Garcet.

13. However, on 16 November 2004, those authorities declared that Ms Garcet could not be considered to be single and therefore issued a correction notice stating that the applicants in the main proceedings would be taxed jointly and setting a new amount of tax payable, on the basis of the income declared by Ms Garcet and the income earned in Germany by Mr Imfeld in a self-employed capacity.

14. By letter of 9 December 2004, the applicants in the main proceedings expressed their disagreement with that correction notice, objecting to joint taxation and claiming individual assessment, in order to ensure freedom of establishment and the actual and full exemption of the income earned in Germany by Mr Imfeld.

15. On 13 December 2004, the tax authority notified the applicants in the main proceedings of the tax decision, stating that Mr Imfeld’s income earned in Germany was fully exempt but that the joint taxation must take account of childcare costs, the tax-free income allowance and reductions in respect of alternative income sources.

16. On 10 February 2005, the amount of tax to be levied for the tax year 2003 on income adjusted to 0 was established in the name of Ms Garcet, an amount which was contested by the applicants in the main proceedings on 9 March 2005.

17. That complaint was rejected by decision of the Liège (Belgium) Regional Director for Direct Taxation of 11 July 2005.

18. The applicants in the main proceedings appealed against that decision by application lodged at the registry of the national court on 29 September 2005.

19. On 13 October 2005, the amount of tax to be levied for the tax year 2003 was established in the joint names of the applicants in the main proceedings, an amount which they contested on 13 January 2006.

20. That complaint was rejected by decision of the Liège Regional Director for Direct Taxation of 7 March 2006.

21. The applicants in the main proceedings appealed against that decision by application lodged at the registry of the national court on 31 March 2006.

2. Disputes relating to the tax year 2004

22. On 24 June 2005, the amount of tax to be levied for the tax year 2004 was established in the joint names of the applicants in the main proceedings, an amount which they contested on 15 September 2005.

23. That complaint was rejected by decision of the Liège Regional Director for Direct Taxation of 19 October 2005.

24. The applicants in the main proceedings appealed against that decision by application lodged at the registry of the national court on 21 November 2005.

B – The dispute arising from the tax treatment of Mr Imfeld in Germany

25. It is also apparent from the order for reference, from the written and oral observations and from the written replies to the questions posed by the Court, that, for the tax year 2003, the German tax authorities denied Mr Imfeld the benefit of the joint taxation scheme, to which taxpayers who are married and not permanently separated, who are taxable in Germany while residing in another Member State, are entitled under Article 1a(1)(2) of the Income Tax Law (Einkommensteuergesetz). ( 7 )

26. The action brought by Mr Imfeld against that refusal decision was dismissed by judgment of the Finanzgericht Köln (Cologne Finance Court) (Germany) of 25 July 2007, ( 8 ) since, on the one hand, his taxable income in Germany was less than 90% of the total income of his household and, on the other hand, his wife’s income was higher than both the absolute threshold of EUR 12 372 and the relative threshold of 10% of overall income laid down by the German tax legislation.

27. The appeal brought by Mr Imfeld against that judgment was dismissed by judgment of the Bundesfinanzhof (Federal Finance Court) (Germany) of 17 December 2007. ( 9 )

28. Both the Finanzgericht Köln and the Bundesfinanzhof pointed out inter alia that the Court of Justice had ratified those thresholds in its judgment of 14 September 1999 in Gschwind. ( 10 )

III – The question referred for a preliminary ruling and the procedure before the Court

29. It was in these circumstances that, joining the various disputes brought before it by the applicants in the main proceedings, the national court, by judgment of 31 May 2012, received at the Court Registry on 22 June 2012, decided to stay proceedings and refer the following question to the Court for a preliminary ruling: ‘Is it contrary to Article 39 [EC] [(now Article 45 TFEU)] that, as a result of the provisions made under the Belgian tax system, specifically under Article 155 of the [1992 ITC] and the second subparagraph of Article 134(1) [of the 1992 ITC], and regardless of whether [the Circular of 2008] is applied, the income earned in Germany by the first applicant — which is exempt from tax [in Belgium] pursuant to Article [14] of the [1967 Bilateral Convention] — is taken into account for the purposes of calculating the tax payable in Belgium and is used as the basis of assessment for the grant of tax advantages provided for under the [1992 ITC], and those advantages, such as the tax-free allowance arising from the first applicant’s family circumstances, are reduced or granted to a lesser extent than if the income of both applicants were earned in Belgium and if the higher income were that earned by the second applicant, rather than by the first applicant, whereas, in Germany, the first applicant is taxed as an individual on his earned income and he can accordingly not obtain all the tax advantages linked to his personal and family circumstances, of which the German tax authorities take account only in part?’

30. The applicants in the main proceedings, the Kingdom of Belgium, the Republic of Estonia, and the European Commission have submitted written observations.

31. The applicants in the main proceedings, the Kingdom of Belgium and the Commission were requested to reply in writing, before the hearing, to questions posed by the Court, a request which they obeyed.

32. The applicants in the main proceedings, the Kingdom of Belgium and the Commission also presented oral argument at the hearing held on 22 April 2013.

IV – Preliminary observations on the wording and scope of the question referred for a preliminary ruling

33. Summarised in very basic terms, the question referred for a preliminary ruling by the national court requests the Court of Justice to rule on the compatibility with EU law of the tax treatment accorded by a Member State, in this case the Kingdom of Belgium, to a couple residing in that Member State and receiving income there, one of whom is self-employed in another Member State, in this case the Federal Republic of Germany, where he receives the whole of his income, which represents the larger part of the couple’s income and which is taxable in Germany and exempt from taxation in Belgium under a bilateral convention.

34. However, this apparent simplicity hides a number of problems which must be set out and eliminated at the outset.

35. These problems arise, first of all, from the specific features, not to say the complexity, of the Belgian tax legislation applicable to the main proceedings, but also from the need to comprehend the tax treatment accorded to the applicants in the main proceedings by the Kingdom of Belgium by taking the German tax legislation into consideration.

36. The very wording of the question referred for a preliminary ruling, which refers to the relevant characteristics of the two legislations, clearly shows that complexity. In order to evaluate fully the scope of that question and to be able to provide it with a useful reply, it is therefore necessary to begin by setting out those characteristics and the tax treatment accorded to the applicants in the main proceedings.

37. That will enable me, subsequently, to identify the situation to be examined in the light of the provisions of the Treaty, a situation which, as we shall see, is the subject of different assessments on the part of the applicants in the main proceedings, the Belgian Government and the Commission, and therefore in the light of the freedom applicable to that situation. The national court refers to freedom of movement for workers although the only foreign element in the situation at issue in the main proceedings relates to Mr Imfeld’s self-employed activity in Germany.

A – Main characteristics of the tax situation of the applicants in the main proceedings in Belgium and Germany

1. Tax treatment of the applicants in the main proceedings in Belgium

38. It is apparent from the order for reference that the joint taxation of the applicants in the main proceedings was undertaken pursuant to Article 126(1) of the 1992 ITC, which provides that ‘the income of the spouses other than earned income is combined with the earned income of the spouse who receives the higher earned income’, and that ‘the amount of tax to be levied is established in the names of both spouses’.

39. It is established that the amount of tax to be levied on the applicants in the main proceedings was established in the name of them both and it is specifically that accumulation which is contested by the applicants in the cases brought before the national court.

40. In the present case, the income earned by Ms Garcet in Belgium and the income earned by Mr Imfeld in Germany, which is exempt from tax in Belgium under Article 23 of the 1967 Bilateral Convention but taken into account for determining the tax payable in Belgium under that provision and under Article 155 of the 1992 ITC, were added together in order to determine the tax payable by the couple on their total income at the progressive tax rate, account being taken of tax deductions.

41. The allowance for dependent children, provided for in Article 131(2) of the 1992 ITC permits each spouse to subtract from the taxable amount an income allowance of a specified amount. That provision states that, for calculating the tax, an income allowance for each spouse, of a basic amount of EUR 4 610 (the basic amount) is exempted. The first subparagraph of Article 134(1) of the 1992 ITC states that that basic amount is set against the income of each spouse which is included in the taxable amount.

42. Those basic amounts are then increased, in accordance with Article 132 of the 1992 ITC, by supplementary amounts for dependants, in this case EUR 1 180 for one dependent child and EUR 3 050 for two dependent children. The second subparagraph of Article 134(1) of the 1992 ITC states that those increases are set, as a priority, against the income of the spouse who receives the higher earned income. It is this ‘supplementary allowance for dependent children’, set against Mr Imfeld’s tax-free income, which is at issue in the main proceedings and which is the only subject-matter of the question referred for a preliminary ruling.

2. The relevant parts of the German tax legislation

43. In accordance with the 1967 Bilateral Convention, Mr Imfeld was taxed separately in Germany on the income he received in that Member State, that is to say, without entitlement to the ‘Ehegattensplitting’ regime, since he did not fulfil the conditions laid down by the German tax legislation.

44. It is apparent, however, from his reply to the written question put by the Court, that, in connection with the income tax paid in Germany, he received an advantage for dependent children in the form of a tax-free income allowance (‘Freibetrag für Kinder’). ( 11 )

B – Identification of the situation to be examined in the light of EU law and the freedom applicable to the situation of the applicants in the main proceedings

1. Freedom applicable to the situation of the applicants in the main proceedings

45. The national court refers, in the question it has referred for a preliminary ruling, to Article 39 EC, concerning the free movement of workers, while repeatedly, in the explanations given in the order for reference, looking at the situation from the perspective of freedom of establishment.

46. Mr Imfeld, who is a German national living in Belgium, works in Germany as a lawyer, so that, unless he exercises his profession as an employed person, which is not apparent either from the order for reference or from the observations submitted to the Court, he falls within the scope not of freedom of movement for workers, but of freedom of establishment, ( 12 ) which includes the right to take up and pursue activities as self-employed persons. ( 13 ) Moreover, the provision of the 1967 Bilateral Convention expressly cited by the national court as being applicable to the cases in the main proceedings concerns the liberal professions and similar self-employed activities.

47. Since it is for the national court to check Mr Imfeld’s professional status, it is therefore necessary to interpret the question referred for a preliminary ruling as referring to Article 49 TFEU, as both the Belgian Government and the Commission agree. ( 14 )

2. The situation to be examined in the light of freedom of establishment

(a) Summary of observations

48. The applicants in the main proceedings claim, in essence, that the Belgian tax legislation puts them at a disadvantage in relation to couples who receive all their income in Belgium and therefore constitutes a restriction on freedom of establishment. Since the tax-free income allowance for dependent children is set against the couple’s higher income and since that income is received in another Member State and is exempt from tax in Belgium, they do not benefit, in practical terms, from that advantage.

49. The Belgian Government basically contests that approach. It points out that the 1992 ITC sets out ‘the principles according to which the earned income of spouses is taxed separately, even though the amount of tax payable is levied on them jointly’. On the basis of the premise that the applicants in the main proceedings were assessed for tax separately, it considers that it is only Mr Imfeld’s tax situation which must be examined in the light of freedom of establishment. It is therefore necessary, in order to determine the existence of an obstacle to freedom of establishment, to compare Mr Imfeld’s situation with what it would have been if he had not exercised his freedom and if he had received all his earned income in Belgium.

50. The Commission considers that the restrictive effect of the Belgian tax legislation lies not in the disadvantageous treatment of Mr Imfeld’s income, which is taxable in Germany and tax-exempt in Belgium, but in the disadvantageous treatment of his wife’s income, which is received in Belgium and wholly taxable in that Member State.

(b) Analysis

51. It is clear from an examination of the main characteristics of the Belgian tax legislation that the ‘supplementary allowance for dependent children’ is granted to the couple as a whole.

52. As the Commission pointed out in its reply to the question which was put to it by the Court, the fact that that supplementary allowance is calculated by setting it against the higher taxable income of one of the two spouses only confirms that specific nature. The Belgian tax legislation thus intends to maximise the effect of the family tax advantage and, when it is examined in the light of freedom of establishment, that objective must be taken into account.

53. From the point of view of freedom of establishment, the question which arises is therefore whether the application of the Belgian tax legislation means, for the applicants in the main proceedings taken as a couple for tax purposes, a disadvantage stemming from the fact that Mr Imfeld receives all his income in another Member State and that the couple is therefore deprived of the actual benefit of the ‘supplementary allowance for dependent children’.

C – Reformulation of the question referred for a preliminary ruling

54. The above account leads me to propose that the Court reformulate the question referred for a preliminary ruling by the national court in simpler terms, reducing it to its most basic elements from the point of view of EU law and therefore removing from its wording the various factual information it contains, concerning the structure of the income of the applicants in the main proceedings or the rules for attributing the advantage at issue in the cases in the main proceedings, which is the ‘supplementary allowance for dependent children’.

55. The Court is asked, in essence, whether Article 49 TFEU is to be interpreted as precluding the application of the tax legislation of a Member State, such as that at issue in the main proceedings, which has the effect of depriving a couple residing in that Member State and receiving income both in that Member State and in another Member State of entitlement to a specific tax advantage, owing to the rules for offsetting it, even though that couple would be entitled to it if the members of the couple received all or most of their incomes in the Member State of residence.

V – The existence of a restriction on freedom of establishment

56. It should be pointed out, first of all, that, according to the settled case-law of the Court of Justice, as Community law stands at present, direct taxation is a matter within the competence of the Member States, but that they must nevertheless exercise that competence in a manner consistent with EU law. ( 15 )

57. The Court has, in particular, repeatedly pointed out that, in the absence of unifying or harmonising measures adopted by the European Union, the Member States retain competence for determining the criteria for taxation on income and capital with a view to eliminating double taxation by means, inter alia, of international agreements. In that context, the Member States are free to determine the connecting factors for the allocation of fiscal jurisdiction in bilateral agreements for the avoidance of double taxation. ( 16 )

58. Nevertheless, that allocation of fiscal jurisdiction does not mean that the Member States are entitled to impose measures that contravene the freedoms of movement guaranteed by the Treaty. The Member States are still required, when exercising the power of taxation so allocated by bilateral conventions to prevent double taxation, to comply with EU rules. ( 17 )

59. It should also be pointed out that, according to the Court’s settled case-law, it is a matter for the Member State of residence, in principle, to grant the taxpayer all the tax allowances relating to his personal and family circumstances because that State is, with the occasional exception, best placed to assess the taxpayer’s personal ability to pay tax, since that is where his personal and financial interests are centred. ( 18 )

60. The Member State of employment is required to take into account personal and family circumstances only where the taxpayer derives all or almost all of his taxable income from employment in that State and where he has no significant income in his State of residence, so that the latter is not in a position to grant him the advantages resulting from taking account of his personal and family circumstances. ( 19 )

61. It is in the light of these principles that the compatibility with freedom of establishment of the application of the Belgian legislation to the situation at issue in the main proceedings must be examined.

62. In the present case, the applicants in the main proceedings were taxed jointly on their income in Belgium, where they live, since the income received in Germany was tax-exempt, and Mr Imfeld was taxed separately on the income he received in Germany, where he works, in accordance with the 1967 Bilateral Convention.

63. Both in Germany and in Belgium, account was taken, at least in part, of their personal and family circumstances. Mr Imfeld was entitled, under the German tax legislation, to an allowance for dependent children (‘Freibetrag für Kinder’), but was not able, however, to benefit under the ‘Ehegattensplitting’ regime.

64. The couple was also entitled, under the Belgian tax legislation, to the allowance for dependent children and to a deduction for childcare costs, but, on the other hand, did not benefit financially from a further allowance, the ‘supplementary allowance for dependent children’ provided for in Article 134 of the 1992 ITC. The supplementary income allowance which was liable to be tax-exempt was set against Mr Imfeld’s income received in Germany, since it was the couple’s higher income, but that income was then deducted from the taxable amount, because it was exempt under the 1967 Bilateral Convention, so that, in the end, no income allowance relating specifically to a supplementary allowance for dependent children was exempted.

65. Consequently, the Belgian tax legislation, and more particularly the combined effect of Article 23 of the 1967 Bilateral Convention, permitting the Kingdom of Belgium to take exempt income into account for calculating tax, and the rules for offsetting the ‘supplementary allowance for dependent children’ laid down in Article 134 of the 1992 ITC, places at a disadvantage couples in the situation of the applicants in the main proceedings, which is characterised by the fact that the larger part of their income is received in another Member State, in relation to couples who receive all or most of their income in Belgium.

66. The applicants in the main proceedings suffered, as a couple, a real disadvantage since they did not obtain the tax advantage resulting from application of the ‘supplementary allowance for dependent children’ to which they would have been entitled if they had received all of their income in Belgium or, at least, if the income earned by Ms Garcet in Belgium had been higher than that earned by Mr Imfeld in Germany.

67. The Belgian tax legislation thus establishes a difference in tax treatment between European Union citizen couples residing in the Kingdom of Belgium according to the origin and size of their incomes which is likely to discourage those citizens from exercising the freedoms guaranteed by the Treaty, inter alia the freedom of establishment. ( 20 )

68. First of all, it is likely to discourage the nationals of that Member State from exercising their right both to freedom of movement and to freedom of establishment by pursuing their activity permanently in another Member State while continuing to live in the first Member State. ( 21 ) It is also likely to discourage the nationals of other Member States from exercising, as European Union citizens, their right to freedom of movement by establishing their residence in that Member State, inter alia for the purposes of family reunification, while continuing to carry on an activity permanently in the Member State of which they are nationals. ( 22 )

69. More generally, the Belgian tax legislation creates an obstacle to the freedoms guaranteed to European Union citizens by the Treaty, in so far as it does not take into consideration cross-border situations such as that at issue in the main proceedings and therefore does not make it possible to compensate, when tax is payable, for the negative effects which it is likely to have on the exercise of those freedoms.

70. As the Commission pointed out in its written observations, the purpose of the rule for offsetting the ‘supplementary allowance for dependent children’ to the higher of the couple’s incomes is, in principle, to maximise the effect of the advantage for the couple as a whole. However, that rule, when applied in a cross-border situation such as that at issue in the main proceedings, may have exactly the opposite effect in certain circumstances, in the present case where the couple receives income in another Member State and that income represents the larger part of their income.

71. Contrary to what the Belgian Government claimed, the obstacle thus identified to freedom of establishment is by no means the inevitable consequence of the disparity of the national legislations at issue in the main proceedings.

72. The couple formed by the applicants in the main proceedings was deprived of some of the allowances envisaged for resident couples owing to the exercise, by one of them, of his freedom of establishment and solely because of the rules for offsetting the ‘supplementary allowance for dependent children’ provided for by the Belgian tax legislation. ( 23 )

73. The Belgian Government cannot claim, moreover, that its tax legislation does not constitute an obstacle to the freedom of establishment because Mr Imfeld’s exercise of his freedom of establishment did not make his tax situation worse, in so far as he did not have to pay, in Germany, higher taxes than he would have paid in Belgium and his personal and family circumstances were taken into account in Germany, so that the Kingdom of Belgium was completely free from any obligation in that regard.

74. Admittedly, as is apparent from the statement of the facts which gave rise to the disputes in the main proceedings, in the present case Mr Imfeld was entitled to have his personal and family circumstances partially taken into account in Germany, by means of the grant of the ‘Freibetrag für Kinder’.

75. However, it cannot be considered that the grant of that tax advantage in Germany may, in some way, compensate for the loss of the tax advantage registered by the applicants in the main proceedings in Belgium. The grant of the ‘Freibetrag für Kinder’ is, in fact, a purely short-term circumstance which may change at any time, since the Federal Republic of Germany may inter alia withdraw or reduce the amount of that advantage without that having any effect on the conditions for granting the ‘supplementary allowance for dependent children’ in Belgium. The compatibility of the Belgian tax legislation with EU law cannot depend on such circumstances.

76. As the Court has repeatedly held, detrimental tax treatment by a Member State contrary to a fundamental freedom cannot be justified by the existence of other tax advantages. ( 24 ) More specifically, a Member State cannot rely on the existence of an advantage granted unilaterally by another Member State, in this case the Member State in which Mr Imfeld works and receives all his income, to escape its obligations under the Treaty, in particular under the Treaty provisions on freedom of establishment. ( 25 )

77. The Belgian tax legislation establishes a tax advantage for couples in the form, in particular, of a ‘supplementary allowance for dependent children’, which is offset against the income of the member of the couple who earns the larger part of their income, without taking any account of the fact that, after exercising the freedoms guaranteed by the Treaty, he may not receive income separately in Belgium, with the immediate and automatic consequence that the couple then loses all the benefit of that advantage. It is the automatic nature of that loss which, irrespective of the tax treatment accorded to Mr Imfeld in Germany, undermines freedom of establishment.

78. In so far as a Member State taxes resident taxpayers on their income taking into account the fact that they are part of a couple, it must, in principle, take into consideration all their personal and family circumstances.

79. Therefore, the fact that, in the present case, Mr Imfeld’s personal and family circumstances were partially taken into account in Germany in respect of his separate taxation and he was consequently entitled to obtain a tax advantage there cannot exempt the Kingdom of Belgium from its obligation to guarantee the same treatment to all its residents who are in the same situation and not to maintain tax restrictions on their exercise of the freedoms guaranteed by the Treaty, unless those restrictions are justified by wholly proportionate overriding reasons of public interest, a matter which must now be examined.

VI – Justifications for the restriction on freedom of establishment

A – Summary of observations

80. In its reply to the question put by the Court, the Belgian Government claimed that its tax legislation was, in any event, justified by the need to safeguard the balanced distribution of the power of taxation between the Member States.

81. The Estonian government considers that the aim of the Belgian tax legislation is to avoid the taxpayer’s personal and family circumstances being taken into account simultaneously in two Member States and consequently leading to the unjustified grant of a double advantage. It points out, from this perspective, that the Court has accepted that the Member States must be able to prevent the double deduction of losses. ( 26 )

B – Analysis

82. Even if it may be accepted that the different tax advantages granted respectively by the two Member States are comparable and that, following a comparative quantitative evaluation of the facts in the case, it may be concluded that the applicants in the main proceedings did actually receive a double advantage, that fact is, in any event, only the result of the parallel application of the Belgian and German tax legislations, as agreed between the two Member States in the terms set out by the 1967 Bilateral Convention. ( 27 )

83. Those States exercise their specific powers in the area of direct taxation, pursuing similar objectives of protection of the family.

84. Moreover, the 1967 Bilateral Convention does not impose on the Member State of employment any obligation to take into account the personal and family circumstances of taxpayers living in another Member State, either one way or the other. ( 28 )

85. In those circumstances, it cannot be a matter for the Court of Justice to ensure the coordination of the national tax legislations in order to prevent a taxpaying couple, both of whom are taxed jointly in one Member State and one of whom is also taxed separately in another Member State, receiving a double tax advantage as a result of the partial taking into account, by both Member States, of their personal and family circumstances.

86. It should be pointed out, moreover, that the Belgian tax legislation does not establish any correlation between the tax advantages which it grants to its residents and the tax advantages which they may receive in connection with their taxation in another Member State. The applicants in the main proceedings failed to qualify for the ‘supplementary allowance for dependent children’ not because they received an equivalent advantage in Germany, but only because the benefit of it was neutralised by the rules for offsetting it.

87. The Kingdom of Belgium also pointed out in that regard that the Circular of 2008, which constitutes a mechanism establishing such a correlation, is not applicable to Mr Imfeld’s situation, because he did not receive taxable income in Belgium.

88. It follows that Article 49 TFEU is to be interpreted as precluding the application of the tax legislation of a Member State, such as that at issue in the main proceedings, which has the effect of depriving a couple residing in that State and receiving income both in that State and in another Member State of entitlement to a specific tax advantage, owing to the rules for offsetting it, whereas that couple would be entitled to the tax advantage if the members of that couple received all or most of their income in their Member State of residence.

VII – Conclusion

89. I therefore propose that the Court reply to the question referred by the Tribunal de première instance de Liège as follows: Article 49 TFEU is to be interpreted as precluding the application of the tax legislation of a Member State, such as that at issue in the main proceedings, which has the effect of depriving a couple residing in that State and receiving income both in that State and in another Member State of entitlement to a specific tax advantage, owing to the rules for offsetting it, whereas that couple would be entitled to the tax advantage if the members of that couple received all or most of their income in their Member State of residence.

( 1 ) Original language: French.

( 2 ) Moniteur belge, 30 July 1969, ‘the 1967 Bilateral Convention’.

( 3 ) Moniteur belge, 30 July 1992, ‘the 1992 ITC’.

( 4 ) What the national court defines as the ‘system of exemption subject to progressivity’.

( 5 ) Case C-385/00 de Groot [2002] ECR I-11819.

( 6 ) ‘The Circular of 2008’.

( 7 ) The ‘Ehegattensplitting’ regime.

( 8 ) Az. 4 K 4725/05

( 9 ) Az. 1 B 96/07

( 10 ) Case C-391/97 Gschwind [1999] ECR I-5451.

( 11 ) That advantage was, for the years 2002 and 2003, EUR 5 808 per child, an amount reduced prorata temporis for the child born during the tax period.

( 12 ) For a case concerning a lawyer in Germany, see Case C-340/89 Vlassopoulou [1991] ECR I-2357.

( 13 ) See, inter alia, Case C-9/02 De Lasteyrie du Saillant [2004] ECR I-2409, paragraph 40, and Case C-152/03 Ritter-Coulais [2006] ECR I-1711, paragraph 19.

( 14 ) As the Court has repeatedly held, even though the national court has directed its reference for a preliminary ruling solely to the interpretation of the free movement of workers, the Court is not thereby precluded from providing the national court with all those elements for the interpretation of Community law which may be of assistance in adjudicating on the case pending before it, whether or not that court has specifically referred to them in its question. See, inter alia, Ritter-Coulais, paragraph 29, and Case C-544/07 Rüffler [2009] ECR I-3389, paragraph 57.

( 15 ) See, inter alia, Case C-279/93 Schumacker [1995] ECR I-225, paragraph 21, and Case C‑123/11 A [2013] ECR, paragraph 29.

( 16 ) See, inter alia, Case C-336/96 Gilly [1998] ECR I-2793, paragraph 24; de Groot, paragraph 93; Case C-527/06 Renneberg [2008] ECR I-7735, paragraph 48, and Case C‑168/11 Beker [2013] ECR, paragraph 32.

( 17 ) de Groot, paragraph 94; Renneberg, paragraphs 50 and 51, and Beker, paragraphs 33 and 34.

( 18 ) See, inter alia, Schumacker, paragraph 36; Beker, paragraph 43, and Case C-87/99 Zurstrassen [2000] ECR I-3337, paragraph 21.

( 19 ) See, inter alia, Schumacker, paragraph 36; Gschwind, paragraph 27; Zurstrassen, paragraphs 21 to 23, and de Groot, paragraph 89.

( 20 ) See, to the same effect, Beker, paragraph 52.

( 21 ) See, inter alia, Case C-107/94 Asscher [1996] ECR I-3089, paragraphs 32 to 35.

( 22 ) See Renneberg, paragraphs 35 and 36. See also Case C-520/04 Turpeinen [2006] ECR I-10685, paragraphs 18 to 39, and Rüffler, paragraphs 55 and 56.

( 23 ) To the same effect, de Groot, paragraph 87.

( 24 ) See, inter alia, de Groot, paragraph 97 and Case C-182/06 Lakebrink and Peters-Lakebrink [2007] ECR I-6705, paragraph 24.

( 25 ) See, inter alia, Case C-379/05 Amurta [2007] ECR I-9569, paragraph 78; Case C-11/07 Eckelkamp and Others [2008] ECR I-6845, paragraph 69; Case C-43/07 Arens-Sikken [2008] ECR I-6887, paragraph 66, and Case C-510/08 Mattner [2010] ECR I-3553, paragraph 43.

( 26 ) See, inter alia, Case C-446/03 Marks & Spencer [2005] ECR I-10837, paragraph 47.

( 27 ) Regarding the consequences, in the light of EU law, of the parallel exercise by the Member States, of their fiscal jurisdiction, see, inter alia, Case C-513/04 Kerckhaert and Morres [2006] ECR I-10967, paragraph 20; Case C-298/05 Columbus Container Services [2007] ECR I-10451, paragraph 43; Case C-194/06 Orange European Smallcap Fund [2008] ECR I-3747, paragraphs 37 to 42 and 47; Case C-67/08 Block [2009] ECR I-883, paragraph 28; Case C-128/08 Damseaux [2009] ECR I-6823, paragraph 27, and Case C-96/08 CIBA [2010] ECR I-2911, paragraphs 25 to 29.

( 28 ) See, in that regard, de Groot, paragraph 88.