Case C‑559/13

Finanzamt Dortmund-Unna

v

Josef Grünewald

(Request for a preliminary ruling from the Bundesfinanzhof)

‛Reference for a preliminary ruling — Free movement of capital — Direct taxation — Income tax — Deductibility of support payments made in consideration for a gift by way of anticipated succession — Exclusion of non-residents’

Summary — Judgment of the Court (Grand Chamber), 24 February 2015

Free movement of capital and liberalisation of payments — Restrictions — Tax legislation — Income tax — Income derived from shares in a company transferred in the course of a gift by way of anticipated succession — Deductibility of support payments made in consideration for that gift — Exclusion of non-residents — Difference in treatment — Comparable situations — No justification

(Art. 63 TFEU)

Article 63 TFEU must be interpreted as precluding legislation of a Member State which does not permit a non-resident taxpayer who has received in that Member State commercial income generated by shares in a business which were transferred to him by a relative in the course of a gift by way of anticipated succession to deduct from that income the annuities which he has paid to that relative in consideration for that gift, whereas that legislation allows a resident taxpayer to make such a deduction.

First, that legislation constitutes a difference in treatment relating to situations which are objectively comparable. In relation to expenses directly linked to an activity which has generated taxable income in a Member State, residents of that State and non-residents are in a comparable situation. Thus, expenses occasioned by the activity in question are directly linked to that activity and are accordingly necessary in order to carry out that activity. That is the case for annuities, where the commitment to pay those annuities stems directly from the transfer of the shares in the business which gave rise to the income taxed in the Member State concerned, and that commitment was a necessary condition for the transfer by way of anticipated succession.

Secondly, such a restriction on the movement of capital cannot be justified either by the objective of preserving the balanced allocation of powers of taxation between Member States or by the need to safeguard the coherence of the national tax regime. In particular, the second objective cannot be relied on, since no direct link has been established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy. The deduction of the annuities by the debtor and the taxation of those annuities in the hands of the recipient necessarily concern different taxpayers.

(see paras 23, 29, 30, 33, 44, 47, 49, 53, 54, operative part)

Case C‑559/13

Finanzamt Dortmund-Unna

v

Josef Grünewald

(Request for a preliminary ruling from the Bundesfinanzhof)

‛Reference for a preliminary ruling — Free movement of capital — Direct taxation — Income tax — Deductibility of support payments made in consideration for a gift by way of anticipated succession — Exclusion of non-residents’

Summary — Judgment of the Court (Grand Chamber), 24 February 2015

Free movement of capital and liberalisation of payments — Restrictions — Tax legislation — Income tax — Income derived from shares in a company transferred in the course of a gift by way of anticipated succession — Deductibility of support payments made in consideration for that gift — Exclusion of non-residents — Difference in treatment — Comparable situations — No justification

(Art. 63 TFEU)

Article 63 TFEU must be interpreted as precluding legislation of a Member State which does not permit a non-resident taxpayer who has received in that Member State commercial income generated by shares in a business which were transferred to him by a relative in the course of a gift by way of anticipated succession to deduct from that income the annuities which he has paid to that relative in consideration for that gift, whereas that legislation allows a resident taxpayer to make such a deduction.

First, that legislation constitutes a difference in treatment relating to situations which are objectively comparable. In relation to expenses directly linked to an activity which has generated taxable income in a Member State, residents of that State and non-residents are in a comparable situation. Thus, expenses occasioned by the activity in question are directly linked to that activity and are accordingly necessary in order to carry out that activity. That is the case for annuities, where the commitment to pay those annuities stems directly from the transfer of the shares in the business which gave rise to the income taxed in the Member State concerned, and that commitment was a necessary condition for the transfer by way of anticipated succession.

Secondly, such a restriction on the movement of capital cannot be justified either by the objective of preserving the balanced allocation of powers of taxation between Member States or by the need to safeguard the coherence of the national tax regime. In particular, the second objective cannot be relied on, since no direct link has been established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy. The deduction of the annuities by the debtor and the taxation of those annuities in the hands of the recipient necessarily concern different taxpayers.

(see paras 23, 29, 30, 33, 44, 47, 49, 53, 54, operative part)