Keywords

Summary



Keywords

1. Privileges and immunities of the European Communities – Fiscal immunity of the Communities – Direct taxes – Definition

(Protocol on the Privileges and Immunities of the European Communities, Art. 3, first para.; Council Directive 77/799, Art. 1(2))

2. Privileges and immunities of the European Communities – Fiscal immunity of the Communities – Direct taxes

(Protocol on the Privileges and Immunities of the European Communities, Art. 3, first para.)

Summary

1. Although the Protocol on the Privileges and Immunnities of the European Communities contains no definition of a direct tax and no provisions were adopted for the purpose of implementing the Protocol, some criteria for interpretation of that term are provided by Directive 77/799 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation. That directive, the scope of application of which, prior to its amendment by Directive 79/1070, was restricted solely to direct taxes, defined, in Article 1(2) thereof, tax on income and on capital, including in that term taxes on total capital, or on elements of capital, irrespective of the manner in which they are levied.

Consequently, for the purposes of the first paragraph of Article 3 of that protocol, a regional tax relating to the owners of real property rights in buildings and imposed directly on persons on the basis of their assets or their real property rights having a value as assets is in the nature of a direct tax because it could be regarded as being levied on an element of capital within the meaning of Directive 77/799. Moreover, the characteristics of that tax must be ascertained taking account of all those subject to it, namely the natural and legal persons on whom it is imposed, and not according to any financial consequences which that tax might, indirectly, have as regards the Communities.

(see paras 44-46)

2. Although it is established that the first paragraph of Article 3 of the Protocol on the Privileges and Immunities of the European Communities exempts the Communities from direct taxes, it does not, however, provide for such exemption for parties contracting with the Communities. Furthermore, that provision does not mention the passing on of the cost of direct taxes payable by such contracting parties. The Commission and the Council cannot therefore challenge the passing on of a regional tax imposed within a Member State on the basis of the first paragraph of Article 3 of the Protocol.

On the one hand, where that tax is passed on by virtue of a contractual provision in the lease, it must necessarily reflect the intention of the contracting parties, since the inclusion of such a provision falls within the scope of their freedom of contract. On the other hand, where that tax is passed on by an increase in the amount of the rent, it also falls within the scope of the parties’ freedom of contract, since the definition of the content of a contract, including the determination of an element of the contract such as the amount of the rent, requires the consent of the parties. Moreover, in the latter case, the same tax imposed on owners would not necessarily be passed on by them automatically and in its entirety to the tenants.

(see paras 50-51)