Judgment of the Court of 24 February 1988. - Commission of the European Communities v Kingdom of Belgium. - Abolition of reductions in the tax on imcome from immovable assets for officials of the Communities. - Case 260/86.



European Court reports 1988 Page 00955



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

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PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES - OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES - EXEMPTION FROM NATIONAL TAXES ON SALARIES PAID BY THE COMMUNITIES - SCOPE - TAX ON INCOME FROM IMMOVABLE ASSETS BORNE BY TENANTS - REDUCTIONS REFUSED BY REASON OF THE FACT THAT THE TENANT IS AN OFFICIAL OR OTHER SERVANT - NOT PERMISSIBLE

( PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES, ART . 13, SECOND PARAGRAPH )

Summary

THE SECOND PARAGRAPH OF ARTICLE 13 OF THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES IS INTENDED TO LAY DOWN AN EXEMPTION FROM ALL DIRECT OR INDIRECT NATIONAL TAXES ON SALARIES, WAGES AND EMOLUMENTS PAID BY THE COMMUNITIES TO THEIR OFFICIALS AND OTHER SERVANTS AND PRECLUDES ANY NATIONAL TAX, REGARDLESS OF ITS NATURE AND THE MANNER IN WHICH IT IS LEVIED, WHICH IS IMPOSED DIRECTLY OR INDIRECTLY ON OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES BY REASON OF THE FACT THAT THEY ARE IN RECEIPT OF REMUNERATION PAID BY THE COMMUNITIES, EVEN IF THE TAX IN QUESTION IS NOT CALCULATED BY REFERENCE TO THE AMOUNT OF THAT REMUNERATION .

CONSEQUENTLY, THE FACT THAT A MEMBER STATE DOES NOT APPLY, WITH REGARD TO A TAX ON INCOME FROM IMMOVABLE ASSETS WHICH IS IN PRACTICE BORNE BY TENANTS, A REDUCED RATE OF TAX WHERE THE TENANT OR THE TENANT' S SPOUSE, AS AN OFFICIAL OR OTHER SERVANT OF THE COMMUNITIES, IS EXEMPT FROM NATIONAL TAXES IN RESPECT OF REMUNERATION PAID BY THE COMMUNITIES, CONSTITUTES A BREACH OF THE OBLIGATIONS ARISING FROM THE AFOREMENTIONED PROVISION .

Parties

IN CASE 260/86

COMMISSION OF THE EUROPEAN COMMUNITIES, REPRESENTED BY PHILIPPE COMBESCOT, A MEMBER OF ITS LEGAL DEPARTMENT, ACTING AS AGENT, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF G . KREMLIS, ALSO A MEMBER OF ITS LEGAL DEPARTMENT, JEAN MONNET BUILDING, KIRCHBERG,

APPLICANT,

V

KINGDOM OF BELGIUM, REPRESENTED BY THE MINISTER FOR FOREIGN AFFAIRS, WHOSE AGENT IS JAN DEVADDER, CONSEILLER ADJOINT ( DEPUTY ADVISER ) AT THE MINISTRY OF FOREIGN AFFAIRS, EXTERNAL TRADE AND COOPERATION WITH DEVELOPING COUNTRIES, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE BELGIAN EMBASSY, 4 RUE DES GIRONDINS,

DEFENDANT,

APPLICATION FOR A DECLARATION THAT, BY REFUSING TO GRANT REDUCTIONS IN THE TAX ON INCOME FROM IMMOVABLE ASSETS IN RESPECT OF A RESIDENCE OCCUPIED BY A TENANT WHO IS EXEMPT FROM THE TAX ON NATURAL PERSONS BY VIRTUE OF INTERNATIONAL CONVENTIONS AND BY FAILING TO ADOPT MEASURES ENABLING REDUCTIONS NOT GRANTED IN PREVIOUS YEARS TO BE REIMBURSED, THE KINGDOM OF BELGIUM HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE SECOND PARAGRAPH OF ARTICLE 13 AND ARTICLE 14 OF THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES AND UNDER ARTICLE 7 OF THE EEC TREATY,

THE COURT

COMPOSED OF : LORD MACKENZIE STUART, PRESIDENT, G . BOSCO AND O . DUE ( PRESIDENTS OF CHAMBERS ), U . EVERLING, K . BAHLMANN, Y . GALMOT AND R . JOLIET, JUDGES,

ADVOCATE GENERAL : J . MISCHO

REGISTRAR : D . LOUTERMAN, ADMINISTRATOR

HAVING REGARD TO THE REPORT FOR THE HEARING AND FURTHER TO THE HEARING ON 3 DECEMBER 1987 AT WHICH THE APPLICANT WAS REPRESENTED BY C . BERARDIS-KAYSER, A MEMBER OF THE COMMISSION' S LEGAL DEPARTMENT,

AFTER HEARING THE OPINION OF THE ADVOCATE GENERAL DELIVERED AT THE SITTING ON 26 JANUARY 1988,

GIVES THE FOLLOWING

JUDGMENT

Grounds

1 BY AN APPLICATION LODGED AT THE COURT REGISTRY ON 16 OCTOBER 1986 THE COMMISSION OF THE EUROPEAN COMMUNITIES BROUGHT AN ACTION UNDER ARTICLE 169 OF THE EEC TREATY FOR A DECLARATION THAT THE KINGDOM OF BELGIUM HAD FAILED TO FULFIL ITS OBLIGATIONS UNDER THE SECOND PARAGRAPH OF ARTICLE 13 AND ARTICLE 14 OF THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES ( HEREINAFTER REFERRED TO AS "THE PROTOCOL ") AND UNDER ARTICLE 7 OF THE EEC TREATY,

BY ADOPTING THE PROVISIONS OF ARTICLE 17 OF THE LAW OF 10 FEBRUARY 1981, WHICH BECAME ARTICLE 162 ( 6 ) OF THE CODE DES IMPOTS SUR LES REVENUS ( INCOME TAX CODE ),

BY APPLYING THOSE PROVISIONS TO OFFICIALS AND OTHER SERVANTS OF THE EUROPEAN COMMUNITIES AS FROM THE 1981 FINANCIAL YEAR, THEREBY ABOLISHING IN RESPECT OF SUCH PERSONS THE REDUCTIONS IN THE TAX ON INCOME FROM IMMOVABLE ASSETS WHICH ARE NORMALLY GRANTED TO PERSONS WHO PAY TAX ON THEIR REMUNERATION TO THE BELGIAN TREASURY, WITHOUT GIVING THEM A RIGHT TO REIMBURSEMENT .

2 IT IS APPARENT FROM THE DOCUMENTS BEFORE THE COURT THAT THE TAX ON INCOME FROM IMMOVABLE ASSETS IS LEVIED ON THE CADASTRAL INCOME FROM REAL ESTATE SITUATED IN BELGIUM; IT IS PAYABLE BY THE PERSON WHO OWNS OR IS IN POSSESSION OF THE TAXABLE PROPERTY, WHO HOLDS A LONG LEASE OR A BUILDING LEASE OF THE PROPERTY OR WHO HOLDS A BENEFICIAL LIFE INTEREST IN IT . REDUCTIONS IN THE TAX MAY BE GRANTED, DEPENDING IN PARTICULAR ON THE SOCIAL CIRCUMSTANCES OF THE OCCUPANT OF THE PROPERTY . THUS, ARTICLE 162 ( 1 ), ( 2 ) AND ( 3 ) OF THE CODE DES IMPOTS SUR LES REVENUS PROVIDES FOR A REDUCTION OF 10 OR 20%, DEPENDING ON THE CASE, WHERE THE PROPERTY IS OCCUPIED BY A WAR INVALID, BY A HANDICAPPED PERSON OR BY A HEAD OF A FAMILY COMPRISING AT LEAST TWO CHILDREN OR A HANDICAPPED PERSON . HOWEVER, ACCORDING TO ARTICLE 162 ( 6 ), WHICH WAS INSERTED BY ARTICLE 17 OF THE LAW OF 10 FEBRUARY 1981 AMENDING FISCAL AND FINANCIAL PROVISIONS, THOSE REDUCTIONS, WHICH, ACCORDING TO ARTICLE 162 ( 3 ), MAY BE DEDUCTED FROM THE RENT REGARDLESS OF ANY AGREEMENT TO THE CONTRARY, ARE NOT APPLICABLE IF THE RESIDENCE IS OCCUPIED, IN PARTICULAR, "BY A TENANT WHO, EITHER HIMSELF OR ON ACCOUNT OF HIS SPOUSE, IS EXEMPT FROM THE TAX ON NATURAL PERSONS BY VIRTUE OF INTERNATIONAL CONVENTIONS ".

3 THIS ACTION IS ESSENTIALLY DIRECTED AGAINST THE FACT THAT UNDER THE AFOREMENTIONED TAX LEGISLATION THE SAID REDUCTION IN THE TAX ON INCOME FROM IMMOVABLE ASSETS IS NOT GRANTED IN A CASE WHERE THE TENANT OR HIS SPOUSE IS AN OFFICIAL OR OTHER SERVANT OF THE EUROPEAN COMMUNITIES AND IN THAT CAPACITY IS EXEMPT FROM THE TAX ON THE INCOME OF NATURAL PERSONS IN ACCORDANCE WITH THE PROVISIONS OF THE PROTOCOL .

4 REFERENCE IS MADE TO THE REPORT FOR THE HEARING FOR A FULLER ACCOUNT OF THE RELEVANT BELGIAN LEGISLATION, THE RELEVANT PROVISIONS OF COMMUNITY LAW AND THE SUBMISSIONS AND ARGUMENTS OF THE PARTIES, WHICH ARE MENTIONED OR DISCUSSED HEREINAFTER ONLY IN SO FAR AS IS NECESSARY FOR THE REASONING OF THE COURT .

THE COMMISSION' S FIRST COMPLAINT

5 THE COMMISSION' S FIRST COMPLAINT IS THAT THE DEROGATION PROVIDED FOR IN ARTICLE 162 ( 6 ) OF THE CODE DES IMPOTS SUR LES REVENUS IS CONTRARY TO THE SECOND PARAGRAPH OF ARTICLE 13 AND ARTICLE 14 OF THE PROTOCOL AND TO ARTICLE 7 OF THE EEC TREATY .

6 IN SUPPORT OF THAT COMPLAINT THE COMMISSION MAINTAINS, IN THE FIRST PLACE, THAT THE EFFECT OF THE LEGISLATION IN QUESTION IS TO IMPOSE ON THE OWNER OF IMMOVABLE PROPERTY A HIGHER RATE OF TAX ON INCOME FROM SUCH PROPERTY WHERE THE TENANT IS AN OFFICIAL OR OTHER SERVANT OF THE COMMUNITIES . SINCE THAT TAX IS IN PRACTICE PASSED ON TO THE TENANT BY THE OWNER, IT IS ULTIMATELY THE OFFICIALS AND OTHERS SERVANTS OF THE COMMUNITIES WHO MUST BEAR THE HIGHER RATE OF TAX, CONTRARY TO THE SECOND PARAGRAPH OF ARTICLE 13 OF THE PROTOCOL, WHICH PROVIDES THAT OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES "SHALL BE EXEMPT FROM NATIONAL TAXES ON SALARIES, WAGES AND EMOLUMENTS PAID BY THE COMMUNITIES ".

7 THE COMMISSION FURTHER CONTENDS THAT THE LEGISLATION AT ISSUE IS CONTRARY TO ARTICLE 14 OF THE PROTOCOL, WHICH PROVIDES THAT, IN THE APPLICATION OF INCOME TAX, OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES ARE TO BE CONSIDERED AS HAVING MAINTAINED THE DOMICILE FOR TAX PURPOSES WHICH THEY HAD AT THE TIME OF THEIR ENTRY INTO SERVICE .

8 FINALLY, THE COMMISSION MAINTAINS THAT, BY TREATING BELGIAN WORKERS AND WORKERS FROM OTHER MEMBER STATES WHO RENT THEIR HOMES DIFFERENTLY FROM OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES IN THE SAME POSITION, WITHOUT ANY OBJECTIVE JUSTIFICATION, THE LEGISLATION AT ISSUE DISCRIMINATES ON THE GROUNDS OF NATIONALITY, WHICH IS CONTRARY TO ARTICLE 7 OF THE EEC TREATY .

9 THE BELGIAN GOVERNMENT DOES NOT DISPUTE THE ALLEGED BREACH OF TREATY OBLIGATIONS BUT REFERS TO THE PRACTICAL DIFFICULTIES ENCOUNTERED IN REPEALING THE LEGISLATION AT ISSUE .

10 AS REGARDS THE ARGUMENT ALLEGING A BREACH OF THE SECOND PARAGRAPH OF ARTICLE 13 OF THE PROTOCOL, IT IS NECESSARY TO STATE THAT, ACCORDING TO ITS WORDING AND SCHEME, THAT PROVISION PROVIDES FOR AN EXEMPTION FROM ALL DIRECT OR INDIRECT NATIONAL TAXES ON SALARIES, WAGES AND EMOLUMENTS PAID BY THE COMMUNITIES TO THEIR OFFICIALS AND OTHER SERVANTS . CONSEQUENTLY, IT PRECLUDES ANY NATIONAL TAX, REGARDLESS OF ITS NATURE AND THE MANNER IN WHICH IT IS LEVIED, WHICH IS IMPOSED DIRECTLY OR INDIRECTLY ON OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES BY REASON OF THE FACT THAT THEY ARE IN RECEIPT OF REMUNERATION PAID BY THE COMMUNITIES, EVEN IF THE TAX IN QUESTION IS NOT CALCULATED BY REFERENCE TO THE AMOUNT OF THAT REMUNERATION .

11 WHILST IT IS TRUE THAT THE PERSONS SUBJECT TO THE TAX ON INCOME FROM IMMOVABLE ASSETS AT ISSUE IN THIS CASE ARE THE OWNERS AND NOT THE TENANTS OF THE PROPERTY, NEVERTHELESS WHERE THE RESIDENCE IS LET THE FINANCIAL BURDEN OF THE TAX IS BORNE BY THE TENANT OF THE PROPERTY . IT IS FOR THAT REASON THAT ARTICLE 162 ( 3 ) OF THE CODE DES IMPOTS SUR LES REVENUS PROVIDES THAT REDUCTIONS IN THE TAX MAY BE DEDUCTED FROM THE RENT NOTWITHSTANDING ANY AGREEMENT TO THE CONTRARY .

12 IN THOSE CIRCUMSTANCES, THE FACT THAT THE GRANT OF THE REDUCTIONS AT ISSUE IS MADE DEPENDENT ON THE CONDITION THAT NEITHER THE TENANT OF THE PROPERTY NOR THE TENANT' S SPOUSE IS AN OFFICIAL OR OTHER SERVANT OF THE COMMUNITIES AND IN THAT CAPACITY EXEMPT FROM THE TAX ON NATURAL PERSONS BY VIRTUE OF THE SECOND PARAGRAPH OF ARTICLE 13 OF THE PROTOCOL MEANS THAT THE PERSONS FALLING WITHIN THAT CATEGORY, IN SO FAR AS THEY SATISFY THE OTHER CONDITIONS LAID DOWN BY THE BELGIAN LEGISLATION FOR RECEIVING A REDUCTION, MUST BEAR AN ADDITIONAL FINANCIAL CHARGE, NAMELY THE DIFFERENCE BETWEEN THE AMOUNT RESULTING FROM THE APPLICATION OF THE NORMAL RATE OF TAX AND THAT RESULTING FROM THE APPLICATION OF THE REDUCED RATE, FOR THE PRECISE REASON THAT THEY ARE IN RECEIPT OF REMUNERATION WHICH IS EXEMPT FROM NATIONAL TAXES . SUCH A CHARGE IS CONTRARY TO THE REQUIREMENTS OF THE SECOND PARAGRAPH OF ARTICLE 13 OF THE PROTOCOL AS SET OUT ABOVE .

13 ON THE OTHER HAND, THE COMPLAINT ALLEGING AN INFRINGEMENT OF ARTICLE 14 OF THE PROTOCOL, WHICH RELATES TO THE DOMICILE OF OFFICIALS AND OTHER SERVANTS OF THE COMMUNITIES FOR TAX PURPOSES, CANNOT BE UPHELD . AS THE COMMISSION HAS ITSELF ADMITTED, ARTICLE 14 DOES NOT PRECLUDE THOSE OFFICIALS OR SERVANTS FROM BEING SUBJECT TO THE TAX ON INCOME FROM IMMOVABLE ASSETS IN BELGIUM, EVEN IF THEIR DOMICILE FOR TAX PURPOSES IS IN ANOTHER MEMBER STATE . LIKEWISE, IT CANNOT THEREFORE PRECLUDE THEM FROM BEING REFUSED ANY POSSIBLE REDUCTIONS IN THAT TAX .

14 NOR CAN IT BE ACCEPTED THAT THE KINGDOM OF BELGIUM HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 7 OF THE EEC TREATY . ARTICLE 162 ( 6 ) OF THE CODE DES IMPOTS SUR LES REVENUS EXCLUDES THE GRANT OF REDUCTIONS WHEN THE TENANT OF THE PROPERTY OR HIS SPOUSE IS AN OFFICIAL OR OTHER SERVANT OF THE COMMUNITIES WITHOUT MAKING ANY DISTINCTION IN THAT RESPECT BETWEEN BELGIAN NATIONALS AND NATIONALS OF OTHER MEMBER STATES . CONSEQUENTLY, THE LEGISLATION IN QUESTION DOES NOT INVOLVE ANY DIFFERENCE OF TREATMENT BASED UPON THE NATIONALITY OF THE PERSONS CONCERNED .

15 IN VIEW OF ALL THE FOREGOING CONSIDERATIONS, IT IS NECESSARY TO DECLARE THAT, BY REFUSING TO GRANT REDUCTIONS IN THE TAX ON INCOME FROM IMMOVABLE ASSETS WHERE THE TENANT OF THE RESIDENCE, OR THE SPOUSE OF SUCH TENANT, IS AN OFFICIAL OR OTHER SERVANT OF THE COMMUNITIES AND IN THAT CAPACITY EXEMPT, BY VIRTUE OF THE SECOND PARAGRAPH OF ARTICLE 13 OF THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES, FROM NATIONAL TAXES ON SALARIES, WAGES AND EMOLUMENTS, THE KINGDOM OF BELGIUM HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THAT PROVISION .

THE COMMISSION' S SECOND COMPLAINT

16 THE COMMISSION' S SECOND COMPLAINT IS ESSENTIALLY THAT THE KINGDOM OF BELGIUM IS ACTUALLY APPLYING THE LEGISLATIVE PROVISIONS AT ISSUE AND THAT THERE IS NO PROVISION FOR THE REIMBURSEMENT OF SUMS WRONGFULLY LEVIED IN PREVIOUS FINANCIAL YEARS .

17 AS FAR AS THAT COMPLAINT IS CONCERNED, IT IS SUFFICIENT TO STATE THAT IT RELATES TO THE APPLICATION OF THE LEGISLATION AT ISSUE AND CANNOT THEREFORE BE REGARDED AS A SEPARATE COMPLAINT . CONSEQUENTLY, IT IS NOT NECESSARY TO CONSIDER IT SEPARATELY .

Decision on costs

COSTS

18 UNDER ARTICLE 69 ( 2 ) OF THE RULES OF PROCEDURE, THE UNSUCCESSFUL PARTY IS TO BE ORDERED TO PAY THE COSTS . SINCE THE KINGDOM OF BELGIUM HAS FAILED IN ITS SUBMISSIONS, IT MUST BE ORDERED TO PAY THE COSTS .

Operative part

ON THOSE GROUNDS,

THE COURT

HEREBY :

( 1 ) DECLARES THAT, BY REFUSING TO GRANT REDUCTIONS IN THE TAX ON INCOME FROM IMMOVABLE ASSETS WHERE THE TENANT OF THE RESIDENCE, OR THE SPOUSE OF SUCH TENANT, IS AN OFFICIAL OR OTHER SERVANT OF THE COMMUNITIES AND IN THAT CAPACITY EXEMPT, BY VIRTUE OF THE SECOND PARAGRAPH OF ARTICLE 13 OF THE PROTOCOL ON THE PRIVILEGES AND IMMUNITIES OF THE EUROPEAN COMMUNITIES, FROM NATIONAL TAXES ON SALARIES, WAGES AND EMOLUMENTS PAID BY THE COMMUNITIES, THE KINGDOM OF BELGIUM HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THAT PROVISION;

( 2 ) ORDERS THE KINGDOM OF BELGIUM TO BEAR THE COSTS .