Judgment of the Court (Sixth Chamber) of 25 May 1993. - Niels Kristoffersen v Skatteministeriet. - Reference for a preliminary ruling: Østre Landsret - Denmark. - Protocol on the Privileges and Immunities of the Communities - Tax on the rental value of immovable property. - Case C-263/91.



European Court reports 1993 Page I-02755



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

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1. Privileges and Immunities of the European Communities ° Officials and servants of the Communities ° Imposition of income tax in the State in which an official has his domicile for tax purposes ° Taxation on the basis of the rental value of a home purchased and occupied by an official in another Member State ° Permissibility

(Protocol on the Privileges and Immunities of the European Communities, Art. 14, first para.)

2. Privileges and Immunities of the European Communities ° Officials and servants of the Communities ° Exemption from national taxes on salaries paid by the Communities ° Scope ° Taxation by the State in which an official has his domicile for tax purposes of the income corresponding to the rental value of a home purchased by an official in another Member State ° Permissibility

(Protocol on the Privileges and Immunities of the European Communities, Art. 13, second para.)

Summary

1. The first paragraph of Article 14 of the Protocol on the Privileges and Immunities of the European Communities must be interpreted as meaning that officials and other servants of the Communities who are covered by that provision may be liable to pay income tax in their country of domicile for tax purposes on the rental value of the home which is occupied and owned by them in another Member State.

2. The second paragraph of Article 13 of the Protocol on the Privileges and Immunities of the European Communities precludes any national tax, regardless of its nature and the manner in which it is levied, which is imposed directly or indirectly on officials or 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.

Income tax levied by the State in which an official has his domicile for tax purposes on the basis of the rental value of the home purchased in another Member State does not constitute indirect taxation of remuneration. Such a tax, which is charged on an objective basis connected with a form of investment chosen by the official concerned, has no legal connection with the salaries, wages and emoluments paid by the Communities. The ownership of immovable property, like the ownership of other property, must be regarded as a separate source of income, irrespective of the origin of the funds used to purchase it.

Parties

In Case C-263/91,

REFERENCE to the Court under Article 177 of the EEC Treaty by the OEstre Landsret (Denmark) for a preliminary ruling in the proceedings pending before that court between

Niels Kristoffersen

and

Skatteministeriet

on the interpretation of Articles 13 and 14 of the Protocol on the Privileges and Immunities of the European Communities,

THE COURT (Sixth Chamber),

composed of: C.N. Kakouris, President of the Chamber, G.F. Mancini, F.A. Schockweiler M. Diez de Velasco and P.J.G. Kapteyn, Judges,

Advocate General: F.G. Jacobs,

Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

° N. Kristoffersen, by A. Torboel, of the Copenhagen Bar,

° the Danish Government, by T. Lehmann, Head of the Legal Department at the Ministry of Foreign Affairs, acting as Agent, and by K. Hagel-Soerensen, of the Copenhagen Bar,

° the Italian Government, by P.G. Ferri, Avvocato dello Stato, acting as Agent,

° the Commission of the European Communities, by its Legal Adviser, J. Foens Buhl, acting as Agent,

having regard to the Report for the Hearing,

after hearing the oral observations of Mr Kristoffersen, the Danish Government and the Commission at the hearing on 22 October 1992,

after hearing the Opinion of the Advocate General at the sitting on 26 November 1992,

gives the following

Judgment

Grounds

1 By decision of 7 October 1991, received at the Court on 14 October 1991, the OEstre Landsret (Eastern Regional Court), Denmark, referred to the Court for a preliminary ruling under Article 177 of the Treaty two questions concerning the interpretation of Articles 13 and 14 of the Protocol on the Privileges and Immunities of the European Communities ("the Protocol").

2 The questions were raised in the context of proceedings between Mr Kristoffersen, a Danish national who is an official of the European Parliament, and the Danish tax authorities.

3 Mr Kristoffersen owns a house in Luxembourg. The house was built between 1982 and 1983 and was financed by a loan, the interest on which amounted to DKR 138 804 in 1983 and DKR 153 604 in 1984.

4 Under Paragraph 4(b) of the Danish Tax Law, the rental value of a home owned by a taxpayer is treated as part of his income, even if he uses it exclusively as his residence. Under Paragraph 6(1)(e) of the same Law the interest paid on loans used to purchase such a home is deductible from the taxable income.

5 Pursuant to those provisions, the Danish tax authorities determined the rental value of Mr Kristoffersen' s house for 1983 and 1984 as DKR 42 283 and DKR 70 927 respectively. As the interest paid in those years on the loan taken out to finance the house exceeded the rental value, Mr Kristoffersen' s taxable income was negative.

6 Under the tax provisions applicable, the negative taxable income of one spouse may serve to reduce the taxable income of the other. However, Mr Kristoffersen' s negative income was less than it would have been if the rental value of his home had not been taken into account. He therefore brought proceedings in the national courts, claiming that by treating the rental value of his home in Luxembourg as taxable income the Danish tax authorities had infringed Articles 13 and 14 of the Protocol.

7 Taking the view that the outcome of the proceedings depended on the interpretation of the abovementioned provisions of the Protocol, the OEstre Landsret stayed the proceedings and asked the Court of Justice to give a preliminary ruling on the following questions:

"1. Should the first paragraph of Article 14 of the Protocol on the Privileges and Immunities of the European Communities be interpreted as meaning that officials and other servants of the Communities who are covered by that provision are not liable to pay income tax in their original country of domicile on the rental value of a home which is owned by them and situated in another Member State when all taxpayers who own their homes are liable to tax on such rental value as personal income under the tax system in the original country of domicile?

2. Should the second paragraph of Article 13 of the Protocol on the Privileges and Immunities of the European Communities be interpreted as meaning that the application of income tax in the original country of domicile to officials or other servants of the Communities on the rental value of a home which is owned by them and situated in another Member State constitutes indirect taxation of salaries, wages and emoluments paid by the Communities?"

8 Reference is made to the Report for the Hearing for a fuller account of the legal context and the facts of the main proceedings, the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

First question

9 To answer the first question, it should be observed that Articles 13 and 14 of the Protocol establish a division of fiscal powers between the Community and the State in which the official had his domicile for tax purposes prior to entering the service of the Communities.

10 Pursuant to Article 13 of the Protocol, officials and other servants of the Communities are liable to a tax for the benefit of the Communities on salaries, wages and emoluments paid to them by the Communities and are exempt from national taxes on such salaries, wages and emoluments.

11 Article 14 of the Protocol provides that in the application of, inter alia, income tax, officials and other servants of the Communities who, solely by reason of the performance of their duties in the service of the Communities, establish their residence in the territory of a Member State other than their country of domicile for tax purposes at the time of entering the service of the Communities, are to be considered, both in the country of their actual residence and in the country of domicile for tax purposes, as having maintained their domicile in the latter country provided that it is a member of the Communities.

12 With regard to income tax, it must be observed that what constitutes income tax for the purpose of Article 14 must be determined according to the criteria of the national law applicable.

13 Consequently, the answer to the first question must be that the first paragraph of Article 14 of the Protocol must be interpreted as meaning that officials and other servants of the Communities who are covered by that provision may be liable to pay income tax in their original country of domicile on the basis of the rental value of the home which is occupied and owned by them in another Member State.

Second question

14 With regard to the second question, it must be observed that the prohibition in Article 13 of the Protocol is interpreted by the Court as precluding any national tax, regardless of its nature and the manner in which it is levied, which is imposed directly or indirectly on officials or 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 (Case 260/86 Commission v Belgium [1988] ECR 955, paragraph 10).

15 As for the taxation of the rental value of the home of a European official, it should be observed that such tax has no legal connection with the salaries, wages and emoluments paid by the Communities, but is charged on an objective basis by reference to a form of investment chosen by the official concerned. The ownership of immovable property, like the ownership of other property, must be regarded as a separate source of income, irrespective of the origin of the funds used to purchase it.

16 The answer to the second question must therefore be that the second paragraph of Article 13 of the Protocol must be interpreted as meaning that the application of income tax in the original country of domicile on the basis of the rental value of the home belonging to the official or servant in relation to immovable property situated in another Member State and owned by officials and other servants of the Communities does not constitute indirect taxation of the salaries, wages and emoluments paid by the Communities.

Decision on costs

Costs

17 The costs incurred by the Danish and Italian Governments and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Sixth Chamber),

in answer to the questions referred to it by the OEstre Landsret by decision of 7 October 1991, hereby rules:

1. The first paragraph of Article 14 of the Protocol on the Privileges and Immunities of the European Communities must be interpreted as meaning that officials and other servants of the Communities who are covered by that provision may be liable to pay income tax in their original country of domicile on the basis of the rental value of the home which is occupied and owned by them in another Member State.

2. The second paragraph of Article 13 of that Protocol must be interpreted as meaning that the application of income tax in the original country of domicile on the basis of the rental value of the home belonging to the official or servant in relation to immovable property situated in another Member State and owned by officials and other servants of the Communities does not constitute indirect taxation of the salaries, wages and emoluments paid by the Communities.