OPINION OF ADVOCATE GENERAL

SZPUNAR

delivered on 26 November 2015 ( 1 )

Case C‑522/14

Sparkasse Allgäu

v

Finanzamt Kempten

(Request for a preliminary ruling from the Bundesfinanzhof (Germany))

‛Freedom of establishment — Legislation of a Member State requiring banks to notify the tax authorities of deceased customers’ assets for purposes related to the collection of inheritance tax — Application of that legislation to branches established in another Member State where banking secrecy prohibits the supply of such information’

Introduction

1. Freedom of establishment, one of the fundamental freedoms of the single market, enables inter alia companies established in one Member State to set up a branch in another Member State. This form of cross-border economic activity certainly has a large number of merits from the point of view of undertakings, and also their customers. At the same time it gives rise to difficulties caused by the fact that a foreign branch is subject to the legislation of two Member States, that is to say the State of origin and the host State. Differences between those two legal orders may result in restrictions on the exercise of that freedom.

2. That is the case here. Conflicting German and Austrian legislation hinders — or can even prevent — cross-border banking activity in the form of a branch. Therefore, the question before the Court is whether that must be regarded as a natural consequence of non-harmonisation of the Member States’ legislation or a restriction on the exercise of the freedom of establishment which can be ascribed to the Member State and which that State must therefore remove.

Legal framework

EU law

3. This case falls within the scope of Article 49 TFEU, in conjunction with Article 54 thereof (freedom of establishment).

4. As regards the banking sector, the rules governing exercise of freedom of establishment were set out in Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions. ( 2 ) In particular, Articles 16, 23, 26(1) and 31 of Directive 2006/48 provide as follows: ‘Article 16 Host Member States may not require authorisation or endowment capital for branches of credit institutions authorised in other Member States. … … Article 23 The Member States shall provide that the activities listed in Annex I may be carried on within their territories, in accordance with Articles 25, 26(1) to (3), 28(1) and (2) and 29 to 37 either by the establishment of a branch or by way of the provision of services, by any credit institution authorised and supervised by the competent authorities of another Member State, provided that such activities are covered by the authorisation. … Article 26 1. Before the branch of a credit institution commences its activities the competent authorities of the host Member State shall … prepare for the supervision of the credit institution … and if necessary indicate the conditions under which, in the interest of the general good, those activities shall be carried on in the host Member State. … Article 31 Articles 29 and 30 shall not affect the power of host Member States to take appropriate measures to prevent or to punish irregularities committed within their territories which are contrary to the legal rules they have adopted in the interests of the general good. This shall include the possibility of preventing offending credit institutions from initiating further transactions within their territories.’

German law

5. Under Paragraph 33(1) of the Erbschaftsteuer- und Schenkungsteuergesetz (Law on inheritance and gift tax; ‘the ErbStG’), anyone engaged commercially in the holding or management of third-party assets is required to notify the office responsible for inheritance and gift tax matters of the assets and claims which form part of a deceased person’s estate.

Austrian law

6. Under Paragraph 9(1) and (7) of the Bankwesengesetz (Banking Law; ‘the BWG’), branches of credit institutions established in other Member States can carry on activities in the territory of the Republic of Austria but are required to comply with a number of provisions of Austrian law, including those contained in Paragraph 38 of the BWG.

7. The latter provision establishes what is known as ‘banking secrecy’. Under that provision, credit institutions, their members, officers and persons otherwise acting on their behalf cannot disclose or exploit information entrusted or made available to them pursuant to a customer agreement. Paragraph 38(2) of BWG lists derogations from banking secrecy which do not include an obligation to notify the tax authorities similar to that in German law.

8. Paragraph 101 of the BWG makes a breach of banking secrecy a criminal offence.

Facts, procedure and question referred

9. Sparkasse Allgäu is a credit institution within the meaning of Directive 2006/48, which acts on authorisation issued in the Federal Republic of Germany. It operates inter alia a branch in Austria.

10. On 25 September 2008 Finanzamt Kempten (Kempten tax office, the competent German tax authority) asked Sparkasse Allgäu to supply information required under Paragraph 33 of the ErbStG for the period from 1 January 2001 in relation to customers of its Austrian branch who were German residents.

11. Sparkasse Allgäu lodged an appeal against that decision which was dismissed, as was the action it brought before the court of first instance. In that situation the applicant in the main proceedings lodged an appeal on a point of law with the referring court.

12. That court is uncertain whether the applicant in the main proceedings can effectively challenge that decision by relying on Article 49 TFEU. It was in those circumstances that that court decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling: ‘Does the freedom of establishment (Article 49 of the Treaty on the Functioning of the European Union, ex Article 43 [of the Treaty establishing] the European Communities) preclude a provision in a Member State under which a credit institution established in its national territory must, on the death of a domestic testator, also notify the tax office responsible for the administration of inheritance tax in the national territory of those of the testator’s assets which are held or managed in a dependent branch of the credit institution in another Member State, where there is no similar notification obligation in the other Member State and credit institutions in that State are subject to banking secrecy any breach of which constitutes a criminal offence?’

13. The reference for a preliminary ruling was registered at the Court Registry on 19 November 2014. Observations were submitted by the parties to the main proceedings, the German Government, the Greek Government, the Polish Government, and the European Commission. The Court decided, pursuant to Article 76(2) of the Rules of Procedure, not to hold a hearing.

Analysis

14. In the view of the referring court, the request for information which Finanzamt Kempten made to Sparkasse Allgäu is consistent with German law. A foreign branch of that bank does not have legal personality of its own and is therefore subject to German legislation in the same way as its head office and its branches in Germany. On the other hand, however, the Austrian authorities indicated, pursuant to Article 26(1) of Directive 2006/48, the provisions of its law concerning banking secrecy as one with which the branches of credit institutions of other Member States carrying on activity in the territory of Austria must comply. Thus, Sparkasse Allgäu is confronted with a conflict between contradictory obligations which may hinder it, or even prevent it, from carrying on activity in Austria, and therefore from exercising freedom of establishment.

15. Consequently, it is necessary to establish whether there is a restriction contrary to Article 49 TFEU and whether that restriction arises merely from the concurrency of the legislation of two Member States and whether that restriction can be ascribed to one of those States. If it is found that such a restriction does in fact exist, it will be necessary to examine whether or not it is justified by overriding reasons of general interest. However, I will start by clearing up a certain factual uncertainty raised by the defendant in the main proceedings and the German Government in their observations in this case.

Preliminary observation

16. In their observations Finanzamt Kempten and the German Government question Sparkasse Allgäu’s contention that Austrian law prevents it from fulfilling its obligation to supply information pursuant to Paragraph 33 of the ErbStG and that any fulfilment of that obligation would render it liable to criminal proceedings. They consider, (i) that Austrian law allows information to be supplied with the customer’s authorisation and, (ii) that only a breach of banking secrecy for the purpose of gaining material benefit for oneself or for another constitutes a criminal offence, which is not the case where information is supplied to the tax authorities.

17. However, in making a request for a preliminary ruling the national court clearly assumes that Sparkasse Allgäu is unable simultaneously to comply with German and Austrian law. In my view, that assumption is correct. Firstly, as regards possible customer authorisation it should be noted that the information to be supplied pursuant to Paragraph 33 of the ErbStG concerns deceased persons who, naturally cannot give such authorisation. Sparkasse Allgäu cannot require such authorisation in advance from its customers and make the provision of services at its Austrian branch contingent on the grant thereof, since that would render nugatory the provisions of Austrian law on banking secrecy. Secondly, as regards a possible criminal offence committed by Sparkasse Allgäu if it breaches banking secrecy, suffice it to note, without entering into a detailed interpretation of the provisions of Austrian criminal law, that the prohibition on supplying information contained in Paragraph 38(1) of the BWG is worded in categorical terms and is, subject to the exceptions laid down in Paragraph 38(2), unconditional. Under Article 31 of Directive 2006/48, Member States have the right to take suitable measures to prevent branches of foreign credit institutions from carrying on activities in their territory in breach of the provisions applicable to those branches, including the right, where appropriate, to prohibit such activity.

18. In the light of the referring court’s findings, Sparkasse Allgäu is therefore unable to carry on, in the territory of Austria, activity in the form of branch in accordance, simultaneously, with the provisions of German law on the obligation to supply information laid down in Paragraph 33 of the ErbStG and the provisions of Austrian law on banking secrecy.

The existence of a restriction on freedom of establishment

Freedom of establishment and the restriction thereof in the banking sector

19. Credit institutions acting on authorisation issued in a Member State, including Sparkasse Allgäu, constitute a company or firm within the meaning of the second paragraph of Article 54 TFEU and therefore enjoy freedom of establishment under the first paragraph thereof.

20. Freedom of establishment includes, under the first paragraph of Article 49 TFEU, the right to set up agencies, subsidiaries and branches in the territory of Member States other than the State of residence of the taxpayer concerned. ( 3 ) As regards the banking sector, exercise of that freedom by setting up branches is only partially governed by Directive 2006/48. Therefore, the general rules governing freedom of establishment must apply in the area not governed by the provisions of that directive.

21. According to settled case-law, although the provisions of the FEU Treaty on freedom of establishment are aimed at ensuring the benefit of national treatment in the host Member State, they also prohibit the Member State of origin from hindering the establishment in another Member State of one of its nationals or of a company incorporated in accordance with its legislation. ( 4 )

22. Furthermore, the Court takes the view that all measures which prohibit, impede or render less attractive the exercise of freedom of establishment must be considered to be restrictions on that freedom, even if applicable without discrimination on grounds of nationality. ( 5 )

23. Therefore, the element of discrimination is not a necessary condition for a restriction of freedom of establishment. ( 6 ) This is also true of restrictions arising from provisions of the State of origin. It is irrelevant that they also apply to an operator in the State of origin if at the same time they hinder or prevent that operator from carrying on that activity and thus from exercising freedom of establishment. ( 7 )

24. In accordance with the second sentence of the first paragraph of Article 49 TFEU, exercise of freedom of establishment includes choosing the legal form in which the operator concerned is to pursue its economic activities in the host Member State (agency, branch, subsidiary). Provisions of national law restricting that choice or affecting the choice of one legal form over another therefore constitute a restriction of freedom of establishment. ( 8 )

25. The freedom to choose the legal form in which the operator concerned will carry on its activity in another Member State is particularly relevant in the banking sector. Under Directive 2006/48 (now Directive 2013/36), credit institutions operating on authorisation issued in one Member State merely have to complete certain administrative formalities in order to open a branch in another Member State. ( 9 ) The principle of the mutual recognition of authorisations applies in relation to the branches of credit institutions of other Member States. ( 10 ) However, to take up business in the form of a subsidiary, and therefore a separate undertaking from a legal point of view, it is necessary to obtain authorisation in the Member State where that business will be conducted and satisfy the obligations relating to initial capital, and the eligibility of the company or firm’s managers and of the shareholders and members. ( 11 ) Nor is it coincidence that Directive 2006/48 considers the opening of a branch to be a basic form of exercise of freedom of establishment by credit institutions. ( 12 )

26. A credit institution commencing activity in another Member State in the form of a subsidiary therefore constitutes an economic operation of a completely different dimension from the opening of a branch there. The former requires incomparably greater organisational effort and considerably greater expenditure. The establishment of a subsidiary, which is normally an undertaking that is independent not only from a legal, but also financial and organisational, point of view, also requires an appropriate scale of activity to allow that undertaking to function independently in economic terms. On the other hand, a branch operating with the support of a head office in the State of origin can operate on a considerably smaller scale and in a defined part of the host State’s market, for example in border regions alone.

27. This means that in many cases where the setting up of a branch in another Member State would make economic sense, the setting up of a subsidiary may prove to be uneconomical. In other words, the operator concerned, which will not have the possibility of establishing a branch in another Member State, may refrain completely from pursuing activity there. Consequently, the restriction on the freedom to choose the legal form, in particular the difficulty in establishing a branch, constitutes a considerably more far-reaching restriction in the banking sector than in less regulated sectors. In an extreme case preventing the establishment of a branch therefore constitutes a fundamental reduction in the attractiveness of exercising freedom of establishment at all, and thus a breach of the very essence of that freedom.

The notification obligation laid down in Paragraph 33 of the ErbStG as a restriction on freedom of establishment

– Breach of the principle of national treatment

28. Under the second paragraph of Article 49, ‘freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings … under the conditions laid down for its own nationals by the law of the country where such establishment is effected’. ( 13 ) To put it another way, an operator exercising freedom of establishment must have the possibility of competing under the same conditions as domestic operators. ( 14 ) This means above all a prohibition of discrimination — direct or indirect — in the State hosting operators originating in other Member States.

29. However, as I have pointed out at point 21 of this Opinion, the prohibition of restrictions on freedom of establishment relates not only to the host State, but also to the State of origin. This means that the State of origin must also enable operators established in their territory to carry on activity in other Member States under the same conditions as those enjoyed by domestic operators.

30. Therefore, while matters relating to the organisation of the economic operator, his registration and authorisation to carry on an activity can be subject to the law of the State of origin, the actual conditions for providing services, and thus the relationship between that operator and customers, must be subject to the legislation of the host State, as with domestic operators. However, each additional administrative burden attached to responsibility for the implementation thereof, ( 15 ) imposed by the legislation of the State of origin on operators exercising freedom of establishment, leads to those operators being placed in a less favourable market situation than domestic operators.

31. In my view, the notification obligation laid down in Paragraph 33 of the ErbStG hinders and renders less attractive to German credit institutions exercise of freedom of establishment through the establishment of a branch, and thus in a fundamental form provided for in Directive 2006/48.

32. In that respect, it is irrelevant that, as the German Government in particular highlights in its observations, that obligation applies indiscriminately to both branches of German banks established and operating in the territory of Germany and branches of those banks in other Member States. According to the case-law of the Court, the criterion relating to discrimination is not decisive in determining whether or not there is a restriction of freedom of establishment. ( 16 )

– Infringement of freedom to choose the legal form of activity

33. The obligation to supply information, laid down in Paragraph 33 of the ErbStG, concerns branches of German credit institutions in other Member States. As is clear from the explanations contained in the request for a preliminary ruling, that is because German legislation extends the obligation on credit institutions operating in Germany to those branches. A contrario, that obligation does not therefore concern subsidiaries set up by German credit institutions in other Member States.

34. Thus, the branch of a German bank in another Member State, is, on account of the obligation on it to supply information under Paragraph 33 of the ErbStG, in a less favourable situation than a subsidiary of that bank. In so far as it also concerns branches set up in other Member States, that obligation consequently affects the choice of legal form of the activity of German banks in other Member States by hindering or rendering less attractive the setting up of a branch.

35. As I have recalled above, the Court has consistently held, one, that the prohibition of restrictions on freedom of establishment relates not only to the host State, but also the State of origin, ( 17 ) and, two, that inter alia provisions having an effect on the choice of legal form of cross-border activity, in particular by favouring a subsidiary over a branch, must be regarded as a restriction on freedom of establishment. ( 18 ) If these rules are read in conjunction, it would appear logical that the prohibition of restrictions on freedom of establishment also concerns less favourable treatment by the State of origin of branches of its undertakings established in other Member States in comparison with subsidiaries of those undertakings.

– Concurrency of German legislation and the legislation of the host State

36. The situation is made worse by the fact that in some Member States at least the obligation laid down in Paragraph 33 of the ErbStG may be irreconcilable with the provisions of the national law with which branches of credit institutions of other Member States, and thus also of Germany, must comply under Article 26(1) of Directive 2006/48. In that case the setting up in those States of a branch by German credit institutions will not only be hindered and less attractive, but downright impossible. Since, as I have noted at point 27 of this Opinion, the absence of the choice of the branch as a form in which to carry on economic activity can render exercise of freedom of establishment entirely uneconomical, a restriction of the freedom to choose the legal form of activity can completely discourage exercise of the freedom of establishment.

– Conclusion

37. Therefore, the obligation laid down in Paragraph 33 of the ErbStG constitutes a restriction on the freedom of establishment because; one, it imposes on German credit institutions carrying on activity in other Member States additional obligations which are not laid down in the law of those States; two, it restricts the freedom to choose the legal form of that activity by favouring a subsidiary over a branch; and three, it can potentially, and not only hypothetically — as this case demonstrates — prevent cross-border activity in the form of a branch and thus also render exercise of the freedom uneconomical.

The possibility of applying the Court’s case-law concerning the concurrence of Member States’ provisions on tax

38. In their observations the German Government and the Commission propose that the Court’s case-law concerning the concurrence of the legislation of two Member States on direct taxation be applied by analogy in this case. ( 19 )

39. The Court ruled that a Member State cannot be required to take account, for the purposes of applying its tax law, of the possible negative results arising from particularities of legislation of another Member State applicable to a permanent establishment situated in the territory of the said State which belongs to a company with a registered office in the first State. ( 20 ) Freedom of establishment cannot be understood as meaning that a Member State is required to draw up its tax rules on the basis of those in another Member State in order to ensure, in all circumstances, taxation which removes any disparities arising from national tax rules. ( 21 )

40. However, firstly, as I have noted at points 28 to 35 of this Opinion, the obligation placed on branches of German banks in other Member States pursuant to Paragraph 33 of the ErbStG constitutes a restriction on freedom of establishment per se. Its possible concurrence with the legislation of other Member States can only aggravate the situation by potentially preventing exercise of that freedom entirely.

41. Secondly, unlike the cases concerning the concurrence of the provisions of Member States’ laws on direct taxation, ( 22 ) the provisions of national law under consideration in this case do not concern the taxation of an operator exercising freedom of establishment. As the defendant in the main proceedings notes in its observations, Paragraph 33 of the ErbStG serves to facilitate the collection of tax, but from bank customers and their heirs, not from banks themselves. The situation would be identical if the information supplied pursuant to that provision did not serve to collect taxes but to, for example, combat money laundering. However, the provisions of Austrian law governing banking secrecy do not concern taxation at all.

42. Therefore, whereas the cases referred to in the preceding point considered restrictions on freedom of establishment arising from provisions governing the relationship between taxable persons and the competent tax authorities, this case concerns rules governing the conduct of economic activity and thus relating directly to the relationship between an undertaking and customers. Consequently, there is no analogy at all which justifies applying that case-law to this case.

43. Thirdly, the powers of the Member States in respect of direct taxation are based on rules which are clearly defined in international law and recognised in the Court’s case-law. Those States have the power to tax the entire profits of their tax residents (unlimited tax liability) and in respect of non-residents to tax the profits from activity carried on in their territory. ( 23 ) Hence, preserving the allocation of powers of taxation between the Member States also constitutes, according to the case-law of the Court, one of the conditions which can justify a restriction on freedoms of the single market, including freedom of establishment. ( 24 )

44. In that respect direct taxation is a special case, since it concerns one of the fundamental sovereign powers of States and one of the fundamental sources of their budget revenue. Thus far the EU legislature has decided not to harmonise this area and the prevention of possible inconveniences, such as double taxation, for example, is left to the individual Member States to deal with through bilateral agreements. In the absence of such harmonisation it is difficult to apply with full stringency, in the field of direct taxation, rules requiring the removal of all restrictions on freedom of establishment since that would lead to an undermining of the sovereign powers of the Member States. ( 25 )

45. The above arguments do not apply to provisions of national law which, as I have noted at point 42 of this Opinion, do not govern the relations between taxable persons and the tax authorities but rather lay down the rules for carrying on economic activity. In this regard the Member States have undertaken, through the TFEU, to guarantee the freedom to carry on that activity in cross-border situations. Therefore, it is possible to require them to define the territorial scope of the provisions of their national law in such a way that they do not conflict with the provisions of the laws of other Member States.

46. Fourthly, and finally, what distinguishes this case from the cases concerning the simultaneous application of the legislation of two Member States on direct taxation is the nature of the restrictions on freedom of establishment which may arise from those provisions of national law. Less favourable tax treatment may clearly have a particular effect on the economic operator concerned from a financial point of view. However, it does not hinder, or still less prevent, it from carrying on the activity at all, or carrying it on in a particular legal form. At most it affects the assessment of the profitability of that activity, but in that regard the level of taxation is only one of very many factors amongst which market conditions (the level of demand, competition, operating costs, and price levels) normally play a considerably greater role. In any case, the differences between the tax systems of the various Member States are not always disadvantageous to undertakings operating across borders — those undertakings are often in a more favourable situation than domestic operators. Furthermore, economic operators have a certain margin which allows them to offset the tax burden, either by reducing costs or increasing prices. Therefore, tax treatment is not normally a factor which determines the decision whether or not to take up cross-border activity. They are instead, to use the term coined by Advocate General L.A. Geelhoed, ‘quasi-restrictions’. ( 26 )

47. A distinction must be drawn between those quasi-restrictions and genuine restrictions, for example those which concern the actual conditions for carrying on an activity. On the one hand, economic operators have, in that regard, a very small margin of adjustment or no margin of adjustment at all — in principle they can only comply with the rules in force or refrain from an activity. On the other, the provisions laying down the conditions for carrying on the activity can hinder it to such an extent that, as in the present case, it becomes practically impossible or entirely uneconomic. Consequently, restrictions on freedom of establishment concerning the conditions for carrying on an activity have a considerably greater effect on the decision to exercise that freedom than restrictions of a purely fiscal nature.

48. In the light of the foregoing, I consider that the rules laid down by the Court in its case-law concerning the simultaneous application of the legislation of two Member States on direct taxation ( 27 ) cannot be regarded as horizontal rules which apply to every kind of restriction on freedom of establishment. Consequently, they likewise cannot be applied to this case.

49. In support of its argument the Commission also refers to the judgment in Hervein and Others, ( 28 ) which concerns a different matter, namely social security. In that judgment the Court held that, given the disparities in the social security legislation of the Member States, the Treaty does not guarantee to workers that the taking up of activity in several Member States, or the transfer thereof to another Member State, will be neutral from the point of view of social security. ( 29 ) However, it should be noted that social security contributions are in nature public charges similar to direct taxes. Therefore, the same arguments that I have discussed at points 40 to 47 of this Opinion apply here. ( 30 ) Thus, the judgment in Hervein and Others likewise does not militate in favour of extending application of the principles laid down in the case-law concerning the concurrence of Member States’ laws on direct taxation to restrictions on freedom of establishment concerning the conditions for carrying on economic activity.

Provisions of Austrian law as an independent restriction on freedom of establishment

50. It could perhaps be argued, as the defendant in the main proceedings and the German Government do in their observations, that the provisions of Austrian law on banking secrecy also constitute a restriction on freedom of establishment in so far as they concern branches of credit institutions of other Member States and prevent those branches from fulfilling any obligations at variance with that secrecy which are laid down in the law of the State of origin.

51. That is not the subject matter of this case and therefore I will not pursue it further. I merely note that the provisions on banking secrecy in fact constitute a specific obligation on a bank but at the same time may be perceived by customers as favourable. Therefore, exempting the branches of credit institutions of other Member States from that secrecy could result in them being in a less favourable competitive position than domestic banks. Thus, in seeking to remove one restriction on freedom of establishment, we would be introducing another. In my view, that paradox confirms that restrictions on that freedom in this case must be sought instead in the provisions of German law.

52. However, regardless of the above considerations, even if it were concluded that a parallel restriction on freedom of establishment exists in Austria, there would not be a restriction arising from the concurrence of provisions of German and Austrian law, but two independent restrictions. Nonetheless, I do not consider that the existence of a possible restriction on one freedom of the single market in the host Member State would be sufficient reason not to eliminate that restriction in the State of origin. If in the present proceedings it is concluded that Sparkasse Allgäu must instead seize the Austrian courts in order to contest the compatibility with EU law of the application to its Austrian branch of the previsions of Austrian law on commercial secrecy, those courts might not uphold that challenge and find that the problem lies with Paragraph 33 of the ErbStG and it is the German courts which should remove it.

53. Therefore, a paradoxical situation would arise where it is the restrictions on freedoms of the single market arising from the legislation of the host State or the State of origin that are relatively easily eliminated once and for all, but where such a restriction arises simultaneously and independently of the legislation of those two States, it is not possible to remove it, since it is not known which of the States is required to do so in the first place.

Conclusion as to the existence of a restriction

54. In the light of all the foregoing considerations, I conclude that the notification obligation laid down in Paragraph 33 of the ErbStG, in so far as it is binding also on the branches of German credit institutions established in other Member States, must be regarded as a restriction on freedom of establishment, which is prohibited, in principle, under Article 49 TFEU.

Justification of the restriction

55. According to the now standard wording used in the Court’s case-law, the freedom of establishment may be restricted only if the restriction at issue is justified by overriding reasons in the public interest, will lead to the attainment of the objective in question, and not go beyond what is necessary to attain that objective. ( 31 ) Consequently, it is necessary to examine whether the restriction on freedom of establishment arising from Paragraph 33 of ErbStG satisfies those conditions.

Issue of discrimination

56. That examination must be preceded by an analysis of whether the provisions of national law are discriminatory in nature. Both the referring court in its order and the German Government in the observations submitted in this case, contend that Paragraph 33 of the ErbStG is not discriminatory in nature since it applies without distinction to the branches of German banks in other Member States and banks carrying on activity in the territory of Germany. However, that does not completely resolve the issue of discrimination. This case certainly does not involve direct discrimination on the grounds of nationality since national and cross-border situations are formally treated in the same manner.

57. However, the concept of discrimination in EU law is not limited to direct discrimination. According to the now standard wording, discrimination is the different treatment of similar situations, ( 32 ) and also similar treatment of different situations, ( 33 ) unless in either case such treatment is objectively justified.

58. From that point of view, the present case, which concerns the provisions of the State of origin governing relations between foreign branches and their customers, raises doubts in three respects. Firstly, is it justified to treat equally the foreign branches of German credit institutions and establishments of the same institutions in the territory of Germany since foreign branches carry on activity in a different economic and legal environment? Secondly, is it justified to treat differently foreign branches of German credit institutions in comparison with credit institutions established in other Member States, and carrying on economic activity in the same markets as those branches? Thirdly, and finally, is it justified to treat differently German credit institutions carrying on activity in other Member States in the form of a branch from the same credit institutions carrying on cross-border activity in the form of a subsidiary?

59. In my view, that problem can be approached in two ways.

60. The first approach is based on the particular organisational situation of the branch as a legal form for carrying on activity. A branch does not have separate legal personality and is merely a defined part of a legal person which is the principal undertaking. That undertaking, together with all its branches, both domestic and foreign, is in principle subject to the law of the State in which it is established. In other words, the obligations laid down in the law of the State of establishment naturally also concern foreign branches of the undertaking. As a result, those branches are, on the one hand, in a situation objectively comparable with that of domestic operators but, on the other, objectively different from that of both foreign undertakings and subsidiaries of domestic undertakings. On this approach, the treatment of foreign branches of German credit institutions in other Member States on a par with domestic operators, but different from foreign operators and the subsidiaries of domestic operators, would be objectively justified.

61. The second approach to the problem under consideration which I consider possible consists in taking account of the economic substance of a foreign branch as one possible form for carrying on economic activity as part of freedom of establishment. Viewed thus, a foreign branch, despite being legally connected with the State in which the undertaking is established, is, in functional terms, a foreign undertaking and must consequently be treated in the same way as other foreign undertakings (including foreign subsidiaries of domestic undertakings). Therefore, a legal connection with the State in which the undertaking (head office) is established loses its value as an objective element of differentiation and becomes a merely secondary feature which cannot justify different treatment. On that approach, the treatment of foreign branches of German credit institutions in other Member States on a par with domestic operators, but different from foreign operators and the subsidiaries of domestic operators, constitutes de facto discrimination.

62. In my view, the adoption of either approach affects the possibility of justifying a restriction on the freedom of establishment arising from Paragraph 33 of the ErbStG.

Justification

63. Both the referring court and the German Government in their observations cite the need to ensure the effectiveness of fiscal supervision and the effective collection of taxes as justification for Paragraph 33 of the ErbStG. That provision serves, firstly, to supervise fulfilment by the heir of a deceased customer of liabilities by way of inheritance tax and, secondly, to supervise fulfilment by that customer, when alive, of his tax liabilities arising in connection with the assets held by him at a bank. That is the justification taken into account in the Court’s case-law ( 34 ) in relation to both freedom of establishment and other freedoms of the single market.

64. However, for that justification to be accepted it must fulfil the requirement of proportionality. To that end, the provision of national law under consideration must, one, lead to attainment of the objective pursued and, two, not go beyond what is necessary for attaining that objective. ( 35 ) Finally, it is the national court which is most competent to assess the facts and, consequently, the proportional nature of the previsions of national law. However, in that respect, the Court may provide guidance based on the information contained in the case file. ( 36 )

– Problem of justification if the argument concerning the existence of discrimination is accepted

65. Paragraph 33 of the ErbStG relates, as regards credit institutions which can hold and manage assets of German residents outside Germany, ( 37 ) only to branches of German banks. By contrast, it does not concern either subsidiaries of those banks or — for obvious reasons — banks of other States.

66. If it is concluded that foreign branches are in a situation comparable with that of undertakings established in other Member States, nothing, in my opinion, justifies restricting application of the provisions of German law to branches. In that situation the justification for restricting freedom of establishment must be based on objective criteria from the point of view of the provision which constitutes such restriction. Whilst from that point of view all credit institutions which can hold or manage assets of German residents are in a comparable situation, since those assets are subject equally to tax liability by way of inheritance tax, effective supervision of the fulfilment of that obligation is equally necessary. Therefore, whereas the need to ensure the effectiveness of fiscal supervision can justify the imposition on those taxable persons of additional obligations, such as the obligation to supply information to the tax authorities, different treatment of branches in that regard would require separate justification, and there is no such justification.

67. Viewed thus, the connection between the foreign branch and the legal system of the State of origin in this regard is a secondary circumstance which does not justify the imposition on those branches of obligations concerning the conditions for them supplying services. Therefore, the State of origin must refrain from imposing such obligations.

– Possibility of justification if the arguments about the particular situation of branches is accepted

68. I consider, however, that it is necessary instead to accept the argument that branches of credit institutions operating in Member States other than the State in which the undertaking is established, are, on account of their particular connection with the legal system of the State of origin, in a different situation from foreign credit institutions. This particular connection justifies the imposition of certain obligations, which apply to domestic banks and also their foreign branches, even if foreign operators are not subject to the same obligations. That is so, inter alia, where that obligation concerns, as it does in this case, only the relationship between the foreign branch and customers who are residents of the State of origin. It is easier for those residents to open an account at a foreign branch of a domestic bank than at a foreign bank. In that case the need to ensure the effectiveness of fiscal supervision justifies a restriction on freedom of establishment, provided that it leads to attainment of the objective pursued and does not go beyond what is necessary for attaining that objective.

69. In my view, laying down an obligation to supply information leads to attainment of the objective in terms of ensuring the effectiveness of tax supervision. The information received from the bank allows the tax authorities to check the data which taxable persons have supplied to them in their tax returns. Furthermore, if a taxable person fails to fulfil the obligation to submit such a return, that information enables the tax authorities to confirm the existence of the event giving rise to the tax liability and to take steps to collect the tax due.

70. I also consider that the provision of German law in question does not go beyond what is necessary. Firstly, the tax authorities cannot obtain that information in an equally certain and complete manner from another source. Checking the accuracy of the data contained in a tax return would therefore be significantly hindered.

71. Secondly, it should be noted that in the decision at issue in the main proceedings the request for the foreign branch of Sparkasse Allgäu to supply information was limited to information on customers of that branch who are German residents. I consider that that aspect is exceedingly relevant. Although the tax liability by way of inheritance tax has a somewhat broader scope, ( 38 ) in practice it certainly concerns primarily the estate of German residents. Therefore, if the German authorities requested information on all foreign customers of the branches of German banks, as it does in relation to domestic branches, that would constitute for foreign branches significant hindering of their activity. By restricting the request to information on German residents, the German authorities therefore had recourse to the least onerous measure from the point of view of freedom of establishment. Consequently, branches of German credit institutions in other Member States, may, in relation to customers who are not German residents, carry on activity under precisely the same conditions as domestic banks.

72. I therefore consider that Paragraph 33 of the ErbStG is proportionate to the objective it seeks to pursue and consequently, the restriction on freedom of establishment to which that provision gives rise can be regarded as justified.

– Problem of the banking secrecy in force in Austria

73. I am naturally aware of the shortcoming in that finding from the point of view of ensuring the freedom of establishment. It is difficult to ignore the fact that if the referring court rules, on the basis of a judgment of the Court, that Paragraph 33 of the ErbStG is consistent with EU law, and consequently upholds the decision at issue in the main proceedings, that will in no way resolve the problem confronting Sparkasse Allgäu. That bank will continue to be faced with two contradictory legal obligations, especially since the request by the German tax authority concerns the supply of information from previous years and thus on deceased customers who cannot, for example, give their authorisation to that information being supplied.

74. In that case, the principles of sincere cooperation and the primacy of EU law would, in my view, require from the Austrian authorities an interpretation of the provisions on banking secrecy, or a restriction on the application thereof, which would enable the branches of German credit institutions operating in the territory of Austria to supply information pursuant to Paragraph 33 of the ErbStG. ( 39 ) That clearly concerns only the obligation to supply that information in so far as it is consistent with EU law and therefore, in particular, limited to the necessary minimum.

Conclusion

75. In the light of all the foregoing, I propose that the Court’s answer to the question referred for a preliminary ruling by the Bundesfinanzhof should be as follows: Article 49 TFEU must be interpreted as not precluding a provision in a Member State which imposes on branches of national credit institutions in other Member States an obligation to notify the national tax authorities of the assets held at those branches on the death of the owner of those assets who is a resident of the first of those Member States, provided that that obligation is limited to the minimum necessary to ensure the effectiveness of fiscal supervision.

( 1 ) Original language: Polish.

( 2 ) OJ 2006 L 177, p. 1. That directive was in force at the time the decision at issue in the main proceedings was given. It was replaced by Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (OJ 2013 L 176, p. 338).

( 3 ) See, inter alia, recently, Verder LabTec (C‑657/13 EU:C:2015:331, paragraph 32).

( 4 ) See, inter alia, judgments in Daily Mail and General Trust (81/87, EU:C:1988:456, paragraph 16) and Verder LabTec, C‑657/13, EU:C:2015:331, paragraph 33).

( 5 ) See, inter alia, judgments in Kraus (C‑19/92, EU:C:1993:125, paragraph 32); Attanasio Group (C‑384/08, EU:C:2010:133, paragraph 43); and Verder LabTecC‑657/13, EU:C:2015:331, paragraph 34).

( 6 ) See also, for example: C. Barnard, The Substantive Law of the EU. The Four Freedoms, 4th ed., Oxford University Press 2013, p. 309 et seq.; M. Szwarc-Kuczer, komentarz do art. 49 TFUE, in: A. Wróbel (edit.), Traktat o funkcjonowaniu Unii Europejskiej. Komentarz Lex, Warsaw 2012, volume 1, p. 866 to 867.

( 7 ) See to that effect, as regards the freedom to provide services, judgment in Alpine Investments (C‑384/93, EU:C:1995:126, paragraphs 32 to 38).

( 8 ) See to that effect, inter alia, judgments in Commission v France (270/83, EU:C:1986:37, paragraph 22) and Philips Electronics UK (C‑18/11, EU:C:2012:532, paragraph 13).

( 9 ) See Articles 25 and 26 of Directive 2006/48.

( 10 ) See recital 7 of Directive 2006/48 and Article 16 thereof.

( 11 ) See Articles 6 to 12 of Directive 2006/48.

( 12 ) Section 3 ‘Exercise of the right of establishment’, of Title III ‘Provisions Concerning the Freedom of Establishment and the Freedom to Provide Services’ (Articles 25 to 27) of Directive 2006/48 governs the establishment of branches.

( 13 ) Emphasis added.

( 14 ) See to that effect judgments in Commission v Italy (C‑565/08, EU:C:2011:188, paragraph 51) and SC Volksbank România (C‑602/10, EU:C:2012:443, paragraph 80).

( 15 ) The referring court does not state which penalties are specifically related to failure to fulfil the obligation laid down in Paragraph 33 of the ErbStG. However, it is clear that an economic operator, in particular one operating in such a tightly regulated sector as the banking sector, cannot afford to ignore the obligations which it has under the law towards the administrative authorities.

( 16 ) See point 23 of this Opinion.

( 17 ) See point 21 of this Opinion.

( 18 ) See point 24 of this Opinion and the case-law cited therein.

( 19 ) See, inter alia, judgments in Columbus Container Services (C‑298/05, EU:C:2007:754); Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt (C‑157/07, EU:C:2008:588); and National Grid Indus (C‑371/10, EU:C:2011:785).

( 20 ) See judgment in Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt (C‑157/07, EU:C:2008:588, paragraph 49).

( 21 ) See inter alia judgment in National Grid Indus (C‑371/10, EU:C:2011:785, paragraph 62).

( 22 ) See footnote 19 above.

( 23 ) See, inter alia, judgment in Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 39).

( 24 ) See, inter alia, judgment in National Grid Indus (C‑371/10, EU:C:2011:785, paragraph 45).

( 25 ) See the very interesting discussion on that topic in: C. Barnard, op. cit., p. 347 to 349.

( 26 ) See Opinion of Advocate General Geelhoed in Test Claimants in Class IV of the ACT Group Litigation (C‑374/04, EU:C:2006:139, points 37 to 40).

( 27 ) See footnote 19 above.

( 28 ) Judgment in C‑393/99 and C‑394/99, EU:C:2002:182.

( 29 ) Ibidem, paragraph 51.

( 30 ) That analogy was also pointed out by Advocate General Geelhoed in his Opinion in Test Claimants in Class IV of the ACT Group Litigation (C‑374/04, EU:C:2006:139, footnote 42 at point 46).

( 31 ) See, inter alia, judgments in Gebhard (C‑55/94, EU:C:1995:411, paragraph 37) and recently in Commission v Germany (C‑591/13, EU:C:2015:230, paragraph 63).

( 32 ) See, inter alia, judgment in Ruckdeschel and Others (117/76 and 16/77, EU:C:1977:160, paragraph 7).

( 33 ) See, inter alia, judgment in Sermide (106/83, EU:C:1984:394, paragraph 28).

( 34 ) See, inter alia, judgments in Futura Participations and Singer (C‑250/95, EU:C:1997:239, paragraph 31) and Emerging Markets Series of DFA Investment Trust Company (C‑190/12, EU:C:2014:249, paragraph 71).

( 35 ) See point 55 of this Opinion and the case-law cited.

( 36 ) See my Opinion in Trijber and Harmsen (C‑340/14 and C‑341/14, EU:C:2015:505, point 80, and the case-law cited therein).

( 37 ) Under Paragraph 33(1) of the ErbStG, the obligation to supply information concerns anyone subject to German legislation who engages commercially in the holding or management of third-party assets, not only foreign branches. However, the restriction on freedom of establishment does not arise from that provision per se, but merely from its application to branches of German credit institutions in other Member States. In so far as it concerns German banks operating in Germany, that provision does not form the subject matter of this case.

( 38 ) As is clear from the information contained in the request for a preliminary ruling, the tax liability under the ErbStG arises in relation to the entire estate where either the testator at the time of death or the heir at the time of the event giving rise to the tax liability (probably meaning the time the estate is acquired) are German residents. Physical persons resident or normally resident in the territory of Germany and also German nationals who have been permanently resident abroad for less than five years are regarded as residents (Paragraph 2(1)(1) of the ErbStG).

( 39 ) See, by analogy, judgment in Hervein and Others (C‑393/99 and C‑394/99, EU:C:2002:182, paragraph 63).