Case C‑489/13

Ronny Verest

and

Gaby Gerards

v

Belgische Staat

(Request for a preliminary ruling from the hof van beroep te Antwerpen)

‛Reference for a preliminary ruling — Income tax — Legislation for the avoidance of double taxation — Taxation of income from immovable property received in a Member State other than the Member State of residence — Method of exemption with maintenance of progressivity in the Member State of residence — Difference in treatment between immovable property situated in the Member State of residence and in another Member State’

Summary — Judgment of the Court (Seventh Chamber), 11 September 2014

Free movement of capital and freedom of payments — Restrictions — Tax legislation — Income tax — Taxation of income from immovable property received in a Member State other than the Member State of residence in accordance with a method of exemption with maintenance of progressivity in the Member State of residence — Method liable to lead to a higher rate of tax in relation to immovable property situated in another Member State — Unlawful — Determination by the national court

(Art. 63 TFEU)

Article 63 TFEU must be interpreted as precluding legislation of a Member State, which, when a progressivity clause contained in a convention for the prevention of double taxation is applied, lays down that, in order to establish the tax rate on income, income derived from immovable property situated in another Member State that is not rented out is to be determined on the basis of its ‘rental value’, whereas income derived from such property but situated in the first Member State is to be determined on the basis of its ‘cadastral income’, the amount of which is lower than the rental value of such property. Such legislation is liable to lead, when the progressivity clause is applied, to a higher rate of tax on income merely because the method for determining income from immovable property results in income deriving from immovable property that is not rented out situated in another Member State being assessed at a higher amount than income from such property situated in the first Member State. It is for the referring court to ascertain whether that is in fact the effect of the national legislation.

The exemption method with ‘maintenance of progressivity’ serves to ensure that the income of a taxpayer that is exempt in the Member State of residence may nevertheless be taken into account by that Member State for the purpose of applying the rule of progressivity when calculating the amount of tax on the taxpayer’s remaining income. The objective of such a rule is to prevent, in the Member State of residence, a lower rate of tax being applied to the taxable income of a taxpayer who is the owner of immovable property situated in another Member State than the rate applicable to the income of taxpayers who are the owners of comparable properties in the Member State of residence. In the light of that objective, the situation of taxpayers who have acquired immovable property in the Member State of residence is comparable to that of taxpayers who have acquired such a property in another Member State.

(see paras 17, 30-32, 34, operative part)