OPINION OF ADVOCATE GENERAL

Sharpston

delivered on 21 July 2011 ( )

Case C‑250/08

European Commission

v

Kingdom of Belgium





(Registration duty payable on the purchase of a principal residence – Right to move and reside freely – Freedom of establishment – Free movement of capital – Restrictions)

1. In these proceedings, the Commission claims that Belgian legislation concerning the payment of registration duty within the Flemish Region discriminates in particular against citizens of Member States who seek to exercise their rights to move residence, to freedom of establishment and to move capital within the European Union. The legislation at issue allows registration duty ( ) paid on the purchase of a principal residence in the Flemish Region – but not elsewhere – to be offset against that payable on the acquisition of a subsequent principal residence within the same Region.

Legal background

Relevant provisions of the Treaty and the EEA Agreement

2. Article 18(1) EC (now Article 21(1) TFEU) provides:

‘Every citizen of the Union shall have the right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it effect.’

3. Article 43 EC (now Article 49 TFEU) states:

‘Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.

Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48 (now Article 54 TFEU), under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.’

4. Article 31(1) of the EEA Agreement in effect extends those provisions to the whole of the European Economic Area.

5. Article 56(1) EC (now Article 63(1) TFEU) states:

‘Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.’

6. Article 40 of the EEA Agreement in effect extends that provision to the whole of the European Economic Area.

7. Article 6 of the EEA Agreement states that the provisions of the Agreement, in so far as they are identical in substance to corresponding rules of the Treaty (and to acts adopted in application of the Treaty), are to be interpreted in conformity with the case-law of the Court at the time that the EEA Agreement was signed. ( ) The EEA Agreement does not contain a similar provision relating to subsequent case-law of the Court. ( ) However, it follows from Article 105 of the EEA Agreement that rules of the Agreement which are identical in substance to those of the Treaty should be interpreted uniformly. ( ) The Court of Justice has jurisdiction to interpret the EEA Agreement with regard to the territory of the European Union and the EFTA Court has jurisdiction to do so as regards its application in the EFTA States. In that respect the Agreement provides for cooperation between the Court of Justice and the EFTA Court. ( )

8. The rules prohibiting restriction on the freedom of establishment set out in Article 31 of the EEA Agreement are identical to those imposed by Article 49 TFEU. ( ) Furthermore, the provisions concerning the free movement of capital (whose wording is similar but not identical to the corresponding provisions of the Treaty on the Functioning of the European Union) must likewise, as far as possible, be interpreted in the same way. ( )

Council Directive 88/361/EEC

9. The explanatory notes to Annex I of Council Directive 88/361/EEC ( ) make it clear that ‘movement of capital’ in that context includes purchases of buildings and land and the construction of buildings by private persons for personal use. ( )

National legislation

10. Under Article 44 of the Wetboek der registratie‑, hypotheek‑ en griffierechten) (Code of registration duties, mortgage duties and registry fees for the Flemish Region; ‘the Wetboek’), registration duty of 10% is levied on the value of all non-gratuitous transfers of proprietary or usufructuary rights in immovable property. ( ) Under Article 46a, in the case of a purchase of residential property by one or more natural persons for the purpose of establishing their principal residence there, the basis of assessment is reduced by EUR 12 500, provided that they do not own any other residential property at the time. This abatement in respect of the basis of assessment is available to all first-time buyers who are natural persons, irrespective of whether they previously resided in the Flemish Region or elsewhere.

11. Article 61.3 of the Wetboek provides:

‘When immovable property used or intended to be used for residential purposes is purchased in a normal sale transaction by an individual in order to establish it as his principal residence, his statutory portion of the duty payable … on the acquisition of the dwelling previously used as his principal residence, or of the land upon which that dwelling was constructed, is to be offset against his statutory portion of the duty payable on the acquisition of the new property, provided that the latter acquisition is duly dated within two years of the date of the registration of the document giving rise to the determination of the proportional duty on either the resale of the previous dwelling by normal sale transaction, or on the division of joint ownership of that dwelling, the individual having relinquished all of his rights.

There can be no offset under this article of duty paid on the acquisition of a property which is not situated in the Flemish Region.

The amount to be offset … cannot in any case exceed EUR 12 500 …’

12. Article 212a of the Wetboek provides for reimbursement (rather than offset) of registration duty where (i) the preceding property is sold within two years after the acquisition of the subsequent property (five years where land is acquired for the purpose of constructing a dwelling house) and (ii) the purchaser establishes his principal residence in the new dwelling within two years of acquiring it (five years where land is acquired for the purpose of constructing a dwelling house). Again, the preceding property must be situated in the Flemish Region, and the amount that may be reimbursed is limited to EUR 12 500.

13. I shall refer to the system put in place by Articles 61.3 and 212a of the Wetboek jointly as ‘the disputed measure’. Those articles, together with the provisions outlined in point 10 above and a number of related procedural provisions, were introduced into the Wetboek by an amending decree of 1 February 2002. ( ) The explanatory memorandum to the draft decree acknowledged that registration duty often proved an obstacle for people wishing to move their place of residence closer to their place of work or to adapt it to changed family circumstances. It stated that the aim of the amendment was to ‘promote mobility for all citizens who, for whatever reason (professional, family or other), wish to purchase a new principal residence which corresponds better than their current residence to their requirements’. That was to be achieved by allowing part of the duty paid on a previous, principal residence (that is, home) up to a maximum of EUR 12 500, to be deducted from the duty payable on the subsequent purchase of another home.

The pre-litigation procedure

14. Considering the disputed measure to be discriminatory and therefore precluded by the Treaty, the Commission sent the Kingdom of Belgium a letter of formal notice on 23 December 2005. The Belgian Government contested the alleged infringement in its reply of 22 March 2006.

15. The Commission was not satisfied with that response and issued a reasoned opinion on 13 July 2006. The Belgian authorities confirmed by letter of 13 September 2006 that they considered the disputed measure to be consistent with EU law and in any event to be justified in the public interest.

16. The Commission maintained its view and therefore lodged the present application on 5 May 2008. The Commission asks the Court to declare that the Kingdom of Belgium has failed to fulfil its obligations under Articles 18, 43 and 56 of the EC Treaty and Articles 31 and 40 of the EEA Agreement in so far as, in the Flemish Region, for the assessment of a tax advantage on the purchase of immovable property intended as a new principal place of residence, the amount of registration duty paid upon the purchase of a previous principal place of residence is taken into account only where the latter was situated in the Flemish Region and not where it was in a Member State other than Belgium or in an EFTA State. The Commission also asks the Court to order the Kingdom of Belgium to pay the costs.

17. The Hungarian Government has intervened in support of Belgium.

18. At the hearing on 23 September 2010, the Commission and the Belgian and Hungarian Governments submitted oral argument.

Assessment

Preliminary observations

19. A number of preliminary matters require to be clarified before examining the Commission’s application.

20. First, the Kingdom of Belgium comprises three Communities, three regions and four language areas. ( ) The three regions have certain legislative competences; however, those of the Flemish Community and the Flemish Region are pooled and exercised jointly by the Flemish Government, which introduced the disputed measure. It is settled case-law, none the less, that a Member State may be found liable where a local or regional authority is found to be in breach of EU law. ( )

21. Second, registration duty in Belgium has already been examined by the Court in the context of an obligation to pay such duty following an order by a national court in a contractual dispute. ( ) The Court there accepted that the duty payable constituted indirect taxation. In doing so, however, it essentially adopted the classification given by the national court. ( ) In general terms, the distinction between indirect taxation and direct taxation is this: an indirect tax is included in a sum paid by one person to another who accounts for the tax but does not bear the economic burden, whereas a direct tax is collected from the person who bears the economic burden. ( ) It therefore seems to me that a tax on property transactions the burden of which falls on the purchaser and is collected from him is more correctly to be regarded as a direct tax, rather than as indirect taxation.

22. Third, regardless of whether the registration duty in the present case constitutes direct or indirect taxation, it is clear that it is not the subject of EU harmonisation and therefore falls within the competence of the Member States. None the less, according to the settled case-law of the Court, Member States must exercise such competence consistently with EU law. ( )

23. Fourth, the Commission alleges infringement of Articles 18, 43 and 56 EC (and the provisions of the EEA Agreement corresponding to the latter two articles). The Belgian Government submits that Article 56(1) EC is the only relevant provision and that the present matter should be considered on that basis alone.

24. Examination of that issue reveals a curious aspect of the Commission’s approach when compared with two other infringement actions brought in the same period: Commission v Greece, ( ) in which judgment was delivered on 20 January 2011, and Commission v Hungary. ( )Commission v Greece concerned an exemption from property transfer tax for first-time buyers who were either permanently resident in Greece or had Greek nationality. Commission v Hungary concerns a measure whereby, in the case of a sale of one residence and the purchase of a new home, property transfer tax is charged only on the difference in market value between the two properties, provided that they are both in Hungary.

25. Clearly there are points of similarity between the contested measures in those cases and the present matter: indeed, the Commission alleges discrimination and restriction of Treaty freedoms in all three. However, in those cases the Commission alleged infringement of Articles 18, 39 and 43 EC (in Commission v Greece an infringement of Article 12 EC was also alleged), ( ) whereas in the present case it claims there is infringement of Articles 18, 43 and 56 EC, together with Articles 31 and 40 of the EEA Agreement, but does not allege breach of Articles 12 and 39 EC. ( )

26. Although there are, of course, features which differentiate the measures in issue in each case, the fact remains that the Commission’s approach does not appear to be wholly consistent. That said, it is for the Commission to decide how to formulate its application in infringement proceedings, and for the Court to determine whether each specific allegation is borne out. The Belgian Government’s submission therefore cannot be entertained.

Order of analysis

27. It is true that Article 18 EC, which sets out in general terms the right of every EU citizen to move and reside freely within the territory of the Member States, finds specific expression in Article 43 EC so far as establishment for the purposes of economic activity is concerned. ( ) Furthermore, as the Court observed in Konle, ( ) the right to acquire, use or dispose of immovable property on the territory of another Member State is the corollary of freedom of establishment; and capital movements include investments in such property in the territory of a Member State by non-residents. ( ) The Court therefore commonly first considers the more specific provisions, before examining the more general provision. ( )

28. However, it seems to me that in the present infringement proceedings the Commission’s case, based as it is on legislation relating to the purchase of a private residence, must concern primarily the right to move and reside freely in the territory of the Member States, guaranteed by Article 18 EC. In so far as such a residence is purchased with funds transferred from another State, the transaction requires free movement of the necessary capital, as guaranteed by Article 56 EC. Finally, in so far as citizens may exercise (or intend to exercise) an economic activity from or close to their private residence, a question may also arise as to the exercise of the right of establishment guaranteed by Article 43 EC.

29. It therefore seems sensible first to address the Commission’s case under Article 18 EC (which finds no counterpart in the EEA Agreement), before turning to consider the arguments relating to freedom of establishment (Article 43 EC; Article 31(1) of the EEA Agreement) and free movement of capital (Article 56(1) EC; Article 40 of the EEA Agreement).

Article 18 EC

30. A citizen of the Union who exercises the right to move and reside guaranteed by Article 18 EC must be granted in all Member States the same treatment in law as that accorded to nationals of those Member States who find themselves in the same situation. The Court has held that national legislation which places EU citizens at a disadvantage simply because they have exercised their freedom to move and to reside in another Member State is a restriction on the freedoms conferred by Article 18(1) EC on every EU citizen. ( )

31. Discrimination on the basis of residence has been a recurrent theme in the Court’s case-law relating to free movement of workers and freedom of establishment, ( ) as a form of indirect discrimination on grounds of nationality. Unlike such cases, however, it is not necessary for the purposes of Article 18 EC to establish that a measure adversely affects nationals of other Member States more than those of the State imposing the measure – merely that it affects them adversely. ( )

32. Are EU citizens who move to the Flemish Region from another Member State accorded the same treatment under the disputed measure as Belgian nationals who are residents of that region in respect of eligibility for exemption from payment of registration duties?

33. First, it is necessary to identify the correct comparator. Should a comparison be made between Belgian nationals who reside in the Flemish Region and all EU citizens who might wish to purchase a home in that region (that is, a comparison on a wide basis)?

34. The former category (Belgians resident in the Flemish Region) would comprise Belgian nationals who are residents of the Flemish Region who then (a) sell their home and purchase a replacement residence within that region; or (b) do not own a property but purchase one for the first time in the Flemish Region; or (c) sell their home and purchase a replacement residence outside the Flemish region (whether elsewhere in Belgium or in another Member State).

35. The latter category (all EU citizens) would include the following sub-categories: persons who sell their home in another Member State and purchase a replacement residence in the Flemish Region; persons who do not own a property in another Member State but purchase for the first time in the EU in the Flemish Region; and persons who have left the Flemish Region where they owned a property in order to move to another Member State but subsequently decide to return to that Region and buy a property there. This final group is subject to particular rules under the disputed national measure: accordingly, I consider it at greater length below in points 75 to 79.

36. Are the two broad categories of home buyer in the same situation, so that it is appropriate to compare them with one another?

37. In so far as both categories comprise persons who purchase a home within the EU, the answer is ‘yes’.

38. If the comparison is made on that wide basis, all first-time buyers in the Flemish Region are treated in the same manner whether they move to that region from another Member State or whether they move within that region. Neither category of first-time buyer is eligible for the offset on that first purchase, although they will both benefit from the abatement in respect of the basis of assessment to the registration duty. ( )

39. Obviously, individuals who subsequently sell their property in the Flemish Region to move to another Member State do not benefit from the offset. However, that is merely the consequence of the principle of fiscal territoriality. On the one hand, registration duty cannot be levied by the Flemish Region on property purchased in another Member State and therefore the offset is not available in such circumstances. On the other hand, nothing obliges Member States to offer such persons a benefit equivalent to the offset that they would have received had their next purchase been in the Flemish Region.

40. Finally, individuals who subsequently sell their property in the Flemish Region to move elsewhere in Belgium are all treated alike – they, too, do not benefit from the offset.

41. However, the Commission contends that the comparison should be made on a narrower basis: between individuals who move to the Flemish Region from another Member State, selling their home in order to purchase a (first) principal residence in that region, and individuals who remain within the Flemish region who sell their home and buy a replacement residence. The Commission submits that there is no objective distinction between such persons. Both move home within the European Union; in both cases registration duty is payable at the time the new home is purchased and in both cases the previous home is sold in order to acquire the replacement residence in the Flemish Region. Those whose previous home was in the Flemish Region paid registration duty on their previous property. Those who move to that region from another Member State have paid registration duty or a comparable tax in the State of their former residence. Therefore the two situations are objectively comparable. In substance, the Commission’s complaint then seems to be that (unlike their counterparts who move home within the Flemish Region) persons who move to the Flemish Region from another Member State do not receive any benefit (that is, offset) in that region for (a comparable) tax paid in the Member State from which they have moved. Consequently they suffer a fiscal disadvantage.

42. In my view, however, even an examination of two such narrowly defined categories does not necessarily lead to the conclusion that individuals who move to the Flemish Region from another Member State are in the same situation as persons who move within that region.

43. In order to be considered to be in the same situation, the individual in question must meet the conditions of the disputed measure and thus be eligible for the offset. Those conditions are as follows: (a) the previous residence must have been owned and sold by that person; (b) he must purchase a replacement residence situated in the Flemish Region; and (c) registration duty or an equivalent tax must have been paid by that individual upon the acquisition of the preceding residence.

44. The first two matters can easily be established. However, the third condition – that the individual in question has paid the same or an equivalent tax (to that paid in the Flemish Region) on his preceding home in the Member State which he moves from – cannot so readily be assumed to be satisfied.

45. All Member States have systems for what are commonly described as property transfer taxes. The disputed measure is an example of such a tax. However, the basis of taxation, the rates, whether exemptions are available and the schemes for granting relief differ from Member State to Member State because such taxes are not the subject of harmonisation within the European Union. ( ) Therefore, even where an individual who moves to the Flemish Region from another Member State owned his previous residence in that Member State, it does not necessarily follow that he has paid the same or an equivalent duty. For example, his previous residence may have qualified for full exemption from property transfer tax in that State: if so, no equivalent tax will have been paid. ( )

46. Furthermore, the question of mutual recognition of such taxes is a matter within the domain of the Member States. Therefore it cannot be assumed that payment of registration duty in another Member State is, or need be, recognised as payment of registration duty for the purposes of the Flemish Region. This situation has been described as being consistent with EU law as it currently stands. ( )

47. Thus, even if the comparison is made on the narrow basis advocated by the Commission, it cannot be assumed that all individuals who move to the Flemish Region from another Member State are in the same situation as persons who move home within that region.

Discrimination against returning residents of the Flemish Region?

48. In a series of cases, beginning with D’Hoop, ( ) the Court has condemned instances where citizens of the Union receive less favourable treatment in their Member State of nationality than they would have received if they had not exercised their right to freedom of movement, stating that ‘it would be incompatible with the right of freedom of movement were a citizen, in the Member State of which he is a national, to receive treatment less favourable than he would enjoy if he had not availed himself of the opportunities offered by the Treaty in relation to freedom of movement’. ( )

49. Does the disputed measure place residents of the Flemish Region who move to another Member State and return to the Flemish Region after a certain period has elapsed at a disadvantage as compared to residents of the Flemish Region who continue to reside there, simply because the former have exercised their right to move freely within the European Union? ( )

50. In my view it does not.

51. Under the disputed measure, a resident of the Flemish Region who sells his principal residence move to (for example) France and subsequently returns to the Flemish region after a period of four years would not be entitled to the offset in respect of any principal residence situated in the Flemish Region which he purchases upon his return. However, a resident of the Flemish Region who sells his principal residence, stays in the Flemish Region but moves into rented accommodation and then, after four years, decides to purchase a replacement principal residence in that region would also not be entitled to the offset. The individual who has exercised his right to free movement is in exactly the same position as the one who has not. Both are ineligible for the offset because they have not purchased a replacement property within two years, as prescribed by the disputed measure. ( )

52. Thus, any disadvantage follows from the fact that the individual has not purchased a replacement property within two years of the sale of his previous principal residence, not from the exercise of free movement rights.

53. The Commission’s first ground of complaint therefore cannot succeed.

Freedom of establishment (Article 43 EC; Article 31(1) of the EEA Agreement) and free movement of capital (Article 56 (1) EC; Article 40 of the EEA Agreement)

Outline of the arguments

54. In essence, the Commission submits that persons selling their existing home in order to buy a new home in the Flemish Region are treated more favourably if the existing home is situated in that region than if it is in another Member State or an EFTA State; that the two groups of purchasers are objectively comparable, so that the difference in treatment is prohibited – implicitly, as indirect discrimination on grounds of nationality and, in any event, as contrary to the principle of equal treatment; and that those contemplating a move to the Flemish Region in such circumstances are liable to be deterred from doing so by reason of that discrimination, which therefore forms an obstacle to the exercise of their rights to freedom of establishment and to free movement of capital.

55. The Belgian Government, while accepting that there is a difference in treatment, submits that it is not discriminatory because the two groups are not comparable: those who have previously paid registration duty in the Flemish Region are objectively distinguishable from those who have previously paid a levy in another State. It further submits that, by virtue of the principle of fiscal territoriality (or sovereignty), transfers of immovable property can be taxed only by the fiscal authority within whose jurisdiction the property lies. As a corollary, the need to maintain cohesion of the tax system means that only duty already levied within that jurisdiction can be offset against duty subsequently to be levied there.

56. Hungary, like the Belgian Government, considers that the disputed measure does not discriminate against nationals of other Member States who wish to move to the Flemish Region. Furthermore, the Hungarian Government submits that if the national legislation is found to constitute a restriction, it is justified under the principle of fiscal territoriality and for overriding reasons in the public interest relating to the coherence of the tax system.

57. In response to the latter point, the Commission contends that a restriction can be justified by the need to maintain cohesion of the tax system only if there is a direct link between the tax advantage concerned and the offsetting of the advantage by a particular levy. However, there is no such link between duty paid on the purchase of one property and a reduction of the duty payable on the purchase of a subsequent property. The disputed measure merely involves the Flemish authorities forgoing a portion of the revenue that would otherwise have been collected on the second transaction.

Analysis

58. A number of points are not in dispute between the parties.

59. First, there is agreement that the competence of a Member State (or of a tax-levying subdivision of a Member State, such as the Flemish Region) to tax transfers of immovable property is in principle limited to transactions concerning property within its own territory. Thus, whether registration duty is charged on purchases of property within the Flemish Region and, if so, at what rate is entirely a matter for the authorities of that region, just as it is entirely for the authorities of other Member States to decide whether to impose a levy on purchases within their own territory and, if so, at what level.

60. Next, it is common ground that persons purchasing a principal residence in the Flemish Region after owning a previous principal residence are treated differently according to whether the purchase of the preceding property was subject to registration duty in that region or not.

61. Even if there were no such difference in treatment, it might indeed be the case that the 10% duty levied in the Flemish Region might prove an objective deterrent to movement for a potential buyer, as other States charged a levy at a lower rate (or no levy at all). However, disparities in rates of taxation as between Member States, resulting from the independent exercise of fiscal competence in a field where there is no EU harmonisation, do not fall within the scope of the Treaty provisions on freedom of movement, which offer no guarantee that the exercise of such freedoms will be tax-neutral. ( )

62. Does the difference in treatment constitute discrimination?

63. The Court has consistently held that the rules regarding equal treatment forbid not only direct discrimination on grounds of nationality, but also all forms of indirect discrimination which, by application of other criteria of differentiation, lead in fact to the same result. ( ) Thus, the Court has stated that: ‘a provision of national law must be regarded as indirectly discriminatory if it is intrinsically liable to affect nationals of other Member States more than nationals of the host State and there is a consequent risk that it will place the former at a particular disadvantage’. ( )

64. The Court has also specifically ruled that a law, even if applicable to all, which makes entitlement to a right subject to a condition of residence in a region of a Member State, and thereby favours nationals of that Member State over nationals of other Member States, runs counter to the principle of non-discrimination. ( )

65. It is clear that the disputed measure does not discriminate directly on grounds of nationality.

66. Are the three conditions in the disputed measure which must be satisfied in order for the offset to be available ( ) intrinsically liable to affect nationals of other Member States more than Belgian nationals who reside in the Flemish Region, so as to place the former at a particular disadvantage and thus constitute indirect discrimination?

67. It follows from the analysis that I have set out in relation to Article 18 EC ( ) that I consider that the answer is ‘no’.

68. It is relatively easy to establish whether an individual within the Flemish Region who purchases a replacement principal residence in that region has paid registration duty on his previous home. However, in the absence of evidence that an equivalent duty has been paid (and/or mutual recognition of registration duties between Member States which does not as yet exist), it cannot be assumed that all individuals who move to that region from another Member State are in the same position as their counterparts who move within the Flemish Region. Therefore, one cannot ask ‘is there unjustified discrimination between those who have paid registration duty in the Flemish Region and those who have paid an equivalent levy in another Member State?’ because it cannot be assumed that like is being compared with like.

69. All purchasers are subject to the same obligation to pay the registration duty in the Flemish Region. In that respect, there is no objective distinction to be drawn between them.

70. The question then becomes, how are such purchasers subsequently treated? Is there, at that stage, unjustified discrimination between different categories of homebuyers in the Flemish Region?

71. Looking at the issue in that light, it seems that all those buying a principal residence in the Flemish Region are treated in the same way: after they have paid registration duty once, a credit of up to EUR 12 500 will be offset against the amount payable on any subsequent purchase of a principal residence in the same region. ( ) In the absence of a system of mutual recognition, property transfer taxes paid outside the region may lawfully be ignored. There is, true, a difference in treatment between those buying their first principal residence within the Flemish Region and those buying a subsequent principal residence there. All other things being equal, however, it seems plausible to suppose that the less favourable treatment for first-time buyers would in fact be more likely to affect those already resident in that region than those previously resident elsewhere – and thus more likely to effect Belgian nationals than nationals of other Member States or of an EFTA State – because, on the whole, people tend to buy their first home in a country or region where they are already resident.

72. Therefore, unlike Commission v Greece, ( ) it is not possible to draw a neat distinction here between nationals and non-nationals and to compare the two groups. Nor does it necessarily follow that the disputed measure affects nationals of other Member States more than Belgian nationals who are residents of the Flemish Region and that the former are placed at a disadvantage.

73. In so far as an individual moves to the Flemish Region from a Member State that charges a lower rate of duty (tax) on the purchase of a principal residence than the 10% rate charged in the Flemish Region, it may indeed be that that rate (which is substantial) is considered to be a disadvantage. However, that is a disadvantage borne by all individuals who purchase a property in the Flemish Region.

74. It therefore seems to me that the disputed measure is not indirectly discriminatory.

75. That said, I should like to draw attention to a different possible restriction on freedom of movement arising out of the disputed measure.

76. A person who has previously owned a principal residence in the Flemish Region may offset (up to) EUR 12 500 of the registration duty paid on the purchase of that residence against the registration duty payable on the purchase of a subsequent principal residence in that region – but only if the second purchase takes place within a certain period (two or five years, as the case may be) of the sale of the preceding property. A resident selling his principal residence to move to another Member State or to an EFTA State for any longer period, who then returns to the Flemish Region, will lose the not inconsiderable advantage to which he would otherwise have been entitled.

77. Prima facie, it would seem that that temporal limitation to the availability of the offset might act as a deterrent to freedom of movement and residence, because such an individual would not benefit from the offset when he returns to the Flemish Region.

78. However, the Commission has not focused on that aspect of the disputed measure in its application and the Belgian Government has not had an opportunity to consider and respond to a specific complaint made on that basis. I do not therefore consider that it is open to the Court to find in favour of the Commission on that ground.

Justification

79. In the event that the Court does not share my view, but finds that the disputed measure constitutes a prohibited restriction of a free movement right as alleged by the Commission, it becomes necessary to consider the arguments advanced by the Belgian Government by way of justification, namely coherence of the tax system and overriding reasons in the public interest.

Coherence of the tax system

80. Whilst recognising that the need to maintain the cohesion of a national tax system may justify a restriction on fundamental freedoms in the form of differential treatment according to whether a particular event occurs within or outwith the purview of that system, the Court has consistently stressed that such justification depends on there being a direct link between the tax advantage concerned and the offsetting of that advantage by a particular tax levy. ( ) In the present case, the Commission submits that there is no such link; whereas the Belgian Government contends that there is a link between the payment of registration duty in respect of the first property and any payment of such duty on a subsequent purchase.

81. In my view, there is no direct link within the meaning of the case-law between the levying of registration duty (or an equivalent tax) on the acquisition of one principal residence and a reduction of the amount levied on the acquisition of a subsequent principal residence to replace the first (where both properties are situated in the same Member State). The two transactions are no doubt linked in the purchaser’s mind as ensuring coherent and continuous accommodation for himself and, where applicable, his family. But they are quite independent of each other as taxable events.

82. The Belgian Government submits that the situation is comparable to that in Bachmann. ( )

83. In that case, Mr Bachmann had concluded sickness and invalidity insurance contracts, together with a life assurance contract, in Germany, where he then worked, before moving to live and work in Belgium, where he continued to pay the necessary premiums under those contracts. Belgian law did not allow him to deduct the amount of those premiums from his taxable income, as it would have done if the premiums had been paid in Belgium. However, the Belgian Government successfully argued that the exemption from taxation of the premiums was offset by taxation of the pensions, annuities or capital sums paid out by the insurers. The Court considered that the cohesion of the tax system presupposed that, if a State were obliged to allow the deduction of premiums paid in another Member State, it should be able to tax any sums payable by insurers. That could not, however, be guaranteed. Consequently, the cohesion of the tax system could not be ensured by measures less restrictive than the Belgian rules.

84. I do not think that the two situations are comparable.

85. In Bachmann, there was a clear and direct reciprocal link between the taxation of the benefits and the non-taxation of the premiums. Although, as the Belgian Government states, payment of a benefit under an insurance contract is not an automatic result of payment of the premiums (indeed, one may well prefer that no benefit should need to be paid), none the less, when a benefit is paid, it necessarily presupposes the earlier payment of a premium. Where house purchases are involved, there is no such necessary link between one purchase and another. A person (or family) may live only in rented accommodation, may buy one home and stay there without moving, may buy a series of successive homes over a lifetime, or may alternate between owned and rented accommodation, depending on circumstances. Any purchase of a principal residence to serve as a home is simply a new and separate event. If the event is taxed, it is taxed as an individual event, not as part of a chain of events. The Flemish Region remains free, in the exercise of its territorial fiscal powers, to vary the rate of registration duty from time to time, or indeed to abolish it. The exercise of such powers would not, however, give rise to any incoherence in the system – or to any need to reimburse or claw back any duty – because each taxable event is separate from each other taxable event.

86. The mere fact that the disputed measure makes the amount which can be offset against the registration duty payable on the subsequent purchase dependent (in part) on the amount paid or payable on the preceding purchase does not suffice to create a link between the two taxable events. The Flemish Government could equally well have achieved the aim pursued by allowing a flat-rate deduction of EUR 12 500, or of any other appropriate sum. The only real question it has to determine is how much revenue it is willing to forgo in order to achieve that aim.

87. Indeed, the absence of the necessary direct link between the transactions concerned is confirmed by the disputed measure itself, in so far as no offset is possible once a certain period has elapsed between the sale of the preceding property and the purchase of the subsequent property. Had there been any direct link of the kind required by the case-law in order successfully to advance coherence of the tax system as a justification, it would not disappear in that way. ( )

88. I conclude that that justification is not made out.

Overriding reasons in the public interest

89. The Belgian Government submits that the disputed measure is justified by overriding reasons in the public interest, that it is appropriate for securing attainment of the objectives pursued and does not go beyond what is necessary for attaining them. In addition to the aim of fostering mobility explicitly set out in the explanatory memorandum to the draft decree introducing the disputed measure (which includes the objective of reducing distances travelled between home and work, with beneficial effects on health and the environment), the Belgian Government submits that the measure encourages renovation of existing homes rather than new building and has a moderating effect on rents.

90. I confess that I do not find it easy to see how a reduction of registration duty which applies equally to purchases of existing residences and to purchases of land for homebuilding will necessarily encourage renovation rather than building. Nor is it clear that a reduction on the cost of purchasing a principal residence is likely to have a direct effect on rents (since buying to let would appear to be excluded from the offset mechanism). Possibly, in so far as the offset mechanism reduces the overall cost of purchasing subsequent principal residences (after the first purchase), it encourages people to buy rather than to rent and thus reduces (to some unspecified extent) overall demand for rented accommodation in the Flemish Region. The Belgian Government has not offered any further explanation of the ways in which it considers the disputed measure to be appropriate for the achievement of those aims.

91. I can accept that a measure which reduces the amount of duty payable on the purchase of a new principal residence is likely to facilitate moving in general, and that that may include moving closer to one’s place of work, with the health and environmental benefits attendant thereon. But that begs the question: why not facilitate, in the same way, moving into (or out of) the Flemish Region (which would clearly be beneficial in order to limit cross-border commuting)? The disputed measure, however, links availability of the offset to sequential purchases within the Flemish Region.

92. I therefore conclude that the Belgian Government has not established that there are overriding reasons in the public interest such as to justify the disputed measure.

Temporal limitation

93. Finally and for the sake of completeness, I add that – should the Court grant the Commission’s application – I can see no reason for limiting the temporal effect of the judgment. ( ) I agree with the Commission that no new interpretation of EU law is involved, and the Belgian Government has provided no indication of what the financial consequences of the Court’s ruling might be.

94. I would add that the Court has never, to my knowledge, limited the temporal effects of its judgment when finding that a Member State had failed to fulfil its obligations under the Treaty. Indeed, given the nature of such a finding, which concerns a specific moment in time, namely the moment at which the period laid down by the Commission for compliance with its reasoned opinion expires, any limitation of temporal effects would appear inappropriate.

Conclusion

95. For the reasons that I have given earlier, however, I consider that the disputed measure does not infringe Articles 18, 43, and 56 EC and Articles 31 and 40 of the EEA Agreement. I therefore recommend the Court should dismiss the application and, as requested by Belgium and in accordance with Article 69(2) of its Rules of Procedure, order the Commission to pay the costs.