WRITTEN QUESTION P-4010/98

by Gérard Caudron (PSE) to the Commission

(22 December 1998)

Subject: Double taxation of French cross-border workers employed in Belgium

The European Parliament gave its views on the status of cross-border workers in June 1998.

The legislative work by Mrs Van Lancker, MEP, is a further step towards precise clarification of that status.

It should be pointed out that these employees pay income tax to France on the basis of the 1964 convention.

The fact is, however, that the French and Belgian Governments are making no attempt to sort out known cases of double taxation.

Some employees' previously recognised cross-border worker status is even being called into question retroactively. This has repercussions: the Belgian tax authority is demanding payment of very large sums of arrears, which is threatening to ruin the families concerned.

Can the Commission state whether it intends to take urgent measures, given these situations, in particular by asking for arrears to be frozen and for the 1964 convention governing French and Belgian workers to be renegotiated on the basis of the report adopted by the European Parliament?

Can the Commission say whether it intends to force Member States to apply this new legislation as soon as it has been approved by the European Parliament?

Answer given by Mr Monti on behalf of the Commission

(23 February 1999)

First of all, the Commission would point out that, in the absence of Community-wide harmonisation, establishing the rules governing powers of taxation is a matter for the Member States and is covered by the bilateral tax conventions concluded between individual Member States. Moreover, the Court of Justice found in its judgment of 12 May 1998(1) that Member States have the right to define, in the bilateral conventions concluded between them with a view to eliminating double taxation, the criteria for allocating their powers of taxation. The Commission currently takes the view that the Member States are best placed to decide between themselves the allocation of their powers of taxation, taking individual situations into account, and hence that it is not the right time to draw up proposals for harmonisation in this field.

As regards relations between France and Belgium, allocation of powers of taxation is governed by the convention concluded between them on 10 March 1964. Under that convention, wages and salaries are taxable in the country on whose territory the activity from which such income derives is carried out (Article 11 (1)). By way of exception to this principle, border workers are taxed in the country where they are resident (Article 11(2)(c)). Border workers are defined as persons living in the border area of one country and working in the border area of a neighbouring country. Another exception to this principle is the fact that wages and salaries paid by the French or Belgian State or by a legal person governed by public law in one of those two countries are taxable only in the country where such wages and salaries are paid, even if they are paid to border workers (Article 10).

It is up to the signatory States to apply the convention's above-mentioned provisions to particular situations, taking individual circumstances into account. The Commission has no powers in this field.

If employees resident in France were obliged to pay taxes to Belgium on wages and salaries already taxed in France, they could, under Article 24(3) of the convention, write to the French tax authorities, stating their reasons, and request a review of the taxes resulting in double taxation, this being in breach of the convention.

Such a request must be submitted before the expiry of a period of six months from the date of notification or deduction at source of the second tax. The authorities receiving such a request must reach an agreement with the authorities of the other country concerned in order to avoid double taxation. Consequently, the risks of double taxation referred to by the Honourable Member should not exist.

However, the Commission is aware of the anxiety to which the need to have recourse to this potentially lengthy procedure may lead for the employees concerned. It is therefore prepared, in any particularly difficult cases notified to it, to contact the tax authorities of the two Member States concerned to encourage them - should the procedure provided for fail to produce results within a reasonable length of time - to determine as soon as possible the country where the wages in question are to be taxed.

(1) Case C-336/96 Gilly, paragraph 30.