WRITTEN QUESTION E-2279/00

by Bartho Pronk (PPE-DE), Karla Peijs (PPE-DE) and Ria Oomen-Ruijten (PPE-DE) to the Commission

(7 July 2000)

Subject: The impact of the Zurstrassen judgement on the new Dutch tax system

1. In the Commission's opinion, what impact will the Zurstrassen judgement have on Member States' tax systems?

2. Does this mean that the principle of the working country will acquire more prominence in tax matters?

3. Does the Commission intend to take action against Member States which refuse to bring their tax systems in line with Article 39 EC Treaty (formerly Article 48 EC Treaty) which is based on this judgement?

4. Is the reduced assessment, specified in the new Dutch tax system, which is not applicable to partners of certain categories of frontier workers a violation of Article 39 EC Treaty (formerly Article 48 EC Treaty)?

5. If so, in what way?

6. If not, what action does the Commission intend to take?

Answer given by Mr Bolkestein on behalf of the Commission

(14 September 2000)

1. The Commission does not see any particular effect of the Zurstrassen judgment for the tax systems of the Member States. This judgment has only confirmed, in a slightly different situation, the interpretation of the EC Treaty given by the Court in the Schumacker judgment of 14 February 1995 (case C-279/93). It is contrary to Article 39 (ex Article 48) of the EC Treaty and Article 7(2) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community(1) if a Member State, in taxing a person who is married and whose spouse has no income, does not take into account this fact for the sole reason that the spouse is resident in another Member State. This means in particular that Mr Zurstrassen, a Belgian migrant worker resident in Luxembourg, and his wife, living without her own income in Belgium, were entitled to be jointly assessed for taxation purposes in Luxembourg.

2. and 3. The Zurstrassen judgment has no bearing on Member States' tax jurisdiction over a dependent worker. This is, and always has been, the Member State where he works, unless a tax convention provides otherwise. The EC Treaty, as interpreted by the Schumacker and Zurstrassen judgments has, however, a bearing on the tax treatment of such salary if it is received by a non-resident or if the spouse is a non-resident. The principle of free movement of persons requires that no discrimination in the allocation of personal allowances may result from such situations. As far as the Commission is aware, all Member States apply this interpretation and thus respect Article 39 of the EC Treaty, but the Commission would make use of its powers under Article 226 ECT (ex Article 169) of the EC Treaty, if it learned of a situation where this were not true.

4. to 6. The new Dutch tax system, which will be applicable as from 2001, provides inter alia for a so-called levy rebate (heffingskorting) to replace the existing basic personal allowance. It constitutes a discount on the amount of the tax and social security contributions which a Dutch taxpayer has to pay.

In response to the Schumacker judgment, a non-resident taxpayer working in the Netherlands has the option to be taxed as if he were a resident taxpayer. In this case he is entitled to receive the personal allowances of a resident, including the levy rebate. Moreover, because he works in the Netherlands, he is subject to the Dutch social security system and is thus entitled to receive the social security part of the levy rebate.

The option to be taxed as a resident taxpayer has to be exercised by both spouses/partners jointly in order to avoid that couples accumulate allowances in both Member States concerned. If they make the election, the partner of the non-resident, who may for example be living in Belgium or Germany, will also receive the tax part of the levy rebate. However, the partner will not be entitled to receive the social security part.

This system does not appear to be in conflict with the free movement principle, since the choice is left to those concerned to opt for a solution which takes into account their personal situation in a non-discriminatory way.

(1) OJ L 257, 19.10.1968.