EN Official Journal of the European Union CE 78/743

(2004/C 78 E/0791)

WRITTEN QUESTION E-2485/03

by Ria Oomen-Ruijten (PPE-DE) to the Commission

(24 July 2003)

Subject: Double taxation conventions and Regulation (EEC) No 1408/71

In practice, workers who are employed in more than one EU Member State, for example in international road haulage, often find themselves the victims of unfavourable combinations of social insurance costs in one country (where their employer is based) and levying of income tax in their country of residence for days spent working outside the country where their employer is based. The regulation coordinating social security schemes ((EEC) No 1408/71 (1)) and bilateral double taxation conventions do not mesh together smoothly.

1. Do the allocation rules in bilateral double taxation conventions take precedence over the corresponding rules in the multilateral Regulation (EEC) No 1408/71 or vice versa?

2. Is it contrary to EU legislation if Member States agree allocation rules in a double taxation convention which deviate from the principles laid down in Regulation (EEC) No 1408/71?

3. What does the Commission consider to be the significance of consideration 32 in the recent judgment in the case of Gottardo, C-55/00 (With regard to a bilateral international treaty concluded between a Member State and a non-member country for the avoidance of double taxation, the Court has pointed out that, although direct taxation is a matter falling within the competence of the Member States alone, the latter may not disregard Community rules but must exercise their powers in a manner consistent with Community law (…)')?

Answer given by Mrs Diamantopoulou on behalf of the Commission

(11 September 2003)

The Commission would like to inform the Honourable Member that Regulation (EEC) No 1408/71 of the Council (2) creates a system for co-ordinating national social security schemes of the Member States and contains a series of provisions which determine the national legislation to apply in a given case. These provisions aim to ensure that persons who have exercised their right to free movement are subject to the legislation of only one Member State, i.e. the State of employment, and that, as a result, they must pay social security contributions only in the Member State whose legislation is applicable.

As for the allocation rules in bilateral double taxation conventions, in the absence of a Community unifying or harmonising measure the Member States retain the power to lay down criteria for taxing income and savings with a view to eliminating double taxation, if necessary by means of conventions. In this respect, within the framework of bilateral conventions the Member States are free to define attachment factors for the purposes of allocating tax jurisdiction.

There is no relationship, let alone a hierarchical relationship, between the provisions of Regulation (EC) No 1408/71 and those of bilateral double taxation conventions. It follows that the dispute rules laid down in these two types of instrument apply within their respective fields of application.

As far as employment income (dependent activities) is concerned, and particularly in the case of drivers, the Commission notes that double taxation conventions between the Member States use criteria for allocating tax jurisdiction (e.g. the employee's place of residence, the employer's place of residence or the place where the activity is carried out) which do not always correspond to the allocation criteria laid down in Regulation (EEC) No 1408/71. However, the Commission does not consider that this difference in the allocation rules per se represents an infringement of Community law.

The Commission considers that paragraph 32 of the judgment of the European Court of Justice in Gottardo (C-55/00) confirms its earlier judgment in Gilly (C-336/96). According to that judgment, in the absence of European harmonisation in the area, the Member States are free to lay down criteria for allocating tax jurisdiction in bilateral double taxation conventions. However, when doing so, they must respect the fundamental principles of the EC Treaty.

(1) OJ L 149, 5.7.1971, p. 2.

(2) Latest consolidated version: Regulation (EC) No 118/97 of the Council of 2 December 1997 amending and updating Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, OJ L 28, 30.1.1997.