WRITTEN QUESTION No. 2769/98 by Xaver MAYER to the Commission. Taxation of pensioners resident in an EU country other than their own
Date: 1998-09-07
Institutions: European Parliament, MAYER XAVER
Subjects: France, Germany, double taxation, retired person, tax convention, tax on income

8.4.1999

EN

Official Journal of the European Communities

C 96/145

(1999/C 96/206)

WRITTEN QUESTION P-2769/98

by Xaver Mayer (PPE) to the Commission

(7 September 1998)

Subject: Taxation of pensioners resident in an EU country other than their own

An EU citizen, a German national, is married to a Frenchwoman and lives permanently in France. Both receive
pensions from their respective countries. The husband is classified by the German tax authorities in Bracket 1 (as a
single person) and assessed for income tax, although he has his permanent residence in France, on the grounds
that his pension is being paid from public funds (Federal Defence Ministry).

His income from German benefit payments is declared a second time to the French tax authorities and included
with his wife(cid:146)s income in the assessment base ((cid:145)taux effectif(cid:146)). That results in a tax demand on the couple that is
higher than if they were assessed for tax solely in France.

Could the Commission indicate whether it regards the state of affairs described above as being compatible with
the principle of non-discrimination and whether it sees a need for action at European level. In its view, is it
admissible that the couple has to pay more in tax than would a comparable French couple?

Answer given by Mr Monti on behalf of the Commission

(12 October 1998)

1.
The apportionment of the right of taxation in bilateral relations between France and Germany is governed
by the 1959 Tax Convention, Article 14 of which states that amounts paid by way of a retirement pension from a
statutory social insurance fund are taxable in the country in which the fund is situated, i.e. Germany in the case in
hand.

As for this taxable income being included in the basis of assessment of the couple in question, who are resident in
France, it should be pointed out that the Tax Convention provides that the relevant income is also taxable in that
country. However, in order to avoid double taxation, a tax credit equal to the amount of French tax corresponding
to the income is granted (Article 20 of the Convention). This method of avoiding double taxation, which also
appears in the OECD model convention, is widely used internationally.

In reply to the question whether these provisions of the Convention are compatible with Community law, the
Commission would point out that, as Community law stands, Member States are in principle free to lay down the
rules governing income tax in general and the apportionment of the right of taxation in their bilateral relations
with other Member States in particular. Community law is applicable solely with regard to the matter of
compliance with the principle of non-discrimination in the context of the basic freedoms enshrined in the Treaty.
The Commission has not detected any infringement of that principle. Moreover, in its judgment in Case C-336/96
Gilly v Directeur des services fiscaux du Bas-Rhin, the Court of Justice ruled that the above-mentioned tax credit
mechanism was not inconsistent with Article 48 of the EC Treaty.

The Honourable Member also indicates that the couple in question have to pay more in tax than they would

2.
if all their income were taxed solely in France.

The Commission would point out that, generally speaking, income tax is not harmonised at Community level and
that, consequently, the basis of assessment and tax rates may vary considerably from one Member State to
another. It is therefore possible that, when incomes are apportioned under a tax convention between Member
States, the tax burden will be higher than it would be if the combined incomes were taxed in the country of
residence.

The Commission takes the view that the situation described above does not infringe existing Community law
provided, of course, that the principle of non-discrimination is complied with.

Finally, the Commission would point out that no general harmonisation of personal income tax at

3.
Community level is planned.