Case C-269/07: Action brought on 6 June 2007 — Commission of the European Communities v Federal Republic of Germany
Date: 2007-08-25
Institutions: Court of Justice
Subjects: Germany, action for failure to fulfil an obligation, discrimination on the basis of nationality, free movement of workers, frontier worker, supplementary pension, tax law

25.8.2007

EN

Official Journal of the European Union

C 199/19

Action brought on 6 June 2007 — Commission of the
European Communities v Federal Republic of Germany

(Case C-269/07)

(2007/C 199/30)

Language of the case: German

In the Commission's opinion, those provisions infringe Com-
munity law prohibiting discrimination based on nationality and
Community law on the free movement of workers, or rather, on
the equal treatment — in terms of social and tax advantages —
of workers from other Member States. The prohibition on
discrimination against workers from other Member States based
on nationality includes not only overt discrimination based on
nationality, but also covert
forms of discrimination which
would in fact produce the same result if other distinguishing
criteria were applied. Furthermore, it is clear from the case-law
of the Court of Justice that cross-border workers too are entitled
to social
advantages under Article 7(2) of Regulation
No 1612/68.

Parties

Applicant: Commission of the European Communities (repre-
sented by: R. Lyal and W. Mölls, acting as Agents)

Defendant: Federal Republic of Germany

Form of order sought

— Declare that the Federal Republic of Germany has failed to
fulfil
its obligations under Article 39 EC, Article 7 of
Council Regulation No 1612/68 of 15 October 1968 (1),
Article 18 EC and Article 12 EC by introducing and main-
taining the provisions for second pillar pensions in Para-
graphs 79 to 99 of the Einkommensteuergesetz (Law on
Income Tax), in so far as those provisions

(a) deny cross-border workers (and their spouses) the right

to an allowance, unless they are fully liable to tax;

(b) do not permit the capital advanced to be used for an
apartment serving as the recipient's own residence in the
recipient's own house, unless that house is in Germany;

(c) require the repayment of financial support on termina-

tion of liability to unlimited taxation;

— order the Federal Republic of Germany to pay the costs.

Pleas in law and main arguments

In 2001, Germany introduced the ‘supplementary pension
allowance’ which was intended to encourage the building up of
second pillar pensions to compensate for the reduction in the
level of the state pension. However, that allowance is granted
only if the person concerned is fully liable to tax in Germany,
which, certainly as far as cross-border workers are concerned
(who are liable to be taxed by the State of residence under a
double taxation convention, and who do not therefore pay taxes
in Germany), deprives them of the benefit of the allowance. In
addition, it is possible to use part of the accumulated capital for
the purchase of residential property, but only of property that is
situated in Germany, not property that is near the border but
abroad. Finally,
the person
concerned ceases to be fully liable to tax.

the allowance is

repayable if

Since the supplementary pension allowance is within the defini-
tion of a ‘social advantage’,
it should also be granted where
cross-border workers and/or their spouses are not subject to
taxation in Germany at all, because the advantage attaches to
the objective status of
the persons concerned as employed
persons. The state pension, which is being reduced and the
supplementation of which is
therefore being promoted,
primarily applies to employed persons, although it may apply
incidentally to other categories of persons also. Furthermore,
‘social advantage’ also covers advantages which are bestowed
upon recipients merely by virtue of the fact that their place of
residence is within the country. It is clear therefore that frontier
in the same position as resident
workers are, as a rule,
employees; both categories are affected by falling pension rates
in the German system to which they are linked and to which
they have paid contributions. Both have an interest in building
up an additional pension during their active working lives to
counteract falling pension rates. The German legislation, which
precludes frontier workers whose income is subject to taxation
by the State of residence under a double taxation convention
from claiming the advantage, thus amounts to covert discrimi-
nation and,
infringes Article 39(2) EC and
Article 7(2) of Regulation No 1612/68. Whether the supple-
mentary pension allowance is categorised as a ‘tax’ or ‘social’
advantage is ultimately unimportant, since cross-border workers
are entitled to equal treatment in respect of ‘tax’ advantages too.

accordingly,

The notion that what is at issue is a social advantage applies
equally to the prohibition on spending the capital advanced on
an apartment serving as the recipient's own residence in the
recipient's own house (unless it is in Germany). Even if it were
not a tax advantage, the freedom of movement for workers
would still be infringed, since the opportunity to avail oneself of
a social advantage is restricted by that requirement. It makes it
impossible for cross-border workers to spend the capital saved
on an apartment that is situated nearby but abroad, as such
employees would normally be expected to do. A typical frontier
worker has less flexibility than domestic employees in the use of
the allowance when a contractual pension comes to be paid out.
The value of that allowance as a social advantage is thereby
reduced. Putting frontier workers at a disadvantage in this way
also,
represents covert discrimination based on
nationality, which is an infringement of Article 39(2) EC and
Article 7(2) of Regulation No 1612/68.

therefore,

C 199/20

EN

Official Journal of the European Union

25.8.2007

The repayment obligation on termination of liability to unli-
mited taxation that is provided for under German legislation
primarily affects foreigners, since the number of
foreigners
their
returning to their country of origin after the end of
working lives is much higher than the number of German
pensioners moving abroad. Furthermore, the repayment obliga-
tion deters those concerned from changing their place of resi-
dence to another Member State. Moreover, the legislation at
issue here can reduce the value of the allowance for migrant
workers from the outset, as against domestic employees, and
thus entail covert discrimination at the very point at which the
advantage is granted. That applies to those cases in which a
migrant worker wishes from the outset to avoid repayment and
consequently does not even apply for the allowance. There
appears to be no justification for that either. As regards fiscal
cohesion, that is already assured by the provisions of double
taxation conventions. The repayment obligation on termination
of liability to unlimited taxation also therefore represents covert
discrimination based on nationality, and consequently infringes
Article 39 EC, Article 7(2) of Regulation No 1612/68 and Arti-
cles 12 EC and 18 EC.

(1) OJ, English Special Edition I 1968(II), p. 475.

Action brought on 6 June 2007 — Commission of the
European Communities v Federal Republic of Germany

(Case C-270/07)

(2007/C 199/31)

Language of the case: German

Parties

Applicant: Commission of the European Communities (repre-
sented by: F. Erlbacher and A. Szmytkowska, acting as Agents)

Defendant: Federal Republic of Germany

Form of order sought

— Declare that the Federal Republic of Germany has failed, or
is continuing to fail, to fulfil its obligations under Article 1
and Article 5(3) and (4) of Directive 85/73 (1) and — as
from 1 January 2007 — under Article 27(2), (4) and (10) of
Regulation No 882/2004 (2) by failing to amend Paragraph 4
of the Ausführungsgesetz zum Fleischhygienerecht und zum
Geflügelfleischrecht
the
meat hygiene and poultrymeat
the Land of
Schleswig-Holstein to conform to those Community rules.

(Law on the implementation of

laws) of

— order the Federal Republic of Germany to pay the costs.

Pleas in law and main arguments

Under Article 1(1) of Directive 85/73/EEC, the Member States
are to ensure that fees are collected for the costs occasioned by
the health controls and inspections of meat provided for under
the various directives. The detailed rules for the calculation and
collection of those Community fees, which are to replace any
other charge or fee for health inspections and controls that is
collected by the State, regional or local authorities of
the
Member States, are set out in the annexes to the Directive.
Article 5(1) of Directive 85/73 provides that the Community
fees are to be set at a level which covers the costs borne by the
competent authority in carrying out the controls and inspec-
tions. According to Article 5(3), the Member States are to be
authorised to charge a greater amount, provided that the total
fees charged by each Member State do not exceed the actual
cost of inspection. In its judgment in Joined Cases C-284/00
and C-288/00 Stratmann, the Court has already determined that
it is clear from the wording and purpose of Directives 85/73
and 64/433 that the costs of bacteriological examinations are
covered by the Community fee. The legal position remains
substantially unchanged following the replacement of Directive
85/73 by Regulation No 882/2004 with effect from 1 January
2007.

the provisions of

the
The Commission takes the view that
Ausführungsgesetz (Law on Implementation) of
the Land
Schleswig-Holstein, which provide for the collection of fees for
bacteriological examinations in addition to the flat-rate fees for
meat inspections, do not comply with those Community law
provisions and fail to take account of the Court's interpretation
of those provisions in Stratmann.

In particular, it should be noted that bacteriological examina-
tions are included in the health inspections and controls
provided for in Regulation No 854/2004, the costs of which are
to be covered by the Community fee. Although the Member
States can collect a greater fee than is laid down in the annex to
Directive 85/73/EEC, provided that the total fees charged by
each Member State do not exceed the actual cost of inspection,
every increase imposed by a Member State must apply to the
flat-rate fee itself. Special fees exceeding the level of the Com-
munity fee must cover all of the costs actually incurred. That
provision for higher costs cannot be said to apply to a rule of
domestic law which provides for the costs of bacteriological
examinations to be charged in addition to the flat-rate fees, as
that is not a general increase in the flat-rate Community fee,
which incorporates all of the costs actually incurred.

A provision such as the rule of the Ausführungsgesetz of the
Land Schleswig-Holstein in the present case also runs counter to
the relevant Community rules' practical effectiveness. These
harmonised provisions are, after all, intended to eliminate the
distortion of competition in the financing of health inspections
and controls of fresh meat which is to be expected where there
are differences between the Member States in that area. The
Court of Justice took the view also that this objective might not
be achieved if certain inspections laid down by Community law