CELEX: 62007CC0269
Language: en
Date: 2009-03-31 00:00:00
Title: Opinion of Mr Advocate General Mazák delivered on 31 March 2009. # Commission of the European Communities v Federal Republic of Germany. # Failure of a Member State to fulfil obligations - Freedom of movement for workers - Regulation (EEC) No 1612/68 - Savings-pension bonus - Full liability to tax. # Case C-269/07.

OPINION OF ADVOCATE GENERAL
      Mazák
      delivered on 31 March 2009 (1)
      
      Case C‑269/07
      Commission of the European Communities
      v
      Federal Republic of Germany
      (Failure of Member State to fulfil obligations – Infringement of Articles 12 EC, 18 EC and 39 EC, and of Article 7 of Council Regulation (EEC) No 1612/68 of 15 October 1968
         on freedom of movement for workers within the Community – National legislation concerning pecuniary incentives for savings-pensions)
      I –  Introduction
      1.        The present proceedings brought under Article 226 EC concern certain aspects of the income tax legislation of the Federal
         Republic of Germany which were adopted in order to encourage the establishment of private pensions, commonly referred to as
         Riester pensions or Riesterrente. (2) The decision of the Federal Republic of Germany to encourage, by providing pecuniary incentives, the establishment of these
         voluntary pensions was motivated by demographic change and increasing pressure on the national social security pension scheme.
         The Riester pensions are thus intended to complement national social security pensions.
      
      2.        In its application the Commission challenges three aspects of the Riester pension legislation which are contained in Paragraphs
         79 to 99 of the Einkommensteuergesetz (Law on Income Tax) (‘the EStG’). (3) The Commission thus asks the Court to ‘[d]eclare that the Federal Republic of Germany has failed to fulfil its obligations
         under Article 39 EC, Article 7 of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for
         workers within the Community, [(4)] Article 18 EC and Article 12 EC by introducing and maintaining the provisions for second pillar pensions in Paragraphs 79
         to 99 of [the EStG], 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 termination of liability to unlimited taxation.’
      3.        In addition, the Commission requested that the Federal Republic of Germany be ordered to pay the costs.
      
      4.        The Federal Republic of Germany considers that the Commission’s application should be dismissed and that the Commission should
         be ordered to pay the costs. 
      
      II –  Legal context
      A –     Community legislation
      5.        Article 7 of Regulation No 1612/68 reads as follows: 
      
      ‘1.      A worker who is a national of a Member State may not, in the territory of another Member State, be treated differently from
         national workers by reason of his nationality in respect of any conditions of employment and work, in particular as regards
         remuneration, dismissal, and should he become unemployed, reinstatement or re-employment; 
      
      2.      He shall enjoy the same social and tax advantages as national workers.’
      B –    National legislation
      6.        Paragraph 1 of the EStG provides that:
      
      ‘(1)      Natural persons having their domicile or habitual residence in Germany shall be liable to unlimited taxation of income …
      (2)      …
      (3)      At their request, natural persons having neither their domicile nor habitual residence in Germany may also be liable to unlimited
         taxation of income insofar as they receive income arising in Germany … This option applies only if at least 90% of their income
         during a calendar year is subject to German income tax or if their income not subject to German income tax is no more than
         EUR 6 136 a calendar year …’
      
      7.        Paragraph 10(a)(1) of the EStG provides that persons insured under the national social security pension scheme may deduct
         annually as special expenses, up to a certain threshold, payments made to their savings-pension together with the savings-pension
         bonus granted pursuant to Paragraph 79 et seq. Paragraph 10(a)(1) of the EStG also provides that, in addition to those persons
         insured under the national social security pension scheme, other categories of persons may be treated as persons insured under
         that scheme. Paragraph 10(a)(2) of the EStG sets out the relationship between the deduction of payments to the savings-pension
         and the savings-pension bonus and provides that the regime which is more advantageous for the taxpayer must be applied.
      
      8.        Article 79 of the EStG, entitled ‘Beneficiaries of pecuniary advantage’, provides that:
      
      ‘Taxpayers who are fully liable to income tax and are beneficiaries pursuant to Paragraph 10(a)(1) are entitled to a savings-pension
         bonus (bonus). In the case of married couples who have fulfilled the conditions provided by Paragraph 26(1) and where only
         one spouse is a beneficiary under the first indent, the other spouse may also obtain the bonus if there is a savings-pension
         contract in their name.’
      
      9.        Paragraph 26 of the EStG requires that, in principle, the spouse of the beneficiary must also be subject to unlimited personal
         income tax in the Federal Republic of Germany.
      
      10.      Paragraph 83 of the EStG, entitled ‘Savings-pension bonus’, provides that:
      
      ‘A bonus which consists of a basic award (Paragraph 84) and a supplement for children (Paragraph 85) is granted in accordance
         with payments made to the savings-pension.’
      
      11.      Paragraph 92(a) of the EStG provides essentially that the beneficiary of the savings-pension bonus may use at least EUR 10 000
         of the subsidised capital built up under the savings-pension contract for the purchase or construction of a dwelling in the
         Federal Republic of Germany for the purposes of personal occupation. The maximum amount which may be used is EUR 50 000.
      
      12.      Article 93 of the EStG, entitled ‘Prejudicial use’, provides that in the event of the prejudicial use of the subsidised capital
         of the savings-pension, the beneficiary must reimburse the savings-pension bonus received together with the sums deducted
         as special expenses pursuant to Paragraph 10a of the EStG. Paragraph 94 of the EStG establishes the procedure applicable in
         the event of prejudicial use.
      
      13.      Paragraph 95(1) of the EStG provides essentially that Paragraphs 93 and 94 of the EStG shall apply mutatis mutandis where
         the beneficiary is no longer domiciled or habitually resident in Germany and is therefore no longer fully liable to tax, or
         a request has not been made pursuant to Paragraph 1(3) of the EStG. Paragraph 95(2) of the EStG provides that on the request
         of the beneficiary the reimbursement of the sum in question may be postponed to the beginning of the payment stage. The moratorium
         is extended provided at least 15% of the payments under the savings-pension contract are used for the purposes of reimbursement.
      
      III –  Pre-litigation procedure
      14.      By letter of formal notice of 16 December 2003, the Commission informed the Federal Republic of Germany of its doubts as to
         the compatibility of three aspects of the legislation on Riester pensions with Community law. The Federal Republic of Germany
         answered that letter of formal notice by letter of 19 February 2004 by stating that it did not consider that the legislation
         in question infringed Community law.
      
      15.      On 19 December 2005, the Commission sent to the Federal Republic of Germany a reasoned opinion in which it restated its position
         as contained in the letter of formal notice and invited that Member State to take the measures necessary to comply with the
         reasoned opinion within a period of two months of its receipt. Not being satisfied with the German authorities’ reply to that
         opinion, the Commission decided to bring the present action which was lodged at the registry of the Court on 6 June 2007.
         
      
      IV –  The action
      A –     The first complaint
      1.      Arguments of the parties
      16.      The Commission claims that the requirement pursuant to Paragraph 79 of the EStG that a person be fully liable to tax in Germany
         in order to benefit from the savings-pension bonus constitutes disguised discrimination on the basis of nationality and is
         thus contrary to Article 39(2) EC and Article 7(2) of Regulation No 1612/68. The Commission stresses the background to the
         introduction of the bonus and the fact that it was introduced in order to subsidise payments to savings-pensions and thus
         to assist individuals in setting up a complementary pension in order to supplement the national social security pension.
      
      17.      The Commission considers essentially that the savings-pension bonus is a ‘social advantage’ pursuant to Article 7(2) of Regulation
         No 1612/68 as interpreted by the case-law of the Court. The savings-pension bonus in question is, according to the Commission,
         ‘generally’ granted to individuals on the basis of their objective status as workers. The adoption of measures in order to
         prepare for retirement is an integral part of professional life. It is professional activity which provides the economic basis
         of that preparation. The Commission thus considers that the savings-pension bonus is aimed, inter alia, at supplementing that
         economic basis.
      
      18.      The Commission claims that it is not contested by the Federal Republic of Germany that it is mainly individuals that are subject
         to an employment contract that benefit from the national social security pension and that they are thus the principal beneficiaries
         of the savings-pension bonus. The fact that there are additional beneficiaries of the bonus merely demonstrates that the social
         objective pursued in relation to workers has been extended to others who are in a similar situation with regard to the national
         social security pension regime. The Commission claims that the bonus, which appears in a separate part of the EStG to the
         provisions concerning the possibility of deducting as special expenses payments to the savings-pension up to a certain threshold,
         constitutes a minimum aid which is not progressive in relation to income and was adopted in order to protect those individuals
         who are particularly affected by the reform of the national social security pension regime, namely those of modest income
         or with large families. That non-monolithic structure ensures that spouses who do not exercise an activity have an autonomous
         right to the savings-pension bonus pursuant to Paragraph 79(2) of the EStG.
      
      19.      The Commission considers that in any event the concept of social advantage covers, in accordance with the case-law on the
         matter, advantages granted as a result of a beneficiary’s residence on the national territory. That case-law is applicable
         to the present proceedings. Moreover, the fact that the grant of the bonus is subject to the condition that the beneficiary
         concludes a savings-pension contract does not entail that the advantage is not linked to their objective status as a worker
         or resident. Social advantages are regularly subject to conditions which reflect their social objective. This approach also
         corresponds to the objective of Article 7 of Regulation No 1612/68 which is to facilitate the free movement of workers within
         the Community. Workers from other Member States are in general in the same position as German workers with respect to the
         provisions concerning preparation for retirement and are equally concerned by the reduction in the level of the German social
         security pension regime to which they pay contributions. It should be noted in that regard that Article 13(2)(a) of Regulation
         (EEC) No 1408/71 of the Council 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 (5) provides that from a social security perspective a person employed in the territory of one Member State shall be subject
         to the legislation of that State even if he resides in the territory of another Member State. That rule covers the case of
         cross-border workers which are subject to social security payments in the Member State of employment provided they are not
         also employed in their Member State of residence. According to the Commission, Paragraph 79 of the EStG however differentiates
         between workers who are resident in Germany and cross-border workers by making the grant of the bonus subject to the condition
         that a beneficiary be fully liable for tax in Germany. As a result of the terms of Paragraph 1 of the EStG, that condition
         is synonymous with a requirement of residency in Germany and thus excludes cross-border workers. Given that the majority of
         non-residents are non-nationals that condition thus constitutes disguised discrimination on the basis of nationality. The
         Commission also notes that the workers in question from the French Republic and the Republic of Austria may not elect to be
         taxed in Germany pursuant to Paragraph 1(3) of the EStG as a result of double taxation agreements between those Member States
         and the Federal Republic of Germany.
      
      20.      As regards the claim by the Federal Republic of Germany concerning the voluntary nature of the savings-pension contracts,
         the Commission notes that the classification of an advantage as a ‘social advantage’ is not dependent on the existence of
         elements which characterise social security payments, in particular, the obligatory aspect thereof which is generally absent
         in the context of social advantages. A voluntary system may however complement an obligatory insurance system as in the present
         case where the savings-pension bonus is aimed at the setting up of a pension which supplements the national social security
         pension. 
      
      21.      The Commission considers that contrary to the position of the Federal Republic of Germany, the savings-pension bonus is not
         a tax advantage pursuant to Article 7(2) of Regulation No 1612/68. In that regard, it should be noted that the bonus does
         not affect the revenue side of the State budget but rather the expense side. The Commission considers that in any event it
         is not relevant whether the bonus is classified as a ‘social’ or ‘tax’ advantage as Article 7(2) of Regulation No 1612/68
         ensures that tax advantages must also be granted to cross-border workers. 
      
      22.      The Commission considers that in accordance with the Schumacker (6) case, cross-border workers should be assimilated to rather than distinguished from resident workers given that the cross-border
         workers in question in the present proceedings are affiliated to the German social security system and are thus in the same
         position as workers who are resident in Germany with regard to their future pension rights. Moreover, the Commission notes
         that the cross-border workers in question in general receive their entire income in Germany. In addition, the Commission notes
         that the Federal Republic of Germany does not contest the fact that the savings-pension bonus forms an integral part of the
         national social security pension reform.
      
      23.      As regards the arguments of the Federal Republic of Germany concerning fiscal cohesion, (7) the Commission notes that those arguments are not relevant in the context of the present proceedings. The fact that a pension
         is paid by one Member State to residents of another and that that pension may only be taxed by the Member State of residence
         stems from the division of the competence to impose taxes agreed upon by the two States in accordance with a double taxation
         agreement. The agreement between the Member States thus ensures fiscal cohesion. Moreover, where Member States have concluded
         a double taxation agreement in relation to the taxation of pensions, it is clear from the Wielockx (8) case that ‘fiscal cohesion need not be established in relation to one and the same person by a strict correlation between
         the deductibility of contributions and the taxation of pensions but is shifted to another level, that of the reciprocity of
         the rules applicable in the Contracting States’. (9)
      
      24.      The Commission claims that pursuant to Paragraph 85 of the EStG the amount of the savings-pension bonus depends on the number
         of dependent children of the individual in question. The Commission considers that the requirement that that individual be
         fully liable to tax in Germany in order to obtain the benefit in question infringes Article 39(2) EC and Article 7(2) of Regulation
         No 1612/68. Moreover, Paragraph 79(2) of the EStG provides for a derived right for spouses of beneficiaries of the bonus provided
         the spouse is also fully liable to tax in Germany. The Commission considers that in accordance with the settled case-law on
         the matter (10) the requirement that a worker’s spouse be fully liable to tax in Germany also infringes Article 39(2) EC and Article 7(2)
         of Regulation No 1612/68. 
      
      25.      The Federal Republic of Germany considers that the requirement of being fully liable to tax in Germany in accordance with
         Paragraph 79(1) of the EStG does not constitute an infringement of Article 7(2) of Regulation No 1612/68 or Article 39(2) EC.
         
      
      26.      The Federal Republic of Germany notes that the EStG provides for two instruments which grant tax incentives for the setting
         up of a complementary pension, namely the possibility of deducting special expenses pursuant to Paragraph 10(a)(1) of the
         EStG and the right to a savings-pension bonus pursuant to Paragraph 79 et seq. of the EStG. The Federal Republic of Germany
         considers that, contrary to the claims of the Commission, the bonus in question is not a social advantage pursuant to Article
         7(2) of Regulation No 1612/68 but rather a tax advantage.
      
      27.      The Federal Republic of Germany also claims that the grant of the savings-pension bonus is not linked to the beneficiary’s
         objective status as a worker or a resident. 
      
      28.      Thus the Federal Republic of Germany considers that in accordance with Paragraph 10(a)(1) of the EStG, to which Paragraph
         79 of the EStG refers, the right to the savings-pension bonus does not depend on the beneficiary being a worker from the point
         of view of Community law as it is also granted to people who are not salaried workers. Moreover, a non-negligible group of
         workers is required to adhere to professional insurance regimes which are specific to their profession (for example doctors
         and dentists) and may not deduct payments to the savings-pension as special expenses pursuant to Paragraph 10(a)(1) of the
         EStG and do not as a consequence benefit from the bonus. In addition, the grant of the bonus does not depend on being ordinarily
         resident in Germany. The requirements under Paragraphs 10(a) and 79 of the EStG of being insured under the national social
         security pension scheme and being fully liable to tax in Germany are not linked to a domicile requirement. In that regard,
         the requirement of being insured under the national social security pension scheme pursuant to Paragraph 10(a) of the EStG
         is linked to the place of employment and not to residence as can be seen from Article 13(2)(a) of Regulation No 1408/71. As
         regards the requirement of being fully liable to tax in Germany, this is not linked to residency there, as cross-border workers
         may elect pursuant to Paragraph 1(3) of the EStG to be fully liable to tax in Germany. In addition, in order to benefit from
         the bonus, an individual must, in contrast to compulsory payments to the national social security scheme, voluntarily conclude
         a savings-pension contract with a private insurer and make the required payments. This requirement is not linked to the beneficiary’s
         objective status as a worker or a resident. Moreover, contrary to the assertions of the Commission, the purpose pursued by
         the legislature when adopting the measure in question may not determine its legal qualification. In order to provide incentives
         for the setting up of complementary private pensions, the German legislature chose a solution which is grounded in tax law,
         despite the fact that it was guided by social considerations. 
      
      29.      According to the Federal Republic of Germany, the bonus in question is a tax advantage pursuant to Article 7(2) of Regulation
         No 1612/68. Paragraph 79 et seq. of the EStG provides that in order to benefit from the bonus in question one must be able
         to deduct special expenses pursuant to Paragraph 10(a)(1) of the EStG. The Federal Republic of Germany considers that Paragraph
         10(a)(1) of the EStG is the key provision of the tax incentives for setting up a complementary pension. This is evident from
         the official title of that provision (‘complementary savings-pension’) and the fact that Paragraph 10(a)(1) of the EStG, to
         which Paragraph 79 of the EStG refers, in relation to entitlement to the bonus, defines the group of persons who are entitled
         to the tax incentives in question. In addition, Paragraph 10(a) of the EStG provides for the so-called ‘most advantageous
         regime’ which determines whether a taxpayer may be entitled to a tax deduction in respect of payments into the savings-pension
         over and above the amount of the savings-pension bonus. The Federal Republic of Germany stresses the close link between the
         deduction of special expenses and the savings-pension bonus which is not only evident from the cross-references contained
         in the legislation itself but also from the fact that the bonus is an advance of the tax reduction which results from the
         deduction of special expenses pursuant to Paragraph 10(a)(1) of the EStG. Thus the savings-pension bonus allows the beneficiary
         to obtain, before they have submitted their tax declaration, a part of the tax reduction to which they are entitled as a result
         of payments towards their savings-pension. Moreover, the savings-pension bonus affects the revenue side of the State budget
         as given that payments to the savings-pension are tax exonerated, tax revenue is reduced.
      
      30.      The Federal Republic of Germany considers that there is no discriminatory treatment of comparable situations in the present
         case. The Federal Republic of Germany notes that it is settled case-law that discrimination can arise only through the application
         of different rules to comparable situations or the application of the same rule to different situations. (11) Moreover in the Meindl case the Court stated that ‘[i]n relation to direct taxes, the situations of residents and non-residents in a State are generally
         not comparable, because the income received in the territory of a State by a non-resident is in most cases only a part of
         his total income, which is concentrated at his place of residence, and because a non-resident’s personal ability to pay tax,
         determined by reference to his aggregate income and his personal and family circumstances, is easier to assess at the place
         where his personal and financial interests are centred, which in general is the place where he has his usual abode’. (12)
      
      31.      The Federal Republic of Germany thus considers that in accordance with the Schumacker case (13) it is in principle the State of residence and not the State of employment which is required to take into consideration the
         personal situation of non-resident workers. In that regard, in compliance with the Gschwind case, (14) if a cross-border worker receives over 90% of his income in Germany, he can elect to be fully liable to tax in Germany and
         thus deduct the special expenses pursuant to Paragraph 10(a)(1) of the EStG and obtain the bonus in accordance with Paragraph
         79 et seq. of the EStG. Moreover, if in accordance with double taxation agreements entered into by the Federal Republic of
         Germany with the French Republic and the Republic of Austria, cross-border workers are taxable in their State of residence,
         it is that State which must take into consideration those workers’ personal situation and which is competent to grant tax
         advantages. The Federal Republic of Germany considers that, in the absence of any right to impose tax, it is not required
         to grant a tax advantage aimed at encouraging the setting up of a complementary pension independently of whether analogous
         advantages are granted in France and Austria. In any event, the Federal Republic of Germany notes that both France and Austria
         provide pecuniary incentives for the setting up of such complementary savings pensions.
      
      32.      The Federal Republic of Germany also claims that there is no prohibited discrimination, even taking into account the criteria
         established by the Court in relation to the grant of social advantages. The Court in the Geven case stated that a social advantage could be limited to those who have a sufficiently close connection with German society
         without reserving that allowance exclusively to persons who reside in Germany. (15) The German legislature thus intended to provide incentives to set up a complementary savings-pension to those persons who
         have a sufficient link to German society without strictly requiring that those incentives be subject to a residence requirement
         on the national territory. The absence of such a requirement can be seen from the terms of Paragraph 1(3) of the EStG which
         enables a cross-border worker to elect to be fully liable to tax in Germany and thus benefit from the bonus in question. The
         Federal Republic of Germany considers that those cross-border workers whose situation is regulated by double taxation agreement
         do not have such sufficient links with that Member State and are thus integrally linked from a legal perspective to their
         State of residence.
      
      33.      As regards the bonus granted to spouses, (16) the Federal Republic of Germany considers that Paragraph 79(2) of the EStG does not infringe Article 39(2) EC or Article
         7(2) of Regulation No 1612/68 as a spouse who is not resident in Germany can obtain the bonus in question which is reserved
         for those who are fully liable to tax in Germany if both spouses elect to be fully liable to tax in that Member State and
         provided 90% of the spouses’ common income is taxed in Germany and their revenue taxed abroad does not exceed EUR 12 272.
      
      34.      The Federal Republic of Germany also claims, in the alternative, that if the Court considers that there is indirect discrimination,
         that discrimination is justified on grounds of fiscal cohesion. The bonus granted pursuant to Paragraph 79 of the EStG, and
         the possibility to deduct special expenses pursuant to Paragraph 10(a)(1) of the EStG, correspond to a tax reduction or advantage
         in respect of payments made to the savings-pension. That advantage is counter-balanced by the possibility for the Federal
         Republic of Germany to tax at a later stage all payments from the savings-pension contracts pursuant to Paragraph 22(5) of
         the EStG. 
      
      2.      Appreciation
      35.      By this complaint, the Commission considers that Paragraph 79 of the EStG infringes Article 39 EC and Article 7(2) of Regulation
         No 1612/68 as it requires cross-border workers and their spouses to be fully liable to tax in Germany in order to benefit
         from the savings-pension bonus provided for in that provision of national law. 
      
      36.      The pleadings of the parties in respect of the present complaint centre firstly, on whether the savings-pension bonus should
         be classified as a social or a tax advantage pursuant to Article 7(2) of Regulation No 1612/68 and secondly, whether the exclusion
         of cross-border workers who are not fully liable to tax in Germany from benefiting from that bonus constitutes indirect discrimination
         on the basis of nationality against those workers, the parties to the proceedings being in agreement that Article 7(2) of
         Regulation No 1612/68 is indeed applicable to the bonus in question. 
      
      37.      I will first examine whether I consider that the savings-pension bonus should be classified as a social or tax advantage pursuant
         to Article 7(2) of Regulation No 1612/68 before examining whether the requirement imposed by Paragraph 79 of the EStG of being
         fully liable to tax in Germany in order to benefit from the bonus is discriminatory in nature or otherwise. 
      
      38.      It should be noted in that regard that the Commission confirmed at the hearing on 17 December 2008 that the present complaint
         relates solely to cross-border workers who are taxable in their Member State of residence. The Commission stated at the hearing
         that the ‘first complaint is limited to those cases where that right to tax is granted exclusively to the neighbouring State
         of residence’. The Commission however stressed that this complaint is not limited to cross-border workers from the French
         Republic and the Austrian Republic who cannot elect to be taxed in Germany pursuant to Paragraph 1(3) of the EStG. Moreover,
         in the present proceedings the Commission seeks a declaration of infringement merely in relation to the savings-pension bonus
         and not the possibility of deducting certain payments to the savings-pension pursuant to Paragraph 10(a)(1) of the EStG.
      
      39.      To my knowledge the Court has not specifically ruled on the difference or otherwise between the advantages provided for by
         Article 7(2) of Regulation No 1612/68. The Court has however stated that ‘social advantages’ are to be understood as ‘all
         advantages which, whether or not linked to a contract of employment, are generally granted to national workers because of
         their objective status as workers or by virtue of the mere fact of their residence on the national territory, and whose extension
         to workers who are nationals of other Member States therefore seems likely to facilitate their mobility within the European
         Community’. (17) In addition, the Court has stated that the reference to ‘social advantages’ in that provision cannot be interpreted restrictively. (18)
      
      40.      In order to ascertain whether the savings-pension bonus is a social or tax advantage it is necessary to examine its purpose
         and the conditions on which it is granted, and not merely its classification under national legislation. The fact that the
         provisions concerning the grant of the savings-pension bonus are contained in the German income tax law is not decisive, in
         my view, in determining its legal nature or qualification and thus whether it should be classified as a social or tax advantage
         for the purposes of Article 7(2) of Regulation No 1612/68.
      
      41.      It is clear from the documents before the Court that the Federal Republic of Germany has sought to encourage the establishment
         of Riester pensions by means of a savings-pension bonus and by the possibility of deducting as special expenses payments into
         the savings-pension from taxable income. Moreover, it is notorious that the establishment of the Riester pension scheme was
         motivated by demographic change in Germany and the need to reform the national social security pension regime. The Riester
         pension scheme is thus intended to supplement the national social security pension regime, the level of payments from which
         will be reduced in the future. The Riester pension scheme is thus directly aimed at those individuals who are affected by
         the reform of the national social security pension scheme. 
      
      42.      In my view, it is evident from the file before the Court, and indeed it is not challenged by the Federal Republic of Germany,
         that the reasons which motivated the grant of the pecuniary incentives in question (19) were to ensure that retired persons have an adequate pension at the end of their professional lives. I therefore consider
         that the grant of the pecuniary incentives in question is motivated by social concerns.
      
      43.      While I agree with the argument by the Federal Republic of Germany that the social purpose of a national advantage is not
         sufficient in itself to qualify that advantage as a ‘social advantage’ pursuant to Article 7(2) of Regulation No 1612/68,
         I consider, in the light of the case-law of the Court, that the purpose pursued by the Federal Republic of Germany in granting
         the savings-pension bonus favours its classification as a social advantage. In that regard, I would note that the Court has
         already held that the term ‘social advantage’ within the meaning of Article 7(2) of Regulation No 1612/68 includes income
         guaranteed to elderly people by the legislation of a Member State. (20)
      
      44.      The conclusion of a Riester savings-pension contract and payments into that scheme are clearly voluntary in nature. However,
         in my view, contrary to the pleadings of the Federal Republic of Germany, the voluntary nature of the Riester pension scheme
         does not detract from the fact that the savings-pension bonus granted pursuant to Paragraph 79 of the EStG is a pecuniary
         incentive provided for under German law to ensure that beneficiaries, albeit through primarily their own initiative, are guaranteed
         a sufficient income in their old age. In my view, it would, in principal, be contrary to the purpose and spirit of the Community
         rules on the freedom of movement for workers if an advantage could not be considered a social advantage pursuant to Article
         7(2) of Regulation No 1612/68 merely on the basis of the voluntary nature of the scheme which grants that advantage. (21)
      
      45.      It is not disputed in the present proceedings that the savings-pension bonus is granted, inter alia, to individuals who may
         not be classified as workers pursuant to Article 39 EC and that some workers may not in fact benefit from the bonus as they
         are covered by pension regimes other than the national social security pension scheme and are thus not affected by the reforms
         to the latter scheme. However, it is clear from the documents before the Court that it is principally salaried workers that
         benefit from the national social security pension and are thus the principal targets of the Riester pension scheme and ultimately
         the principal beneficiaries of the savings-pension bonus. (22) The lack of a perfect correlation between the potential beneficiaries of the savings-pension bonus and the definition of
         worker pursuant to Article 39 EC, as interpreted in the case-law of this Court, does not in my view undermine the fact that
         the bonus, in the words of the case-law of the Court, is ‘generally’ granted to national workers because of their objective
         status as workers and is aimed at ensuring that those workers will be guaranteed a sufficient income in their old age, in
         the light of the reform of the national social security pension scheme. (23) I therefore consider that the savings-pension bonus is, as claimed by the Commission, generally granted to individuals on
         the basis of their objective status as workers. 
      
      46.      The Federal Republic of Germany has sought in its pleadings to demonstrate that the savings-pension bonus is a tax advantage
         rather than a social advantage as that bonus is irretrievably intertwined with the possibility of deducting payments to the
         savings-pension up to a certain threshold as special expenses pursuant to Paragraph 10(a)(1) of the EStG. In effect, that
         Member State claims that the bonus is merely an advance on a subsequent tax reduction which is assessed in accordance with
         Paragraph 10(a)(2) of the EStG. I consider however that while there are obvious links between the savings-pension bonus and
         the possibility of deducting payments to the savings-pension, not least because they were both motivated by the reform of
         the national social security pension scheme, the bonus is a minimum aid which is paid into a beneficiary’s savings-pension (24) irrespective of that person’s income. The possibility of deducting payments to the savings-pension up to a certain threshold
         as special expenses pursuant to Paragraph 10(a)(1) of the EStG is, in my view, a separate and additional advantage which may
         be obtained depending on the level of a person’s income and is economically divisible from the savings-pension bonus.
      
      47.      I therefore consider that the savings-pension bonus in question in the present proceedings is a social advantage within the
         terms of Article 7(2) of Regulation No 1612/68. 
      
      48.      Given that I consider that the savings-pension bonus is a social advantage pursuant to Article 7(2) of Regulation No 1612/68,
         I shall examine the question of discrimination from that perspective and not from a tax perspective.
      
      49.      As to the question of discrimination, it should be recalled that the equal treatment rule which appears both in Article 39 EC
         and in Article 7 of Regulation No 1612/68 prohibits not only overt discrimination on grounds of nationality but also all covert
         forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result. Unless
         it is objectively justified and proportionate to the aim pursued, a provision of national law must be regarded as indirectly
         discriminatory if it is intrinsically liable to affect migrant workers more than national workers and if there is a consequent
         risk that it will place the former at a particular disadvantage. (25)
      
      50.      Thus under Article 7 of Regulation No 1612/68, a migrant worker is to enjoy the same social advantages as those which are
         made available to national workers. In accordance with settled case-law, the concept of worker referred to by that provision
         covers frontier workers who have the same entitlement to rely on it as any other worker targeted by that provision. (26)
      
      51.      In its pleadings the Commission claimed that as a result of the terms of Paragraph 1 of the EStG, the requirement of being
         fully liable to tax in Germany is synonymous with residency in that Member State, thereby effectively excluding cross-border
         workers from benefiting from the savings-pension bonus. While the Federal Republic of Germany challenged that assertion by
         the Commission, that Member State effectively admitted in its pleadings that a distinction is drawn between resident workers
         and cross-border workers from the French Republic and the Republic of Austria in relation to the grant of the bonus as those
         workers may not elect to be fully liable to tax in Germany. As regards other cross-border workers it is clear from the documents
         before the Court that those workers who are not resident or domiciled in Germany may not benefit from the savings-pension
         bonus unless they elect, pursuant to Paragraph 1(3) of the EStG, to be fully liable to tax in Germany. 
      
      52.      I therefore consider that, in principle, non-residents are excluded from benefiting from the bonus. Moreover, contrary to
         the claims of the Federal Republic of Germany, I do not consider that the facility for certain cross-border workers to elect
         to be fully liable to tax in Germany pursuant to Paragraph 1(3) of the EStG alters that finding. In any event, the election
         of full tax liability in Germany is not possible unless 90% of the revenue of the worker in question is taxable in Germany
         and their revenue which is not taxable in Germany does not exceed EUR 6 136. (27) In my view, given the onerous requirements imposed on the cross-border workers in question in order to obtain the status
         of being fully liable to tax in Germany, I consider that at least some such workers are effectively excluded from benefiting
         from the savings-pension bonus as a result of their State of residence. Given that in accordance with the case-law of the
         Court non-residents are most frequently non-nationals, (28) I therefore consider that the Commission has established in the present proceedings that the condition of being fully liable
         to tax in Germany imposed by Paragraph 79 of the EStG in order to benefit from a social advantage can be more easily met by
         German workers than by cross-border workers from other Member States and therefore constitutes indirect discrimination prohibited
         by Article 39(2) EC and Article 7(2) of Regulation No 1612/68. 
      
      53.      Moreover, contrary to the pleadings of the Federal Republic of Germany, I do not consider that the ruling of the Court regarding
         the absence of a sufficiently close connection with the society of the Member State granting the social advantage in the Geven case (29) is applicable to the present proceedings. 
      
      54.      The savings-pension bonus is a social advantage pursuant to Article 7(2) of Regulation No 1612/68 which is granted as part
         of the reforms to the German social security pension system scheme. It is clear from the terms of Paragraphs 10(a)(1) and
         79 of the EStG that a cross-border worker must, inter alia, be insured under the national social security pension scheme in
         Germany in order to obtain the bonus. That condition, which is by no means challenged by the Commission in these pleadings,
         ensures that the cross-border workers in question are required to pay contributions to the German social security system.
         Moreover, I wish to highlight the fact that cross-border workers are equally affected by the reforms to the social security
         pension system as workers who are resident/fully liable to tax in the Federal Republic of Germany. (30) In my view, the cross-border workers at issue in the present proceedings thus have a sufficiently close connection with German
         society in order to benefit from the social advantage in question. (31)
      
      55.      In the light of the above, I also consider that the requirement that a cross-border worker be fully liable to tax in Germany
         in order to benefit from the supplement to the savings-pension bonus pursuant to Paragraph 85 of the EStG based on the worker’s
         number of dependent children is discriminatory in nature and infringes Article 39(2) EC and Article 7(2) of Regulation No
         1612/68. 
      
      56.      Moreover, it follows from the case-law of the Court (32) that a social advantage may be claimed by the spouse of a worker who falls within the scope of Regulation No 1612/68. In
         effect the spouse of a worker is an indirect beneficiary of the equal treatment accorded to the migrant worker. (33) Given that the requirement of being fully liable to tax in Germany is in general equivalent to a residence condition which
         can naturally be more easily met by German workers or their spouses, who usually live in Germany, than by workers from other
         Member States or their spouses, who more often reside in another Member State, (34) I consider that the requirement that a cross-border worker and their spouse be fully liable to tax in Germany pursuant to
         Paragraph 79 of the EStG together with Paragraph 26 of the EStG in order for the spouse to obtain the savings-pension bonus
         also infringes Article 39(2) EC and Article 7(2) of Regulation No 1612/68. 
      
      57.      I therefore propose that the Court should declare that the Federal Republic of Germany has failed to fulfil its obligations
         under Article 39 EC and Article 7 of Regulation No 1612/68 by introducing and maintaining the provisions for second pillar
         pensions in Paragraphs 79 to 99 of the EStG, in so far as those provisions deny cross-border workers and their spouses the
         right to a savings-pension bonus, unless they are fully liable to tax in that Member State.
      
      B –    The second complaint
      1.      Arguments of the parties
      58.      According to the Commission, pursuant to Paragraph 92(a) of the EStG the beneficiary of a savings-pension bonus may, within
         certain limits, use the subsidised capital in his savings-pension to acquire or build a dwelling for their personal occupation
         provided the property is situated in the Federal Republic of Germany. The Commission considers that that condition limits
         the extent to which a social advantage may be used as cross-border workers may not use the capital in question for a dwelling
         in another Member State. According to the Commission, the unfavourable treatment of cross-border workers constitutes indirect
         discrimination based on nationality and infringes Article 39(2) EC and Article 7(2) of Regulation No 1612/68. The Commission
         also notes that the prohibition of discrimination in question is not subject to a de minimis rule. In any event, the Commission
         claims that the temporary use of a sum up to EUR 50 000 may in some instances represent a non-negligible advantage. Moreover,
         the Commission considers that the Federal Republic of Germany admitted that the advantage in question facilitates the acquisition
         of a dwelling. 
      
      59.      Contrary to the claim of the Federal Republic of Germany that the condition affects migrant workers and German workers equally,
         the Commission considers that cross-border workers do not in the main relocate to Germany. Moreover, German workers only exceptionally
         acquire a dwelling outside their Member State. In the Ritter-Coulais case (35) the Court found that non-residents are more likely to own a house outside Germany than resident citizens. The Commission
         also notes that the Court did not follow the Opinion of the Advocate General in the Hartmann case, (36) as the Court confirmed the settled case-law that cross-border workers are entitled to social advantages. 
      
      60.      The Commission considers that extending the advantage in question to cross-border workers does not, as claimed by the Federal
         Republic of Germany, have negative effects on the German social security system. 
      
      61.      The Commission considers that contrary to the claim of the Federal Republic of Germany, there is nothing to indicate that
         the savings-pension bonus is a measure aimed at encouraging the construction of dwellings. In any event, that Member State
         does not deny the fact that the acquisition of a dwelling abroad in a border region has in general a positive effect on the
         housing situation in Germany. There is also no risk of conflict between the housing policies of the Federal Republic of Germany
         and its neighbouring Member States. The possibility pursuant to Paragraph 92(a) of the EStG of using a part of the capital
         in question for a dwelling is available not only for the construction but also for the acquisition of such a dwelling. In
         the event of a surplus of housing in the border region of another Member State, the worker would be more interested in buying
         rather than building a dwelling thereby assisting the Member State in eliminating the surplus.
      
      62.      The Federal Republic of Germany considers that the possibility in accordance with Paragraph 92(a) of the EStG to use, within
         certain limits, the subsidised capital in the savings-pension in order to acquire a dwelling located solely in the national
         territory does not infringe Article 7(2) of Regulation No 1612/68 or Article 39(2) EC. 
      
      63.      The Federal Republic of Germany considers that the limitation in question does not constitute overt discrimination based on
         nationality. The location of the dwelling is neutral from the point of view of the acquirer. Moreover, the limitation in question
         does not constitute indirect discrimination as it affects equally German workers and workers from other Member States. Both
         German workers and workers from other Member States who have their domicile abroad may not use the capital to buy or construct
         a dwelling abroad. The Federal Republic of Germany considers that the ruling in Ritter-Coulais, to the effect that non-residents are more often owners of dwellings outside Germany than residents, indicates in fact that
         there is no indirect discrimination in the present case. In the present case the dwellings have not yet been built or acquired
         while in the Ritter-Coulais case (37) the fiscal measures at issue concerned existing dwellings. According to the Federal Republic of Germany, it is in the long-term
         interest of workers from other Member States who work in Germany to acquire a dwelling in that Member State for the simple
         reason that they already own a dwelling abroad and are thus no longer interested in such incentives. Moreover, in accordance
         with the Advocate General’s opinion in the Hartmann case, (38) Article 7(2) of Regulation No 1612/68 is aimed at ensuring that foreign workers have the same advantages ‘on the national
         territory of the State of employment’. A measure does not constitute an infringement where it provides for an advantage both
         for German and foreign workers on the national territory. 
      
      64.      The Federal Republic of Germany considers that the measure in question does not constitute a restriction on the freedom of
         movement for workers as it does not influence the choice of workplace. To find otherwise would ensure that all advantages
         granted in the Member State of employment and not in the Member State of residence would constitute restrictions on the freedom
         of movement for workers. In any event, the effects of Paragraph 92(a) of the EStG on the freedom of movement for workers are
         too remote and indirect.
      
      65.      As a subsidiary argument, the Federal Republic of Germany considers that the restriction or discriminatory measure may be
         justified by overriding reasons in the public interest. In his Opinion, in Case C‑152/05 Commission v Germany, (39) Advocate General Bot considered that the desire to increase the German housing stock may be viewed as a public interest requirement. (40) The use of the capital of the savings-pension bonus facilitates the realisation of that public interest. 
      
      66.      Moreover, the fact that a person owns their dwelling guarantees their quality of life during their old age and reduces the
         level of supplementary payments by the social security system resulting from demographic change. If the beneficiaries own
         their dwellings they will not have to pay high rents, thereby relieving the social security system. The protection of the
         social security system is a legitimate aim in accordance with the ITC case. (41) Contrary to the claims of the Commission these aims cannot be accomplished by the purchase of a dwelling in a border region
         of another Member State. 
      
      67.      As regards the policy of construction of dwellings, according to the Federal Republic of Germany, Community law does not oblige
         a Member State to extend the advantages concerning the acquisition and construction of real property to other Member States.
         Construction aid does not fall within the competences of the Community. Moreover, the Federal Republic of Germany considers
         that the extension of Paragraph 92(a) of the EStG may affect or even disrupt another Member State’s housing policy. 
      
      2.      Appreciation
      68.      In its second complaint, the Commission considers that Paragraph 92(a) of the EStG which prevents the beneficiary of a savings-pension
         bonus from using the subsidised capital of their savings-pension to acquire or build a dwelling for their personal occupation
         unless the property is situated in the Federal Republic of Germany constitutes disguised discrimination based on nationality
         and infringes Article 39(2) EC and Article 7(2) of Regulation No 1612/68. At the hearing, the Commission stated that the present
         complaint relates to all cross-border workers, not just those that are taxed in their Member State of residence.
      
      69.      It is not disputed that Paragraph 92(a) of the EStG does not allow cross-border workers to use, up to a certain limit, the
         capital of their savings-pension to build or purchase a dwelling for their own occupation in the territory of a Member State
         other than Germany. However the subsidised capital may be used for building or purchasing a dwelling in Germany. 
      
      70.      In my view, Paragraph 92(a) of the EStG effectively limits the possibility of cross-border workers to enjoy a social advantage
         under Article 7(2) of Regulation No 1612/68 as such workers may not use the subsidised capital in question build or purchase
         a dwelling for their own occupation in the territory of their residence. While it is true as claimed by the Federal Republic
         of Germany that both German workers and workers from other Member States who have their domicile abroad may not use the capital
         to buy or construct a dwelling there and thus Paragraph 92(a) of the EStG is not specifically directed at non-residents, the
         latter are in my view more likely to wish to buy or build a home outside Germany than resident citizens. (42)
      
      71.      I therefore consider that the limitation in question constitutes indirect discrimination based on nationality. In my view,
         Paragraph 92(a) of the EStG places at a disadvantage cross-border workers in Germany who wish to build or purchase a dwelling
         for their own occupation in the territory of another Member State and is thus, as a rule, contrary to Article 39 EC and Article
         7(2) of Regulation No 1612/68. Moreover, I do not consider that the discrimination in question has no practical repercussions
         on cross-border workers as it effectively denies them the possibility to borrow (43) up to EUR 50 000 from the capital in their savings-pensions interest free to build or purchase a dwelling in a Member State
         other than Germany. (44)
      
      72.      Consequently it must be examined whether the requirement in question can be justified and whether it is proportionate to the
         aim pursued.
      
      73.      The Federal Republic of Germany effectively claims that the requirement pursuant to Paragraph 92(a) of the EStG that the dwelling
         be situated in the national territory is justified by the aim of ensuring an adequate supply of housing. In my view, in the
         light of the judgment of the Court in Commission v Germany, (45) while the objective of satisfying demand for housing is an objective in the public interest, given that that objective is
         also attained if cross-border workers continue to maintain their residence in another Member State rather than in Germany,
         the requirement imposed by Paragraph 92(a) of the EStG with regard to the location of the dwelling in Germany is disproportionate
         in nature. (46) Moreover, as regards the claim by the Federal Republic of Germany that if the possibility of using the capital of the savings-pension
         for the purchase or construction of a dwelling were extended to the territory of another Member State, this would disrupt
         the housing policy of the latter, I consider that the risk in question should be treated as hypothetical as the Federal Republic
         of Germany has failed to adduce any evidence of such a possible conflict or disruption.
      
      74.      As regards the claim of the Federal Republic of Germany concerning preservation of its social security system, it is clear
         from the ITC (47) case that the risk of seriously undermining the financial balance of the social security system may constitute an overriding
         reason in the general interest. However, in my view such a risk of financial instability has not been established in the present
         case. The Federal Republic of Germany has not indicated how the use of subsidised capital from a savings-pension in order
         to buy or build a dwelling outside the German territory could undermine the financial balance of the German social security
         system. The absence of such an explanation is particularly implicatory, given that it is clear from the documents before the
         Court that cross-border workers may only benefit from the savings-pension bonus if they are insured under the German social
         security pension scheme. 
      
      75.      I therefore propose that the Court should declare that the Federal Republic of Germany has failed to fulfil its obligations
         under Article 39 EC and Article 7 of Regulation No 1612/68 by denying cross-border workers the right to use the subsidised
         capital in their savings-pension for the acquisition or construction of a dwelling for their own personal use unless the property
         is situated within the territory of that Member State.
      
      C –    The third complaint
      1.      Arguments of the parties
      76.      The Commission considers that the obligation to reimburse the savings-pension bonus in accordance with Paragraph 95 of the
         EStG, together with Paragraphs 93 and 94 of the EStG, infringes Article 39 EC and Article 7(2) of Regulation No 1612/68 as
         well as Articles 12 EC and 18 EC. 
      
      77.      As regards workers, the Commission claims that the provisions of national law in question discriminate indirectly against
         cross-border and migrant workers. According to the Commission, cross-border and migrant workers are more likely to cease to
         be fully liable to tax in Germany, by leaving their employment in Germany in order to work in another Member State, than German
         workers. The legislative provisions in question may result in cross-border and migrant workers not requesting the savings-pension
         bonus in the first place in order to avoid any repayment.
      
      78.      The Commission also claims that the provisions in question restrict the free movement of workers. It claims, by analogy with
         the decision of the Court in Case C‑9/02 Lasteyrie du Saillant, (48) that the national provisions in question place at a disadvantage German nationals who leave their country in order to exercise
         their right to freedom of movement in comparison with those who stay in Germany. The Commission considers that in the event
         of departure, the Federal Republic of Germany appropriates certain of the assets of the person concerned. This would not occur
         if the person remained in Germany. 
      
      79.      The Commission considers that while the conditions on repayment of the bonus may alleviate the severity of the provisions
         in question, those conditions do not alter the fact that the bonus must be repaid. Moreover, the Commission considers in response
         to the pleadings of the Federal Republic of Germany (49) that the decision of the Court in the N (50) case is not applicable to the present case. The N case concerned latent increases in value of company holdings, which in the case of departure from the national territory
         before their realisation were taxed in the absence of a provision of a guarantee. The Federal Republic of Germany attempts
         to demonstrate that the suspension of payment in that case without an obligation to provide a guarantee would eliminate the
         restrictive nature of an obligation to pay linked to departure. The Commission notes however that the suspension of payment,
         without an obligation to provide a guarantee, until the realisation of the increase, would have resulted in their taxation
         as if the person had stayed on the national territory. Thus such taxation is perfectly normal even where the person stays
         on the national territory. In the present case however the savings-pension bonus does not have to be reimbursed if the person
         concerned remains on the national territory. 
      
      80.      As regards the claim by the Federal Republic of Germany concerning the absence of competence to tax those persons who leave
         Germany, (51) the Commission notes that that Member State invokes the claim in order to demonstrate firstly that there is no discrimination
         and secondly as a justification based on fiscal coherence.
      
      81.      The Commission considers that in accordance with the Wielockx case (52) and given the reciprocal nature of double taxation agreements, the fact that people leaving Germany may not be taxed in the
         future in that Member State does not constitute a decisive difference in relation to those who stay there. The Commission
         also notes that the people who stay in Germany are not taxed for many decades. This cannot be compared to the dissuasive effect
         of the obligation to reimburse.
      
      82.      The Commission also considers that the absence of competence of the Federal Republic of Germany to tax those persons who leave
         Germany may not be invoked as a justification based on reasons of fiscal coherence. Fiscal coherence is maintained by the
         division of power to impose taxes agreed upon by States in double taxation agreements. 
      
      83.      The Commission also considers that the provisions in question infringe Articles 12 EC and 18 EC in relation to people who
         are retired and those who were never subject to an employment contract. 
      
      84.      The Commission considers that the obligation to reimburse in question infringes Article 12 EC as it constitutes indirect discrimination
         given that it affects principally non-nationals. The number of non-nationals who return to their country of origin when they
         retire is many times greater than the number of Germans who retire abroad. Moreover, the obligation to repay infringes Article
         18 EC as it dissuades citizens of the Union regardless of their nationality from transferring their residence to another Member
         State.
      
      85.      At the hearing, the Commission also noted that the Federal Republic of Germany overlooks the objective of the savings-pension
         bonus and the fact that without the reforms to the German social security pension system, workers who are no longer fully
         liable to tax in Germany would have received a full social security pension which would not be taxed in that Member State.
      
      86.      The Federal Republic of Germany claims that Paragraph 95 of the EStG does not infringe the principle of freedom of movement
         for workers or Articles 12 EC and 18 EC. 
      
      87.      Firstly, the obligation to reimburse the bonus in the event of no longer being fully liable to tax in Germany is not a real
         barrier to the free movement of workers as it does not have the effect of discouraging those concerned from accepting work
         abroad or changing their domicile to another Member State. 
      
      88.      The Federal Republic of Germany stresses the fact that in accordance with Paragraph 95(2) of the EStG reimbursement of the
         bonus may, on request, be postponed until payments are made on foot of the savings-pension contract (not until the end of
         the beneficiary’s 60th year). Moreover, even at the time of payment from the savings-pension, the interest free moratorium
         is extended provided at least 15% of the sums paid out under the savings-pension contract are used for the purposes of the
         reimbursement. In addition, the person concerned is released of the obligation to reimburse upon once again becoming fully
         liable to tax in Germany.
      
      89.      The Federal Republic of Germany claims that a beneficiary of the bonus is only required to reimburse the bonus provided for
         by Paragraph 79 et seq. of the EStG and the tax reduction stemming from the deduction of special expenses pursuant to Paragraph
         10(a) of the EStG. Thus unlike the situation in the Lasteyrie du Saillant (53) and N (54) cases no other ‘tax on leaving’ is imposed. Moreover, in the N (55) case the Court indicated that the suspension of a payment, which is not subject to the provision of a guarantee, may eliminate
         the restrictive character of an obligation to pay linked to departure. 
      
      90.      The Federal Republic of Germany thus considers that the Commission, by constantly referring to the ‘dissuasive effect’ exaggerates
         the psychological effect of the reimbursement on people who decide to change their place of work or domicile.
      
      91.      The Federal Republic of Germany also considers that those who are no longer fully liable to tax in Germany are not at a financial
         disadvantage in comparison to those who maintain that status. There is therefore no unequal treatment. In accordance with
         Paragraph 22(5) of the EStG, if a person is fully liable to tax in Germany, payments from a savings-pension contract are subject
         to income tax there. If a person is not fully liable to tax in Germany, payments from the savings-pension are not taxed there
         which in effect compensates for the obligation to reimburse in question. With the aid of a number of numerical examples, the
         Federal Republic of Germany claims that a person who leaves the national territory is not disadvantaged but rather benefits
         due to the fact that payments from the pension are not taxed in that Member State. Moreover, the advantage in question is
         not eliminated by the fact that the payments from the savings-pension are subject to tax in the Member State of domicile in
         accordance with double taxation agreements. In general, in the Member State of domicile the payments from the savings-pension
         are not taxed or are not fully taxed. 
      
      92.      The Federal Republic of Germany also claims in the alternative that the obligation to reimburse pursuant to Paragraph 95 of
         the EStG is justified for reasons of fiscal coherence.
      
      2.      Appreciation
      93.      By its third complaint the Commission considers that the obligation to reimburse the savings-pension bonus upon no longer
         being fully liable to tax in Germany as provided by Paragraph 95 of the EStG, together with Paragraphs 93 and 94 of the EStG,
         infringes Article 39 EC and Article 7(2) of Regulation No 1612/68 together with Articles 12 EC and 18 EC. 
      
      94.      The Commission considers that the legislation in question primarily affects non-German workers thereby infringing Article
         39 EC, since the number of non-German workers which leave their employment in order to work in another Member State is greater
         than the number of German workers who do so. 
      
      95.      Moreover, the Commission claims that the legislation in question infringes Article 12 EC as the number of non-nationals who
         return to their country of origin after the end of their working lives is much higher than the number of German pensioners
         who retire abroad. 
      
      96.      In my view, the legislation in question is indirectly discriminatory in relation to cross-border and migrant workers. Such
         workers, which are generally non-German workers, are more likely to leave their employment in Germany in order to work in
         another Member State, and thus no longer be fully liable to tax in Germany, than German workers. There is therefore a risk
         that the legislation in question will place non-German workers at a particular disadvantage. (56)
      
      97.      Moreover, I consider that the legislation in question is indirectly discriminatory in relation to citizens of the Union from
         Member States other than Germany. Non-German nationals are more likely to return to their country of origin at the end of
         their working lives and thus no longer be fully liable to tax in Germany than German nationals are likely to retire abroad.
         
      
      98.      The Commission also considers that the obligation to reimburse deters the free movement of workers.
      
      99.      In the ITC (57) case the Court stated that national provisions which preclude or deter a national of a Member State from leaving his country
         of origin in order to exercise his right to freedom of movement constitute an obstacle to that freedom even if they apply
         without regard to the nationality of the workers concerned. 
      
      100. I consider that the obligation to reimburse in question restricts the exercise of the right of free movement pursuant to Article
         39 EC of German workers as it has a dissuasive effect on those wishing to work in another Member State. Such a worker, who
         may thus no longer be fully liable to tax in Germany, is subjected to disadvantageous treatment in comparison with a person
         who continues working in Germany and is fully liable to tax there. The German worker wishing to work abroad will be required,
         if by reason of his working abroad he is no longer fully liable to tax in Germany, to reimburse the savings-pension bonus,
         whereas, if he does not avail of the opportunity to exercise his freedom of movement pursuant to Article 39 EC and remains
         working in Germany that obligation will not arise. In my view, that difference in treatment is likely to discourage German
         workers from working abroad.
      
      101. In relation to infringement of the rights granted to citizens of the Union pursuant to Article 18 EC, I also consider that
         the above (58) reasoning applies to German nationals wishing to retire abroad at the end of their working lives. According to consistent
         case-law, national legislation which disadvantages some nationals of the Member State concerned simply because they have exercised
         their freedom to move and to reside in another Member State is a restriction on the freedoms conferred by Article 18(1) EC
         on every citizen of the Union. (59)
      
      102. In my view, the discriminatory and restrictive effects of the legislation in question, while no doubt ameliorated or reduced
         by the timing and conditions of reimbursement laid down by the legislation in question, none the less persist in relation
         to workers or citizens of the Union who are no longer fully liable to tax in Germany due to transferring their work or residence
         from Germany to another Member State. (60) Moreover, the fact that such workers or citizens of the Union do not have to pay tax in Germany on payments from the savings-pension
         when it matures does not, as claimed by the Federal Republic of Germany, eliminate the discrimination or restriction in question.
         The Federal Republic of Germany itself notes in its pleadings that the competence to tax such payments has been allocated
         to other Member States pursuant to double taxation agreements between those Member States and the Federal Republic of Germany.
         In my view, the Federal Republic of Germany cannot rely on the fact that the payments from the savings-pension may not be
         taxed or taxed at a lower rate in other Members States in order to demonstrate that the discrimination or restriction in question
         has been eliminated. Such circumstances do not eliminate the discrimination or restriction in question but may merely, fortuitously,
         reduce their impact. 
      
      103. Moreover, I do not consider that the principle of fiscal cohesion (61) may be invoked to justify the obligation to reimburse in question. It would appear that fiscal cohesion is secured by the
         double taxation agreements concluded by the Federal Republic of Germany on a reciprocal basis with other Member States. (62)
      
      104. I would also note that in my view there is no strict correlation or link between the grant of the savings-pension bonus and
         the possibility of the Federal Republic of Germany to tax in the future payments from savings-pensions when they mature. (63)
      
      105. The savings-pension bonus is a social rather than a tax advantage in accordance with Article 7(2) of Regulation No 1612/68
         which is paid under certain conditions to persons who are insured under the national social security pension scheme in Germany
         in order to provide pecuniary incentives for them to set up their own private pension in the wake of reforms to the former
         scheme. I therefore see no reason why such workers or citizens of the Union who are no longer fully liable to tax in Germany,
         but are none the less affected by the reforms of the German social security pension system, (64) should be required to reimburse the savings-pension bonus pursuant to Paragraph 95 of the EStG.
      
      106. I therefore propose that the Court should declare that the Federal Republic of Germany has failed to fulfil its obligations
         under Article 39 EC and Article 7 of Regulation No 1612/68 and Articles 12 EC and 18 EC by requiring, in accordance with Paragraph
         95 of the EStG, together with Paragraphs 93 and 94 of the EStG, the repayment of the savings-pension bonus on termination
         of liability to unlimited taxation in that Member State. 
      
      V –  Costs
      107. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
         applied for in the successful party’s pleadings. Since the Commission has applied for costs and the Federal Republic of Germany
         has been unsuccessful, the latter must be ordered to pay the costs. 
      
      VI –  Conclusion
      108. I propose that the Court declare:
      
      (1)      that the Federal Republic of Germany has failed to fulfil its obligations under Article 39 EC, Article 7 of Council Regulation
         (EEC) No 1612/68 of 15 October 1968 on freedom of movement for workers within the Community, Article 18 EC and Article 12 EC
         by introducing and maintaining the provisions for second pillar pensions in Paragraphs 79 to 99 of the Einkommensteuergesetz,
         in so far as those provisions:
      
      –        deny cross-border workers and their spouses the right to a savings-pension bonus, unless they are fully liable to tax in that
         Member State;
      
      –        deny cross-border workers the right to use the subsidised capital in their savings-pension for the acquisition or construction
         of a dwelling for their own personal use, unless the property is situated within the territory of that Member State;
      
      –        require the repayment of the savings-pension bonus on termination of liability to unlimited taxation in that Member State;
      (2)      order the Federal Republic of Germany to pay its own costs and the costs of the Commission of the European Communities.
      1 –	Original language: English.
      
      2 –	The Riester pensions are also sometimes referred to as second/third pillar pensions.
      
      3 –	The provisions of the EStG which are in question in the present proceedings are those contained in the ‘Alterseinkünftegesetz’
         of 5 July 2004, Gesetz zur Neuordnung der einkommensteuerrechtlichen Behandlung von Altersvorsorgeeinkünften und Altersbezügen
         (Law on new rules concerning the fiscal treatment of revenues from savings-pension contracts and old age pensions), Bundesgesetzblatt 2004 I, p. 1427.
      
      4 –	OJ, English Special Edition 1968(II), p. 475.
      
      5 –	OJ, English Special Edition 1971(II), p. 416.
      
      6 –	Case C‑279/93 [1995] ECR I‑225.
      
      7 –	See point 34 below.
      
      8 –	Case C‑80/94 [1995] ECR I‑2493.
      
      9 –	See paragraph 24.
      
      10 –	Case 32/75 Cristini [1975] ECR 1085; Case 63/76 Inzirillo [1976] ECR 2057; Case 261/83 Castelli [1984] ECR 3199; Case 94/84 Deak [1985] ECR 1873; Case 316/85 Lebon [1987] ECR 2811; Case C‑3/90 Bernini [1992] ECR I‑1071; Case C‑310/91 Schmid [1993] ECR I‑3011; and Case C‑337/97 Meeusen [1999] ECR I‑3289.
      
      11 –	See Schumacker, cited in footnote 6, paragraph 30, and Case C‑391/97 Gschwind [1999] ECR I‑5451, paragraph 21.
      
      12 –	Case C‑329/05 [2007] ECR I‑1107, paragraph 23.
      
      13 –	Cited at footnote 6.
      
      14 –	Cited at footnote 11.
      
      15 –	Case C‑213/05 [2007] ECR I‑6347.
      
      16 –	Where a spouse does not qualify themselves for the savings-pension bonus pursuant to Paragraph 10(a)(1) of the EStG. 
      
      17 –	See Geven, cited in footnote 15, paragraph 12; see also Case 65/81 Reina [1982] ECR 33, paragraph 12; Case 249/83 Hoeckx [1985] ECR 973, paragraph 20; Case C‑57/96 Meints [1997] ECR I‑6689, paragraph 39; and Case C‑85/96 Martínez Sala [1998] ECR I‑2691, paragraph 25.
      
      18 –	Meints, cited in footnote 17, paragraph 39.
      
      19 –	In form of the savings-pension bonus and the deduction as special expenses from taxable income payments to the savings-pension.
      
      20 –	See by analogy, Castelli, cited in footnote 10, and Case 157/84 Frascogna [1985] ECR 1739.
      
      21 –	Moreover, I consider that in the present case where the bonus is granted on foot of a voluntary scheme which partially
         replaces a compulsory social security scheme, it would be unconscionable to deprive a worker of an advantage pursuant to Article
         7(2) of Regulation No 1612/68 solely on the basis that it is granted under a voluntary scheme.
      
      22 –	In its pleadings, the Commission citing statistics from the German Statistics Office (Statistisches Bundesamt) claimed
         that 75 to 80% of people who are active in the workplace are salaried workers who are subject to obligatory social insurance.
      
      23 –	It should be noted that the present complaint only concerns cross-border workers and indirectly their spouses. The Commission
         has not pleaded that the Federal Republic of Germany should extend the savings-pension bonus to any other category of persons.
         
      
      24 –	It would appear therefore that, in contrast to the deduction of special expenses, the savings-pension bonus becomes part
         of the capital of the savings-pension. Moreover, the Federal Republic of Germany stated in its pleadings that in accordance
         with Paragraph 88 of the EStG the right to the bonus arises from the mere passage of the calendar year in which payments to
         the savings-pension contract were made.
      
      25 –	Meints, cited in footnote 17, paragraphs 44 and 45.
      
      26 –	See, to that effect, Meints, cited in footnote 17, paragraph 50; Meeusen, cited in footnote 10, paragraph 21; and Case C‑212/05 Hartmann [2007] ECR I‑6303, paragraph 24. 
      
      27 –	This amount is doubled in relation to married couples.
      
      28 –	Schumacker, cited in footnote 6, paragraph 28; Case C‑107/94 Asscher [1996] ECR I‑3089, paragraph 38; Hartmann, cited in footnote 26, paragraph 31; and Meeusen, cited in footnote 10, paragraphs 23 and 24.
      
      29 –	Cited in footnote 15.
      
      30 –	The Federal Republic of Germany stated that cross-border workers from the French Republic and the Republic of Austria which
         are taxable in their Member State of residence may obtain similar pecuniary incentives in their State of domicile. I do not
         consider the fact that similar or even more advantageous pecuniary incentives may be available to such workers in their Member
         State of residence may be invoked by the Federal Republic of Germany in order to demonstrate that there is no discrimination
         in relation to the grant of a social advantage pursuant to Article 7(2) of Regulation No 1612/68. It is worth restating in
         that regard that cross-border workers from the French Republic and the Republic of Austria who pay contributions to the German
         social security system are directly affected in the same manner as resident workers from the reform of that system. Those
         cross-border workers should consequently have the possibility to benefit from the savings-pension bonus. In my view, it is
         also worth noting that the Court did not follow the opinion of Advocate General Geelhoed in the Hartmann case to the effect ‘that in the context of Article 7(2) of Regulation No 1612/68 frontier workers are entitled to equal treatment
         in the Member State of employment in respect of the granting of social advantages only to the extent that such advantages
         are directly and exclusively linked to employment’. Compare point 55 of the opinion and paragraph 27 of the judgment (cited
         in footnote 26). Moreover, the Court in the Hartmann case did not address the question raised by the German and United Kingdom Governments to the effect that ‘it would be unfair
         to allow a frontier worker whose residence and workplace are in different Member States to enjoy the same social advantages
         in both Member States and to combine them. To avoid that risk, and in view of the fact that Regulation No 1612/68 does not
         contain any coordinating rules to avoid cumulation of benefits, the possibility of “exporting” child-raising allowance to
         the frontier worker’s Member State of residence could be excluded.’ See paragraph 23 of the judgment (cited in footnote 26).
         In the absence of Community legislation on the matter and given the extremely complex issues involved, I do not consider that
         the Court should apply such anti-cumulative rules.
      
      31 –	See by analogy Hartmann, cited in footnote 26, paragraphs 36 and 37.
      
      32 –	See footnote 10 above.
      
      33 –	See by analogy Hartmann, cited in footnote 26, paragraphs 24 and 25.
      
      34 –	See Hartmann, cited in footnote 26, paragraph 31. 
      
      35 –	Case C‑152/03 [2006] ECR I‑1711.
      
      36 –	See citation in footnote 30. See point 63 below. 
      
      37 –	Cited in footnote 35.
      
      38 –	Cited in footnote 26.
      
      39 –	[2008] ECR I‑39.
      
      40 –	See point 86.
      
      41 –	Case C‑208/05 [2007] ECR I‑181, paragraphs 38 to 42.
      
      42 –	See by analogy Ritter-Coulais, cited in footnote 35, paragraph 36. 
      
      43 –	See Paragraph 92(a) of the EStG for the conditions of repayment of the loan.
      
      44 –	As regards the submissions of the Federal Republic of Germany concerning the opinion of the Advocate General in the Hartmann case to the effect that a measure does not constitute an infringement where it provides for an advantage both for German
         and foreign workers on the national territory (see point 63 above), it should be noted as claimed by the Commission that the
         opinion was not followed in that regard. The Court found firstly that a national of a Member State who, while maintaining
         his employment in that State, has transferred his residence to another Member State and has since then carried on his occupation
         as a frontier worker can claim the status of migrant worker for the purposes of Regulation No 1612/68. The Court held also
         that Article 7(2) of Regulation No 1612/68 precludes the spouse of a migrant worker carrying on an occupation in one Member
         State, who does not work and is resident in another Member State, from being refused a child-raising allowance on the ground
         that he does not have his permanent or ordinary residence in the former State.
      
      45 –	Cited in footnote 39.
      
      46 –	See paragraphs 27 and 28. In his Opinion in Commission v Germany (cited in footnote 39), Advocate General Bot stated that ‘the purchase or construction of a dwelling in another Member State
         by … non-residents and by frontier workers in particular contributes to reducing housing demand in Germany. Those non-residents
         would therefore not encumber the German property market and would not exert pressure on the strong demand that already exists.’
         See point 93.
      
      47 –	Cited in footnote 41, paragraph 43. 
      
      48 –	[2004] ECR I‑2409.
      
      49 –	See point 89 below.
      
      50 –	C‑470/04 [2006] ECR I‑7409.
      
      51 –	See inter alia point 91 below.
      
      52 –	Cited in footnote 8. See also pleadings of the Commission at point 23 above.
      
      53 –	Cited in footnote 48.
      
      54 –	Cited in footnote 50.
      
      55 –	See paragraph 36.
      
      56 –	While the Commission did not present any statistics specifically on workers, it noted in its application that between 1991
         and 2004 over 75% of the people who left Germany to go abroad were non-nationals. 
      
      57 –	Case cited in footnote 41, paragraph 33.
      
      58 –	See point 100 above.
      
      59 –	Case C‑406/04 DeCuyper [2006] ECR I‑6947, paragraph 39, and Case C‑192/05 Tas-Hagen and Tas [2006] ECR I‑10451, paragraph 31.
      
      60 –	The event which crystallises the obligation to reimburse is the change of the worker’s Member State of employment or the
         citizen of the Union’s change of residence and loss of full liability to taxation in Germany. I therefore find highly persuasive
         the Commission’s claim that the obligation to reimburse may deter the individual concerned from requesting the bonus in the
         first place in order to avoid reimbursement. See point 77 above.
      
      61 –	The Court has held that the need to safeguard the cohesion of a tax system may justify rules that are liable to restrict
         fundamental freedoms. See Case C‑204/90 Bachmann [1992] ECR I‑249, paragraph 28, and Case C‑300/90 Commission v Belgium [1992] ECR I‑305, paragraph 21.
      
      62 –	See to that effect Wielockx, cited in footnote 8, paragraphs 23 to 26.
      
      63 –	In Bachmann and Commission v Belgium (cases cited in footnote 61) the Court found that ‘there was a direct link between the deductibility of contributions paid
         for old-age and life assurance contracts and the taxation of the sums paid out under those contracts, a link which had to
         be maintained in order to safeguard the cohesion of the tax system in question’. See Case C‑385/00 de Groot [2002] ECR I‑11819, paragraph 108.
      
      64 –	As their future German social security pension payments will in principal be reduced by the reform of that system.