Theodor Jäger v Finanzamt Kusel-Landstuhl.
Date: 2008-01-17
23. First of all, it must be noted that, although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with Community law (see, inter alia, Case C-319/02 Manninen  [2004] ECR I‑7477, paragraph 19; Case C-386/04 Centro di Musicologia Walter Stauffer  [2006] ECR I-8203, paragraph 15; and Case C-347/04 Rewe Zentralfinanz  [2007] ECR I-2647, paragraph 21).
24. It must also be observed that the EC Treaty does not define the term ‘movement of capital’. However, it is settled case-law that, inasmuch as Article 73b of the Treaty substantially reproduced the content of Article 1 of Directive 88/361, and even if the latter was adopted on the basis of Articles 69 and 70(1) of the EEC Treaty (Articles 67 to 73 of the EEC Treaty were replaced by Articles 73b to 73g of the EC Treaty, now Articles 56 EC to 60 EC), the nomenclature relating to capital movements annexed thereto retains the same indicative value as before for the purposes of defining the term ‘movement of capital’ (see, inter alia, Case C-513/03 v an Hilten-van der Heijden  [2006] ECR I-1957, paragraph 39, and Case C-452/04 Fidium Finanz  [2006] ECR I-9521, paragraph 41).
25. In that regard, the Court, noting in particular that inheritances involving a transfer to one or more persons of assets left by the deceased fall within heading XI of Annex I to Directive 88/361, entitled ‘Personal capital movements’, held in paragraph 42 of the judgment in van Hilten-van der Heijden  that an inheritance is a movement of capital within the meaning of Article 73b of the Treaty (see also, to that effect, Barbier , paragraph 58), except in cases where its constituent elements are confined within a single Member State.
28. It is thus necessary to examine, first, whether, as maintained by Mr Jäger and the Commission, a national provision such as that at issue in the main proceedings amounts to a restriction on the movement of capital.
29. The German Government submits that the national legislation at issue in the main proceedings does not amount to a restriction on the movement of capital. First, it submits that, since the assets situated in France were acquired initially by the father of Mr Jäger before 1 June 1990, the date by which Directive 88/361 had to be transposed into national law, the rights deriving from that directive or from the Treaty could not be relied on directly by the purchaser of the assets concerned. Secondly, according to the German Government, such a purchaser cannot be deterred by th e effects of legislation such as that at issue in the main proceedings, which does not in any way affect the person in question but, at the very most, his heirs. For that reason, the effects of such legislation are too indirect to be capable of constituting a restriction on the movement of capital.
30. In that respect, according to the case-law of the Court, national provisions which determine the value of immovable property for the purposes of calculating the amount of tax due when it is acquired through inheritance may not only be such as to discourage the purchase of immovable property situated in the Member State concerned and the transfer of financial ownership of such property to another person by a resident of another Member State, but may also have the effect of reducing the value of the inheritance of a resident of a Member State other than that in which that property is situated (see to that effect, Barbier , paragraph 62).
31. Furthermore, as regards inheritances, the case‑law has confirmed that the measures prohibited by Article 73b(1) of the Treaty as being restrictions on the movement of capital include those the effect of which is to reduce the value of the inheritance of a resident of a State other than the Member State in which the assets concerned are situated and which taxes the inheritance of those assets ( van Hilten-van der Heijden , cited above, paragraph 44).
32. In the present case, the national provisions in issue in the main proceedings, in so far as they result in an inheritance consisting of agricultural land and forestry situated in another Member State being subject, in Germany, to inheritance tax that is higher than that which would be payable if the assets inherited were situated exclusively within the territory of that Member State, have the effect of restricting the movement of capital by reducing the value of an inheritance consisting of such an asset situated outside Germany.
33. That conclusion cannot be called into question by the arguments put forward by the German Government, noted in paragraph 29 of this judgment, since they are irrelevant in the light of the criteria arising from the case-law cited in paragraphs 30 and 31 of this judgment. In the present case, the effects of the national legislation in issue in the main proceedings on the value of the inheritance occurred after 1 June 1990 and are manifestly not too indirect to be capable of constituting a restriction on the movement of capital.
34. The same is true of the German Government’s argument that there cannot be a restriction resulting from a reduction in the value of the inheritance, since the effect of legislation such as that at issue in the main proceedings is merely the unavoidable consequence of the coexistence of national tax systems. That circumstance is irrelevant in the light of the criteria resulting from the case-law cited in paragraphs 30 and 31 of this judgment. Indeed, in any event it is clear that the reduction in the value of the estate flows solely from the application of the German legislation at issue.
35. It follows that the fact that the grant of tax advantages in relation to inheritance tax is made subject to the condition that the asset acquired by inheritance be situated in the national territory constitutes a restriction on the free movement of capital prohibited, in principle, by Article 73b(1) of the Treaty.
40. That stated, Article 73d(1)(a) of the Treaty, in so far as it is a derogation from the fundamental principle of the free movement of capital, must be interpreted strictly. That provision cannot therefore be interpreted as meaning that all tax legislation which draws a distinction between taxpayers based on their place of residence or the Member State in which they invest their capital is automatically compatible with the Treaty.
41. The derogation provided for in Article 73d(1)(a) of the Treaty is itself, as the German Government observed, limited by Article 73d(3) of the Treaty, which provides that the national provisions referred to in paragraph 1 of that article ‘shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 73b’ (see Verkooijen , paragraph 44, and Manninen , paragraph 28). Moreover, in order to be justified, the difference in treatment between the agricultural land and forestry assets situated in Germany and those situated in the other Member States must not go beyond what is necessary to achieve the objective pursued by the legislation at issue.
42. A distinction must therefore be made between the unequal treatment permitted under Article 73d(1)(a) of the Treaty and arbitrary discrimination prohibited under Article 73d(3). According to the case-law, in order for national tax legislation such as that at issue in the main proceedings, which, for the purposes of calculating inheritance tax, distinguishes between assets situated in another Member State and those situated in Germany, to be considered compatible with the provisions of the Treaty on the free movement of capital, the difference in treatment must concern situations which are not objectively comparable or be justified by overriding reasons in the general interest (see Verkooijen , paragraph 43, Manninen , paragraph 29, and Case C-443/06 Hollmann [2007] ECR I-0000, paragraph 45).
43. In that respect, it must be stated, first, that the difference in the amount of tax paid according to whether the inheritance consists only of agricultural land and forestry situated in Germany or consists also of such an asset situated in another Member State cannot be justified on the ground that it concerns situations which are not objectively comparable.
44. The calculation of the tax is, under the national legislation at issue in the main proceedings, directly linked to the value of the assets included in the estate, with the result that there is objectively no difference in situation such as to justify unequal tax treatment so far as concerns the level of inheritance tax payable in relation to, respectively, an asset situated in Germany and an asset situated in another Member State. A situation such as that of Mr Jäger is therefore comparable to that of any other heir whose inheritance consists only of agricultural land and forestry situated in Germany bequeathed by a person domiciled in that State.
50. It is, admittedly, conceivable that objectives connected with the carrying on of the activities of agricultural and forestry holdings and preservation of jobs in the latter in cases of inheritance may in themselves, in certain circumstances and under certain conditions, be in the public interest and capable of justifying restrictions on the free movement of capital (see, to that effect, Case C-370/05 Festersen  [2007] ECR I-1129, paragraph 28).
51. However, with regard to the arguments put forward by the Finanzamt and the German Government, these have been unable to demonstrate a need to refuse the benefit of a favourable assessment and other tax advantages to any heir who acquires by inheritance an agricultural or forestry holding which is not situated within German territory (see, to that effect, with regard to a tax advantage limited to research carried out in the Member State concerned, Case C-39/04 Laboratoires Fournier [2005] ECR I-2057, paragraph 23, and, with regard to an exemption from inheritance tax reserved to certain undertakings preserving jobs in the territory of the Member State concerned, Case C-464/05 Geurts and Vogten [2007] ECR I-0000, paragraph 27).
54. In that regard, it should be noted that, while it may indeed prove difficult for national authorities to apply the assessment procedure provided for in Paragraphs 140 to 144 of the BewG to agricultural land and forestry situated in another Member State, that difficulty cannot justify a categorical refusal to grant the tax advantage in question since the taxpayers concerned could be asked themselves to supply the authorities with the data which they consider necessary to ensure application of that procedure in such a way that it is adapted to holdings in other Member States.
55. It should be added that any disadvantages encountered in determining the value of assets situated in the territory of another Member State under a special national procedure cannot, in any event, be sufficient to justify restrictions on the free movement of capital such as those arising under the legislation at issue in the main proceedings, which, apart from that assessment procedure, also reserves application of two other tax advantages to assets situated within German territory (see, to that effect, Case C-334/02 Commission v France [2004] ECR I-2229, paragraph 29).