Herbert Schwarz and Marga Gootjes-Schwarz v Finanzamt Bergisch Gladbach.
Date: 2007-09-11
34. Secondly, it should be noted that Article 18 EC, which lays down generally the right for every citizen of the Union to move and reside freely within the territory of the Member States, finds specific expression in the provisions guaranteeing the freedom to provide services (Case C-92/01 Stylianakis  [2003] ECR I-1291, paragraph 18, and Case C-208/05 ITC  [2007] ECR I-0000, paragraph 64). If, therefore, the case in the main proceedings falls under Article 49 EC, it will not be necessary for the Court to rule on the interpretation of Article 18 EC ( Stylianakis , paragraph 20, and ITC , paragraph 65).
36. In that regard, it should first be noted that, whilst the third paragraph of Article 50 EC refers only to the active provision of services, where the provider moves to the beneficiary of the services, well-established case-law shows that the freedom to provide services includes the freedom of the persons for whom the services are intended to go to another Member State, where the provider is, in order to enjoy the services there (Joined Cases 286/82 and 26/83 Luisi and Carbone [1984] ECR 377, paragraphs 10 and 16). In the main proceedings here, the issues are the refusal to grant tax relief on the ground that the private school attended is established in another Member State and, hence, the possibility of taking advantage of offers of education emanating from such a school.
37. It needs to be examined, however, whether those offers of education have the supply of services as their subject-matter. To that end, it needs to be examined whether courses offered by a school such as Cademuir School constitute, in accordance with the first paragraph of Article 50 EC, ‘services ... normally provided for remuneration’.
38. The Court has already held that, for the purposes of that provision, the essential characteristic of remuneration lies in the fact that it constitutes consideration for the service in question ( Humbel and Edel , paragraph 17; Case C-157/99 Smits and Peerbooms  [2001] ECR I-5473, paragraph 58; Case C-136/00 Danner  [2002] ECR I-8147, paragraph 26; Case C-355/00 Freskot  [2003] ECR I-5263, paragraph 55; and Case C-422/01 Skandia and Ramstedt  [2003] ECR I-6817, paragraph 23).
39. The Court has thus excluded from the definition of services within the meaning of Article 50 EC courses offered by certain establishments forming part of a system of public education and financed, entirely or mainly, by public funds (see, to that effect, Humbel and Edel , paragraphs 17 and 18, and Wirth , paragraphs 15 to 16). The Court thus held that, by establishing and maintaining such a system of public education, financed as a general rule by the public budget and not by pupils or their parents, the State did not intend to involve itself in remunerated activities, but was carrying out its task in the social, cultural and educational fields towards its population.
40. However, the Court has held that courses given by educational establishments essentially financed by private funds, notably by students and their parents, constitute services within the meaning of Article 50 EC, since the aim of those establishments is to offer a service for remuneration ( Wirth , paragraph 17).
41. It should be noted here that it is not necessary for that private financing to be provided principally by the pupils or their parents. According to consistent case-law, Article 50 EC does not require that the service be paid for by those for whom it is performed (see, for example, Case 352/85 Bond van Adverteerders and Others  [1988] ECR 2085, paragraph 16; Joined Cases C-51/96 and C-191/97 Deliège  [2000] ECR I-2549, paragraph 56; Smits and Peerbooms , paragraph 57; and Skandia and Ramstedt , paragraph 24).
45. In Case C-372/04 Watts  [2006] ECR I-4325, paragraph 90, which concerns medical services, which constitute supplies of services, the Court held that Article 49 EC applies to the situation of a patient living in the United Kingdom, whose state of health required hospital treatment and who, having gone to another Member State to receive the services in question for payment, then applied for reimbursement from the National Health Service, even though services identical in nature were supplied free by the National Health Service of the United Kingdom.
66. Legislation such as that under Paragraph 10(1)(9) of the EStG has the effect of deterring taxpayers resident in Germany from sending their children to schools established in another Member State. Furthermore, it also hinders the offering of education by private educational establishments established in other Member States, to the children of taxpayers resident in Germany.
67. Such legislation constitutes an obstacle to the freedom to provide services guaranteed by Article 49 EC. That article precludes the application of any national rules which have the effect of making the provision of services between Member States more difficult than the provision of services purely within a Member State (see, for example, Case C-118/96 Safir  [1998] ECR I-1897, paragraph 23; Smits and Peerbooms , paragraph 61; Danner , paragraph 29; Case C-334/02 Commission  v France  [2004] ECR I-2229, paragraph 23; Watts , paragraph 94; and Case C-444/05 Stamatelaki  [2007] ECR I-0000, paragraph 25).
69. It should be noted in that respect that Paragraph 10(1)(9) of the EstG concerns the tax treatment of school fees. According to well-established case‑law, although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with Community law (see, for example, Danner , paragraph 28; Case C-374/04 Test Claimants in Class IV of the ACT Group Litigation  [2006] ECR I-11673, paragraph 36; and Case C-524/04 Test Claimants in the Thin Cap Group Litigation  [2007] ECR I-0000, paragraph 25).
70. Similarly, whilst Community law does not detract from the power of the Member States as regards, first, the content of education and the organisation of education systems and their cultural and linguistic diversity (Article 149(1) EC) and, secondly, the content and organisation of vocational training (Article 150(1) EC), the fact remains that, when exercising that power, Member States must comply with Community law, in particular the provisions on the freedom to provide services (see, by analogy, Watts , paragraphs 92 and 147).
72. Concerning the German Government’s argument that the refusal to grant the tax advantage under Paragraph 10(1)(9) of the EStG in respect of school fees paid to private schools established in another Member State is justified by the fact that the German schools concerned by that article and private schools established in another Member State such as Cademuir School are not in an objectively comparable situation, it should be noted that that article makes the deductibility of part of the school fees subject to the approval, authorisation or recognition in Germany of the private school concerned, without fixing an objective criterion allowing it to be determined which types of school fees charged by German schools are deductible.
73. It follows that any private school established in a Member State other than the Federal Republic of Germany, merely by reason of the fact that it is not established in Germany, is automatically excluded from the tax advantage at issue in the main proceedings, whether or not it meets criteria such as the charging of school fees of an amount that does not give rise to the selection of pupils according to parental means.
77. First, according to the consistent case-law of the court, prevention of a reduction in tax receipts is not one of the reasons set out in Article 46 EC, read in conjunction with Article 55 EC, and neither can it be regarded as an imperative reason in the public interest.
80. As the Advocate General has pointed out in point 62 of her Opinion, in order to avoid an excessive burden it is legitimate for a Member State to limit the amount deductible in respect of school fees to a given level, corresponding to the tax relief granted by that State, taking account of certain values of its own, for the attendance of schools situated in its territory, which would constitute a less stringent method than refusing to grant the tax relief in question.
81. It appears in any event disproportionate totally to exclude from the tax relief under Paragraph 10(1)(9) of the EStG school fees paid by income tax payers in Germany to schools established in a Member State other than the Federal Republic of Germany. That excludes school fees paid by those taxpayers to schools established in another Member State from the tax relief at issue, whether or not those schools fulfil objective criteria determined on the basis of principles individual to each Member State and allowing it to be determined what types of school fees confer a right to that tax relief.
86. According to settled case-law, the status of citizen of the Union is destined to be the fundamental status of nationals of the Member States, enabling those among such nationals who find themselves in the same situation to enjoy the same treatment in law within the area of application ratione materiae  of the EC Treaty irrespective of their nationality, subject to such exceptions as are expressly provided for in that regard (see, in particular, Case C-184/99 Grzelczyk  [2001] ECR I-6193, paragraph 31; Case C‑224/98 D’Hoop  [2002] ECR I-6191, paragraph 28; Case C-148/02 Garcia Avello  [2003] ECR I-11613, paragraphs 22 and 23; and Case C-224/02 Pusa  [2004] ECR I-5763, paragraph 16).
87. Situations falling within the scope of Community law include those involving the exercise of the fundamental freedoms guaranteed by the EC Treaty, in particular those involving the freedom to move and reside within the territory of the Member States, as conferred by Article 18 EC (see, in particular, Grzelczyk , paragraph 33; D’Hoop , paragraph 29; Garcia Avello , paragraph 24; and Pusa , paragraph 17).
88. Inasmuch as a citizen of the Union must be granted in all Member States the same treatment in law as that accorded to nationals of those Member States who find themselves in the same situation, it would be incompatible with the right to freedom of movement were a citizen to receive in the Member State of which he is a national treatment less favourable than he would enjoy if he had not availed himself of the opportunities offered by the EC Treaty in relation to freedom of movement ( D’Hoop , paragraph 30; and Pusa , paragraph 18).
89. Those opportunities could not be fully effective if a national of a Member State could be deterred from availing himself of them by obstacles placed in the way of his stay in the host Member State by legislation in his State of origin penalising the mere fact that he has used them (see, to that effect, Case C-370/90 Singh  [1992] ECR I-4265, paragraph 23; D’Hoop , paragraph 31; Pusa , paragraph 19; and Case C-406/04 De Cuyper  [2006] ECR I‑6947, paragraph 39).
90. The Schwarz children, by attending an educational establishment situated in another Member State, used their right of free movement. As is shown by the judgment in Case C-200/02 Zhu and Chen  [2004] ECR I-9925, paragraph 20, even a young child may make use of the rights of free movement and residence guaranteed by Community law.
93. National legislation which places at a disadvantage certain of the 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 ( De Cuyper , paragraph 39; and Case C-192/05 Tas-Hagen and Tas  [2006] ECR I-10451, paragraph 31).
94. Such a difference in treatment can be justified only if it is based on objective considerations independent of the nationality of the persons concerned and is proportionate to the legitimate aim of the national provisions ( D’Hoop , paragraph 36; De Cuyper , paragraph 40; and Tas-Hagen and Tas , paragraph 33)
99. The answer to the referring court must therefore be that, where taxpayers of a Member State send their children to school at a school established in another Member State, the services of which are not covered by Article 49 EC, Article 18 EC precludes legislation which allows taxpayers to claim as special expenses conferring a right to a reduction in income tax the payment of school fees to certain private schools established in national territory, but generally excludes that possibility in relation to school fees paid to a private school established in another Member State.
Costs