Commission of the European Communities v Kingdom of Denmark.
Date: 2005-09-15
17. Article 3a of that law, which includes the rules on registration tax in cases of temporary registration (‘the temporary registration tax’), provides:
‘1. The national customs and tax authorities may, on request, authorise payment of registration tax for taxable motor vehicles which are registered for temporary use in Denmark to be made in accordance with paragraph 2 if:
(1) the motor vehicle belongs to a foreign national and is used by the latter during a temporary stay; or
(2) the motor vehicle is made available by a company or a fixed establishment located abroad to a person resident in Denmark for business and private use in the foreign country concerned and in Denmark, where the employment by the undertaking or the fixed establishment constitutes that person’s principal employment.
2. The tax shall be paid in advance on a quarterly basis, at the rate of 3% of the calculated tax by quarterly period started. The payment shall be increased by 1.5% of the balance which remains due after the previous payment by quarterly period started. When the first payment is made, a deposit corresponding to the amount of the tax due in the first quarterly period and an additional sum to cover any payment arrears relating to registration shall also be paid.
3. The person who makes the vehicle available to the person resident in Denmark shall be liable for payment of the tax under paragraph 1(2). …
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6. The provisions of paragraphs 1 to 5 shall apply correspondingly to motor vehicles referred to by paragraph 1(2) which are registered with foreign registration plates.
7. In the case of a motor vehicle referred to in Article 4 and Article 5(1), which is used in Denmark by a resident for the sole purpose of performing work for an employer referred to in paragraph 1(2), the customs and fiscal authorities may authorise the tax to be paid per day on which the vehicle is used in Denmark. That tax shall be set at DKK 60 per day for motor vehicles referred to in Article 4 and DKK 30 per day for motor vehicles referred to in Article 5(1). No tax is payable on motor vehicles referred to in Article 5(3), in Article 5(5)(2) and in Article 5(10) [concerning certain categories of commercial vehicles of a certain weight or intended for certain purposes], where the resident uses the motor vehicles in Denmark only for performing work for an employer referred to in paragraph 1(2).
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9. The Minister for Taxation may adopt detailed rules in relation to authorisation requests and payment of the taxes and other charges referred to in paragraphs 1 to 8.’
34. The provisions of the Treaty on freedom of movement for persons are intended to facilitate the pursuit by Community citizens of occupational activities of all kinds throughout the Community, and preclude measures which might place Community citizens at a disadvantage when they wish to pursue an economic activity in the territory of another Member State (Case C-415/93 Bosman  [1995] ECR I-4921, paragraph 94; Case C-232/01 Van Lent  [2003] ECR I-11525, paragraph 15; and Case C-387/01 Weigel  [2004] ECR I-4981, paragraph 52).
35. 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 therefore constitute an obstacle to that freedom even if they apply without regard to the nationality of the workers concerned ( Bosman , paragraph 96).
36. However, in order to be capable of constituting such an obstacle, they must affect access of workers to the labour market (Case C-190/98 Graf [2000] ECR I-493, paragraph 23).
37. The manner in which an activity is pursued is liable also to affect access to that activity. Consequently, legislation which relates to the conditions in which an economic activity is pursued may constitute an obstacle to freedom of movement within the meaning of that case-law.
39. The Commission submits that both the original scheme and the amended scheme are contrary to the freedom of movement for workers enshrined in Article 39 EC on the basis that they have the effect of hindering the right of employees to seek employment in another Member State and the freedom of employers in other Member States to take on employees resident in Denmark.
45. It is settled case-law that Article 39 EC prohibits not only all discrimination, direct or indirect, based on nationality, but also national rules which are applicable irrespective of the nationality of the workers concerned but impede their freedom of movement ( Graf , paragraph 18, and Weigel , paragraphs 50 and 51).
46. It is clear that the original scheme, in so far as it remains applicable, could, on account of the obligation to register in Denmark a company car made available to the employee by an employer established in another Member State, deter such an employer from taking on an employee resident in Denmark for work which is not the employee’s principal employment and, consequently, impede access to such employment by residents in Denmark.
50. However, an employee resident in Denmark might already be deterred from seeking employment in another Member State faced with the prospect of receiving a salary lower than that of a comparable employee resident in that other Member State. As the Court ruled in paragraph 18 of Case 127/86 Ledoux  [1988] ECR 3741, the fact that an employee is placed at a disadvantage in regard to working conditions compared to his colleagues residing in the country of their employer has a direct effect on the exercise of his right to freedom of movement within the Community.
51. As regards the Finnish Government’s argument that, in the case of mixed-use company vehicles registered in another Member State and made available to permanent Danish residents, there is no obstacle to freedom of movement for workers on the basis that such a vehicle is treated in the same way as an employee’s personal vehicle, that argument is based on a false premiss. An employee resident in Denmark, who is able to use a company vehicle not only for business purposes but also for private purposes, does not have the same freedom to use that vehicle as he might have with his private car, the use of which is not restricted by the requirements of his professional duties.
52. Consequently, it must be held that the Danish legislation, both in its original version and in its amended version, constitutes a restriction on freedom of movement for workers.
53. Such measures could be allowed only as a derogation expressly provided for by Article 39(3) EC or if they pursued a legitimate aim compatible with the Treaty and were justified by pressing reasons of public interest. But even if that were so, application of those measures would still have to be such as to ensure achievement of the aim in question and not go beyond what is necessary for that purpose (see, in particular, Bosman  paragraph 104, and Case C-224/01 Köbler  [2003] ECR I-10239, paragraph 77).
Justification of the restriction on freedom of movement for workers
Arguments of the parties
64. In that respect, it must be noted that, in the framework of Article 39 EC, a person who, for a certain period of time, performs services for and under the direction of another person in return for which he receives remuneration must be considered to be a worker. Any person who pursues activities which are real and genuine, to the exclusion of activities on such a small scale as to be regarded as purely marginal and ancillary, is entitled to freedom of movement as a worker (see, to that effect, Case 66/85 Lawrie-Blum  [1986] ECR 2121, paragraphs 16 and 17, and Case C-138/02 Collins  [2004] ECR I-2703, paragraph 26).
66. It follows from the case-law, in particular from Case C-212/97 Centros  [1999] ECR I-1459, paragraph 24, that a Member State is entitled to take measures designed to prevent certain of its nationals from attempting, under cover of the rights created by the Treaty, improperly to circumvent their national legislation or to prevent individuals from improperly or fraudulently taking advantage of provisions of Community law.
67. However, the fact that a worker resident in Denmark, who uses a company car of an employer established in another Member State, is employed in work in that State which is not his principal employment cannot form the basis for a general presumption of abuse.
74. Subject to certain exceptions which are not relevant here, the taxation of motor vehicles has not been harmonised. Member States are therefore free to exercise their powers of taxation in that area, provided they do so in compliance with Community law ( Cura Anlagen , paragraph 40).
75. For the purposes of determining the restrictions imposed by Article 39 EC on the power of the Kingdom of Denmark to levy a registration tax, it should be borne in mind that the Cura Anlagen case concerned only the situation created by a three-year leasing contract concluded by a company registered in Austria with a company registered in another Member State concerning a vehicle intended to be used essentially in Austria. In paragraph 35 of that judgment, the Court stated that hiring contracts made for short periods, such as the hiring of a replacement vehicle from a company established in another Member State were not therefore concerned.
76. Where the company vehicle is intended to be used essentially in Denmark on a permanent basis or where it is in fact used in that manner, the situation is comparable to that at issue in Cura Anlagen .
77. In those circumstances, it is open to the Kingdom of Denmark to impose a registration tax on a vehicle made available to an employee who resides there by a company established in another Member State.
78. In that situation, treating equally the use of a company car by the employees in question and other residents of the Kingdom of Denmark as regards the imposition of such a tax is legitimate and is sufficient to justify the restriction on freedom of movement for workers.
79. On the other hand, if the conditions set out in paragraph 76 above are not satisfied, the connection with Denmark of the company vehicle registered in another Member State is weaker, so that another justification for the restriction in question is necessary.
80. In that regard, it should be noted that the temporary registration tax cannot be justified on the basis that it seeks to prevent fiscal erosion. It is settled case-law that reduction in tax revenue cannot be regarded as an overriding reason in the public interest which may be relied on to justify a measure which is in principle contrary to a fundamental freedom (Case C-319/02 Manninen  [2004] ECR I-7477 paragraph 49).
83. That finding is valid not only in respect of use of a company vehicle for business purposes but also in respect of use for private purposes that are incidental to the business use (see, to that effect, Ledoux , paragraph 18).
Article 10 EC