Max-Heinz Feilen v Finanzamt Fulda.
Date: 2016-06-30
16


As the referring court has observed, inheritances consisting in the transfer to one or more persons of assets left by a deceased person constitute, according to the settled case-law of the Court, movements of capital within the meaning of Article 63 TFEU, except in cases where their constituent elements are confined within a single Member State (see, to that effect, judgments of 23 February 2006 in van Hilten-van der Heijden, C‑513/03, EU:C:2006:131, paragraphs 39 to 42; of 17 January 2008 in Jäger, C‑256/06, EU:C:2008:20, paragraphs 24 and 25; of 17 October 2013 in Welte, C‑181/12, EU:C:2013:662, paragraphs 19 and 20; and of 3 September 2014 in Commission v Spain, C‑127/12, not published, EU:C:2014:2130, paragraphs 52 and 53).
19


The Court has already ruled that legislation of a Member State which makes the application of an inheritance tax advantage, such as a tax-free allowance, dependent on the place of residence of the deceased person or the heir, or on the location of the assets contained in the estate, constitutes a restriction on the free movement of capital prohibited by Article 63(1) TFEU when it has the result that inheritances involving non-residents or containing assets located in another Member State are subject to a higher tax liability than that imposed on inheritances involving only residents or containing only assets located in the Member State of taxation, and which, therefore, has the effect of reducing the value of the inheritance (see, to that effect, judgments of 17 January 2008 in Jäger, C‑256/06, EU:C:2008:20, paragraphs 30 to 35; of 17 October 2013 in Welte, C‑181/12, EU:C:2013:662, paragraphs 23 to 26; of 3 September 2014 in Commission v Spain, C‑127/12, not published, EU:C:2014:2130, paragraphs 57 to 60; and of 4 September 2014 in Commission v Germany, C‑211/13, not published, EU:C:2014:2148, paragraphs 40 to 43).
25


In so far as that provision of Article 65 TFEU constitutes a derogation from the fundamental principle of the free movement of capital, it must be interpreted strictly. It cannot therefore be interpreted as meaning that all tax legislation which draws a distinction between taxpayers on the basis of their place of residence or of the Member State in which they invest their capital is automatically compatible with the Treaty. The derogation provided for in Article 65(1)(a) TFEU is itself limited by Article 65(3) TFEU, 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 63 [TFEU]‚ (judgment of 4 September 2014 in Commission v Germany, C‑211/13, not published, EU:C:2014:2148, paragraph 46 and the case-law cited).
26


A distinction must therefore be made between the differences in treatment authorised under Article 65(1)(a) TFEU and the arbitrary discrimination prohibited under Article 65(3) TFEU. In that regard, the case-law of the Court makes it clear that, in order for national tax rules which, for the purposes of calculating inheritance or gift tax, distinguish between residents and non-residents, or between assets located within the national territory and those located outside that territory, to be able to be regarded as being compatible with the Treaty provisions on the free movement of capital, the difference in treatment must relate to situations which are not objectively comparable or must be justifiable by overriding reasons in the public interest (judgment of 3 September 2014 in Commission v Spain, C‑127/12, not published, EU:C:2014:2130, paragraph 73 and the case-law cited).
27


As regards the comparability of the situations at issue, it is common ground that, for inheritance tax purposes, the legislation at issue in the main proceedings places on the same footing persons in Tax Class I and resident in the national territory who acquire by inheritance an estate involving assets that had already been acquired by persons in that tax class during the ten years preceding the acquisition, irrespective of where the assets are located or where the beneficiaries thereof were resident at the time of that previous inheritance. It is only for the application of the reduction in inheritance tax provided for under Paragraph 27(1) of the ErbStG that that legislation treats those persons differently depending on whether the assets in question were or were not located within national territory at the time of the previous inheritance and as to whether the parties to that inheritance were or were not resident within that territory (see, by analogy, judgment of 17 October 2013 in Welte, C‑181/12, EU:C:2013:662, paragraph 51 and the case-law cited).
30


In that regard, it must be borne in mind that the Court has already recognised that the need to maintain the coherence of a tax system may justify a restriction on the exercise of the freedoms of movement guaranteed by the Treaty. However, in order for such justification to be accepted, a direct link must be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy, the direct nature of that link falling to be examined in the light of the objective pursued by the legislation in question (judgments of 17 October 2013 in Welte, C‑181/12, EU:C:2013:662, paragraph 59, and of 7 November 2013 in K, C‑322/11, EU:C:2013:716, paragraphs 65 and 66 and the case-law cited).
33


With regard to those considerations, it is apparent that, by providing that only persons receiving assets by way of an inheritance which has given rise to the imposition of such taxes in Germany can benefit from the reduction in inheritance tax, the configuration of that tax advantage reflects a logical symmetry (see judgments of 1 December 2011 in Commission v Belgium, C‑250/08, EU:C:2011:793, paragraph 73, and in Commission v Hungary, C‑235/09, EU:C:2011:795, paragraph 74). That logic would be disturbed if that tax advantage were also to benefit persons inheriting assets which did not give rise to the imposition of inheritance tax in that Member State.
35


Admittedly, the Court has held, in cases not coming within the field of inheritance tax, that there is no such direct link where a case relates, in particular, to different taxes or to the tax treatment of different taxpayers (see, to that effect, judgments of 18 September 2003 in Bosal, C‑168/01, EU:C:2003:479, paragraph 30, and of 24 February 2015 in Grünewald, C‑559/13, EU:C:2015:109, paragraph 49).
39


Furthermore, in order for such a restriction to be justified, it must be appropriate and proportionate to the objective pursued (see, to that effect, judgments of 1 December 2011 in Commission v Belgium, C‑250/08, EU:C:2011:793, paragraph 78, and in Commission v Hungary, C‑253/098, EU:C:2011:795, paragraph 79).
40


In that regard, it must be held that a reduction in inheritance tax calculated by applying percentages by reference to the period which has elapsed between the two dates on which the liability to tax arose, and made subject to the condition that the asset has already given rise to the imposition of such taxes in Germany in the preceding ten years appears to be appropriate in order to attain the objective pursued in Paragraph 27 of the ErbStG, as described in paragraph 37 above. That reduction is, furthermore, proportionate with regard to that objective since the Federal Republic of Germany did not have the power to tax the previous inheritance. In those circumstances, limiting the benefit of that reduction to situations in which that asset gave rise to taxation in Germany appears proportionate in the light of that objective (see, to that effect, judgment of 1 December 2011 in Commission v Hungary, C‑253/09, EU:C:2011:795, paragraphs 80 and 81).