Frans Gschwind v Finanzamt Aachen-Außenstadt.
Date: 1999-09-14
20 The Court observes first of all that, although direct taxation falls within the competence of the Member States, the latter must none the less exercise that competence consistently with Community law and therefore avoid any overt or covert discrimination by reason of nationality (Schumacker, paragraphs 21 and 26, and Wielockx, paragraph 16, both cited above).
21 It is settled law that discrimination arises through the application of different rules to comparable situations or the application of the same rule to different situations.
22 As far as direct taxes are concerned, the situations of residents and of non-residents in a given State are not generally comparable, since 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 a non-resident's personal ability to pay tax, determined by reference to his aggregate income and his personal and family circumstances, is more easy 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 (Schumacker, cited above, paragraphs 31 and 32).
23 In paragraph 34 of Schumacker, cited above, the Court held that the fact that a Member State does not grant to a non-resident certain tax benefits which it grants to a resident is not, as a rule, discriminatory having regard to the objective differences between the situations of residents and of non-residents, both from the point of view of the source of their income and their personal ability to pay tax or their personal and family circumstances.
26 In those circumstances, there could be discrimination within the meaning of the Treaty between residents and non-residents only if, notwithstanding their residence in different Member States, it was established that, having regard to the purpose and content of the national provisions in question, the two categories of taxpayers are in a comparable situation.
27 According to the case-law of the Court, this is the case where the non-resident has no significant income in the State of his residence and gains the main part of his taxable income from an activity in the State of employment. In those circumstances, his State of residence is not in a position to grant him the benefits resulting from the taking into account of his personal and family circumstances, so that there is no objective difference between the situation of such a non-resident and that of a resident engaged in comparable employment such as to justify different treatment as regards the taking into account for taxation purposes of the taxpayer's personal and family circumstances (Schumacker, cited above, paragraphs 36 and 37).
28 A situation such as that in question in the main proceedings is, however, clearly different from that with which the judgment in Schumacker was concerned.  Mr Schumacker's income formed almost the entire income of his tax household and neither he nor his spouse had any significant income in their State of residence allowing account to be taken of their personal and family circumstances.  However, by laying down a percentage threshold and an absolute  threshold for income respectively taxable in Germany and not subject to German tax, the German legislation takes account specifically of the possibility of taking into consideration, on a sufficient tax base, of the personal and family circumstances of taxpayers in the State of residence.
29 In the present case, given that nearly 42% of the total income of the Gschwinds is received in their State of residence, that State is in a position to take into account Mr Gschwind's personal and family circumstances according to the rules laid down by the legislation of that State, since the tax base is sufficient there to enable them to be taken into account.
32 It follows from the foregoing that Article 48(2) of the Treaty is to be interpreted as not precluding the application of a Member State's legislation under which resident married couples are granted favourable tax treatment such as that under the splitting procedure whilst the same treatment of non-resident married couples is made subject to the condition that at least 90% of their total income must be subject to tax in that Member State or, if that percentage is not reached, that their income from foreign sources not subject to tax in that State must not be above a certain ceiling, thus maintaining the possibility for account to be taken of their personal and family circumstances in the State of residence.