Ronny Verest and Gaby Gerards v Belgische Staat.
Date: 2014-09-11
13. Under the procedure laid down by Article 267 TFEU providing for cooperation between national courts and the Court of Justice, it is for the latter to provide the national court with an answer which will be of use to it and enable it to determine the case before it. To that end, the Court may have to reformulate the questions referred to it (judgment in Brey , C‑140/12, EU:C:2013:565, paragraph 31 and the case-law cited).
18. First of all, it should be recalled that, in accordance with settled case-law, in the absence of unifying or harmonising measures adopted by the European Union, the Member States retain competence for determining the criteria for taxation on income and capital with a view to eliminating double taxation by means, inter alia, of international conventions. In that context, the Member States are free to determine the connecting factors for the allocation of fiscal jurisdiction in bilateral conventions for the avoidance of double taxation (judgment in Imfeld and Garcet , C‑303/12, EU:C:2013:822, paragraph 41 and the case-law cited).
19. However, that allocation of fiscal jurisdiction does not allow Member States to apply measures contrary to the freedoms of movement guaranteed by the FEU Treaty. As regards the exercise of the power of taxation so allocated by bilateral conventions to prevent double taxation, the Member States must comply with EU rules (judgment in Imfeld and Garcet , EU:C:2013:822, paragraph 42).
20. It follows that, subject to the freedoms of movement guaranteed by the Treaty being respected, a Member State is free to lay down, with a view to the taxation of the income of natural persons, methods of assessment of income from immovable property of property that is not rented out that differ according to whether the property is situated in that Member State or in another Member State.
21. In this connection, it should be recalled that the measures prohibited by Article 63(1) TFEU as restrictions on the movement of capital, include those which are likely to discourage residents of one Member State from making investments in immovable property in other Member States (judgment in Libert and Others , C‑197/11 and C‑203/11, EU:C:2013:288, paragraph 44).
23. It is for the referring court to ascertain whether the taxable income of Belgian residents who own immovable property situated in a Member State other than Belgium that is not rented out is therefore liable to be subject to a higher rate of tax than that applicable to the income of Belgian residents who have a comparable property in Belgium.
26. In so far as Article 65(1)(a) TFEU is a derogation from the freedom of 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 based on their place of residence or the State in which they invest their capital is automatically compatible with the Treaty (see judgment in Emerging Markets Series of DFA Investment Trust Company , C‑190/12, EU:C:2014:249, paragraph 55 and the case-law cited).
27. Indeed, the derogation provided for by Article 65(1)(a) TFEU is itself limited by Article 65(3) TFEU, which provides that the national provisions referred to in Article 65(1) TFEU ‘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’ (see judgment in Emerging Markets Series of DFA Investment Trust Company , EU:C:2014:249, paragraph 56).
28. The differences in treatment authorised by Article 65(1)(a) TFEU must thus be distinguished from discrimination prohibited by Article 65(3) TFEU. It is clear from the case-law of the Court that, if a national tax rule is to be regarded as compatible with the provisions of the Treaty on the free movement of capital, the difference in treatment which it prescribes must concern situations which are not objectively comparable or be justified by an overriding reason in the public interest (see judgment in Emerging Markets Series of DFA Investment Trust Company , EU:C:2014:249, paragraph 57).
29. First, in the dispute in the main proceedings, it is common ground that under the convention for the prevention of double taxation as applied in Belgium, income from immovable property of property situated in France is not taxed in Belgium, whereas income from immovable property of property situated in Belgium is included in the basis of assessment. However, that convention allows the Belgian authorities to take account of income from immovable property of property situated in France for the purpose of determining, in accordance with the ‘maintenance of progressivity’ provided for by the convention, the tax rate applicable to income taxable in Belgium.
30. It is apparent from the case-law of the Court that the exemption method with ‘maintenance of progressivity’ serves to ensure that the income of a taxpayer that is exempt in the Member State of residence may nevertheless be taken into account by that Member State for the purpose of applying the rule of progressivity when calculating the amount of tax on the taxpayer’s remaining income (see, to that effect, judgment in Asscher , C‑107/94, EU:C:1996:251, paragraph 47).
31. The objective of such a rule is to prevent, in the Member State of residence, a lower rate of tax being applied to the taxable income of a taxpayer who is the owner of immovable property situated in another Member State than the rate applicable to the income of taxpayers who are the owners of comparable properties in the Member State of residence.
32. In the light of that objective, the situation of taxpayers who have acquired immovable property in the Member State of residence is comparable to that of taxpayers who have acquired such a property in another Member State.