Commission of the European Communities v Kingdom of Denmark.
Date: 2007-01-30
34. It should be noted, at the outset, that, although direct taxation falls within their competence, Member States must none the less exercise that competence consistently with Community law (see, in particular, Case C‑80/94 Wielockx  [1995] ECR I‑2493, paragraph 16; Case C‑35/98 Verkooijen  [2000] ECR I‑4071, paragraph 32; and Case C‑422/01 Skandia and Ramstedt  [2003] ECR I‑6817, paragraph 25).
37. In that regard, first, it should be noted that the provision of insurance constitutes a service within the meaning of Article 50 EC and that Article 49 EC precludes the application of any national legislation which, without objective justification, impedes a provider of services from actually exercising the freedom to provide them (see, to that effect, Case C‑118/96 Safir  [1998] ECR I‑1897, paragraph 22; Case C‑136/00 Danner  [2002] ECR I‑8147, paragraphs 25 to 27; and Skandia and Ramstedt , paragraphs 22 to 24).
38. With reference to the single market and in order to permit the achievement of its objectives, Article 49 EC also 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 one Member State (see Safir , paragraph 23).
40. With regard to Article 49 EC, two categories of situation in which such a requirement is liable to have a dissuasive effect must be distinguished.  In the first, service providers are dissuaded from establishing themselves in Denmark because of the costs involved.  Such a situation constitutes, of itself, a denial of that freedom (see, to that effect, Case C‑496/01 Commission  v France  [2004] ECR I‑2351, paragraph 65, and Case C‑439/99 Commission  v Italy  [2002] ECR I‑305, paragraph 30).  In the second, the recipients of those services are dissuaded from becoming members of a pension scheme with a pension institution established in another Member State, in view of the important role played, at the time when a pension insurance contract is taken out, by the possibility of obtaining tax relief under that head (see Danner , paragraph 31).
41. Secondly, with regard to freedom of movement for workers, salaried workers who have carried on an occupation in a Member State other than the Kingdom of Denmark and who are subsequently employed, or seek employment, in the latter Member State will normally have concluded their pension and life assurance contracts or invalidity and sickness insurance contracts with insurers established in the first State.  It follows that there is a risk that the provisions in question may operate to the particular detriment of these workers who are, as a general rule, nationals of other Member States (see, to that effect, Case C‑204/90 Bachmann  [1992] ECR I‑249, paragraph 9, and Case C‑300/90 Commission  v Belgium  [1992] ECR I‑305, paragraph 7).
46. According to well-established case-law, however, national measures which are liable to hinder the exercise of fundamental freedoms guaranteed by the EC Treaty or make them less attractive may nevertheless be allowed if they pursue a legitimate objective in the public interest, are appropriate to ensuring the attainment of that objective, and do not go beyond what is necessary to attain it (Case C‑470/04 N  [2006] ECR I‑0000, paragraph 40).
51. The Court has held that the prevention of tax avoidance (see Case C‑264/96 ICI  [1998] ECR I‑4695, paragraph 26; Joined Cases C‑397/98 and C‑410/98 Metallgesellschaft and Others  [2001] ECR I‑1727, paragraph 57; and Case C‑315/02 Lenz  [2004] ECR I‑7063, paragraph 27) and the effectiveness of fiscal supervision (see, Case C‑436/00 X and Y  [2002] ECR I‑10829, paragraph 51, and Case C‑334/02 Commission  v France  [2004] ECR I‑2229, paragraphs 31 and 32) constitute overriding requirements of general interest capable of justifying legislation which restricts the exercise of fundamental freedoms guaranteed by the Treaty (see, to that effect, Case C‑386/04 Centro di Musicologia Walter Stauffer  [2006] ECR I‑0000, paragraph 32).
52. In that connection, it should be recalled that Council Directive 77/799 enables a Member State to obtain from the competent authorities of another Member State all the information enabling it to determine the correct amount of income tax (see Case C‑55/98 Vestergaard  [1999] ECR I‑7641, paragraph 26), or all the information it considers necessary to ascertain the correct amount of income tax payable by a taxpayer according to the legislation which it applies (see, to that effect, Wielockx , paragraph 26).
54. The fact that Article 8(1) of the Directive imposes no obligation on the tax authorities of Member States to collaborate where the conditions laid down in that provision are met cannot justify the lack of deductibility or exemption of contributions paid to pension schemes.  There is nothing to prevent the Danish tax authorities from demanding from the person involved such proof as they consider necessary and, where appropriate, from refusing to allow deduction or exemption where such proof is not forthcoming (see, to that effect, Bachmann , paragraphs 18 and 20, and Case 300/90 Commission  v Belgium , paragraphs 11 and 13).
58. Furthermore, it must be noted that the mere fact that a taxpayer makes contributions to a pension scheme taken out with an inst itution established outside Denmark cannot form the basis for a general presumption of tax avoidance or justify a fiscal measure which prejudices the enjoyment of a fundamental freedom guaranteed by the Treaty (see, to that effect, Case C‑478/98 Commission  v Belgium  [2000] ECR I‑7587, paragraph 45, and Case C‑334/02 Commission  v France , paragraph 27).
66. In that regard, in the context of proceedings for failure to fulfil obligations, the purpose of the pre-litigation phase is to give the Member State concerned an opportunity, on the one hand, to comply with its obligations under Community law and, on the other, to avail itself of its right to defend itself against the charges formulated by the Commission (see Case C‑494/01 Commission  v Ireland  [2005] ECR I‑3331, paragraph 33).
67. Furthermore, it is clear from the case-law of the Court that the Commission’s reasoned opinion and the action must be based on the same grounds without, however, going so far as to make it necessary that in every event they should be completely identical (see, to that effect, Case C‑417/02 Commission  v Greece  [2004] ECR I‑7973, paragraph 17).
70. With regard to the justification of the cohesion of the tax system, it is established that the need to preserve such cohesion requires the existence of a direct link between a tax advantage and a corresponding disadvantage (see Case 300/90 Commission  v Belgium , paragraph 14; Case C‑484/93 Svensson and Gustavsson  [1995] ECR I‑3955, paragraph 18; ICI , paragraph 29; Vestergaard , paragraph 24; Case C‑478/98 Commission  v Belgium , paragraph 35; and X and Y , paragraph 52).
71. In that regard, the factor liable adversely to affect the cohesion of the Danish tax system is to be found in the fact that the transfer of the residence of the person concerned occurs between the time of payment of contributions to a pension scheme and that of payment of the corresponding benefits, and less in the fact that the pension institution is in another Member State.
72. When a Danish resident, having become a member of a pension scheme with an institution established in Denmark, receives tax advantages on the contributions paid into that scheme, then, before benefits fall to be paid, transfers his residence to another Member State, the Kingdom of Denmark is deprived of the power to tax the benefits corresponding to the contributions deducted or exempted, at least where it has concluded with the Member State to which the person concerned has transferred his residence a double taxation convention based on the OECD Convention.  However, in such a case, that result is not due to the fact that the pension institution is established abroad.
73. Conversely, there is nothing to prevent the Kingdom of Denmark from exercising its power of taxation over the benefits paid by a pension institution established in another Member State to a taxpayer still resident in Denmark when that payment is made, as a counterbalance to the contributions which it allowed to be deducted or exempted.  It is only in the case where, before benefits fall to be paid, that taxpayer transferred his residence to a Member State other than the Kingdom of Denmark that it might encounter difficulties in taxing the benefits paid and where, therefore, the cohesion of the Danish tax system with regard to the taxation of private pensions would be adversely affected.
76. Since the provisions of the Treaty on freedom to provide services, free movement for workers and freedom of establishment preclude the contested legislation, it is not necessary to consider that legislation separately in the light of Article 56 EC on free movement of capital (see, to that effect, Case C‑345/05 Commission  v Portugal  [2006] ECR I‑0000, paragraph 45).