Commission of the European Communities v Portuguese Republic.
Date: 2006-10-26
10. It must be borne in mind at the outset that, according to the settled case-law of the Court, although direct taxation falls within their competence, Member States must none the less exercise that competence consistently with Community law (see Case C-334/02 Commission  v France  [2004] ECR I-2229, paragraph 21, and Case C-446/03 Marks & Spencer  [2005] ECR I-10837, paragraph 29).
13. Article 18 EC, which sets out in general terms the right of every citizen of the Union to move and reside freely within the territory of the Member States, finds specific expression in Article 43 EC with regard to freedom of establishment (Case C-470/04 N [2006] ECR I-0000, paragraph 22) and in Article 39 EC with regard to freedom of movement for workers.
15. The provisions of the EC 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 (see Case C-464/02 Commission  v Denmark  [2005] ECR I-7929, paragraph 34 and the case-law cited).
16. 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 (Case C-209/01 Schilling and Fleck-Schilling [2003] ECR I-13389, paragraph 25, and Commission  v Denmark , paragraph 35).
17. It is clear from the case-law of the Court that, even if, according to their wording, the rules on freedom of movement for workers are directed, in particular, at ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that State, they also preclude the State of origin from obstructing the freedom of one of its nationals to accept and pursue employment in another Member State (Case C-385/00 De Groot  [2002] ECR I-11819, paragraph 79).
18. The same applies to the provisions relating to freedom of establishment. According to the same case-law, even though, according to their wording, those provisions are directed at ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that State, they also prohibit the State of origin from hindering the establishment in another Member State of one of its nationals or of a company incorporated under its legislation (Case C‑9/02 De Lasteyrie du Saillant  [2004] ECR I-2409, paragraph 42, and Case C-471/04 Keller Holding  [2006] ECR I-2107, paragraph 30).
24. According to well-established case-law, however, national measures which are liable to hinder the exercise of fundamental freedoms guaranteed by the 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 ( De Lasteyrie du Saillant , paragraph 49, and N , paragraph 40).
27. Furthermore, it is clear from an examination of Article 10(5) of the CIRS that, contrary to the argument put forward by the Portuguese Republic, the alleged link between the tax advantage granted to the taxpayer and tax treatment of that advantage is questionable. There can be no capital gains tax thereon in the future unless such gains are realised. Also, as long as the person concerned purchases a new property as his residence in Portugal, he can always rely on the exemption provided for in Article 10(5) of the CIRS.
29. Admittedly, the Court has recognised that the need to maintain the cohesion of a tax system can justify a restriction on the exercise of the fundamental freedoms guaranteed by the Treaty. However, for an argument based on such a justification to succeed, a direct link must be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy (see, to that effect, Keller Holding , paragraph 40 and the case-law cited), which is not the case here.
31. The Portuguese Republic also maintains that Article 10(5) of the CIRS is intended to ensure that the taxpayer’s own residence and that of his family are protected and maintained and, therefore, guarantees that individual a right to accommodation, which is a constitutional right.
32. Even if it were possible to invoke such an argument to justify restricting the freedom of movement for persons, the requirement to reinvest in Portuguese territory imposed by Article 10(5) of the CIRS goes beyond what is necessary to attain the intended objective in any event.
33. If the objective of that national provision is to guarantee the right to accommodation, that objective could be attained without there being any need to impose a requirement to reinvest in national territory.
35. Even if it were justified, that argument cannot demonstrate that the contested provision is necessary to attain the objective pursued. On the contrary, the objective of guaranteeing a right to accommodation referred to at paragraph 31 above is just as easily attained if the taxpayer elects to transfer his residence to another Member State rather than retaining it in Portugal. Consequently, in the light of that objective, whether the housing policy in other Member States may be indirectly financed thereby, as alleged, is irrelevant.
40. Furthermore, both the Court of Justice and the EFTA Court have recognised the need to ensure that the rules of the EEA Agreement which are identical in substance to those of the Treaty are interpreted uniformly ( Keller Holding , paragraph 48 and the case-law cited).
45. Since the contested legislation runs counter to the provisions of the Treaty and the EEA Agreement on freedom of movement for persons, there is no need for a separate examination of that legislation in the light of Article 56(1) EC and Article 41 of the EEA Agreement (see, by analogy, Case C-483/99 Commission  v France  [2002] ECR I-4781, paragraph 56).
Costs