European Commission v Kingdom of Belgium.
Date: 2018-04-12
26


The Kingdom of Belgium does not dispute that the methods of assessing income from immovable property differ according to whether or not that property is situated on Belgian territory. It submits, however, that it is apparent from the judgment of 11 September 2014, Verest and Gerards (C‑489/13,EU:C:2014:2210, paragraph 20), that the use of differing methods of assessing income from immovable property is permitted, provided that the freedoms of movement are guaranteed. That is the case with regard to the Belgian legislation, which does not necessarily lead to higher taxation on the part of a Belgian taxpayer who owns immovable property situated on the territory of another State.
30


As regards, in particular, property that is exempted from taxation in Belgium under a convention for the prevention of double taxation, the Kingdom of Belgium submits that, in so far as the tax rate applicable to income taxable in Belgium increases with each tax bracket, taking foreign income from immovable property into account under a progressivity clause does not necessarily affect the tax rate applicable to other income taxable in Belgium. That would be the case only where a potential overvaluation would have the effect of moving the marginal income of the taxpayer into a higher tax bracket on the tax scale. As is apparent, in its view, from the judgment of 11 September 2014, Verest and Gerards (C‑489/13, EU:C:2014:2210, paragraph 23), the national court, which has jurisdiction to ascertain whether there is a potential higher rate of tax, should carry out a case-by-case assessment.
38


In so far as the Kingdom of Belgium refers to circular No AGFisc 22/2016, which, according to that Member State, has the purpose of bringing the legislation at issue into line with Article 63 TFEU and Article 40 of the EEA Agreement, suffice it to recall that it is settled case-law that the question whether a Member State has failed to fulfil obligations must be determined by reference to the situation prevailing at the end of the period laid down in the reasoned opinion, and the Court cannot take account of any subsequent changes (judgment of 29 October 2015, Commission v Belgium, C‑589/14, not published, EU:C:2015:736, paragraph 49).
40


It should be recalled that the measures prohibited by Article 63(1) TFEU as restrictions on the movement of capital include all those which are likely to discourage residents of one Member State from making investments in immovable property in other Member States (judgment of 11 September 2014, Verest and Gerards, C‑489/13, EU:C:2014:2210, paragraph 21 and the case-law cited).
52


Where there are conventions for the prevention of double taxation which provide for the maintenance of progressivity, income from immovable property located in another State is not taxed in Belgium. It is, however, taken into account for the purpose of applying the rule of progressivity when calculating the amount of tax on the taxpayer’s remaining income taxable in Belgium (see, to that effect, judgment of 11 September 2014, Verest and Gerards, C‑489/13, EU:C:2014:2210, paragraphs 29 and 30). In this case, the overvaluation of income from property situated in a Member State of the European Union or the EEA other than the Kingdom of Belgium may lead to the application of a more onerous tax rate, which the Kingdom of Belgium acknowledges in its observations submitted to the Court.
53


In the light of the foregoing, it must be held that the legislation at issue providing that income relating to unrented immovable property or property rented either to natural persons who do not use them for professional purposes or to legal persons which make such property available to natural persons for private purposes is determined on a flat‑rate basis for property situated in Belgium and on the basis of the actual rental value or the actual rent for that situated in another State results in a difference in treatment that is liable to discourage Belgian residents from making investments in immovable property in Member States of the European Union or the EEA other than the Kingdom of Belgium.
55


According to settled case-law, a distinction must be made between the differences in treatment authorised by Article 65(1)(a) TFEU and discrimination prohibited by Article 65(3) TFEU. For national tax legislation such as the legislation at issue to be capable of being regarded as compatible with the provisions of the FEU Treaty on the free movement of capital, it is necessary that the difference in treatment should concern situations which are not objectively comparable or be justified by an overriding reason in the public interest (see, to that effect, judgments of 3 September 2014, Commission v Spain, C‑127/12, not published, EU:C:2014:2130, paragraph 73; of 11 September 2014, Verest and Gerards, C‑489/13, EU:C:2014:2210, paragraph 28; and of 17 September 2015, Miljoen and Others, C‑10/14, C‑14/14 and C‑17/14, EU:C:2015:608, paragraph 64).
59


The objective of such an exemption with ‘maintenance of progressivity’ is to prevent, in Belgium, a situation in which a lower rate of tax is 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 Belgium (see, to that effect, judgment of 11 September 2014, Verest and Gerards, C‑489/13, EU:C:2014:2210, paragraph 31).
60


In the light of that objective, the situation of taxpayers who have acquired immovable property in Belgium is comparable to that of taxpayers who have acquired such property in another Member State of the European Union or the EEA (see, to that effect, judgment of 11 September 2014, Verest and Gerards, C‑489/13, EU:C:2014:2210, paragraph 32).
63


In so far as the provisions of Article 40 of the EEA Agreement have the same legal scope as the substantially identical provisions of Article 63 TFEU, all of the foregoing considerations, concerning the existence of a restriction on the free movement of capital within the meaning of Article 63 TFEU, may, in the circumstances of the present action, be transposed mutatis mutandis to Article 40 of the EEA Agreement (judgment of 4 May 2017, Commission v Greece, C‑98/16, not published, EU:C:2017:346, paragraph 49).