Hein Persche v Finanzamt Lüdenscheid.
Date: 2009-01-27
23. It is to be noted that Article 56(1) EC lays down a general prohibition on restrictions on the movement of capital between Member States.
24. In the absence of a definition in the Treaty of ‘movement of capital’ for the purposes of Article 56(1) EC, the Court has previously recognised the nomenclature annexed to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty [an article repealed by the Treaty of Amsterdam] (OJ 1988 L 178, p. 5) as having indicative value, even though that directive was adopted on the basis of Articles 69 and 70(1) of the EEC Treaty (Articles 67 to 73 of the EEC Treaty were replaced by Articles 73B to 73G of the EC Treaty, now Articles 56 EC to 60 EC), subject to the qualification, contained in the introduction to the nomenclature, that the list set out therein is not exhaustive (see, in particular, Case C‑513/03 van Hilten‑van der Heijden  [2006] ECR I‑1957, paragraph 39; Centro di Musicologia Walter Stauffer , paragraph 22; and Case C‑11/07 Eckelkamp [2008] ECR I‑0000, paragraph 38). Gifts and endowments are listed under Heading XI, entitled ‘Personal capital movements’ in Annex I to Directive 88/361.
26. Indeed, the reference, under Heading XI in Annex I to Directive 88/361, to inheritances and legacies shows that, in order to determine whether the tax treatment by a Member State of certain transactions is covered by the provisions on the free movement of capital, there is no need to distinguish between transactions effected in money and those effected in kind. Thus, the Court has noted that inheritances consist in the transfer to one or more persons of assets left by a deceased person or, in other words, a transfer to the heirs of ownership of the various items of property and rights which make up those assets (see, particularly, van Hilten‑van der Heijden , cited above, paragraph 42, and Eckelkamp , cited above, paragraph 39). It follows that national legislation can come within the compass of Articles 56 EC to 58 EC even if it concerns the transfer of assets which can include both sums of money and movable and immovable property.
27. Like the tax levied on inheritances, the tax treatment of gifts in money or in kind therefore comes within the compass of the Treaty provisions on the movement of capital, except in cases where the constituent elements of the transactions concerned are confined within a single Member State (see, to that effect, Eckelkamp , paragraph 39 and the case-law cited).
28. As regards the question whether, as the Greek Government argues, a gift of consumer goods should not rather come within the scope of the Treaty provisions on the free movement of goods, it must be noted that, according to well established case-law, in order to determine whether national legislation falls within the scope of one or other of the freedoms of movement, the purpose of the legislation concerned must be taken into consideration (see, particularly, Case C‑157/05 Holböck [2007] ECR I‑4051, paragraph 22 and the case-law cited).
30. Therefore, the answer to the first question referred is that, where a taxpayer claims, in a Member State, the deduction for tax purposes of gifts to bodies established and recognised as charitable in another Member State, such gifts come within the compass of the provisions of the Treaty relating to the free movement of capital, even if they are made in kind in the form of everyday consumer goods.
The second and third questions
31. By its second and third questions, with which it is appropriate to deal together, the national court asks, in essence, whether Article 56 EC precludes legislation of a Member State which allows the benefit of a deduction for tax purposes only for gifts made in favour of charitable bodies established in that State, having regard to the fact that the tax authorities of that Member State must be able to verify the taxpayer’s declarations and cannot be required to act in breach of the principle of proportionality. That court is uncertain, in that context, whether Directive 77/799 requires those tax authorities to have recourse to the assistance of the competent authorities of the recipient body’s Member State of establishment to obtain the necessary information or whether, on the other hand, the said tax authorities may require the taxpayer himself to provide all the necessary evidence.
38. As the Advocate General pointed out in paragraphs 47 and 48 of his Opinion, since the possibility of obtaining a deduction for tax purposes can have a significant influence on the donor’s attitude, the inability in Germany to deduct gifts to bodies recognised as charitable if they are established in other Member States is likely to affect the willingness of German taxpayers to make gifts for their benefit.
41. However, it is important to distinguish unequal treatment permitted under Article 58(1)(a) EC from arbitrary discrimination or disguised restrictions prohibited under Article 58(3) EC. Indeed, for national tax legislation such as that at issue in the main proceedings, which distinguishes between national bodies and those established in another Member State, to be regarded as compatible with the Treaty provisions on the free movement of capital, the difference in treatment must concern situations which are not objectively comparable or it must be justified by an overriding reason in the public interest, such as the need to safeguard effective fiscal supervision. In order to be justified, moreover, the difference in treatment must not go beyond what is necessary in order to attain the objective of the legislation in question (see, to that effect, Centro di Musicologia Walter Stauffer , paragraph 32 and the case-law cited).
The comparability of national bodies recognised as being charitable with those established in another Member State
44. Whilst it is lawful for a Member State to restrict the grant of tax advantages to bodies pursuing certain of its charitable purposes (see, to that effect, Centro di Musicologia Walter Stauffer , paragraph 57), a Member State cannot however restrict the benefit of such advantages only to bodies established in that State whose activities are thus capable of absolving it of some of its responsibilities.
45. Admittedly, by encouraging taxpayers, with the prospect of a tax deduction for gifts made to bodies recognised as charitable in support of their activities, a Member State encourages such bodies to develop charitable activities for which, usually, it would or could take responsibility itself. It is conceivable, therefore, that national legislation providing for a deduction for tax purposes of gifts for the benefit of charitable bodies could encourage such bodies to substitute themselves for the public authorities in assuming certain responsibilities, and that such assumption could lead to a reduction of the expenses of the Member State concerned capable of compensating, at least partly, for its decreased tax revenues resulting from the right to deduct gifts.
46. However, it does not follow that a Member State can introduce a difference in treatment, in respect of the deduction for tax purposes of gifts, between national bodies recognised as being charitable and those established in another Member State on the grounds that gifts made for the benefit of the latter, even if their activities are among the purposes of the legislation of the former Member State, cannot lead to such budgetary compensation. It is settled case-law that the need to prevent the reduction of tax revenues is neither among the objectives stated in Article 58 EC nor an overriding reason in the public interest capable of justifying a restriction on a freedom instituted by the Treaty (see, to that effect, Case C‑319/02 Manninen  [2004] ECR I-7477, paragraph 49, and Centro di Musicologia Walter Stauffer , paragraph 59; see, by analogy, as regards the freedom to supply services, Case C‑136/00 Danner  [2002] ECR I-8147, paragraph 56, and Case C‑76/05 Schwarz and Gootjes-Schwarz  [2007] ECR I‑6849, paragraph 77).
48. As the Court held in paragraph 39 of the judgment in Centro di Musicologia Walter Stauffer , it is not a requirement under Community law for Member States automatically to confer on foreign bodies recognised as having charitable status in their Member State of origin the same status in their own territory. Member States have a discretion in this regard that they must exercise in accordance with Community law. In those circumstances, they are free to define the interests of the general public that they wish to promote by granting benefits to associations and bodies which pursue objects linked to such interests in a disinterested manner and comply with the requirements relating to the implementation of those objects.
49. The fact remains that where a body recognised as having charitable status in one Member State satisfies the requirements imposed for that purpose by the law of another Member State and where its object is to promote the very same interests of the general public, so that it would be likely to be recognised as having charitable status in the latter Member State, which it is a matter for the national authorities of that same Member State, including its courts, to determine, the authorities of that Member State cannot deny that body the right to equal treatment solely on the ground that it is not established in that Member State (see, to that effect, Centro di Musicologia Walter Stauffer , paragraph 40; see, by analogy, as regards the freedom to provide services, Schwarz and Gootjes-Schwarz , cited above, paragraph 81).
50. Contrary to what the Governments which have submitted observations maintain in that regard, a body which is established in one Member State but satisfies the requirements imposed for that purpose by another Member State for the grant of tax advantages, is, in respect of the grant by the latter Member State of tax advantages intended to encourage the charitable activities concerned, in a situation comparable to that of bodies recognised as having charitable purposes which are established in the latter Member State.
The justification based on the need to safeguard the effectiveness of fiscal supervision
52. Admittedly, the need to guarantee the effectiveness of fiscal supervision constitutes an overriding reason in the public interest capable of justifying a restriction on the exercise of the freedoms of movement guaranteed by the Treaty. However, for a restrictive measure to be justified, it must comply with the principle of proportionality, in that it must be appropriate for securing the attainment of the objective it pursues and must not go beyond what is necessary to attain it (Case C‑101/05 A  [2007] ECR I‑11531, paragraphs 55 and 56, and the case‑law cited).
53. In that context, the Court has decided that the possibility cannot be excluded a priori that the taxpayer is able to provide relevant documentary evidence enabling the tax authorities of the Member State of taxation to ascertain, clearly and precisely, the nature and genuineness of the expenditure incurred in other Member States (see Case C‑254/97 Baxter and Others [1999] ECR I‑4809, paragraph 20, and Case C‑39/04 Laboratoires Fournier [2005] ECR I‑2057, paragraph 25).
54. Nothing would prevent the tax authorities concerned from requiring the taxpayer to provide such proof as they may consider necessary in order to determine whether the conditions for deducting expenses provided for in the legislation at issue have been met and, consequently, whether to allow the deduction requested (see, to that effect, Danner , cited above, paragraph 50, and Case C‑422/01 Skandia and Ramstedt [2003] ECR I‑6817, paragraph 43).
55. In the light of the principles extracted by the Court in paragraph 48 of the judgment in Centro di Musicologia Walter Stauffer , before granting a tax exemption to a body established and recognised as having charitable status in another Member State, a Member State is authorised to apply measures enabling it to ascertain in a clear and precise manner whether the body meets the conditions imposed by national law in order to be entitled to the exemption and to monitor its effective management, for example, by requiring the submission of annual accounts and an activity report. Any administrative disadvantages arising from the fact that such bodies may be established in another Member State are not sufficient to justify a refusal on the part of the authorities of the State concerned to grant such bodies the same tax exemptions as are granted to national bodies of the same kind.
60. Since nothing prevents the tax authorities of the Member State of taxation from requiring a taxpayer, wishing to obtain the deduction for tax purposes for gifts made for the benefit of bodies established in another Member State, to provide the relevant evidence, that Member State of taxation cannot invoke the need to safeguard the effectiveness of fiscal supervision to justify national legislation which absolutely prevents the taxpayer from producing such evidence.
61. Moreover, the tax authorities concerned may, pursuant to Directive 77/799, call upon the authorities of another Member State in order to obtain all the information that may be necessary to effect a correct assessment of a taxpayer’s liability to tax ( Centro di Musicologia Walter Stauffer , paragraph 50). That directive provides, with a view to preventing tax evasion, for the possibility of national tax authorities requesting information which they cannot obtain for themselves (Case C‑184/05 Twoh International [2007] ECR I‑7897, paragraph 32).
62. Contrary to the submissions of Ireland and the United Kingdom Government, a request by the tax authorities of a Member State for information concerning a body established in another Member State, in order to determine whether a gift made to that body can benefit from a tax advantage, is by no means outside the scope of Directive 77/799. The information which Directive 77/799 allows the competent authorities of a Member State to request is in fact all the information which appears to them to be necessary in order to ascertain the correct amount of tax in relation to the legislation which they have to apply themselves ( Twoh International , cited above, paragraph 36). The information required in order to supplement that which a taxpayer has provided to the tax authorities of a Member State in order to obtain a tax advantage constitutes information capable of enabling each competent authority of the Member States concerned to effect a correct assessment of the income tax in a particular case within the meaning of Articles 1(1) and 2(1) of Directive 77/799.
63. However, Directive 77/799 does not in any way affect the powers of the competent authorities of the donor’s Member State to assess in particular whether the conditions to which that legislation subjects the grant of a tax advantage are fulfilled (see, to that effect, Twoh International , paragraph 36). Thus, as regards a body established and recognised as having charitable status in another Member State, the donor’s Member State must allow identical tax treatment to that applied to gifts made to national bodies only if that body satisfies the requirements laid down by the legislation of that latter Member State for the grant of tax advantages, among which are the pursuit of objectives identical to those promoted by the tax law of that Member State. It is for the competent national authorities, including the national courts, to establish whether, under the rules of national law, compliance with the requirements imposed by the donor’s Member State for the grant of the tax advantage in question has been proved.
65. Since Directive 77/799 provides for the possibility of national tax authorities requesting information which they cannot obtain for themselves, the Court has ruled that the use, in Article 2(1) of Directive 77/799, of the word ‘may’ indicates that, whilst those authorities have the possibility of requesting information from the competent authority of another Member State, such a request does not in any way constitute an obligation. It is for each Member State to assess the specific cases in which information concerning transactions by taxable persons in its territory is lacking and to decide whether those cases justify submitting a request for information to another Member State ( Twoh International , paragraph 32).
68. In addition, where the Member State of establishment of the recipient body has a system of tax advantages intended to support the activities of charitable bodies, it will normally be sufficient for the donor’s Member State to be informed by the other Member State, within the framework of mutual assistance under Directive 77/799, of the subject matter and detailed arrangements for the supervision to which such bodies are subject, for tax authorities of the Member State of taxation to be able to identify, with sufficient precision, the additional information which they need to verify whether the recipient body fulfils the conditions imposed by the national legislation for the grant of tax advantages.
69. Indeed, even if it proves difficult to verify the information provided by the taxpayer, in particular due to the limited nature of the exchange of information provided for by Article 8 of Directive 77/799, nothing prevents the tax authorities concerned refusing the deduction applied for if the evidence that they consider they need to effect a correct assessment of the tax is not supplied (see, to that effect, Case C-204/90 Bachmann [1992] ECR I‑249, paragraph 20; Case C‑451/05 ELISA  [2007] ECR I-8251, paragraph 95; and A , cited above, paragraph 58).
70. As regards charitable bodies in a non-member country, it must be added that it is, as a rule, legitimate for the Member State of taxation to refuse to grant such a tax advantage if, in particular, because that non-member country is not under any international obligation to provide information, it proves impossible to obtain the necessary information from that country (see, to that effect, A , paragraph 63).
72. Therefore, the answer to the second and third questions is that Article 56 EC precludes legislation of a Member State by virtue of which, as regards gifts made to bodies recognised as having charitable status, the benefit of a deduction for tax purposes is allowed only in respect of gifts made to bodies established in that Member State, without any possibility for the taxpayer to show that a gift made to a body established in another Member State satisfies the requirements imposed by that legislation for the grant of such a benefit.
Costs