Florian W. Wallentin v Riksskatteverket.
Date: 2004-07-01
15. As the Court has held, in relation to direct taxes, the situations of residents and of non-residents are generally not comparable, because the income received in the territory of a State by a non-resident is in most cases only a part of his total income, which is concentrated at his place of residence, and because a non-resident’s personal ability to pay tax, determined by reference to his aggregate income and his personal and family circumstances, is easier to assess at the place where his personal and financial interests are centred, which in general is the place where he has his usual abode ( Schumacker , cited above, paragraphs 31 and 32; Case C-391/97 Gschwind  [1999] ECR I-5451, paragraph 22; Case C-87/99 Zurstrassen  [2000] ECR I-3337, paragraph 21, and Gerritse , cited above, paragraph 43).
16. Also, the fact that a Member State does not grant to a non-resident certain tax benefits which it grants to a resident is not, as a rule, discriminatory having regard to the objective differences between the situations of residents and of non-residents, from the point of view both of the source of their income and of their personal ability to pay tax or their personal and family circumstances ( Schumacker , paragraph 34; Gschwind , paragraph 23, and Gerritse , paragraph 44).
17. The Court has held that the position is different, however, in a case where the non-resident receives no significant income in the State of his residence and obtains the major part of his taxable income from an activity performed in the State of employment, with the result that the State of his residence is not in a position to grant him the benefits resulting from the taking into account of his personal and family circumstances (see Schumacker , paragraph 36, and Case C-385/00 de Groot  [2002] ECR I-11819, paragraph 89).  In the case of a non-resident who receives the major part of his income in a Member State other than that of his residence, discrimination arises from the fact that his personal and family circumstances are taken into account neither in the State of residence nor in the State of employment ( Schumacker , paragraph 38), irrespective of the different rates applicable to special income tax and to standard income tax.
18. That is exactly the situation in the main proceedings, whose distinguishing feature is that Mr Wallentin did not have, at the material time, any taxable income in his State of residence, since the monthly subsistence allowance from his parents and the grant paid to him by the German State did not constitute taxable income under German tax legislation.
19. As regards whether the basic allowance in question reflects consideration of the taxpayer’s personal and family circumstances, the Court has held that the basic tax-free allowance in German law (‘Grundfreibetrag’) has a social purpose since it ensures that the taxpayer has a minimum subsistence amount which is not subject to income tax ( Gerritse , paragraph 48).  There is nothing in the case-file requiring a different assessment in respect of the basic allowance provided for by Swedish tax law.
21. The argument that the grant of the tax allowance to a non-resident would undermine the cohesion of the tax system, because there is in Swedish tax law a direct link between the taking into account of personal and family circumstances and the right to tax fully and progressively residents’ worldwide income, cannot be upheld.  In a situation such as that in the main proceedings, the State of residence cannot take account of the taxpayer’s personal and family circumstances because there is no liability for tax there. Where that is the case, the Community principle of equal treatment requires that, in the State of employment, the personal and family circumstances of a foreign non-resident be taken into account in the same way as those of resident nationals and that the same tax benefits be granted to him ( Schumacker , paragraph 41).
22. The distinction between residents and non-residents at issue in the main proceedings is thus in no way justified by the need to ensure the cohesion of the applicable tax system (see, regarding a similar situation, Schumacker , paragraph 42).