European Commission v Kingdom of Belgium.
Date: 2011-12-01
30. In that regard, it should be borne in mind that, according to settled case-law, Article 18 EC can apply independently only to situations where European Union law applies but in respect of which the Treaty lays down no particular provisions (see, to that effect, Skanavi and Chryssanthakopoulos , paragraph 22; Oteiza Olazabal , paragraph 26; and Case C-318/05 Commission v Germany [2007] ECR I-6957, paragraphs 35 and 36).
31. Furthermore, it is also settled case-law that national measures liable to prevent or limit the acquisition of immovable property situated in another Member State may be deemed to constitute restrictions on the movement of capital (see Case C‑377/07 STEKO Industriemontage [2009] ECR I-299, paragraph 24, and Case C‑35/08 Busley and Cibrian Fernandez [2009] ECR I‑9807, paragraph 21).
33. It is necessary to recall at the outset that, according to settled case-law, while direct taxation falls within the competence of the Member States, the latter must none the less exercise that competence in a manner consistent with European Union law (Case C‑334/02 Commission v France  [2004] ECR I-2229, paragraph 21; Case C‑155/09 Commission v Greece  [2011] ECR I-0000, paragraph 39; and Case C‑10/10 Commission v Austria [2011] ECR I-0000, paragraph 23).
36. Article 56(1) EC prohibits all restrictions on the movement of capital between Member States and between Member States and non-member countries. While the Treaty does not define the concept of a movement of capital, it is also common ground that Directive 88/361, together with the nomenclature annexed to it, has indicative value for defining that term (see Joined Cases C-282/04 and C-283/04 Commission v Netherlands  [2006] ECR I-9141, paragraph 19). Furthermore, investments in immovable property come under, first, heading II (entitled ‘Investments in real estate (not included under I)’) of Annex I to Directive 88/361. Second, it follows from that heading that that type of investment is implicitly included under heading I of that annex, entitled ‘Direct investments’.
41. It must, however, be borne in mind that European Union law cannot be applied to such a purely internal situation where there has been no question of the exercise of freedom of movement within the European Union (see, to that effect, Case C‑212/06 Government of Communauté française and Gouvernement wallon [2008] ECR I-1683, paragraphs 37 and 38).
44. In that regard, it is common ground that, in excluding the persons referred to in paragraph 42 of this judgment from the benefit of the fiscal offsetting of the registration duties at issue, the system of the portability of registration duties entails for them a heavier tax burden than for those who benefit from that offsetting. Since the tax advantages are liable to influence the attitude of the person purchasing a new principal residence, it cannot be ruled out that the fact that registration duties paid in a Member State other than the Kingdom of Belgium cannot be offset may, in certain cases, discourage individuals exercising their right of free movement from purchasing immovable property in the Flemish Region (see, to that effect, Case C-318/07 Persche  [2009] ECR I-359, paragraph 38, and Case C‑10/10 Commission v Austria , paragraph 26).
48. Furthermore, it is true that the Member State at issue, by planning the taxation of purchases of residential property in its territory, is proceeding in accordance with the principle of territoriality enshrined in international tax law and recognised by European Union law (see, inter alia, Futura Participations and Singer , paragraph 22). However, the powers which Member States are recognised as having by virtue of the principle of territoriality must be exercised in accordance with the principles of European Union law.
49. According to Article 58(1)(a) EC, Article 56 EC is without prejudice to the right of Member States ‘to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation … with regard to the place where their capital is invested’. However, that derogation is itself limited by Article 58(3) EC, which provides that the national provisions referred to in Article 58(1) EC ‘shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 56’ (Case C-319/02 Manninen [2004] ECR I-7477, paragraph 28, and Case C‑10/10 Commission v Austria , paragraph 28).
50. Acceptance of the proposition that a Member State may freely apply a different treatment solely on the basis of the location of the first principal residence would deprive the rules relating to the free movement of capital of all meaning (see, to that effect, in relation to the freedom of establishment, Case 270/83 Commission v France [1986] ECR 273, paragraph 18; Joined Cases C-397/98 and C-410/98 Metallgesellschaft and Others  [2001] ECR I-1727, paragraph 42; and Case C‑418/07 Papillon  [2008] ECR I-8947, paragraph 26).
51. It should be noted in this regard, at the outset, that, according to the Court’s case-law, for national tax legislation, such as that at issue, which distinguishes between offsetting of registration duties paid in the Flemish Region and those paid in another Member State, to be regarded as compatible with the Treaty provisions on the free movement of capital, the difference in treatment must relate to situations which are not objectively comparable, or must be justified by an overriding reason in the public interest (see, to that effect, Case C-35/98 Verkooijen  [2000] ECR I‑4071, paragraph 43; Manninen , paragraph 29; and Case C‑10/10 Commission  v Austria , paragraph 29).
55. It is true that, according to the Court’s case-law, in relation to direct taxes, the situations of residents and of those not resident in a State are generally not comparable, because, on the one hand, the income received in the territory of a State by a non-resident is in most cases only a part of that person’s total income, which is concentrated at his place of residence, and, on the other, 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 , paragraphs 31 and 32; Case C-87/99 Zurstrassen [2000] ECR I-3337, paragraph 21; and Wallentin , paragraph 15).
56. Moreover, and as the Kingdom of Belgium points out, the fact that a Member State does not grant a non-resident certain tax advantages which it grants to a resident is not, as a rule, discriminatory, having regard to the objective differences between the situation of residents and that 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 (see Schumacker , paragraph 34; Case C-234/01 Gerritse  [2003] ECR I-5933, paragraph 44; and Wallentin , paragraph 16).
61. That said, it should be noted that, in order to establish whether discrimination exists, the comparability of the situations in question must also be examined by taking into account the objective pursued by the national provisions at issue (see, to that effect, Case C-231/05 Oy AA  [2007] ECR I-6373, paragraph 38, and Papillon , paragraph 27).
68. Finally, it should be noted that, according to the Court’s case-law, such a restriction can be permissible only if it is justified by overriding reasons of public interest. It is further necessary, in such a case, that its application should be appropriate to ensuring the attainment of the objective in question and not go beyond what is necessary to attain it (Case C-446/03 Marks & Spencer  [2005] ECR I-10837, paragraph 35, and Case C-524/04 Test Claimants in the Thin Cap Group Litigation  [2007] ECR I‑2107, paragraph 64).
70. The Court has previously held that the need to safeguard the cohesion of the tax system may justify rules that are liable to restrict fundamental freedoms ( Bachmann , paragraph 21; Case C‑300/90 Commission v Belgium , paragraph 14; Manninen , paragraph 42; and Case C-157/07 Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt  [2008] ECR I-8061, paragraph 43).
71. However, according to settled case-law, in order 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 concession by a particular tax levy (see, inter alia, Verkooijen , paragraph 57; Case C‑168/01 Bosal  [2003] ECR I‑9409, paragraph 29; and Manninen , paragraph 42 and the case-law cited).
73. However, it should be noted that, as the Kingdom of Belgium has no power of taxation on a purchase transaction which was carried out previously in another Member State by persons who decide to establish their new principal residence in the Flemish Region, the configuration of that tax advantage reflects a logical symmetry (see, by analogy, Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt , paragraph 42).
76. In that context, it should be noted that those two conditions, in this case the same taxpayer and the same taxation, were considered sufficient by the Court to establish the existence of such a link (see, to that effect, Verkooijen , paragraph 58; Bosal , paragraphs 29 and 30; and Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt , paragraph 42). Furthermore, it is important to emphasise that the Commission does not dispute, and has even admitted in its response, that the tax advantage at issue is granted to the same taxpayer and in the context of the same tax.
78. The fact none the less remains that, in order for the restriction to be justified in that regard, it is still necessary, as noted in paragraph 68 of this judgment, that it be appropriate and proportionate in relation to the objective pursued.
80. It is important to note that, in the light of the Court’s case-law, the restriction at issue is appropriate to achieve such an objective, in that it operates in a perfectly symmetrical manner, as only the registration duties previously paid under the Belgian tax system may be offset (see, to that effect, Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt , paragraph 44).
81. Furthermore, it is also settled case-law of the Court that that restriction is entirely proportionate to the objective pursued, since the provision at issue limits to a maximum of EUR 12 500 the amount which may be offset against the registration duties payable by the person who purchases a new principal residence in the Flemish Region (see, to that effect, Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt , paragraph 45). In providing for such a limitation, the system at issue retains its character as a tax advantage and is not in the nature of a disguised exemption.
83. With regard to the adverse effect that the system at issue has on Article 40 of the EEA Agreement, a point raised by the Commission, it should be noted that, in so far as the provisions of that article have the same legal scope as the substantially identical provisions of Article 56 EC (see Case C‑521/07 Commission v Netherlands  [2009] ECR I‑4873, paragraph 33, and Case C‑72/09 Établissements Rimbaud [2010] ECR I‑0000, paragraph 22), all of the foregoing considerations may, in circumstances such as those of the present case, be transposed, mutatis mutandis , to Article 40 of the EEA Agreement.