Yvon Welte v Finanzamt Velbert.
Date: 2013-10-17
19. In the absence of a definition of ‘movement of capital’ in the Treaty, the Court has recognised the nomenclature in Annex I to Directive 88/361 as having indicative value, it being understood that, as stated in the introduction to that annex, the list it contains is not exhaustive (see, inter alia, Case C-513/03 van Hilten-van der Heijden [2006] ECR I-1957, paragraph 39, and Case C-25/10 Missionswerk Werner Heukelbach [2011] ECR I-497, paragraph 15).
20. In that regard, it is apparent from settled case-law that inheritances, namely the transfer to one or more persons of assets left by a deceased person and falling under heading XI of Annex I to Directive 88/361, entitled ‘Personal capital movements’, constitute movements of capital within the meaning of Article 56 EC, except in cases where their constituent elements are confined within a single Member State (see, inter alia, Case C-364/01 Barbier  [2003] ECR I-15013, paragraph 58; van Hilten-van der Heijden , paragraphs 40 to 42; and Case C-31/11 Scheunemann [2012] ECR I-0000, paragraph 22).
23. It is apparent from settled case-law that, as regards inheritances, the measures which Article 56(1) EC prohibits as being restrictions on the movement of capital include those whose effect is to reduce the value of the inheritance of a resident of a State other than the State in which the assets concerned are situated and which taxes the inheritance of those assets (see, inter alia, Barbier , paragraph 62; Case C-11/07 Eckelkamp and Others [2008] ECR I-6845, paragraph 44; Case C-43/07 Arens-Sikken [2008] ECR I-6887, paragraph 37; and Missionswerk Werner Heukelbach , paragraph 22).
25. It should be noted that such legislation, which makes the application of a tax-free allowance in respect of the immovable property concerned dependent on the place of residence of the deceased and the heir at the time of the death, leads to succession between non-residents including such property being subject to a higher tax liability than that involving at least one resident and therefore has the effect of reducing the value of that succession (see, by analogy, Eckelkamp and Others , paragraphs 45 and 46; Mattner , paragraphs 27 and 28; and Missionswerk Werner Heukelbach , paragraph 24).
26. Consequently, national legislation such as that at issue in the main proceedings constitutes a restriction on the free movement of capital within the meaning of Article 56(1) EC.
The application of Article 57(1) EC concerning restrictions on the free movement of capital with regard to third countries
29. In that regard, it must be observed that Article 57(1) EC, which sets out a restrictive list of movements of capital to which Article 56(1) EC may not apply, does not mention inheritances. Such a provision, in so far as it is an exception to the fundamental principle of the free movement of capital, must be interpreted strictly (see, by analogy, Eckelkamp and Others , paragraph 57).
32. While those concepts are not defined in the Treaty, it is apparent from the list in heading I and the explanatory notes to it, whose indicative value has already been acknowledged by the Court, that the concept of direct investment concerns investments by natural or legal persons which serve to establish or maintain lasting and direct links between the person providing the capital and the company to which that capital is made available in order to carry out an economic activity (see, to that effect, Case C-157/05 Holböck  [2007] ECR I-4051, paragraphs 34 and 35 and the case-law cited).
42. In so far as that provision of Article 58 EC derogates from the fundamental principle of the free movement of capital, it must be interpreted strictly. It cannot therefore be interpreted as meaning that all tax legislation which draws a distinction between taxpayers on the basis of their place of residence or the Member State in which they invest their capital is automatically compatible with the Treaty (see Case C‑256/06 Jäger  [2008] ECR I-123, paragraph 40; Eckelkamp and Others , paragraph 57; Arens-Sikken , paragraph 51; and Mattner , paragraph 32).
43. The derogation in Article 58(1)(a) EC is itself limited by Article 58(3) EC, which provides that the national provisions referred to in paragraph 1 of that Article ‘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’ (see Jäger , paragraph 41; Eckelkamp and Others , paragraph 58; Arens-Sikken , paragraph 52; and Mattner , paragraph 33).
44. A distinction must therefore be made between different treatment permitted under Article 58(1)(a) EC and arbitrary discrimination prohibited under Article 58(3) EC. It is apparent from settled case-law that, in order for national tax rules such as those at issue in the main proceedings – which, for the purposes of calculating inheritance tax, distinguish as to the amount of the tax-free allowance in respect of immovable property located in the Member State concerned according to whether the deceased or the heir resides in that State or whether they both reside 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 justifiable by overriding reasons in the public interest. 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 Case C-319/02 Manninen [2004] ECR I-7477, paragraph 29; Eckelkamp and Others , paragraphs 58 and 59; Arens-Sikken , paragraphs 52 and 53; and Mattner , paragraph 34).
The comparability of the situations at issue
48. It must, however, be pointed out that that line of argument has been dismissed by the Court not only, as those governments claim, as regards the calculation of transfer duties payable in respect of the gift of an immovable property ( Mattner , paragraphs 35 to 38) but also as regards the calculation of inheritance tax payable in respect of such a property ( Jäger , paragraph 44; Eckelkamp and Others , paragraphs 61 to 63; and Arens-Sikken , paragraphs 55 to 57).
49. In that regard, the Court held that, as regards the amount of inheritance tax payable in respect of immovable property in Germany, there is no objective difference justifying the unequal tax treatment of the situation in which neither person resides in that Member State and the situation in which at least one of them resides there. The amount of inheritance tax relating to an immovable property in Germany is calculated pursuant to the ErbStG on the basis both of the value of the property and of the personal link between the deceased and the inheritor. Neither of those criteria depends on the place of residence of the deceased and the inheritor (see, to that effect, Jäger , paragraph 44; Eckelkamp and Others , paragraph 61; and Arens-Sikken , paragraph 55).
51. Where, for the purposes of taxing immovable property acquired by inheritance and located in the Member State concerned, national legislation places on the same footing (i) non-resident heirs who have acquired the property from a non‑resident deceased and (ii) non-resident or resident heirs who have acquired it from a resident deceased and resident heirs who have acquired it from a non-resident deceased it cannot, without infringing the requirements of European Union law, treat those heirs differently in connection with that tax as regards the application of a tax-free allowance in respect of the immovable property. By treating inheritances of those two classes of persons in the same way except in relation to the amount of the allowance which an heir may receive, the national legislature accepted that there was no objective difference between them as regards the detailed rules and conditions of charging inheritance tax which could justify a difference in treatment (see, by analogy, Eckelkamp and Others , paragraph 63; Arens-Sikken , paragraph 57; and Mattner , paragraph 38).
52. Admittedly, as the Belgian and German Governments argue, the taxable value of the inheritance of a non-resident heir, where he is partially subject to inheritance tax in Germany, is ‘in principle’, in the words used by those governments, less than that of a resident or non-resident heir who is wholly subject to that tax in that Member State.
55. It follows that, as the amount of the tax-free allowance does not depend on the amount of the taxable value but is granted to the heir in his capacity as a taxable person, the fact that the non-resident heir of a non-resident deceased has limited tax liability does not, for the purposes of that allowance, make the situation of that heir objectively different from that of the non‑resident heir of a resident deceased or from that of the resident heir of a resident or non‑resident deceased.
59. On this point, it should be recalled that the Court has indeed held that the need to preserve the coherence of a tax system may justify a restriction on the exercise of the fundamental freedoms guaranteed by the Treaty. However, for such a justification to be accepted, a direct link has to be established between the granting of the tax advantage concerned and the offsetting of that advantage by a particular tax (see Manninen , paragraph 42, and Case C‑182/08 Glaxo Wellcome  [2009] ECR I‑8591, paragraphs 77 and 78).
60. In the present case, it suffices to state that the tax advantage resulting, in the Member State in which the inherited immovable property is located, from the application of a full allowance against the taxable value in a case where that inheritance involves at least one resident of that State is not offset in that State by any particular tax charge by way of inheritance tax (see, by analogy, Mattner , paragraph 54).
63. According to the case-law of the Court, where the legislation of a Member State makes the grant of a tax advantage dependent on satisfying requirements, compliance with which can be verified only by obtaining information from the competent authorities of a third country, it is in principle legitimate for the Member State to refuse to grant that advantage if – in particular, because that third country is not bound under an agreement to provide information – it proves impossible to obtain such information from that country (see A , paragraph 63; Case C‑72/09 Établissements Rimbaud  [2010] ECR I-10659, paragraph 44; and Case C-48/11 A [2012] ECR I-0000, paragraph 36).