X NV v Staatssecretaris van Financiën.
Date: 2012-10-18
18. As a preliminary point, it should be recalled that, according to well-established case-law, although direct taxation falls within their competence, the Member States must nonetheless exercise that competence in a manner consistent with European Union law (see, inter alia, Case C-374/04 Test Claimants in Class IV of the ACT Group Litigation  [2006] ECR I-11673, paragraph 36; Case C-379/05 Amurta  [2007] ECR I-9569, paragraph 16; and Case C-303/07 Aberdeen Property Fininvest Alpha [2009] ECR I-5145, paragraph 24).
The first question
20. It is important to note at the outset that Article 56 TFEU precludes the application of any national rules which have the effect of making the provision of services between Member States more difficult than the provision of services purely within a Member State (see, inter alia, Joined Cases C-155/08 and C-157/08 X and Passenheim-van Schoot [2009] ECR I-5093, paragraph 32 and the case-law cited).
21. In accordance with the Court’s case-law, Article 56 TFEU requires the abolition of any restriction on the freedom to provide services imposed on the ground that the person providing a service is established in a Member State other than that in which the service is provided (Case C-290/04 FKP Scorpio Konzertproduktionen [2006] ECR I-9461, paragraph 31, and Case C-345/04 Centro Equestre da Lezíria Grande [2007] ECR I-1425, paragraph 20).
22. Restrictions on the freedom to provide services are national measures which prohibit, impede or render less attractive the exercise of that freedom (see, inter alia, Case C-330/07 Jobra  [2008] ECR I-9099, paragraph 19, and Case C-287/10 Tankreederei I  [2010] ECR I-14233, paragraph 15).
23. Furthermore, according to settled case-law, Article 56 TFEU confers rights not only on the provider of services but also on the recipient of those services (see Case C-294/97 Eurowings Luftverkehr  [1999] ECR I-7447, paragraph 34; FKP Scorpio Konzertproduktionen, paragraph 32; and Case C-233/09 Dijkman and Dijkman-Lavaleije  [2010] ECR I-6645, paragraph 24).
26. While it is true that the Court has already accepted the application of different tax collection techniques to those deriving income from capital depending on whether they are resident or non-resident, that difference in treatment relates to situations which are not objectively comparable ( Truck Center , paragraph 41). As that difference in treatment does not, moreover, necessarily procure an advantage for resident recipients, the Court has ruled that it does not constitute a restriction of the freedom of establishment ( Truck Center , paragraphs 49 and 50).
28. However, it is important to note that, irrespective of the effects that the withholding tax may have on the tax situation of non-resident service providers, such an obligation to withhold tax, inasmuch as it entails an additional administrative burden as well as the related risks concerning liability, is liable to render cross-border services less attractive for resident recipients of services than services provided by resident service providers and to deter those recipients from having recourse to non-resident service providers.
30. In that regard, suffice it to point out that a restriction on a fundamental freedom is prohibited by the TFEU even if it is of limited scope or minor importance (see, to that effect, Case C-34/98 Commission  v France  [2000] ECR I-995, paragraph 49; Case C-9/02 de Lasteyrie du Saillant [2004] ECR I-2409, paragraph 43; Case C-170/05 Denkavit Internationaal and Denkavit France [2006] ECR I-11949, paragraph 50; and Dijkman and Dijkman-Lavaleije , paragraph 42).
31. Furthermore, in accordance with the case-law of the Court, unfavourable tax treatment contrary to a fundamental freedom cannot be considered to be compatible with European Union law as a result of the existence of other advantages, even supposing that such advantages exist (see to that effect, Case C-35/98 Verkooijen [2000] ECR I-4071, paragraph 61; Amurta , paragraph 75; and Dijkman and Dijkman-Lavaleije , paragraph 41).
32. Consequently, it must be held that the obligation on the recipient of services to withhold at source tax on the remuneration paid to non-resident service providers, whereas such a withholding tax at source is not levied on remuneration paid to resident service providers, constitutes a restriction on the freedom to provide services in that it entails an additional administrative burden and related liability risks.
36. In accordance with settled case-law, a restriction on the freedom to provide services may be accepted only if it is justified by overriding reasons in the public interest. Even if that were so, application of that restriction would still have to be such as to ensure achievement of the aim pursued and not go beyond what is necessary for that purpose ( Tankreederei I , paragraph 19 and the case-law cited).
37. It follows from well-established case-law that the need for, and proportionality of, provisions adopted by a Member State are not excluded merely because that State has chosen a system of protection different from that adopted by another Member State (see Case C-36/02 Omega  [2004] ECR I-9609, paragraph 38), as those provisions need be assessed solely in the light of the objectives pursued by the national authorities of the Member State concerned and of the level of protection which they seek to ensure (see, to that effect, Case C-124/97 Läärä and Others [1999] ECR I-6067, paragraph 36; Case C-67/98 Zenatti  [1999] ECR I-7289, paragraph 34; and Case C-6/01 Anomar and Others [2003] ECR I-8621, paragraph 80).
39. The Court has already held that the need to ensure the effective collection of income tax constitutes an overriding reason in the general interest capable of justifying a restriction on the freedom to provide services. According to the Court, the procedure of retention at source and the liability rules supporting it constitute a legitimate and appropriate means of ensuring the tax treatment of the income of a person established outside the State of taxation and ensuring that the income concerned does not escape taxation in the State of residence and the State where the services are provided ( FKP Scorpio Konzertproduktionen,  paragraph 36).
40. The governments which submitted observations to the Court claim that such a justification must be allowed in respect of the legislation here at issue in the main proceedings.
41. The Netherlands Government explains, in particular, that the withholding at source at issue in the main proceedings was introduced following the finding by the tax authorities that the system based on tax assessments addressed individually to each non-resident service provider proved to be ineffective as a result of the difficulties and the administrative burden that such a system generated for the non-resident service providers as well as for the authorities. According to the Netherlands Government, the withholding tax at source levied on remuneration paid to sports clubs, from which relevant expenses are deducted, allows the players’ income to be taxed in a simpler and more effective manner, both from the point of view of the players and from that of the authorities.
42. In this respect, it should be noted that, in the case of service providers who provide occasional services in a Member State other than that in which they are established, and where they remain only a short period of time, a withholding tax at source constitutes an appropriate means of ensuring the effective collection of the tax due.
43. It is also necessary to determine whether that measure does not go beyond what is necessary to ensure the effective collection of the tax due, in the light of, inter alia, the opportunities presented by Directive 76/308 in the field of mutual assistance for the recovery of taxes.
44. Directive 76/308 establishes common rules on mutual assistance in order to ensure the recovery of claims relating to certain levies, duties and taxes (Case C-233/08 Kyrian  [2010] ECR I-177, paragraph 34). In accordance with the provisions of that directive, a Member State may request assistance from another Member State in relation to the recovery of income tax payable by a taxpayer resident in the latter Member State (Case C-520/04 Turpeinen [2006] ECR I-10685, paragraph 37).
47. The extension of the scope of Directive 76/308, in particular to claims relating to taxes on income, by Directive 2001/44, seeks, as is evident from recitals 1, 2 and 3 in the preamble to the latter, to safeguard the ‘fiscal neutrality of the internal market’ and to protect the financial interests of Member States in view of the growth of tax fraud (Case C-338/01 Commission  v Council  [2004] ECR I-4829, paragraph 68). While Directive 2001/44 carries out a degree of approximation of national provisions in the area of taxation inasmuch as it obliges all Member States to treat claims originating in other Member States as being national claims ( Commission  v Council , paragraph 75), its aim, as the Advocate General has noted in point 53 of her Opinion, was not to replace the taxation at source as a method of collecting tax.
52. In the light of all of those considerations, it must be held, as the Advocate General has observed in point 59 of her Opinion, that the collection of the tax directly from the non-resident service provider would not necessarily constitute a less severe means than deduction at source.