Commission of the European Communities v Kingdom of Spain.
Date: 2009-10-06
18. As regards, first, the alleged infringement of the principle of protection of legitimate expectations, a corollary of the principle of legal certainty, and the principle of cooperation in good faith, it must be recalled that the procedure for a declaration of failure on the part of a Member State to fulfil its obligations is based on the objective finding that a Member State has failed to fulfil its obligations under Community law and that the principles of protection of legitimate expectations and loyal cooperation cannot, in circumstances such as those of the present case, be relied on by a Member State in order to preclude an objective finding of a failure on its part to fulfil its obligations under the EC Treaty, since to admit that justification would run counter to the aim pursued by the procedure under Article 226 EC (Case C‑523/04 Commission  v Netherlands  [2007] ECR I‑3267, paragraph 28).
21. Admittedly, the excessive duration of the pre-litigation procedure is capable of constituting a defect rendering an action for failure to fulfil obligations inadmissible. However, it is clear from the case-law that such a conclusion is inevitable only where the conduct of the Commission has made it difficult to refute its arguments, thus infringing the rights of defence of the Member State concerned, and that it is for that Member State to provide evidence of such a difficulty (see, to that effect, Case C‑33/04 Commission  v Luxembourg  [2005] ECR I‑10629, paragraph 76 and case-law there cited).
23. As regards, secondly, the principle of legal certainty, it must be pointed out that the Court has consistently held that, first, the question whether there has been a failure to fulfil obligations must be examined on the basis of the position in which the Member State found itself at the end of the period laid down in the reasoned opinion (see, inter alia, Case C‑173/01 Commission  v Greece  [2002] ECR I‑6129, paragraph 7, and Case C‑519/03 Commission  v Luxembourg  [2005] ECR I‑3067, paragraph 18) and, secondly, the Commission still has an interest in bringing an action under Article 226 EC even when the alleged infringement has been remedied after the expiry of the period prescribed in the reasoned opinion (Case C‑519/03 Commission  v Luxembourg , paragraph 19).
25. As regards, thirdly, the plea in law based on an alleged misuse of powers, suffice it to state that, in accordance with the Court’s settled case-law, the Commission does not have to show an interest to bring proceedings or to state the reasons why it is bringing an action for failure to fulfil obligations (see, inter alia, Case C‑333/99 Commission  v France  [2001] ECR I‑1025, paragraph 24; Case C‑474/99 Commission  v Spain  [2002] ECR I‑5293, paragraph 25; and Case C‑33/04 Commission  v Luxembourg , paragraphs 65 and 66). Since the subject-matter of the action as it is to be found in the application corresponds to the subject‑matter of the dispute as stated in the letter of formal notice and in the reasoned opinion, it cannot validly be maintained that the Commission has misused its powers.
42. It must be added that Article 58(1) EC, which, as a derogation from the fundamental principle of the free movement of capital, must be interpreted strictly, cannot be interpreted as meaning that any tax legislation making a distinction between taxpayers by reference to the place where they invest their capital is automatically compatible with the Treaty (see, to that effect, Case C‑315/02 Lenz  [2004] ECR I‑7063, paragraph 26).
46. As the Court has already held, in relation to direct taxes, the situations of residents and of non-residents within a State are generally not comparable, because the income received in the territory of a Member 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 is habitually resident (Case C‑279/93 Schumacker  [1995] ECR I‑225, paragraphs 31 and 32, and Gerritse , paragraph 43).
47. Thus, 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, and Gerritse , paragraph 44).
52. Nor can that argument be supported by an application of Gerritse by way of analogy, as relied on by the Kingdom of Spain. It has neither been demonstrated nor even claimed that the legislation against which the present action is directed, as distinct from that at issue in Gerritse , pursued, by means of granting an advantageous tax treatment to residents, a social purpose. It follows that, in contrast to what the Court decided in paragraph 48 of Gerritse , it cannot, in the present case, be regarded as legitimate to reserve the grant of that advantageous treatment to persons who receive the greater part of their taxable income in the State of taxation, that is to say, as a general rule, residents.
54. It is clear moreover from the Court’s case-law that the existence of a double taxation agreement does not mean that the income which a taxpayer receives in a State where he is not resident and which is exclusively liable to tax in that State may not nevertheless be taken into consideration by the State of residence when calculating the amount of the tax on the remaining income of that taxpayer in order, in particular, to reflect the principle that taxes should be applied progressively. It cannot therefore be validly argued that the fact that a taxpayer is non-resident enables him to escape the application of that rule. It follows that, in such circumstances, the two categories of taxpayers are in a comparable situation with regard to that rule (see, to that effect, Asscher , paragraphs 47 and 48).
55. In those circumstances, it must be concluded that, in relation to the taxation of capital gains accruing on the disposal of assets owned for more than one year, the legislation at issue does not correspond to any difference in situation, for the purposes of Article 58(1) EC, based on the taxpayers’ place of residence (see, to that effect, Lenz , paragraph 33).
61. In that regard, it is clear from the case-law of the Court that such an objective may justify a restriction on the exercise of the fundamental freedoms guaranteed by the Treaty. However, for an argument based on such a justification to succeed, 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 levy (Case C‑319/02 Manninen  [2004] ECR I‑7477, paragraph 42).
67. Since the provisions of Article 40 of the EEA agreement have the same legal scope as the provisions, identical in substance, of Article 56 EC (see Case C‑521/07 Commission  v Netherlands  [2009] ECR I‑0000, paragraph 33), the foregoing considerations can be applied mutatis mutandis  to Article 40.