Katja Ettwein v Finanzamt Konstanz.
Date: 2013-02-28
30. It must be observed that, according to the legislation at issue in the main proceedings, the ‘splitting’ procedure is a tax advantage for spouses subject to income tax in Germany where the income received by one of them is markedly higher than that received by the other. As the Court has found, the system was introduced to mitigate the progressive nature of the income tax scales. It consists in aggregating the total income of the spouses and then notionally attributing 50% of it to each of them and taxing it accordingly. If the income of one spouse is high and that of the other low, ‘splitting’ levels out their taxable amounts and palliates the progressive nature of the income tax scales ( Schumacker , paragraph 7).
33. The argument of the German Government and the European Commission that the Agreement applies solely where there is discrimination on grounds of nationality, in other words where nationals of one contracting party are treated unequally in the territory of the other contracting party compared to nationals, must be rejected at the outset. It is possible that nationals of a contracting party may also claim rights under the Agreement against their own country, in certain circumstances and in accordance with the provisions applicable (see, inter alia, Case C-257/10 Bergström  [2011] ECR I-13227, paragraphs 27 to 34).
34. With respect to the circumstances of the main proceedings and the provisions of the Agreement that may be applicable, it must be noted that, in accordance with its wording, Article 13(1) of Annex I to the Agreement is applicable to the situation of Mr and Mrs Ettwein. They are nationals ‘of a Contracting Party’, namely the Federal Republic of Germany, are resident in the territory ‘of a Contracting Party’, namely the Swiss Confederation, and pursue a self-employed activity in the territory ‘of the other Contracting Party’, namely the Federal Republic of Germany.
35. In that provision a distinction is drawn between the place of residence, situated in the territory of one contracting party, and the place where a self-employed activity is pursued, which must be in the territory of the other contracting party, regardless of the nationality of the persons concerned. Consequently, by virtue of that provision, Mr and Mrs Ettwein must be categorised as ‘self-employed frontier workers’ for the purposes of applying the Agreement, it being moreover common ground that they return every day from the place of their business activity to their place of residence.
41. As Mr and Mrs Ettwein are ‘self-employed frontier workers’ within the meaning of Article 13(1) of Annex I to the Agreement, the principle of equal treatment stated in Article 15(1) of that annex applies to them also (see Case C-506/10 Graf and Engel  [2011] ECR I-9345, paragraph 23 and the case-law cited), the ‘host country’ within the meaning of the latter provision being, in their situation, the Federal Republic of Germany.
46. According to the Court’s case-law, in relation to income tax, the taxpayer’s personal ability to pay tax, as a result of taking into account all his income and his personal and family circumstances, can be assessed most easily in his State of residence, in which the major part of his income will normally be concentrated, and from that point of view the situations of residents and non-residents are as a general rule not comparable ( Schumacker , paragraphs 32 to 34, and Asscher , paragraph 41). The Court has pointed out, however, that the position is different in a case in which the non-resident receives no significant income in his State of residence and obtains the major part of his taxable income from an activity pursued in another State, with the result that the State of residence is not in a position to grant him the advantages resulting from the taking into account of his personal and family circumstances ( Schumacker , paragraph 36).
47. The Court has held that a non-resident taxpayer – employed or self-employed – who receives all or almost all of his income in the State in which he pursues his business activity is objectively in the same situation, as regards income tax, as a resident of that State who pursues comparable activities there. Those two categories of taxpayers are, in particular, in comparable situations with regard to the taking into account of their personal and family circumstances. Such taking into account is not possible in the State of residence of frontier workers such as Mr and Mrs Ettwein, since they do not receive income there (see, to that effect, Schumacker , paragraphs 37 and 38; Asscher , paragraphs 42 and 43; and Case C-80/94 Wielockx  [1995] ECR I-2493, paragraph 20).
51. That conclusion is also in keeping with the case-law of the Court according to which the freedom of movement for persons which, according to the second sentence in the preamble to the Agreement, the contracting parties are resolved to bring about between them on the basis of the rules applying in the European Union would be impeded if a national of a contracting party were to be placed at a disadvantage in his country of origin solely for having exercised his right of movement ( Bergström , paragraphs 27 and 28).