Frank Montag v Finanzamt Köln-Mitte.
Date: 2018-12-06
21


Article 49 TFEU requires the abolition of restrictions on the freedom of establishment. The Court has consistently held that, even though, according to their wording, the FEU Treaty provisions on freedom of establishment are aimed at ensuring that foreign nationals are treated in the host Member State in the same way as nationals of that State, they also prohibit the Member State of origin from hindering the establishment in another Member State of one of its nationals or of a company incorporated under its legislation (see, to that effect, judgments of 13 April 2000, Baars, C‑251/98, EU:C:2000:205, paragraph 28 and the case-law cited; of 11 March 2004, de Lasteyrie du Saillant, C‑9/02, EU:C:2004:138, paragraph 42; and of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 35 and the case-law cited).
22


It is also settled case-law that all measures which prohibit, impede or render less attractive the exercise of the freedom of establishment must be regarded as restrictions on that freedom (judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 36 and the case-law cited).
26


It is clear from the Court’s case-law that such a restriction is permissible only if it relates to situations which are not objectively comparable or if it is justified by an overriding reason in the public interest (judgment of 17 July 2014, Nordea Bank Danmark, C‑48/13, EU:C:2014:2087, paragraph 23). It is further necessary, in such a case, that the restriction be appropriate for ensuring the attainment of the objective that it pursues and not go beyond what is necessary to attain it (judgment of 20 December 2017, Deister Holding and Juhler Holding, C‑504/16 and C‑613/16, EU:C:2017:1009, paragraph 91 and the case-law cited).
27


It is settled case-law that, in relation to direct taxes, the situations of residents and non-residents within a State are not, as a rule, comparable, since 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 (see, inter alia, judgments of 31 March 2011, Schröder, C‑450/09, EU:C:2011:198, paragraph 37, and of 24 February 2015, Grünewald, C‑559/13, EU:C:2015:109, paragraph 25).
28


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, given 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 (see, inter alia, judgments of 31 March 2011, Schröder, C‑450/09, EU:C:2011:198, paragraph 38, and of 24 February 2015, Grünewald, C‑559/13, EU:C:2015:109, paragraph 26).
29


The position is different, however, where the non-resident receives no significant income in the State of his residence and obtains the greater part of his taxable income from an activity performed in the other Member State concerned (judgment of 24 February 2015, Grünewald, C‑559/13, EU:C:2015:109, paragraph 27), and consequently the Member State of residence is not in a position to grant him the benefits that result from taking into account his personal and family circumstances (see, inter alia, judgments of 14 February 1995, Schumacker, C‑279/93, EU:C:1995:31, paragraph 36; of 16 October 2008, Renneberg, C‑527/06, EU:C:2008:566, paragraph 61; and of 18 June 2015, Kieback, C‑9/14, EU:C:2015:406, paragraph 25).
30


Moreover, the Court has also held, in relation to expenses directly linked to an activity which has generated taxable income in a Member State, that residents of that State and non-residents are in a comparable situation (see, inter alia, judgments of 31 March 2011, Schröder, C‑450/09, EU:C:2011:198, paragraph 40 and the case-law cited, and of 24 February 2015, Grünewald, C‑559/13, EU:C:2015:109, paragraph 29).
32


Accordingly, as regards the deduction of provident expenses in Germany, in a situation such as that at issue in the main proceedings, a non-resident, such as the applicant in the main proceedings, and a resident would be in a comparable situation only if, despite its characterisation under national law as special expenses, the provident expenses could be treated as expenses directly linked to an activity which has generated taxable income in Germany, within the meaning of the case-law set out in paragraph 30 above (see, by analogy, judgment of 24 February 2015, Grünewald, C‑559/13, EU:C:2015:109, paragraph 31).
33


In accordance with the Court’s case-law, expenses occasioned by the activity which generated taxable income are directly linked to that activity and are accordingly necessary in order to carry it out (see, to that effect, judgments of 12 June 2003, Gerritse, C‑234/01, EU:C:2003:340, paragraphs 9 and 27; of 15 February 2007, Centro Equestre da Lezíria Grande, C‑345/04, EU:C:2007:96, paragraph 25; and of 24 February 2015, Grünewald, C‑559/13, EU:C:2015:109, paragraph 30).
34


It must be observed that it is ultimately for the national court, which has sole jurisdiction to determine the facts in the case before it and to interpret the national legislation, to determine whether that is the case here. However, in preliminary ruling proceedings, the Court, which is called on to provide answers of use to the national court, may provide guidance based on the documents in the file and on the written and oral observations submitted to it, in order to enable the national court to give judgment (see, inter alia, judgments of 16 May 2013, Alakor Gabonatermelő és Forgalmazó, C‑191/12, EU:C:2013:315, paragraph 31 and the case-law cited, and of 24 February 2015, Grünewald, C‑559/13, EU:C:2015:109, paragraph 32).
41


Second, the fact that the applicant in the main proceedings may have been able to avoid such expenses cannot alter their characterisation. The existence of a direct link, within the meaning of the case-law set out in paragraph 33 above, does not mean that an expense must be unavoidable. Thus, it was held that there was a direct link in respect of costs involved in obtaining tax advice for the purpose of preparing a tax return, since the duty to file such a tax return results from the fact of receiving income in the Member State in question (judgment of 6 July 2006, Conijn, C‑346/04, EU:C:2006:445, paragraph 22).
42


The existence of a direct link, within the meaning of the case-law set out in paragraph 33 above, results from the fact that the expense is inextricably linked to the activity which gives rise to that income (judgments of 31 March 2011, Schröder, C‑450/09, EU:C:2011:198, paragraph 43, and of 24 February 2015, Grünewald, C‑559/13, EU:C:2015:109, paragraph 36). As has been stated in paragraph 37 above, the payment of the contributions to the lawyers’ provident institution is necessary on account of membership of the bar association, which is itself necessary in order to carry on the activity which generated the taxable income.
61


In relying without further explanation on that risk, the defendant in the main proceedings has not enabled the Court to assess the implications of that argument when it has not been claimed that that risk could not have been avoided through the application of Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation (OJ 1977 L 336, p. 15), as amended by Council Directive 2006/98/EC of 20 November 2006 (OJ 2006 L 363, p. 129), in force at the time (see, also, judgment of 24 February 2015, Grünewald, C‑559/13, EU:C:2015:109, paragraph 52).