D. M. M. A. Arens-Sikken v Staatssecretaris van Financiën.
Date: 2008-09-11
28. Article 56(1) EC lays down a general prohibition on restrictions on the movement of capital between Member States (Joined Cases C‑463/04 and C‑464/04 Federconsumatori and Others  [2007] ECR I‑0000, paragraph 19 and the case-law cited).
29. In the absence of a definition in the EC Treaty of ‘movement of capital’ for the purposes of Article 56(1) EC, the Court has previously recognised the nomenclature annexed to Directive 88/361 as having indicative value, even though the latter was adopted on the basis of Articles 69 and 70(1) of the EEC Treaty (subsequently, Articles 69 and 70(1) of the EC Treaty, repealed by the Treaty of Amsterdam), subject to the qualification, contained in the introduction to the nomenclature, that the list set out therein is not exhaustive (see, in particular, Case C‑513/03 van Hilten‑van der Heijden [2006] ECR I‑1957, paragraph 39; Case C‑452/04 Fidi um Finanz [2006] ECR I‑9521, paragraph 41; Federconsumatori and Others , paragraph 20; and Case C‑256/06 Jäger [2008] ECR I‑0000, paragraph 24).
30. In that regard, the Court – noting, in particular, that inheritances consisting in the transfer to one or more persons of assets left by a deceased person or, in other words, a transfer to the heirs of ownership of the various items of property, rights, and so on which make up those assets fall under heading XI of Annex I to Directive 88/361, entitled ‘Personal capital movements’ – has held that an inheritance is a movement of capital for the purposes of Article 56 EC, except in cases where its constituent elements are confined within a single Member State (see Barbier , paragraph 58; van Hilten‑van der Heijden , paragraph 42; and Jäger , paragraph 25).
36. It follows from the case-law of the Court that the effect of national rules which determine the value of immovable property for the purposes of assessing the amount of tax payable when it is acquired through inheritance may be not only to discourage the purchase of immovable property situated in the Member State concerned, but also to reduce the value of the inheritance of a resident of a Member State other than that in which that property is situated (see, to that effect, Barbier , paragraph 62, and Jäger , paragraph 30).
37. As regards inheritances, the case-law has confirmed that the measures prohibited by Article 56(1) EC as being restrictions on the movement of capital include those the effect of which is to reduce the value of the inheritance of a resident of a State other than the Member State in which the assets concerned are situated and which taxes the inheritance of those assets ( van Hilten‑van der Heijden , paragraph 44, and Jäger , paragraph 31).
41. That conclusion cannot be called into question by the Netherlands Government’s argument that the rules which are applied in the Netherlands do not involve any restriction, as the difference in treatment invoked by Ms Arens-Sikken results from the way in which powers of taxation are allocated between the Member States. That circumstance is irrelevant in the light of the criteria resulting from the case-law referred to in paragraphs 36 and 37 of the present judgment. Moreover, the difference in treatment as regards the taking into account of overendowment debts flows solely from the application of the Netherlands rules at issue (see also, to that effect, Jäger , paragraph 34).
44. Similarly, in relation to Articles 49 EC and 50 EC, the Court has held that national rules which, in matters of taxation, refuse to allow non-residents to deduct business expenses which are directly linked to the activity that generated the taxable income in the Member State concerned, while allowing residents to do so, risk operating mainly to the detriment of nationals of other Member States and are contrary to those articles (see, to that effect, Gerritse , paragraphs 27 and 28).
51. That provision of Article 58 EC, in so far as it is a derogation from the fundamental principle of the free movement of capital, must be interpreted strictly. It cannot therefore be interpreted as meaning that all tax legislation which draws a distinction between taxpayers based on their place of residence or the Member State in which they invest their capital is automatically compatible with the Treaty (see Jäger , paragraph 40).
52. The derogation provided for 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 Case C‑35/98 Verkooijen [2000] ECR I‑4071, paragraph 44; Case C‑319/02 Manninen [2004] ECR I‑7477, paragraph 28; and Jäger , paragraph 41). Moreover, in order to be justified, the difference in treatment in relation to inheritance and transfer duties payable in respect of an immovable property situated in the Kingdom of the Netherlands between the person who, at the time of death, was residing in that Member State and the person who, at the time of death, was residing in another Member State, must not go beyond what is necessary to achieve the objective pursued by the legislation at issue (see, to that effect, Manninen , paragraph 29).
53. A distinction must therefore be made between the unequal treatment permitted under Article 58(1)(a) EC and the arbitrary discrimination prohibited under Article 58(3) EC. According to the case-law, in order for national tax rules such as those at issue in the main proceedings – which, for the purposes of assessing inheritance tax, make a distinction as to the deductibility of overendowment debts according to whether the person whose estate is being administered was residing in that Member State or in another Member State at the time of death – to be considered compatible with the provisions of the Treaty on the free movement of capital, the difference in treatment must concern situations which are not objectively comparable or be justified by overriding reasons in the general interest (see Verkooijen , paragraph 43; Manninen , paragraph 29; and Jäger , paragraph 43).
55. In fact, the situation of the heirs of the deceased concerned in the main proceedings is comparable to that of any heir whose inheritance includes an immovable property situated in the Netherlands and left by a person who was residing in that State at the time of death.
56. The Netherlands legislation deems, in principle, both the heirs of resident persons and the heirs of persons who were non-resident at the time of death to be taxable persons for the purposes of collecting inheritance and/or transfer duties on immovable properties situated in the Netherlands. It is only in respect of the deduction of overendowment debts resulting from a testamentary parental partition inter vivos that the inheritances of residents and non-residents are treated differently.
57. Where national legislation places the heirs of a person who, at the time of death, had the status of resident and those of a person who, at the time of death, had the status of non-resident on the same footing for the purposes of taxing an inherited immovable property which is situated in the Member State concerned, that legislation cannot, without giving rise to discrimination, treat those heirs differently in the taxation of that property so far as concerns the deductibility of charges secured on it. By treating the inheritances of those two categories of persons in the same way (except in relation to the deduction of debts) for the purposes of taxing their inheritance, the national legislature has in fact admitted that there is no objective difference between them in regard to the detailed rules and conditions relating to that taxation which could justify different treatment (see, by analogy, in relation to the right of establishment, Case 270/83 Commission  v France  [1986] ECR 273, paragraph 20, and Case C‑170/05 Denkavit Internationaal and Denkavit France  [2006] ECR I‑11949, paragraph 35; and, in relation to the free movement of capital and inheritance duties, Case C‑11/07 Eckelkamp and Others [2008] ECR I‑0000, paragraph 63).
62. It is clear from the case-law of the Court that, under the second indent of Article 293 EC, the abolition of double taxation is one of the objectives of the European Community to be attained by the Member States. In the absence of unifying or harmonising measures at Community level for the elimination of double taxation, the Member States retain competence for determining the criteria for taxation on income and wealth with a view to eliminating double taxation by means, inter alia, of international agreements. In those circumstances, the Member States remain at liberty to determine the connecting factors for the allocation of fiscal jurisdiction by means of bilateral agreements (see Case C‑336/96 Gilly [1998] ECR I‑2793, paragraphs 24 and 30; Case C‑307/97 Saint-Gobain ZN  [1999] ECR I‑6161, paragraph 57; Case C‑265/04 Bouanich [2006] ECR I‑923, paragraph 49; and also Denkavit Internationaal and Denkavit France , paragraph 43).
63. As regards the exercise of the power of taxation so allocated, the Member States may not, however, disregard Community rules ( Saint-Gobain ZN , paragraph 58; Bouanich , paragraph 50; and also Denkavit Internationaal and Denkavit France , paragraph 44).
65. In those circumstances, it is sufficient to note that the Member State in which the immovable property is situated cannot, in order to justify a restriction on the free movement of capital arising from its rules, rely on the existence of a possibility, beyond its control, of a tax credit being granted by another Member State – such as the Member State in which the person whose estate is being administered was residing at the time of death – which could, wholly or partly, offset the loss incurred by that person’s heirs as a result of the fact that, for the purposes of assessing transfer duties, no account is taken in the Member State in which that property is situated of overendowment debts resulting from a testamentary parental partition inter vivos (see, to that effect, Eckelkamp and Others , paragraph 68).
66. A Member State cannot rely on the existence of a tax advantage granted unilaterally by another Member State – in the present case, the Member State in which the person concerned was residing at the time of his death – in order to escape its obligations under the Treaty and, in particular, under the Treaty provisions relating to the free movement of capital (see, to that effect, Case C‑379/05 Amurta [2007] ECR I‑0000, paragraph 78).