Commission of the European Communities v Grand Duchy of Luxembourg.
Date: 1995-10-26
9 The Commission refers to the judgment in Case C-175/88 Biehl v Administration des Contributions [1990] ECR I-1779, and states that the effect of Articles 145 and 154(6) of the LIR is to deprive workers who leave the country or take up residence there during a tax year of the right to repayment of excess amounts of tax deducted, a right which permanent residents enjoy. Consequently, the Commission considers that those provisions introduce discrimination, contrary to Article 48(2) of the Treaty and Article 7(2) of Regulation No 1612/68, against taxpayers who have made use of their right to free movement.
13 In that regard, the Court held in its judgment in Biehl, cited above, at paragraph 12, that the principle of equal treatment with regard to remuneration would be rendered ineffective if it could be undermined by discriminatory national provisions on income tax. For that reason the Council had laid down, in Article 7 of Regulation No 1612/68, that workers who were nationals of a Member State were to enjoy, in the territory of another Member State, the same tax advantages as national workers.
14 Secondly, the Court has held that the rules regarding equality of treatment forbid not only overt discrimination by reason of nationality but also all covert forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result (Case 152/73 Sotgiu v Deutsche Bundespost [1974] ECR 153, paragraph 11).
15 In its judgment in Biehl, the Court deduced from the foregoing that Article 48(2) of the Treaty precluded a Member State from providing in its tax legislation, as in Article 154(6) of the LIR, that sums deducted by way of tax from the salaries and wages of employed persons who were nationals of a Member State and were resident taxpayers for only part of the year because they had taken up residence in the country or left it during the course of the tax year were to remain the property of the Treasury and were not repayable. Even though the criterion of permanent residence in the national territory in connection with obtaining any repayment of excess amounts of tax deducted applied irrespective of the nationality of the taxpayer concerned, there was a risk that it would work in particular against taxpayers who were nationals of other Member States, since it was often those persons who in the course of the year left the country or took up residence there.
16 The same conclusion must be reached, on the same grounds, as regards legislation under which a taxpayer who has no right to taxation by direct assessment must, during the course of a tax year, have been employed on the national territory for a period of at least nine months in order to become entitled, pursuant to Article 145 of the LIR, to an adjustment on the basis of an annual calculation.
17 As the Court has already held in the judgment in Biehl, at paragraphs 17 and 18, the fact that under Luxembourg law there exists a non-contentious procedure allowing temporarily resident taxpayers to request the tax authority to repay excess amounts of tax deducted by showing the unfair consequences which the application of Article 154(6) or Article 145 of the LIR entails for them cannot in every case remedy the discriminatory consequences which follow from the application of the national provisions at issue (see also Case C-279/93 Schumacker [1995] ECR I-225, paragraphs 56 and 57).
18 The Court has consistently held that the incompatibility of provisions of national law with provisions of the Treaty, even those directly applicable, can be definitively eliminated only by means of binding domestic provisions having the same legal force as those which require to be amended. Mere administrative practices, which by their nature are alterable at will by the authorities and are not given appropriate publicity, cannot be regarded as constituting the proper fulfilment of a Member State' s obligations under the Treaty, since they maintain, for the persons concerned, a state of uncertainty as regards the extent of their rights as guaranteed by the Treaty (see in particular Case C-80/92 Commission v Belgium [1994] ECR I-1019, paragraph 20, and in Case C-307/89 Commission v France [1991] ECR I-2903, paragraph 13).