(September 11, 2014)

On September 11, 2014 the European Court of Justice (ECJ) ruled in case C-489/13 Verest and Gerards versus Belgische Staat (ECLI:EU:C:2014:2210). The following question was referred to the ECJ for a preliminary ruling:

Does Article 56 of the EC Treaty preclude the taxation in one Member State, on a basis other than its local cadastral income, of immovable property situated in another Member State which is not rented out, in particular where, as in the present case, the local cadastral income is determined in a similar way to the Belgian cadastral income from Belgian immovable property?

The ECJ ruled as follows:

Article 63 TFEU must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, in so far as it is liable to lead, when a progressivity clause contained in a convention for the prevention of double taxation is applied, to a higher rate of tax on income merely because the method for determining income from immovable property results in income deriving from immovable property that is not rented out situated in another Member State being assessed at a higher amount than income from such property situated in the first Member State. It is for the referrring court to ascertain whether that is in fact the effect of the legislation at issue in the dispute in the main proceedings.

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