On February 16, 2016 on the website of the Court of Justice of the European Union the opinion of Advocate General Campos Sánchez-Bordona in Case C‑300/15 Charles Kohll and Sylvie Kohll-Schlesser versus Directeur de l’administration des contributions directes was published (ECLI:EU:C:2016:86).

Does the principle of freedom of movement for workers, as affirmed, in particular, in Article 45 TFEU, preclude the provisions of Article 139ter(1) of the amended Law of 4 December 1967 on tax in so far as they restrict eligibility for the tax credit established therein to persons in possession of a tax deduction document?

Facts of the case and proceedings before the national court

·        The case before the referring court concerns two pensions of Netherlands origin, paid to Mr Kohll, and taxable in Luxembourg: the first is paid directly by Shell International B.V., an undertaking for which Mr Kohll worked for several years, while the second is paid by the Sociale Verzekeringsbank (‘the SVB’).

·        Given that the two Netherlands pensions had not been subject to deduction at source in Luxembourg, Mr Kohll was not granted pensioners’ tax credit for the three years at issue in the main proceedings, that is to say, 2009, 2010 and 2011.

·        On 20 February 2013, Mr Kohll lodged an administrative complaint with the Directeur de l’administration des Contributions directes (‘the Directeur’) against the income tax notice for the year 2009, issued on 9 June 2010, and the income tax notices for the years 2010 and 2011, both issued on 6 February 2013.

·        By decision of 23 September 2013, the Directeur declared the complaint against the income tax notice for 2009 inadmissible for being out of time and rectified in pejus the income tax notices for the years 2010 and 2011. The Directeur took the view, inter alia, that since the complainant received pensions not subject to deduction at source in Luxembourg, he was not entitled to a tax credit for pensioners under Article 139ter of the LIT for the years 2010 and 2011.

·        The documents before the Court show that the Tribunal administratif ruled inadmissible, because vitiated by a procedural defect, the action brought by Mrs Kohll-Schlesser, the applicant’s wife, in relation to her own pension paid by the SVB, which she had received in the years at issue. That complaint is no longer the object of proceedings.

·       The applicant claimed in the proceedings before the Tribunal administratif that refusing to grant tax credits to persons whose pensions are not subject to deduction at source in Luxembourg excludes those whose pensions are not subject to that deduction, thereby restricting the grant of tax credits to persons receiving their pension from a pension fund in Luxembourg. In that connection, the applicant was doubtful whether the legislature had the intention in 2008, the year when the LIT was amended in the manner at issue, of disqualifying from entitlement to the tax credit pensioners resident in Luxembourg but whose income comes from pension rights acquired with and paid by foreign pension funds. The applicant contended that that interpretation constitutes an infringement of, inter alia, the freedom of movement for persons (workers) affirmed in Article 45 TFEU.

·        For her part, the Government representative submitted that Article 139ter LIT does not raise any difficulties in relation to freedom of movement for workers within the meaning of Article 45 TFEU. She contended that Mr Kohll had not suffered any discrimination, given that the difference in his situation was a consequence of the characteristics of the tax credit regime introduced by the legislature.

·        The Government representative went on to state that that difference was objectively justified in the light of the aim pursued by the provision. Nor did she consider that there was any interference with the free movement of persons safeguarded by Article 21 TFEU, for the national legislation at issue does not affect freedom of movement, inasmuch as it does not place any obstacle in the way of residence in another Member State.

·        The Tribunal administratif states that, in making the grant of the tax credit subject to the condition that the taxpayer must be in possession of a tax deduction document, Article 139ter LIT could lead to indirect discrimination, even though it does not involve any condition relating to the nationality of potential beneficiaries. That view is supported by the fact that the tax credit in question is not granted to persons in receipt of pensions not subject to deduction at source in Luxembourg, such as pensions from abroad.

·        In those circumstances, the referring court states that, in view of the difficulty in interpreting Article 139ter LIT and for want of Community case-law resolving a legal issue of a similar nature, it has decided to seek a preliminary ruling from the Court of Justice on the following question:

“Does the principle of freedom of movement for workers, as affirmed, in particular, in Article 45 TFEU, preclude the provisions of Article 139ter(1) of the amended Law of 4 December 1967 on tax in so far as they restrict eligibility for the tax credit established therein to persons in possession of a tax deduction document?”

Conclusion

In the light of the foregoing arguments, the Advocate General proposes that the Court of Justice should answer the question referred for a preliminary ruling by the Tribunal administrative du Luxembourg as follows:

“Freedom of movement for workers, laid down in Article 45 TFEU, precludes a national measure, like Article 139ter(1) of the amended Law of 4 December 1967 on income tax, in so far as the latter restricts eligibility for pensioners’ tax credit solely to persons subject to the system of tax deduction at source”.

For further information click here to be forwarded to the text of the opinion as published on the website of the CJEU, which will open in a new window.

Did you know that in our section CJEU Rulings we have made a selection of rulings of the CJEU? We have organized these rulings based on the subject they relate to (e.g. Freedom of establishment, Free movement of capital, Indirect taxes on the raising of capital, etc).

Copyright – internationaltaxplaza.info

Are you looking for a motivated new colleague? Then place your job ad on International Tax Plaza!

and

Follow International Tax Plaza on Twitter (@IntTaxPlaza)