On February 18, 2016 on the website of the Court of Justice of the European Union the opinion of Advocate General Wathelet in Case C‑479/14 Sabine Hünnebeck versus Finanzamt Krefeld was published (ECLI:EU:C:2016:100).
Must Article 63(1) TFEU, read in conjunction with Article 65 TFEU, be interpreted as precluding legislation of a Member State which provides that, for the calculation of gift tax, the allowance to be set against the taxable value in the case of a gift of real property situated in that Member State is lower in the case where the donor and the recipient had their place of residence in another Member State on the date of execution of the gift than the allowance which would have been applicable if at least one of them had had his or her place of residence in the former Member State on that date, even if other legislation of the Member State provides that, on the application of the recipient of the gift, the higher allowance is to be applied, on condition that account is taken of all assets transferred gratuitously by the donor ten years prior to and within ten years following the date of execution of the gift?
The dispute in the main proceedings and the question referred for a preliminary ruling
· Ms Hünnebeck and her two daughters are German nationals and reside in Gloucestershire (United Kingdom). Ms Hünnebeck has not lived in Germany since 1996. Her daughters have never lived in Germany.
· Ms Hünnebeck was a 50% co-owner of a piece of land in Düsseldorf (Germany). By an agreement of 20 September 2011 certified by a notary, she transferred that co-ownership share to her daughters, each of them receiving 50%. It was stipulated that Ms Hünnebeck would be liable for any gift tax which might become payable. On 12 January 2012, the guardian of Ms Hünnebeck’s two daughters, who were minors, approved the agreement of 20 September 2011.
· By two decisions of 31 May 2012, the Finanzamt Krefeld (Tax Office, Krefeld) set the amount of the transfer duties payable by Ms Hünnebeck in respect of the acquisition of a share of the land at issue, by each of her daughters, at EUR 146,509 per share. When calculating the transfer duties, the Finanzamt Krefeld deducted from the taxable value of each share the personal allowance of EUR 2,000 granted to persons with limited tax liability.
· Ms Hünnebeck lodged an administrative challenge seeking to obtain application of the personal allowance of EUR 400,000 available to persons with unlimited tax liability (residents).
· The Finanzamt Krefeld rejected that application, maintaining that Paragraph 2(3) of the ErbStG makes it possible for persons with unlimited tax liability and those with limited tax liability (non-residents) to be treated equally.
· The Finanzgericht Düsseldorf (Finance Court, Düsseldorf, Germany), before which the action between Ms Hünnebeck and the Finanzamt Krefeld has been brought, raises the question of whether Paragraph 16(2) of the ErbStG — even in the light of Paragraph 2(3) of the ErbStG — is compatible with Article 63(1) TFEU read in conjunction with Article 65 TFEU.
· It notes that, in the judgment in Mattner, the Court had already held that Paragraph 16(2) of the ErbStG, in the version in force at the material time, which was worded in almost identical terms to the relevant provision at issue in the main proceedings, was incompatible with EU law. In the light of that judgment alone, the action brought by Ms Hünnebeck should therefore be upheld.
· Under Paragraph 2(1), point 3, read in conjunction with Paragraph 16(2) of the ErbStG, the allowance of EUR 2,000, linked to the fact that Ms Hünnebeck and her daughters resided in the United Kingdom on the date of the gift, is less than the allowance of EUR 400,000 that, under Paragraph 2(1), point 1(a), read in conjunction with Paragraph 15(1) and Paragraph 16(1), point 2, of the ErbStG, would have been applied if at least one of them had resided in Germany on that date.
· However, the Finanzgericht Düsseldorf (Finance Court, Düsseldorf) asks whether the provision contained in Paragraph 2(3) of the ErbStG, adopted by the German legislature following the judgment in Mattner in order to make German national law consistent with EU law, may change that conclusion.
· The Finanzgericht Düsseldorf (Finance Court, Düsseldorf) observes that the Court did not give a ruling on that issue in the action for failure to fulfil obligations concerning Paragraph 16(2) of the ErbStG brought by the European Commission against the Federal Republic of Germany and giving rise to the judgment in Commission v Germany (C‑211/13, EU:C:2014:2148) but has none the less already held that a national provision whose application is optional may be contrary to EU law. Therefore, the Finanzgericht Düsseldorf (Finance Court, Düsseldorf, Germany) considers that the addition of Paragraph 2(3) of the ErbStG may not have remedied the incompatibility of Paragraph 16(2) of the ErbStG with EU law, inter alia, since that paragraph applies automatically in the absence of a request made by the taxpayer.
· In addition, the Finanzgericht Düsseldorf (Finance Court, Düsseldorf) observes that it is also questionable whether the rule set out in Paragraph 2(3) of the ErbStG and applicable on request is compatible with EU law for the following reasons.
· First, under the first sentence of Paragraph 2(3) of the ErbStG, the recipient can make a request only if, at the time of the transfer, the deceased, the donor or the recipient was resident in the territory of a Member State of the European Union or in a State to which the Agreement on the European Economic Area of 2 May 1992 applies. However, in paragraphs 27 to 40 of its judgment in Welte (C‑181/12, EU:C:2013:662), the Court extended, in accordance with the free movement of capital, its case-law concerning the calculation of inheritance tax to situations involving third States. Since, from the point of view of the free movement of capital, gifts are comparable to inheritances, the compatibility of the first sentence of Paragraph 2(3) of the ErbStG is therefore called into question.
· Secondly, in the case of multiple transfers from a single person in the ten years preceding and ten years following the transfer of the assets, the second sentence of Paragraph 2(3) of the ErbStG requires that those multiple transfers also be treated as subject to unlimited tax liability and aggregated in accordance with Paragraph 14 of the ErbStG. That provision therefore renders Paragraph 14 of the ErbStG applicable for twenty years, whereas the first sentence of Paragraph 14(1) of the ErbStG lays down a period of only ten years for the persons with unlimited tax liability referred to in Paragraph 2(1), point 1, of the ErbStG. It is therefore conceivable that, in the event of a move to or a departure from Germany, taxpayers who have requested to have unlimited tax liability under Paragraph 2(3) of the ErbStG may be placed at a disadvantage compared with persons with unlimited tax liability under Paragraph 2(1), point 1, of the ErbStG.
· In those circumstances, the Finanzgericht Düsseldorf (Finance Court) decided to stay the proceedings and refer the following question to the Court for a preliminary ruling:
‘Must Article 63(1) TFEU, read in conjunction with Article 65 TFEU, be interpreted as precluding legislation of a Member State which provides that, for the calculation of gift tax, the allowance to be set against the taxable value in the case of a gift of real property situated in that Member State is lower in the case where the donor and the recipient had their place of residence in another Member State on the date of execution of the gift than the allowance which would have been applicable if at least one of them had had his or her place of residence in the former Member State on that date, even if other legislation of the Member State provides that, on the application of the recipient of the gift, the higher allowance is to be applied, on condition that account is taken of all assets transferred gratuitously by the donor ten years prior to and within ten years following the date of execution of the gift?’
Conclusion
In the light of the foregoing considerations, the Advocate General proposes that the Court should answer the question referred by the Finanzgericht Düsseldorf (Finance Court, Düsseldorf) as follows:
(1) Articles 63 TFEU and 65 TFEU must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, which provides that, for the calculation of gift tax, the allowance to be set against the taxable value in the case of a gift of immovable property situated in that Member State is lower in the case where the donor and the donee had their place of residence in another Member State on the date of execution of the gift than the allowance which would have been applicable if at least one of them had had his or her place of residence in the former Member State on that date, even if that legislation provides that, on the application of the donee, the higher allowance may be applied if that person chooses the unlimited tax liability scheme reserved for residents.
(2) Articles 63 TFEU and 65 TFEU must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, which provides that, for the calculation of gift tax in respect of immovable property in that Member State, donees residing in third countries may apply for the higher allowance to be set against the taxable value only if the donor or the donee is resident in that State.
(3) Articles 63 TFEU and 65 TFEU must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, which provides that, for the calculation of gift tax, in the case of a gift of immovable property situated in that Member State, account is to be taken of all assets received gratuitously from the donor in the ten years preceding and the ten years following the gift, where the donor and the donee had their place of residence in another Member State on the date of execution of the gift, whereas if one of them had been resident in the former Member State on that date, account would be taken of only the ten years preceding the gift.
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