On September 7, 2016 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Wathelet in Case C‑283/15 X versus the Staatssecretaris van Financiën (ECLI:EU:C:2016:638) was published. Unfortunately the opinion is not available in the English language, but it is available in several other languages (a.o. the Dutch, French, Portuguese and Spanish language).
Questions referred for a preliminary ruling
The Hoge Raad der Nederlanden (Dutch Supreme Court) has referred the following questions for a preliminary ruling:
1) Must the provisions of the TFEU relating to free movement be interpreted as precluding national legislation under which a European Union citizen who resides in Spain and whose work-related income is taxed in the amount of approximately 60% by the Netherlands and approximately 40% by Switzerland may not deduct his negative income incurred in respect of his property in Spain, which is for his personal use, from his work-related income which is taxed in the Netherlands, even if he receives such a low income in Spain, as his State of residence, that the abovementioned negative income in the year in question could not have led to tax relief in the State of residence?
2)
a) If Question 1 is answered in the affirmative: must every Member State in which the European Union citizen earns part of his income then take into account the full amount of the abovementioned negative income? Or does that obligation apply to only one of the States concerned in which work is carried out, and if so, to which? Or must each of the States in which work is carried out (not being the State of residence) allow part of that negative income to be deducted? In the latter case, how is that deductible part to be determined?
b) In this regard, is the Member State in which the work is actually performed the decisive factor, or is the decisive factor which Member State has the power to tax the income earned thereby?
3) Would the answer to the two questions set out under (2) be different if one of the States in which the European Union citizen earns his income is Switzerland, which is not a Member State of the European Union and also does not belong to the European Economic Area?
4) In to what extent is it significant in this regard whether the legislation of the taxpayer’s country of residence (in this case, Spain) makes provision for the possibility of deducting mortgage interest relating to the taxpayer’s property and the possibility of offsetting the tax losses arising therefrom in the year in question against possible income earned in that country in later years?
Written remarks have been submitted by X, the Dutch, the Belgian, the German, the Austrian, the Portuguese and the Swedish governments, the government of the United Kingdom and the European Commission. Moreover all, except for the Belgian and the Portuguese governments, have expressed their opinions during a hearing that was held on June 29, 2016.
Conclusion
The Advocate-General suggests that the Court answers the questions asked by the Dutch Supreme Court as follows:
1) The provisions of the TFEU relating to free movement must be interpreted as precluding national legislation under which a European Union citizen whose work-related income is taxed in the amount of approximately 60% by a Member State of which he is not a resident and for approximately 40% by a third State of which he is also not a resident, may not deduct his negative income incurred in respect of his real estate, which is for his personal use and which is located in the State of his residency, from his work-related income which is taxed in the Member State, if he receives such a low income in his State of residence, that the aforementioned negative income in the year in question could not have led to tax relief in the State of residence.
2) Where a taxpayer has no significant income in his State of residence, so that his State of residence cannot grant the benefits related to his personal and family circumstances, each Member State in which the taxpayer is working and which is entitled to tax that work-related income should allow that negative income, like the ones in the present case, to be deducted on a pro rata basis from the income taxed by that Member State, provided that the income of the person concerned is sufficient to grant him to such benefits.
3) The answers to the first two questions referred for a preliminary ruling are not different if one of the States earns his income is not a Member State of the European Union and also does not belong to the European Economic Area.
4) The fourth question is inadmissible.
Alternatively, the fact that the laws of the State of residence of the taxpayer allow the taxpayer to deduct negative income incurred in respect of real estate for his personal use from incomes from subsequent tax years, does not affect the answers to the first three questions.
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. The opinion will open in the Dutch language, but the language of the document can be changed via the menu in the left top corner.
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