On April 14, 2016 the Court of Justice of the European Union (CJEU) judged in Case C‑522/14 Sparkasse Allgäu versus Finanzamt Kempten, (ECLI:EU:C:2016:253).

Does the freedom of establishment (Article 49 TFEU, formerly Article 43 EC) preclude a provision in a Member State under which a credit institution established in its national territory must, on the death of a domestic testator, also notify the tax office responsible for the administration of inheritance tax in the national territory of those of the testator’s assets which are held or managed in a dependent branch of the credit institution in another Member State, where there is no similar notification obligation in the other Member State and credit institutions in that State are subject to banking secrecy any breach of which constitutes a criminal offence?

The dispute in the main proceedings and the question referred for a preliminary ruling

·        Sparkasse Allgäu is a credit institution within the meaning of Directive 2006/48 which operates pursuant to an authorisation issued by the German authorities. It operates, inter alia, a dependent branch in Austria.

·        On 25 September 2008 the Kempten tax office asked Sparkasse Allgäu to supply it with the information referred to in Paragraph 33 of the ErbStG, for the period from 1 January 2001, in relation to clients of its branch established in Austria who were resident in Germany at the time of their death.

·        Sparkasse Allgäu lodged an appeal against that decision, but the appeal was dismissed, as was the subsequent action brought by Sparkasse Allgäu before the court of first instance. In those circumstances, the appellant in the main proceedings appealed on a point of law (‘Revision’) to the Bundesfinanzhof (Federal Finance Court).

·        The referring court expresses uncertainty as to whether Paragraph 33(1) of the ErbStG restricts the freedom of establishment even though the notification obligation laid down in that provision applies in the same way to all German credit institutions. According to the referring court, that requirement has the result that German credit institutions may be deterred from exercising, by means of a branch office, commercial operations in Austria. However, the referring court is also unsure (i) whether a restriction on the freedom of establishment may also arise from the combined effect of the legislation of the Member State in which the credit institution’s head office is situated, namely the Federal Republic of Germany, and the legislation of the Member State in which the branch is situated, namely the Republic of Austria, and (ii) to which Member State such a restriction must be attributed.

·        It was in those circumstances that the Bundesfinanzhof (Federal Finance Court) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:

‘Does the freedom of establishment (Article 49 TFEU, formerly Article 43 EC) preclude a provision in a Member State under which a credit institution established in its national territory must, on the death of a domestic testator, also notify the tax office responsible for the administration of inheritance tax in the national territory of those of the testator’s assets which are held or managed in a dependent branch of the credit institution in another Member State, where there is no similar notification obligation in the other Member State and credit institutions in that State are subject to banking secrecy any breach of which constitutes a criminal offence?’

The CJEU judged as follows:

Article 49 TFEU must be interpreted as not precluding legislation of a Member State which requires credit institutions having their head office in that Member State to notify the national authorities of assets held or managed at their dependent branches established in another Member State in the event of the death of the owner of those assets who is resident in the first Member State, in the case where there is no similar notification obligation in that second Member State and credit institutions there are subject to banking secrecy breach of which constitutes a criminal offence.

For further information click here to be forwarded to the text of the ruling 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).

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