On May 26, 2016 the Court of Justice of the European Union (CJEU) judged in Case C‑300/15 Charles Kohll, Sylvie Kohll-Schlesser versus Directeur de l’administration des contributions directes (ECLI:EU:C:2016:361).

Does the principle of freedom of movement for workers, as enshrined in particular in Article 45 TFEU, preclude the provisions of Article 139ter(1) of the LIT in so far as they restrict eligibility for the tax credit established there to persons in possession of a tax deduction form?

 

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

·        Mr Kohll and his wife, Mrs Kohll-Schlesser, both of Luxembourg nationality, are resident in Luxembourg. Mr Kohll receives two pensions from the Netherlands, coming from Shell International BV and the Sociale Verzekeringsbank (Social Insurance Fund), respectively. Mrs Kohll-Schlesser also receives a pension from the Sociale Verzekeringsbank (Social Insurance Fund).

 

·        On 20 February 2013 Mr Kohll submitted a complaint against the income tax notices published for 2009 to 2011 on the grounds that the Luxembourg tax authorities had not granted him the pensioners’ tax credit as provided for under Article 139ter of the LIT (‘the tax credit’).

 

·        By decision of 23 September 2013 the Directeur de l’administration des contributions directes (Director of the Direct Taxation Authorities) rejected Mr Kohll’s complaint, first, in so far as it related to income received during 2009, as being lodged too late and, therefore, inadmissible, and, second, in so far as it related to income received during 2010 and 2011, confirming that Mr Kohll was not eligible for the tax credit and imposing tax adjustments on him for income received during those years.

 

·        On 10 December 2013 Mr Kohll and Mrs Kohll-Schlesser brought an action before the referring court, the tribunal administratif (Administrative Court, Luxembourg), seeking annulment of that decision of the Directeur de l’administration des contributions directes (Director of the Direct Taxation Authorities).

 

·        The tribunal administratif (Administrative Court) takes the view that the action brought by Mrs Kohll-Schlesser, who did not lodge a prior complaint with the Directeur de l’administration des contributions directes (Director of the Direct Taxation Authorities) in her own name, is inadmissible, but considers that Mr Kohll’s action is admissible. That action challenged, in particular, the compatibility of Article 139ter of the LIT with the principle of the free movement of workers provided for under Article 45 TFEU.

 

·        The referring court states that the tax credit is granted to all taxpayers in receipt of income arising from pensions or annuities within the meaning of Article 96(1)(1) and (2) of the LIT, subject to the condition that the right to tax the income lies with the Grand Duchy of Luxembourg and that the taxpayer is in possession of a tax deduction form.

 

·        According to the referring court, although the pensions at issue in the present case are taxable in Luxembourg, it is, on the other hand, undisputed that Mr Kohll has not been issued with a tax deduction form as regards the pensions on which he is claiming a right to a tax credit.

 

·        In that regard, the referring court states that Article 139ter of the LIT is therefore likely to lead to indirect discrimination in so far as that provision makes the grant of a tax credit subject to the condition that the potential beneficiary be in possession of a tax deduction form. That tax credit is not granted to persons receiving a salary or a pension not subject to deduction at source, such as pensions from abroad.

 

·        In those circumstances, the tribunal administratif (Administrative Court) decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:

‘Does the principle of freedom of movement for workers, as enshrined in particular in Article 45 TFEU, preclude the provisions of Article 139ter(1) of the LIT in so far as they restrict eligibility for the tax credit established there to persons in possession of a tax deduction form?’

 

The CJEU judged as follows:

Articles 21 and 45 TFEU must be interpreted as precluding a national tax law, such as that at issue in the main proceedings, which restricts the eligibility for the pensioners’ tax credit to taxpayers in possession of a tax deduction form.

 

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

 

The opinion in this case as delivered on February 16, 2016 by Advocate General Campos Sánches-Bordona can be found here.

 

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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