On November 16, 2023 the European Commission published the key decisions of the November 2023 infringements package. The key decisions published include a letter of formal notice being sent to Portugal for failing to comply with the EU excise duty rules on wine. Furthermore the European Commission decided to refer Belgium to the Court of Justice of the European Union for its failure to comply with the Treaty principle of free movement of workers, as regards taxation of non-resident taxpayers with modest income.

The Commission calls on Portugal to comply with the EU excise duty legislation on wine

The European Commission decided to open an infringement procedure by sending a letter of formal notice to Portugal (INFR(2020)4063) for failing to comply with the EU excise duty rules on wine. Portugal treats as wine and incorrectly applies a zero rate on products with an alcoholic strength between 15% and 18% by volume and which have been enriched. However, EU legislation allows the inclusion of such products in the category of wine only if they are produced without any enrichment. At the same time, Portugal excludes all flavoured wines from the wine category, even if the conditions in the EU legislation are met, which results in a higher excise duty rate being applied. In both cases, the treatment of the above products is contrary to the definition of wine in the EU excise duty legislation. Portugal has two months to address the shortcomings identified in this letter of formal notice. If Portugal does not act within the next two months, the Commission may decide to send a reasoned opinion.

Commission refers Belgium to the CJEU for failing to comply with the free movement of workers principle as regards taxation of non-resident taxpayers

On November 16, 2023 the European Commission decided to refer Belgium (INFR(2014)2191) to the Court of Justice of the European Union for its failure to comply with the Treaty principle of free movement of workers, as regards taxation of non-resident taxpayers with modest income. In its judgment of 10 March 2022 (European Commission v the Kingdom of Belgium, Case C-60/21) the Court found that Belgium infringed the Treaty by refusing non-resident taxpayers who earn less than 75% of their worldwide income in Belgium from deducting their alimony payments from their taxable income. Deduction is refused in Belgium even when the taxpayer has no significant taxable income in their State of residence, making it impossible to deduct payments from their taxable income in that State. In response to the 2022 judgment, Belgium extended the personal scope of the tax deduction. However, it did not eliminate the infringement in its entirety. The new legislation introduces two conditions, which appear to unduly restrict the availability of the benefit for non-residents with modest income.

First, the deduction cannot be carried forward to future tax years in the state of the taxpayer's residence. The unavailability of a similar relief in the other state should, however, be considered for the same tax year in Belgium and the other Member State.

Second, the amending legislation refuses the tax deduction if the taxpayer's spouse could avail themselves of a similar benefit in another state in future periods. By bringing the taxpayer's spouse into the comparability analysis, the amended legislation expressly contradicts the Court's judgment in Case C-60/21, which concerns discrimination of non-resident taxpayers, and not their spouses.

If the Court finds that Belgium has not complied with its judgment, it may impose financial sanctions. A press release is available online.

The full November 2023 infringements package as published by the OECD on November 16, 2023 can be found here.

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