European Commission v Kingdom of Belgium.

• Jurisdiction: European Union
• Celex Number: 62008CJ0250
• ECLI: ECLI:EU:C:2011:793
• Date: 01 December 2011
• Docket Number: C-250/08
• Court: Court of Justice (European Union)
• Procedure Type: Recours en constatation de manquement - non fondé

Case C-250/08

European Commission

v

Kingdom of Belgium

(Failure of a Member State to fulfil obligations – Freedom of movement for persons – Purchase of immovable property intended as a new principal residence – Calculation of a tax advantage – Registration duties – Cohesion of the tax system)

Summary of the Judgment

Free movement of capital – Restrictions – Tax legislation – Tax on the transfer of immovable property

(Art. 56 EC; EEA Agreement, Art. 40)

A Member State does not fail to fulfil its obligations under Articles 18 EC, 43 EC and 56 EC and under Articles 31 and 40 of the Agreement on the European Economic Area (EEA) by keeping in force legislation under which, for the calculation of a tax advantage upon the purchase of immovable property intended as a new principal residence, the amount of registration duties paid upon the purchase of a previous principal residence is taken into account only if the latter was situated in a particular region of that State and not if it was situated in another Member State or in a Member State of the European Free Trade Association.

Admittedly, such legislation constitutes a restriction within the meaning of Article 56 EC since as a result of the exclusion from the benefit of the tax advantage of nationals of Member States other than the Member State concerned who move the place of their principal residence from another Member State to the territory of a region of the Member State concerned and who use the funds obtained on the sale of their previous principal residence to finance the acquisition of their new immovable property situated in that region, it cannot be ruled out that the fact that registration duties paid in another Member State cannot be offset may, in certain cases, discourage individuals exercising their right of free movement from purchasing immovable property in the region concerned.

In particular, the difference in treatment thus introduced concerns objectively comparable situations since, as regards the registration duties at issue, the only difference between the situation of non‑residents, including nationals who have availed themselves of their right to move freely in the European Union, and that of residents in the region concerned, whether nationals or nationals of another Member State, who acquire a new principal residence in that region stems from the place of their previous principal residence. In either situation, those persons will have acquired immovable property in the region concerned in order to establish themselves there and, at the time of purchasing their previous principal residence, some will have paid, in the State in which that residence was located, a tax similar in nature to the registration duties, while others will have paid those duties in the region at issue.

However, that restriction on the free movement of capital is justified by reasons which relate to the safeguarding of the cohesion of the tax system. Since the Member State concerned has no power of taxation on a purchase transaction which was carried out previously in another Member State by persons who decide to establish their new principal residence in the region at issue, the configuration of that tax advantage reflects a logical symmetry. If those persons were to benefit from the portability system upon acquiring a property in the region concerned, they would derive an undue advantage from a tax system to which their previous immovable property acquisition outside the Member State at issue was not subject. It follows that, under such a system, there is a link between the tax advantage and the initial levy. That system involves, first, one and the same taxpayer, who has already paid the duties at issue and who is eligible for the offset and, second, an advantage awarded within the context of the same taxation.

Furthermore, the restriction at issue is appropriate to achieve such an objective, in that it operates in a perfectly symmetrical manner, as only the registration duties previously paid under the national tax system may be offset. Similarly, that restriction is entirely proportionate to the objective pursued, since the rule at issue limits the amount which may be offset against the registration duties payable by the person who purchases a new principal residence in the region concerned to a specific maximum. In providing for such a limitation, the system at issue retains its character as a tax advantage and is not in the nature of a disguised exemption.

In so far as the provisions of Article 40 of the EEA Agreement have the same legal scope as the substantially identical provisions of Article 56 EC, all the foregoing considerations may be transposed, mutatis mutandis, to Article 40 of the EEA Agreement.

(see paras 42, 44-45, 59-60, 73-75, 80-83)

JUDGMENT OF THE COURT (First Chamber)

1 December 2011 (*)

(Failure of a Member State to fulfil obligations – Free movement of persons – Purchase of immovable property intended as a new principal residence – Calculation of a tax advantage – Registration duties – Cohesion of the tax system)

In Case C-250/08,

ACTION under Article 226 EC for failure to fulfil obligations, brought on 10 June 2008,

European Commission, represented by P. van Nuffel, R. Lyal and W. Roels, acting as Agents, with an address for service in Luxembourg,

applicant,

v

Kingdom of Belgium, represented by L. Van den Broeck, acting as Agent, and by B. van de Walle de Ghelcke, advocaat,

defendant,

supported by:

Republic of Hungary, represented by R. Somssich, K. Borvölgyi and M.Z. Fehér, acting as Agents,

intervener,

THE COURT (First Chamber),

composed of A. Tizzano (Rapporteur), President of the Chamber, M. Safjan, M. Ilešič, E. Levits, and M. Berger, Judges,

Advocate General: E. Sharpston,

Registrar: M. Ferreira, Principal Administrator,

having regard to the written procedure and further to the hearing on 23 September 2010,

after hearing the Opinion of the Advocate General at the sitting on 21 July 2011,

gives the following

Judgment

1 By its application, the Commission of the European Communities seeks a declaration from the Court that, in so far as, in the Flemish Region, for the calculation of a tax advantage upon the purchase of immovable property intended as a new principal residence, the amount of registration duties paid upon the purchase of a previous principal residence is taken into account only if the latter was situated in the Flemish Region but not if it was situated in a Member State other than the Kingdom of Belgium or in a Member State of the European Free Trade Association (EFTA), the Kingdom of Belgium has failed to fulfil its obligations under Articles 18 EC, 43 EC and 56 EC and under Articles 31 and 40 of the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3; ‘the EEA Agreement’).

National legal context

2 Article 61.3 of the Code of registration duties, mortgage duties and registry fees (Wetboek der registratie-, hypotheek- en griffierechten), as amended by the decree adopted by the Flemish Region on 1 February 2002 (‘the Wb.Reg.’), introduced into the Flemish Region the system of the ‘portability’ of registration duties. That article states:

‘When immovable property used or intended to be used for residential purposes is purchased in a normal sale transaction by an individual in order to establish it as his principal residence, his statutory portion of the duty payable under Articles 44, 53, 2° or 57 on the acquisition of the dwelling previously used as his principal residence, or of the land upon which that dwelling was constructed, is to be offset against his statutory portion of the duty payable on the acquisition of the new property, provided that the latter acquisition is duly dated within two years of the date of the registration of the document giving rise to the determination of the proportional duty on either the resale of the previous dwelling by normal sale transaction, or on the division of joint ownership of that dwelling, the individual having relinquished all of his rights.

There can be no offset under this article of duty paid on the acquisition of a property which is not situated in the Flemish Region.

There can also be no offset of additional duty payable on a purchase for any reason whatsoever.

Offset of a duty in accordance with the present article shall not, under any circumstances, give rise to a refund.

When a transaction, as referred to in the first paragraph, is preceded by one or more similar transactions and/or by one or more transactions as referred to in the first paragraph of Article 212a, the duty that was not already offset at the time of those previous transactions following the application of the third or fifth paragraphs of the present article, and/or the duty that was not already reimbursed following application of the third or fifth paragraphs of Article 212a shall, should the case arise, be added to the individual’s statutory portion of the duty payable under Articles 44, 53, 2° or 57 on the last purchase but one, in order to determine the amount to be offset against the last purchase.

The amount to be offset that is obtained by application of the first or fourth paragraphs cannot in any case exceed EUR 12 500. This maximum amount to be offset is determined in proportion to the share that the individual obtains of the newly acquired property.’

3 In addition, Article 212a of the Wb.Reg., which is applicable in the Flemish Region, provides, under the same conditions and, mutatis mutandis, in identical terms, for the reimbursement of registration duty paid upon the first acquisition of immovable property in the Flemish Region in the case where a property previously purchased in the Flemish Region, and previously used as a principal residence, is sold within two years, or within five years in the case where land is acquired for the purpose of constructing a dwelling house, of the purchase...