Strojírny Prostějov, a.s. and ACO Industries Tábor s.r.o. v Odvolací finanční ředitelství.

• Jurisdiction: European Union
• Celex Number: 62013CJ0053
• ECLI: ECLI:EU:C:2014:2011
• Date: 19 June 2014
• Docket Number: C‑80/13,C‑53/13
• Writing for the Court: Tizzano
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling

JUDGMENT OF THE COURT (First Chamber)

19 June 2014 ( *1 )

‛Freedom to provide services — Temporary employment agency — Secondment of workers by an agency established in another Member State — Restriction — Undertaking using the workforce — Tax on the income of those workers withheld at source — Obligation — Payment to national budget — Obligation — Situation of workers seconded by a national agency — Absence of such obligations’

In Joined Cases C‑53/13 and C‑80/13,

REQUESTS for a preliminary ruling under Article 267 TFEU from the Krajský soud v Ostravě (Czech Republic) and the Nejvyšší správní soud (Czech Republic), by decisions of 16 and 17 January 2013 respectively, received at the Court on 30 January and 15 February 2013, in the proceedings

Strojírny Prostějov, a.s. (C‑53/13),

ACO Industries Tábor s.r.o. (C‑80/13)

v

Odvolací finanční ředitelství,

THE COURT (First Chamber),

composed of A. Tizzano (Rapporteur), President of the Chamber, A. Borg Barthet, E. Levits, M. Berger and F. Biltgen, Judges,

Advocate General: M. Wathelet,

Registrar: M. Aleksejev, Administrator,

having regard to the written procedure and further to the hearing on 11 December 2013,

after considering the observations submitted on behalf of:

— ACO Industries Tábor s.r.o., by D. Hejzlar, advokát,

— Odvolací finanční ředitelství, by E. Nedorostková, advokátka,

— the Czech Republic, by M. Smolek, T. Müller and J. Vláčil, acting as Agents,

— the Kingdom of Denmark, by M. Søndahl and V. Pasternak Jørgensen, acting as Agents,

— the European Commission, by W. Roels, M. Šimerdová and Z. Malůšková, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 13 February 2014,

gives the following

Judgment

1 These requests for a preliminary ruling concern the interpretation of Articles 18 TFEU, 45 TFEU, 49 TFEU and 56 TFEU.

2 The requests have been made in proceedings between Strojírny Prostějov, a.s. (‘Strojírny Prostějov’) and Odvolací finanční ředitelství (Tax Appeals Directorate) and between ACO Industries Tábor s.r.o. (‘ACO Industries Tábor’) and Odvolací finanční ředitelství, concerning the tax treatment to which those two undertakings were subject.

Legal context

Czech law

3 Paragraph 2 of Law No 586/1992 on income tax, as amended, provides: ‘1. Persons liable to tax on the income of natural persons are natural persons (hereinafter referred to as “taxpayers”). 2. Taxpayers who have their residence or habitual abode in the Czech Republic shall be liable to tax both on income from sources in the Czech Republic and on income from foreign sources. 3. Taxpayers not referred to in subparagraph 2 and those in respect of whom international agreements so provide shall be liable to tax only on income from sources in the Czech Republic (paragraph 22). ... 4. Taxpayers having their habitual abode in the Czech Republic are taxpayers who stay there, either continuously or in several periods, for at least 183 days in any calendar year; the 183-day period includes every day or part of day of stay. For the purposes of this law a place of residence in the Czech Republic shall mean a place where the taxpayer has a stable dwelling in circumstances from which it may be inferred that he intends to stay permanently in that dwelling.’

4 Paragraph 6(2) of that law states as follows: ‘A taxpayer who derives income from non-independent activity and emoluments shall be referred to hereafter as an “employee” and the payer of that income as the “employer”. “Employer” shall also mean a taxpayer referred to in Paragraph 2(2) or Paragraph 17(3) for whom employees perform work under his instructions, even where the income for such work is paid, on the basis of a contractual relationship, through the intermediary of a person established or residing abroad. For the purposes of other provisions of this law, income thus paid shall be regarded as income paid by a taxpayer referred to in Paragraph 2(2) or Paragraph 17(3). Where the employer’s payments to a person established or residing abroad include an amount for intermediation, at least 60% of the total sum paid shall be regarded as income of the employee.’

5 Paragraph 22(1)(b) of that law is worded as follows: ‘In respect of taxpayers referred to in Paragraph 2(3) and Paragraph 17(4), income from non-independent activity (employment) ... which is carried on in the Czech Republic shall be regarded as income from sources in the Czech Republic ...’

6 Paragraph 38c of that law states: ‘A taxable person in accordance with Paragraphs 38d, 38e and 38h shall also include a taxpayer referred to in Paragraph 2(3) and Paragraph 17(4) who has a fixed establishment in the Czech Republic (Paragraph 22(2)) or employs his employees there for longer than 183 days, except in cases of service provision within the meaning of Paragraph 22(1)(c) ... In the case referred to in the second and third sentences of Paragraph 6(2), a taxpayer referred to in Paragraph 2(3) and Paragraph 17(4) shall not be a taxable person.’

7 Under Paragraph 38h(1) of that law : ‘A taxable person shall calculate the advance payment on the income of natural persons from non-independent activity and emoluments (hereinafter referred to as the “advance payment”) by reference to the basis for the advance payment calculation. ...’

Agreement on the avoidance of double taxation

8 Article 14(1) of the agreement between the Czech Republic and the Slovak Republic on the avoidance of double taxation and the prevention of tax avoidance with respect to taxes on income and wealth (Communication of the Ministry of Foreign Affairs, No 100/2003, published in the Collection of International Agreements) provides: ‘Salaries, wages and other similar forms of remuneration which a resident of one Contracting State receives in respect of employment shall be taxed, subject to the provisions of Articles 15, 17 and 18, solely in that State, unless the employment in question is carried on in the other Contracting State. If the employment is carried on there, the remuneration received in respect of it may be taxed in that other State.’

9 Article 23(1) and (3) of the agreement provides as follows: ‘1. Nationals of one Contracting State shall not be subjected in the other Contracting State to any taxation or any requirement connected therewith which is other or more burdensome than the taxation and connected requirements to which nationals of that other State are or may be subjected in the same circumstances, in particular with respect to residence. This provision shall, notwithstanding the provisions of Article 1, also apply to persons who are not residents of one or both of the Contracting States. ... 3. The taxation of fixed establishment which an undertaking of one Contracting State has in the other Contracting State shall not be less favourable in that other State than the taxation of undertakings of that other State carrying on the same activities. ...’

The disputes in the main proceedings and the questions referred for a preliminary ruling

10 The cases in the main proceedings concern two Czech undertakings, Strojírny Prostějov and ACO Industries Tábor, which used the services of a temporary employment agency established in the Slovak Republic but carrying on its activity in the Czech Republic via a branch registered in the commercial register of the Czech Republic. Those two undertakings, as users, availed themselves, for a fixed term, of the labour of workers employed by that agency.

Case C‑53/13

11 The Finanční úřad v Prostějově (Prostějov tax office), by decision of 7 March 2011, required Strojírny Prostějov to pay into the State budget the withholding tax on income payable by the workers whose labour it had used. In the tax office’s view, given that, under Czech law, the branch of a foreign legal person does not have capacity to have rights and obligations, the supplying undertaking must be considered to be a foreign agency. Consequently, the Czech beneficiary of the labour is obliged to withhold the income tax of the workers and to pay it into the State budget.

12 An appeal against that decision, brought by Strojírny Prostějov before the Finanční ředitelství v Ostravě (Ostrava tax directorate), was dismissed by decision of 18 August 2011. That decision is currently subject to a review by the Krajský soud v Ostravě (Regional Court, Ostrava).

13 That court considers that the Czech legislation discriminates between the situation of a Czech undertaking which makes use of the services of a national temporary employment agency and that of a Czech undertaking which uses an agency established in another Member State. It is only in the second case that the Czech undertaking is required to withhold the income tax payable by the workers whose labour it uses pursuant to the contract concluded with the temporary employment agency, whereas in the first case it is for the temporary employment agency, of which the workers are employees, to withhold that tax. That constitutes a restriction on the freedom to provide services and the free movement of workers, given that such an obligation entails costs, inter alia administrative burdens, which are incurred by only the undertakings which choose an agency not established in the Czech Republic.

14 In those circumstances, the Krajský soud v Ostravě decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling: ‘Do Articles 56 [TFEU] and 57 [TFEU] preclude the application of national legislation which, where an...