European Commission v Kingdom of Belgium.

• Jurisdiction: European Union
• Celex Number: 62008CC0250
• Court: Court of Justice (European Union)
• ECLI: ECLI:EU:C:2011:495
• Date: 21 July 2011
• Docket Number: C-250/08
• Writing for the Court: Tizzano
• Procedure Type: Recours en constatation de manquement - non fondé

OPINION OF ADVOCATE GENERAL

Sharpston

delivered on 21 July 2011 (1)

Case C‑250/08

European Commission

v

Kingdom of Belgium

(Registration duty payable on the purchase of a principal residence – Right to move and reside freely – Freedom of establishment – Free movement of capital – Restrictions)

1. In these proceedings, the Commission claims that Belgian legislation concerning the payment of registration duty within the Flemish Region discriminates in particular against citizens of Member States who seek to exercise their rights to move residence, to freedom of establishment and to move capital within the European Union. The legislation at issue allows registration duty (2) paid on the purchase of a principal residence in the Flemish Region – but not elsewhere – to be offset against that payable on the acquisition of a subsequent principal residence within the same Region.

Legal background

Relevant provisions of the Treaty and the EEA Agreement

2. Article 18(1) EC (now Article 21(1) TFEU) provides:

‘Every citizen of the Union shall have the right to move and reside freely within the territory of the Member States, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it effect.’

3. Article 43 EC (now Article 49 TFEU) states:

‘Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.

Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48 (now Article 54 TFEU), under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.’

4. Article 31(1) of the EEA Agreement in effect extends those provisions to the whole of the European Economic Area.

5. Article 56(1) EC (now Article 63(1) TFEU) states:

‘Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.’

6. Article 40 of the EEA Agreement in effect extends that provision to the whole of the European Economic Area.

7. Article 6 of the EEA Agreement states that the provisions of the Agreement, in so far as they are identical in substance to corresponding rules of the Treaty (and to acts adopted in application of the Treaty), are to be interpreted in conformity with the case-law of the Court at the time that the EEA Agreement was signed. (3) The EEA Agreement does not contain a similar provision relating to subsequent case-law of the Court. (4) However, it follows from Article 105 of the EEA Agreement that rules of the Agreement which are identical in substance to those of the Treaty should be interpreted uniformly. (5) The Court of Justice has jurisdiction to interpret the EEA Agreement with regard to the territory of the European Union and the EFTA Court has jurisdiction to do so as regards its application in the EFTA States. In that respect the Agreement provides for cooperation between the Court of Justice and the EFTA Court. (6)

8. The rules prohibiting restriction on the freedom of establishment set out in Article 31 of the EEA Agreement are identical to those imposed by Article 49 TFEU. (7) Furthermore, the provisions concerning the free movement of capital (whose wording is similar but not identical to the corresponding provisions of the Treaty on the Functioning of the European Union) must likewise, as far as possible, be interpreted in the same way. (8)

Council Directive 88/361/EEC

9. The explanatory notes to Annex I of Council Directive 88/361/EEC (9) make it clear that ‘movement of capital’ in that context includes purchases of buildings and land and the construction of buildings by private persons for personal use. (10)

National legislation

10. Under Article 44 of the Wetboek der registratie‑, hypotheek‑ en griffierechten) (Code of registration duties, mortgage duties and registry fees for the Flemish Region; ‘the Wetboek’), registration duty of 10% is levied on the value of all non-gratuitous transfers of proprietary or usufructuary rights in immovable property. (11) Under Article 46a, in the case of a purchase of residential property by one or more natural persons for the purpose of establishing their principal residence there, the basis of assessment is reduced by EUR 12 500, provided that they do not own any other residential property at the time. This abatement in respect of the basis of assessment is available to all first-time buyers who are natural persons, irrespective of whether they previously resided in the Flemish Region or elsewhere.

11. Article 61.3 of the Wetboek provides:

‘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 … 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.

The amount to be offset … cannot in any case exceed EUR 12 500 …’

12. Article 212a of the Wetboek provides for reimbursement (rather than offset) of registration duty where (i) the preceding property is sold within two years after the acquisition of the subsequent property (five years where land is acquired for the purpose of constructing a dwelling house) and (ii) the purchaser establishes his principal residence in the new dwelling within two years of acquiring it (five years where land is acquired for the purpose of constructing a dwelling house). Again, the preceding property must be situated in the Flemish Region, and the amount that may be reimbursed is limited to EUR 12 500.

13. I shall refer to the system put in place by Articles 61.3 and 212a of the Wetboek jointly as ‘the disputed measure’. Those articles, together with the provisions outlined in point 10 above and a number of related procedural provisions, were introduced into the Wetboek by an amending decree of 1 February 2002. (12) The explanatory memorandum to the draft decree acknowledged that registration duty often proved an obstacle for people wishing to move their place of residence closer to their place of work or to adapt it to changed family circumstances. It stated that the aim of the amendment was to ‘promote mobility for all citizens who, for whatever reason (professional, family or other), wish to purchase a new principal residence which corresponds better than their current residence to their requirements’. That was to be achieved by allowing part of the duty paid on a previous, principal residence (that is, home) up to a maximum of EUR 12 500, to be deducted from the duty payable on the subsequent purchase of another home.

The pre-litigation procedure

14. Considering the disputed measure to be discriminatory and therefore precluded by the Treaty, the Commission sent the Kingdom of Belgium a letter of formal notice on 23 December 2005. The Belgian Government contested the alleged infringement in its reply of 22 March 2006.

15. The Commission was not satisfied with that response and issued a reasoned opinion on 13 July 2006. The Belgian authorities confirmed by letter of 13 September 2006 that they considered the disputed measure to be consistent with EU law and in any event to be justified in the public interest.

16. The Commission maintained its view and therefore lodged the present application on 5 May 2008. The Commission asks the Court to declare that the Kingdom of Belgium has failed to fulfil its obligations under Articles 18, 43 and 56 of the EC Treaty and Articles 31 and 40 of the EEA Agreement in so far as, in the Flemish Region, for the assessment of a tax advantage on the purchase of immovable property intended as a new principal place of residence, the amount of registration duty paid upon the purchase of a previous principal place of residence is taken into account only where the latter was situated in the Flemish Region and not where it was in a Member State other than Belgium or in an EFTA State. The Commission also asks the Court to order the Kingdom of Belgium to pay the costs.

17. The Hungarian Government has intervened in support of Belgium.

18. At the hearing on 23 September 2010, the Commission and the Belgian and Hungarian Governments submitted oral argument.

Assessment

Preliminary observations

19. A number of preliminary matters require to be clarified before examining the Commission’s application.

20. First, the Kingdom of Belgium comprises three Communities, three regions and four language areas. (13) The three regions have certain legislative competences; however, those of the Flemish Community and the Flemish Region are pooled and exercised jointly by the Flemish Government, which introduced the disputed measure. It is settled case-law...