F.C. Terhoeve v Inspecteur van de Belastingdienst Particulieren/Ondernemingen buitenland.

• Jurisdiction: European Union
• Celex Number: 61995CJ0018
• ECLI: ECLI:EU:C:1999:22
• Date: 26 January 1999
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling
• Docket Number: C-18/95

Avis juridique important

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61995J0018

Judgment of the Court of 26 January 1999. - F.C. Terhoeve v Inspecteur van de Belastingdienst Particulieren/Ondernemingen buitenland. - Reference for a preliminary ruling: Gerechtshof 's-Hertogenbosch - Netherlands. - Freedom of movement for workers - Combined assessment covering income tax and social security contributions - Non-applicability to workers who transfer their residence from one Member State to another of a social contributions ceiling applicable to workers who have not exercised their right to freedom of movement - Possible offsetting by income tax advantages - Possible incompatibility with Community law - Consequences. - Case C-18/95.

European Court reports 1999 Page I-00345

Summary
Parties
Grounds
Decision on costs
Operative part

Keywords

1 Freedom of movement for persons - Workers - Community provisions - Conditions of applicability - Exercise of the right to freedom of movement

(EC Treaty, Art. 48; Council Regulation No 1612/68, Art. 7)

2 Social security for migrant workers - Powers of the Member States to plan their social security systems - Limits - Compliance with Community law - Treaty rules on freedom of movement for workers

3 Freedom of movement for persons - Workers - Equal treatment - Higher social security contributions payable by workers who have transferred residence in the course of a year from one Member State to another - Whether permissible - Justification - None

(EC Treaty, Art. 48)

4 Freedom of movement for persons - Workers - Equal treatment - Workers who have transferred residence from one Member State to another - Social security contributions - Calculation

5 Freedom of movement for persons - Workers - Equal treatment - National legislation requiring higher social security contributions from workers who have transferred residence in the course of a year from one Member State to another - Incompatible with Community law - Effects

(EC Treaty, Art. 48)

Summary

1 Article 48 of the Treaty and Article 7 of Regulation No 1612/68 may be relied on by a worker against the Member State of which he is a national where he has resided and been employed in another Member State.

Any Community national who, irrespective of his place of residence and his nationality, has exercised the right to freedom of movement for workers and who has been employed in another Member State falls within the scope of the aforesaid provisions.

2 The fact that national rules concern the financing of social security does not exclude the application of Treaty rules, including those relating to freedom of movement for workers.

While, in the absence of harmonisation at Community level, it is for the legislation of each Member State to determine the conditions governing the right or duty to be insured with a social security scheme, Member States must nevertheless comply with Community law when exercising that power.

3 Article 48 of the Treaty precludes a Member State from levying, on a worker who has transferred his residence in the course of a year from one Member State to another in order to take up employment there, higher social security contributions than those which would be payable, in similar circumstances, by a worker who has continued to reside throughout the year in the Member State in question, without the first worker also being entitled to additional social benefits. Such a system for levying social contributions could deter a national of a Member State from leaving the Member State in which he resides in order to pursue an activity as an employed person, for the purposes of the Treaty, in the territory of another Member State and accordingly constitutes an obstacle to freedom of movement for workers.

Such an obstacle may not be justified either by the fact that it stems from legislation whose objective is to simplify and coordinate the levying of income tax and social security contributions, or by difficulties of a technical nature preventing other methods of collection, or by the fact that, in certain circumstances, other advantages relating to income tax may offset, or indeed outweigh, the disadvantage as to social contributions.

4 When assessing whether the burden of social security contributions borne by a worker who has transferred his residence from one Member State to another in order to take up employment there is heavier than that borne by a worker who has continued to reside in the same Member State, all income relevant under national law for determining the amount of contributions, including, as the case may be, income arising from real property, must be taken into account.

5 Where national legislation requiring higher social security contributions to be paid by workers who transfer their residence in the course of a year from one Member State to another in order to take up employment there than those which would be payable, in similar circumstances, by workers who have continued to reside throughout the year in the Member State in question, without the former also being entitled to additional social benefits, is incompatible with Article 48 of the Treaty, a worker who transfers his residence from one Member State to another for that purpose is entitled to have his social security contributions set at the same level as that of the contributions which would be payable by a worker who has continued to reside in the same Member State.

Parties

In Case C-18/95,

REFERENCE to the Court under Article 177 of the EC Treaty by the Gerechtshof te 's-Hertogenbosch, Netherlands, for a preliminary ruling in the proceedings pending before that court between

F.C. Terhoeve

and

Inspecteur van de Belastingdienst Particulieren/Ondernemingen Buitenland

on the interpretation of Articles 7 and 48 of the EEC Treaty and Article 7(2) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475),

THE COURT,

composed of: P.J.G. Kapteyn, President of the Fourth and Sixth Chambers, acting for the President, G. Hirsch and P. Jann, Presidents of Chambers, G.F. Mancini (Rapporteur), J.C. Moitinho de Almeida, C. Gulmann, J.L. Murray, L. Sevón, M. Wathelet, R. Schintgen and K.M. Ioannou, Judges,

Advocate General: D. Ruiz-Jarabo Colomer,

Registrar: D. Louterman-Hubeau, Principal Administrator,

after considering the written observations submitted on behalf of:

- Mr Terhoeve, by F.W. van Eig and S. Feenstra, tax consultants at Moret Ernst & Young,

- the Netherlands Government, by A. Bos, Legal Adviser in the Ministry of Foreign Affairs, acting as Agent, and

- the Commission of the European Communities, by B.J. Drijber and I. Martínez del Peral Cagigal, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Mr Terhoeve, represented by S. Feenstra, the Netherlands Government, represented by M. Fierstra, Legal Adviser in the Ministry of Foreign Affairs, acting as Agent, and the Commission, represented by P.J. Kuijper, Legal Adviser, acting as Agent, at the hearing on 17 March 1998,

after hearing the Opinion of the Advocate General at the sitting on 30 April 1998,

gives the following

Judgment

Grounds

1 By order of 30 December 1994, received at the Court on 23 January 1995, the Gerechtshof te 's-Hertogenbosch (Regional Court of Appeal, 's-Hertogenbosch) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty a number of questions on the interpretation of Articles 7 and 48 of the EEC Treaty and Article 7(2) of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475).

2 Those questions were raised in proceedings between Mr Terhoeve and the Inspecteur van de Belastingdienst Particulieren/Ondernemingen Buitenland (Tax Inspector for Foreign Individuals and Undertakings; hereinafter `the Inspector') concerning a combined assessment, covering income tax and social security contributions, for 1990.

National law

3 Under Netherlands law - in particular, the Algemene Ouderdomswet (General Law on old-age insurance), the Algemene Weduwen- en Wezenwet (General Law on insurance for widows and orphans), the Algemene Arbeidsongeschiktheidswet (General Law on insurance against incapacity for work) and the Algemene Wet Bijzondere Ziektekosten (General Law on special medical expenses) - compulsory insurance schemes apply in principle to all persons residing in the Netherlands.

4 The levying of social security contributions is closely connected to the levying of tax on wages and other income. Until 1990 taxable income for income tax purposes was subject to two levies, one for the collection of social security contributions and the other for the collection of income tax properly so called. In order to prevent a disparity from arising between the contributions paid and the social security benefits which could be expected, social security legislation provided that contributions were not to be levied in so far as income exceeded a certain limit. It was also laid down that the maximum income for the purpose of calculating the contributions had to be reduced pro rata where the person concerned had been liable to pay contributions for only part of the year.

5 A special situation arises where a person resides in the Netherlands for part of a calendar year and abroad for another part and, during those two periods, has taxable income in the Netherlands.

6 Until 1990 the legislation did not settle whether one or two assessments in respect of income in the calendar year had to be issued to such a taxpayer. In practice, two assessments were issued for the purpose of levying income tax: one relating to the period during which the taxpayer was resident and the other relating to the period during which he was non-resident...