Action brought on 8 October 2004 by the Commission of the European Communities against the Kingdom of Belgium

(Case C-433/04)

(2004/C 300/65)

An action against the Kingdom of Belgium was brought before the Court of Justice of the European Communities on 8 October 2004 by the Commission of the European Communities, represented by D. Triantafyllou, acting as Agent, with an address for service in Luxembourg.

The Commission claims that the Court should:

Pleas in law and main arguments

The national legislation in the construction sector which, on pain of a fine, requires principals and contractors, whenever they make payment to parties with whom they have entered into a contract who are not registered in Belgium, to withhold 15 % of the amount billed and to pay it to the Belgian authorities, in order to ensure that any tax debts of those parties are paid or recovered, constitutes an obstacle to the freedom to provide services as provided for in Articles 49 and 50 EC. The joint and several liability of the principals and contractors for the tax debts of the other parties to their contracts who are not registered, which comes to as much as 35 % of the total cost of the works, excluding VAT, likewise constitutes a breach of Articles 49 and 50 EC.

That legislation is such as to deter principals and contractors from entering into contracts with parties not registered in Belgium. The automatic application of joint and several liability of the principals and contractors for the tax debts of the other party to the contract does not comply with the principle of proportionality and involves an unjustified breach of the right to property and the rights of the defence of those principals and contractors. The joint and several liability of principals and contractors is automatic, without the authorities having to prove fault or complicity on the part of the principal or contractor. Also the liability may extend to tax debts relating to works which the other party to the contract has carried out for other persons. Breach of the obligation to withhold is penalised by a fine of double the amount to be withheld.

The legislation also constitutes a genuine obstacle for unregistered parties who wish to offer their services in Belgium. They must accept receiving the amount billed less 15 %, even if they have no tax debt to which the amount withheld could be applied, and they can recover that sum only after a certain time, by applying for its restitution.

Those measures cannot be regarded as objectively justified. First of all, in the majority of cases a person providing services who is established in another Member State is not liable for the taxes to which the legislation relates. Also, in specific situations where tax debts would be payable or recoverable in Belgium, the mechanism set up by the provisions must, because of its general nature, be considered disproportionate.

Finally, the possibility of registration does not justify the obligation to withhold and the joint and several liability. The action involved in the registration procedure, which goes far beyond merely communicating information to the Belgian authorities, means that registration is not a valid alternative for undertakings not established in Belgium which wish to exercise their freedom to offer their services in Belgium occasionally. The requirement to register renders the Treaty provisions intended to guarantee the freedom to provide services entirely redundant.