Keywords
Summary

Keywords

Freedom of movement for persons – Freedom of establishment – Citizenship of the European Union – Right to move and reside freely within the territory of the Member States – Restrictions – Tax legislation – Transfer tax on immovable property

(Arts 18 EC, 39 EC and 43 EC; EEA Agreement, Arts 28 and 31)

Summary

A Member State whose legislation provides, for the purposes of calculating the tax payable upon the purchase of property for use as a principal residence, that where a private purchaser sells his other residence within one year before or after the purchase, the basis of assessment for the calculation of the tax shall be the difference between the gross market value of the property purchased and that of the property sold, provided that the residence sold is also situated in that Member State (‘the Member State concerned’), does not fail to fulfil its obligations under Articles 18 EC, 39 EC or 43 EC or under Articles 28 and 31 of the Agreement on the European Economic Area (EEA).

Admittedly, that legislation constitutes a restriction of the freedoms of movement for persons affirmed in Articles 39 EC and 43 EC, in that it has a dissuasive effect, in terms of the property purchase tax, on persons wishing to settle in the Member State concerned by buying real property there, in comparison with persons moving within that Member State, by denying the former the benefit of the tax advantage at issue when purchasing a property. As regards Article 18 EC, the exclusion from the benefit of the reduction in the basis of assessment of persons moving within the European Union for reasons not connected with the pursuit of an economic activity may also, in some cases, be likely to discourage those persons from exercising the fundamental freedoms guaranteed by Article 18 EC.

In addition, that difference in treatment relates to objectively comparable situations since, in the light of the tax at issue, the only difference between the situation of non-residents (including nationals who have exercised their right to move freely within the European Union) and that of residents (nationals, or the nationals of another Member State, purchasing a new principal residence in the Member State concerned) relates to the place of their previous principal residence. In either situation, the persons in question will have bought a property in the Member State concerned in order to settle there and, when purchasing their previous principal residence, will have paid a tax of the same nature as that at issue, either in the Member State in which that residence was situated or in the Member State concerned.

However, that restriction may be justified by reasons relating to preserving the coherence of the tax system. When the property sold is situated in another Member State, the Member State concerned has no power to tax the transaction entered into in that other Member State by the person deciding to purchase a property in the Member State concerned for his principal residence. In those circumstances, by providing that only those who have already paid the tax at issue on the purchase of such property in the Member State concerned may benefit from the tax advantage in question when purchasing property of the same nature, the configuration of the tax advantage in question reflects a logic of symmetry. If taxpayers not having paid the tax at issue previously were able, under the tax regime at issue, to benefit from the tax advantage in question, they would take unfair advantage of taxation that was not applicable to their previous purchase outside the Member State concerned. There is therefore a direct link between the tax advantage granted and the initial levy. First, that advantage and the tax levy are applied to one and the same person and, second, they relate to the same tax.

In addition, the restriction in question is appropriate to achieve the objective pursued, in that it operates symmetrically, for only the difference in value between the property sold which is situated in the Member State concerned and the value of the property purchased may be taken into account in the tax system at issue. In addition, the restriction in question is proportionate to the objective pursued, since, first, the objective of the legislation at issue is to avoid, upon the purchase of a second principal residence in the Member State concerned, the double taxation of the capital invested in the purchase of the previous residence that has in the meantime been sold and, second, a Member State has no power to tax real property transactions carried out in other Member States. Accordingly, taking the transactions carried out in other Member States into account for the purposes of reducing the basis of assessment for the tax at issue would result in those transactions being treated as already having been subject to the tax at issue, even though that was not the case. That situation would clearly be contrary to the abovementioned objective of avoiding double taxation under the national tax system.

Since the rules prohibiting restrictions of freedom of movement and freedom of establishment laid down in Articles 28 and 31 of the EEA Agreement have the same legal scope as the substantially identical provisions of Articles 39 EC and 43 EC, those articles do not preclude the legislation in question either.

(see paras 58, 64, 68, 74-76, 80-82, 85, 87, 91)