12.3.2011   

EN

Official Journal of the European Union

C 80/11

—

Declare that, by maintaining legal provisions according to which dividends paid to pension funds subject to limited tax liability and interest which is paid to such pension funds and to pension insurance schemes subject to limited tax liability are taxed less favourably than dividends or interest paid to pension insurance schemes subject to unlimited tax liability or pension funds subject to unlimited tax liability, the Federal Republic of Germany has failed to fulfil its obligations under Article 63 TFEU and Article 40 of the EEA Agreement;

—

Order the Federal Republic of Germany to pay the costs.

Interest received by pension insurance schemes is not subject to the tax on revenue from capital assets or corporation tax where the recipient of that interest is a tax-exempt domestic pension insurance scheme. There is thus no taxation of the income concerned. There is no similar exemption from the tax on revenue from capital assets for non-resident pension insurance schemes, meaning that that tax is levied in every case to the extent of 25 % of the gross sum, including solidarity supplement.

With regard to the taxation of dividends received by pension funds, domestic pension funds may include the tax on revenue from capital assets in an assessment procedure. That means, first, that operating costs can be deducted from tax and only net revenue is taxed. Second, the tax on revenue from capital assets is set off against general tax liability, with the result that the general corporation tax rate of 15 % is applied. Non-resident pension funds are however not entitled to such adjustments: the contested rules exclude them entirely from deducting operating costs, including those which are directly related to income received in Germany.

Finally, with regard to the taxation of the interest received by pension funds, the legal situation is essentially the same as that which applies where dividends are received by pension funds: as in the case of dividends, non-resident pension funds are therefore discriminated against, both with regard to the deduction of operating costs and the rate of taxation.

According to the Commission, that discrimination of non-resident pension insurance schemes and pension funds is incompatible with the free movement of capital. In none of the cases is there an objective justification for the distinction in question.

Article 63 TFEU prohibits all measures which treat the cross-border movement of capital less favourably than the movement of capital within a Member State. In that context, Article 65(1)(a) TFEU cannot be understood as meaning that all tax law provisions which distinguish between taxpayers with regard to their place of residence or with regard to the place where their capital is invested are without further consideration compatible with the Treaty. That provision is subject to the limitation contained in Article 65(3) TFEU, according to which the national measures referred to in Article 63(1) are not to constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 63. Such distinctions are compatible with EU law only in so far as they are applied to situations which are not objectively comparable or if they are justified by overriding reasons in the public interest. Such a justification is valid only to the extent that the provisions do not go beyond what is necessary in order to achieve the intended objective.

With regard to the deduction of operating costs, the Commission would like to point out that the Member States must also comply with the prohibitions on discrimination enshrined in the Treaty with regard to withholding taxes. In that context, the source State may not rely on unilateral rules in another Member State in order to avoid complying with its own obligations. Germany has not submitted that agreement has been reached with the other Member States that they deduct operating costs instead of Germany. Even if there were such an agreement, it would often not achieve the objective, for example where the revenue concerned is tax-exempt in the other State or the taxpayer does not make any overall profit. In addition, where the imputation method is used, the deduction of operating costs in the State of residence cannot replace that in the source State. In that case both States namely tax, in principle, the same income. Accordingly, taxation of net revenue rather than gross revenue is guaranteed only where both States apply their provisions on the deduction of operating costs. Deduction by the source State does not therefore lead to a double burden but merely establishes equal treatment vis-à-vis purely internal situations.