6.2.2004   

EN

Official Journal of the European Union

CE 33/27

1.

In Germany, there are a number of benefits which have the purpose of promoting home ownership. These are known as the ‘Eigenheimzulage’ (including a supplement for children, the ‘Kinderzulage’). Do they constitute social and/or tax advantages pursuant to Regulation No 1612/68 (1) (Article 7(2)/(4))?

2.

If so, to which of these advantages is a frontier worker entitled who works in Germany while residing in another Member State where he has his home and where he is not entitled to tax advantages to promote home ownership if he is liable to tax without restriction and is covered by social insurance in Germany?

3.

Is a frontier worker who is liable to tax to a limited extent and has social insurance cover in Germany pursuant to Regulation No 1408/71 (2) entitled to the ‘Kinderzulage’ and/or ‘Eigenheimzulage’?

4.

If a frontier worker who is liable to tax either without restriction or to a limited extent is entitled to the ‘Eigenheimzulage’, is it permissible to terminate the benefit if the worker resigns from his job, is dismissed for any reason, is declared unfit for work or retires?

1.

Under Articles 12, 39 and 43 of the EC Treaty, migrant workers and self-employed persons have the right to equal tratment with workers of the host Member State.

The ‘Eigenheimzulage’ (and its component Kinderzulage) are not granted specifically for workers, but for everybody. It is a general promotion scheme for home ownership. These benefits to encourage home ownership — currently subject to modification by the German legislator — are linked to the status of being subject to unlimited tax liability. Consequently, all workers subject to German tax without limitation are eligible.

Under article 7 of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community, migrant workers have the right to equal treatment in ‘tax and social advantages’ as workers of the host Member State. The European Court of Justice has defined these as: ‘all the advantages which, whether or not linked to a contract, are generally granted to national workers primarily because of their objective status as workers or by virtue of the mere fact of their residence on the national territory and whose extension to workers who are nationals of other Member States therefore seems likely to facilitate the mobility of such workers within the Community (3).’

In so far as the ‘Eigenheimzulage’ is to be regarded as an advantage covered by Article 7 (2) of Regulation (EEC) No 1612/68, persons covered by that Regulation are entitled to it so long as they fulfil the general conditions are met.

However, it is far from clear that Article 7 (2) should be extended to cover all benefits related to tax status. While it is important to ensure that individuals are not deprived of entitlement to benefits when they exercise their right of free movement, it is also important to avoid overlapping benefits.

2.

Under German legislation as it now stands, one of the conditions for grant of the benefits is unlimited tax liability, a status which a non-resident is granted on demand if more than 90 % of his income is subject to German income tax or if his income not subject to German tax does not exceed EUR 6136. A further condition is that the house must be in Germany.

The Commission considers that the condition regarding the location of the house is incompatible with Community law and has therefore launched an infringement procedure (No 1999/4943).

The 90 % threshold requires some examination. What is important as a matter of Community law is whether the state of residence is in a position to take into account the taxpayer's personal and family circumstances, in order to grant him the corresponding tax or related advantages (4). It is not immediately apparent whether or not a fixed 90 % threshold corresponds to that criterion, which relates to the particular situation of the taxpayer.

3.

Under current German legislation a frontier worker in the situation described is not entitled to ‘Eigenheimzulage’ (and its component ‘Kinderzulage’), not only because he is only liable to German tax to a limited extent, but also because his home is not in Germany.

As has already been noted, the Commission considers that the condition of the location of the house is unacceptable.

For the reasons already mentioned, the condition relating to unlimited tax liability requires closer examination.

4.

As long as the frontier worker remains subject to German tax without restriction, he will be entitled to the benefit. That situation will most frequently come to an end when he ceases to be employed and instead receives a pension taxabloe in his Member State of residence.