Case C‑123/15

Max-Heinz Feilen

v

Finanzamt Fulda

(Request for a preliminary ruling from the Bundesfinanzhof)

‛Reference for a preliminary ruling — Taxation — Free movement of capital — Inheritance tax — Legislation of a Member State providing for a reduction in inheritance tax applicable to estates containing assets which have already formed part of an inheritance giving rise to the imposition of inheritance tax in that Member State — Restriction — Justification — Coherence of the tax system’

Summary — Judgment of the Court (Second Chamber), 30 June 2016

Free movement of capital and liberalisation of payments — Restrictions — Inheritance tax — National legislation relating to the calculation of inheritance tax providing for a reduction in those taxes applicable to estates containing assets having already formed part of an inheritance giving rise itself to the imposition of inheritance tax in that Member State — Different treatment on the basis of where the assets are located and the place of residence of the parties to the inheritance at the time of the earlier inheritance — Not permissible — Justification — Need to safeguard the coherence of the tax system

(Art. 63(1) TFEU and Art. 65 TFEU)

Articles 63(1) TFEU and 65 TFEU do not preclude legislation of a Member State which provides for a reduction in inheritance tax in the case of inheritance by persons within a particular tax class where the estate includes assets that had already been acquired, by way of inheritance, by persons within that tax class during the 10 years prior to the acquisition, on condition that inheritance tax was levied in that Member State in respect of that earlier acquisition.

Admittedly, such legislation makes entitlement to the reduction in inheritance tax dependent on the location of the assets contained in the estate of the earlier inheritance and on the place of residence of the deceased or the beneficiary at the time of that earlier inheritance. The consequence of this is that an inheritance involving assets which were located in another Member State at the time of a previous inheritance in which none of the parties was resident in the Member State concerned is subject to higher inheritance tax than that levied in the case of an inheritance involving only assets which were situated in another Member State at the time of an earlier inheritance or involving assets which were situated in another Member State at the time of a previous inheritance at least one of the parties to which was resident in the Member State concerned. That legislation therefore has the effect of reducing the value of the inheritance and constitutes a restriction on the movement of capital within the meaning of Article 63(1) TFEU.

With regard to possible justification of that restriction based on Article 65 TFEU, a distinction must be made between the differences in treatment authorised under Article 65(1)(a) TFEU and the arbitrary discrimination prohibited under Article 65(3) TFEU. The difference in treatment must relate to situations which are not objectively comparable or must be justifiable by overriding reasons in the public interest. As regards the comparability of the situations at issue, it is common ground that, for inheritance tax purposes, the legislation places on the same footing persons in a particular tax class and resident in the national territory who acquire by inheritance an estate involving assets that had already been acquired by persons in that tax class during the ten years preceding the acquisition, irrespective of where the assets are located or where the beneficiaries thereof were resident at the time of that previous inheritance. It is only for the application of the reduction in inheritance tax that that legislation treats those persons differently depending on whether the assets in question were or were not located within national territory at the time of the previous inheritance and as to whether the parties to that inheritance were or were not resident within that territory. It follows that the difference in treatment introduced by the legislation concerns situations which are objectively comparable.

However, by providing that only persons receiving assets by way of an inheritance which has given rise to the imposition of such taxes in the Member State of taxation can benefit from the reduction in inheritance tax, the configuration of that tax advantage reflects a logical symmetry creating a direct link between that tax advantage and the previous imposition. That logic would be disturbed if that tax advantage were also to benefit persons inheriting assets which did not give rise to the imposition of inheritance tax in that Member State. Since the purpose of the tax advantage provided for by the national legislation is to reduce to a certain extent the tax burden on an inheritance involving assets transferred between close relatives which had already given rise to a previous imposition, by preventing partially the double taxation in the Member State of taxation of assets more than once within a short space of time, there is a direct link between the reduction in inheritance tax and the previous imposition of inheritance tax, that tax advantage and that previous imposition relating to the same tax, the same asset, and the close relatives of the same family.

Consequently, the need to safeguard the coherence of the tax system may justify the restriction on the movement of capital resulting from such national legislation.

(see paras 21, 22, 24, 26-28, 33, 34, 37, 38, 42, operative part)