Keywords
Summary

Keywords

1. Free movement of capital – Provisions of the Treaty – Scope

(Arts 39 EC, 43 EC and 56 EC)

2. Free movement of capital – Restrictions – Tax legislation – Income tax

(Art. 56 EC)

Summary

1. A situation in which natural persons residing in a Member State and liable to unlimited taxation in that State inherit a house situated in another Member State is one that is covered by Article 56 EC. It is therefore not necessary to consider whether Articles 39 EC and 43 EC apply.

(see para. 19)

2. Article 56 EC precludes income-tax legislation of a Member State under which natural persons who are resident and liable to unlimited taxation are entitled to have (i) losses from the letting or leasing of an immovable property deducted from the taxable amount in the year in which those losses arise, and (ii) the income from such property assessed on the basis of the application of the decreasing-balance method of depreciation, only if the property in question is situated on the territory of that Member State.

The tax position of a natural person residing and liable to unlimited taxation in the Member State concerned who has an immovable property in another Member State is less favourable than it would be if that property were situated in the first Member State, since that person is, in any event, deprived of a cash-flow advantage. That fiscal disadvantage is liable to discourage such a person both from investing in an immovable property that is situated in another Member State and from keeping any such property of which he is the proprietor and, therefore, the legislation at issue constitutes a restriction on the movement of capital which is prohibited, in principle, by Article 56 EC.

Even on the assumption that the objective of encouraging the construction of rental property in order to satisfy the demand for such housing on the part of the national population is capable of justifying a restriction on the free movement of capital, it does not appear that such a national measure – which makes a clear distinction according to whether or not the housing intended for rent is situated on the national territory – is appropriate for securing the attainment of that objective. Instead of targeting places where the shortage of such housing is particularly acute, the national provision at issue disregards differing needs in different parts of the Member State concerned. In addition, the decreasing-balance method of depreciation can be applied to all categories of rental property, from the most basic to the most luxurious. That being the case, it cannot be assumed that private investors, who are motivated in particular by financial considerations, will meet the allegedly socio-political objective of that provision.

(see paras 25-27, 31-33, operative part)