Keywords
Summary

Keywords

1 EC Treaty - Article 220, second indent - Direct effect - None

(EC Treaty, Art. 220)

2 Freedom of movement for persons - Workers - Equal treatment - Remuneration - Income tax - Income received in one Member State by nationals of another Member State - Frontier workers - Application of the provisions of a bilateral convention for the avoidance of double taxation - Permissible

(EC Treaty, Arts 48 and 220)

3 Freedom of movement for persons - Workers - Equal treatment - Remuneration - Income tax - Income received in one Member State by nationals of another Member State - Application of a tax credit mechanism provided for by a bilateral convention for the avoidance of double taxation - Permissible

(EC Treaty, Art. 48)

Summary

1 Article 220 is not intended to lay down a legal rule directly applicable as such, but merely defines a number of matters on which the Member States are to enter into negotiations with each other `so far as is necessary'. Its second indent merely indicates the abolition of double taxation within the Community as an objective of any such negotiations.

Thus, although the abolition of double taxation within the Community is included among the objectives of the Treaty, it is clear from the wording of that provision that it cannot itself confer on individuals any rights on which they might be able to rely before their national courts.

Consequently, the second indent of Article 220 of the Treaty does not have direct effect.

2 On a proper construction, Article 48 of the Treaty does not preclude the application of provisions such as those in Articles 13(5)(a), 14(1) and 16 of the Convention signed in Paris on 21 July 1959 between the French Republic and the Federal Republic of Germany for the avoidance of double taxation, as amended by the protocols signed in Bonn on 9 June 1969 and 28 September 1989, under which the tax regime applicable to frontier workers differs depending on whether they work in the private sector or the public sector and, where they work in the public sector, on whether or not they have only the nationality of the State of the authority employing them, and the regime applicable to teachers differs depending on whether their residence in the State in which they are teaching is for a short period or not.

The differentiation embodied in such provisions cannot - even though it relates, as regards public-service remuneration, to nationality - be regarded as constituting discrimination prohibited under Article 48 of the Treaty. It flows, in the absence of any unifying or harmonising measures adopted in the Community context under, in particular, the second indent of Article 220 of the Treaty, from the contracting parties' competence to define the criteria for allocating their powers of taxation as between themselves, with a view to eliminating double taxation.

3 On a proper construction, Article 48 of the Treaty does not preclude the application of a tax credit mechanism such as that provided for in Article 20(2)(a)(cc) of the Convention between the French Republic and the Federal Republic of Germany for the avoidance of double taxation.

The object of such a provision is simply to prevent the same income from being taxed in each of the two States party to the convention. It is not to ensure that the tax to which the taxpayer is subject in one State is no higher than that to which he or she would be subject in the other. It is not disputed that any unfavourable consequences entailed in certain cases by the tax credit mechanism set up by the bilateral convention, as implemented in the context of the tax system of the State of residence, are the result in the first place of the differences between the tax scales of the Member States concerned, and, in the absence of any Community legislation in the field, the determination of those scales is a matter for the Member States.