C-321/93

Bundesanstalt für Arbeit,

on the interpretation of Article 73 of Council Regulation (EEC) N o 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Com- munity, as amended by Council Regulation (EEC) N o 3427/89 of 30 October 1989 (OJ 1989 L 331, p . 1),

T H E C O U R T (Fifth Chamber),

composed of: C. Gulmann, President of the Chamber, J. C. Moitinho de Almeida (Rapporteur), D . A. O . Edward, J.-P. Puissochet and L. Sevón, Judges,

* Language of the case: German.

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having regard to the Report for the Hearing,

after hearing the oral observations submitted by the plaintiff in the main action, by the German Government, represented by Bernd Kloke, Oberregierungsrat at the Federal Ministry of the Economy, acting as Agent, by the Spanish Government and by the Commission, represented by Dimitrios Gouloussis and Jörn Sack, Legal Adviser, at the hearing on 30 March 1995,

after hearing the Opinion of the Advocate General at the sitting on 8 June 1995,

gives the following

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JUDGMENT OF 5. 10. 1995 — CASE C-321/93

IMBERNON MARTÍNEZ v BUNDESANSTALT FÜR ARBEIT

Tax Law shall be increased by the supplement assessed under subparagraph 6 if the taxable income (Paragraph 2(5) of the Income Tax Law) of the beneficiary is less than the basic tax free allowance under Paragraph 32a(l)(l) of the Income Tax Law. The taxable income shall be taken into account in so far as and in the manner in which it was made the basis of taxation; where relevant the taxable income shall be determined as a negative amount. If the scale of income tax has been calculated according to Paragraph 32a(5) or (6) of the Income Tax Law the basic tax free allowance shall be replaced by double that amount. The first sentence does not apply to persons whose income, together with that of their spouse unless legally separated or divorced, is comprised essentially of foreign income or national income received abroad or paid by an international institution and as such is not subject to taxation under the Income Tax Law.

6. The supplement shall be one-twelfth of 19% of the difference between the tax- able income and the basic tax free allowance calculated in accordance with the first or third sentence of paragraph (1), subject to a maximum of 19% of the sum total of the tax free allowance for dependent children to which the beneficiary is enti- tled. Where the tax is calculated pursuant to Paragraph 32b of the Income Tax Law, the percentage calculated in accordance with the first sentence shall be replaced by a percentage equal to the difference between the percentage calculated in accordance with the first sentence and the particular amount indicated in the tax return. Paragraph 20(3) applies.'

s The order for reference states that from 1 January to 18 September 1988 Mr Im- bernon Martinez was in Spain, where h e was unemployed; thereafter he transferred his residence to Germany where he was in paid employment from 21 September 1988. During that year his two children and his wife, who had neither employment nor income, lived in Spain.

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IMBERNON MARTÍNEZ v BUNDESANSTALT FÜR ARBEIT

9 The decision of the Finanzamt (Tax Office) Ansbach adjusting the sums deducted at source by way of wage tax and church tax for 1988 provided for a tax allowance for dependent children calculated pro rata on the basis of the number of months spent by Mr Imbernon Martinez in Germany during the relevant year. The allow- ance was granted on the basis of Paragraph 33a(l) of the EStG, which allows the taxpayer, exceptionally and in specified cases, to claim maintenance expenditure for persons under the age of 18 and in respect of whom neither the taxpayer nor any other person is entitled to a tax allowance for dependent children within the mean- ing of Paragraph 32(6) of the EStG. N o tax allowance was accorded in respect of his wife, however, in the absence of a 'certificate of lack of means'.

io Since his wife did not live in Germany, Mr Imbernon Martinez's tax was not cal- culated on the basis of Paragraph 32a(5) of the EStG (under the 'splitting' regime, Paragraph 26b of the EStG), and the double tax allowance provided for in Para- graph 32a(l), second sentence, point (1), of the EStG was also not granted.

1 1 With effect from September 1988 Mr Imbernon Martinez was granted the German family allowance at the full rate for his two children. As regards the supplementary allowance, which is at issue in these proceedings, the Ansbach Family Allowance Fund rejected Mr Imbernon Martinez's application for it to be calculated with ref- erence to the tax allowances for dependent children for which he had been unable to qualify under the tax rules.

u The Sozialgericht Nürnberg decided to stay the proceedings pending a ruling from the Court of Justice on the following questions:

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IMBERNON MARTÍNEZ v BUNDESANSTALT FÜR ARBEIT

' 1 . Does the rule of notional residence contained in Article 73 of Council Regu- lation (EEC) N o 1408/71 mean that persons entitled to a family allowance whose children reside in another Member State must be treated for the purposes of Paragraph 11a of the Bundeskindergeldgesetz (Law on family allowances) and the tax provisions referred to therein as if their children were resident within the territory covered by that Law?

2. (a) Does the rule of notional residence contained in Article 73 of Council Regulation (EEC) N o 1408/71 mean that persons entitled to a family allowance whose spouses reside in another Member State must be treated for the purposes of Paragraph 11a of the Bundeskindergeldgesetz and the tax provisions referred to therein as if their spouses were resident within the territory covered by that Law?

(b) If Question 2(a) is answered in the affirmative, must the plaintiff be treated as if the rate of income tax had been calculated in accordance with Para- graph 32a(5) of the Einkommensteuergesetz (Income Tax Law)?'

i9 It is common ground that an allowance such as the supplementary allowance for children provided for in Paragraph 11 of the B K G G is a family benefit for the pur- poses of Regulation N o 1408/71 falling within Chapter 7 ('Family Benefits') of Title III of the regulation, to which Article 73 belongs.

20 That article provides that 'an unemployed or self-employed person subject to the legislation of a Member State shall be entitled, in respect of the members of his family who are residing in another Member State, to the family benefits provided for by the legislation of the former State, as if they were residing in that State, sub- ject to the provisions of Annex VI'.

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IMBERNON MARTÍNEZ v BUNDESANSTALT FÜR ARBEIT

21 It must be remembered that the purpose of that provision is to prevent Member States from making entitlement to and the amount of family benefits dependent on residence of the members of the worker's family in the Member State providing the benefits, so that Community workers may not be deterred from exercising their right to freedom of movement (see paragraph 12 of the judgment in Case C-228/88 Bronzino [1990] ECR 1-531).

22 It follows that where, as in the main action in this case, entitlement to and the amount of benefits for dependent children are subject to their being resident in the national territory, that condition must be regarded as fulfilled, for the purposes of determining entitlement to and the amount of the benefits in question, where the children reside in the territory of another Member State.

26 The national court states that the wording of Article 73 of Regulation N o 1408/71 appears to preclude the rule of notional residence it lays down from being extended to a worker's spouse where the benefit is granted in respect of another member of the family.

27 It is sufficient to note that there is no support for interpreting the provision thus restrictively; for the reason given in Paragraph 21 the provision must be broadly interpreted so as to apply to all members of the worker's family, where entitlement to and the amount of a family benefit depends, directly or indirectly, on residence by one of the members of the worker's family in the Member State providing the benefit.

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IMBERNON MARTÍNEZ v BUNDESANSTALT FÜR ARBEIT

28 C o n s e q u e n t l y , in o r d e r t o d e t e r m i n e in a case such as this w h e t h e r t h e w o r k e r is entitled t o t h e allowance at issue a n d t o calculate the a m o u n t thereof, it is neces- sary t o a p p l y all the tax provisions of the M e m b e r State p r o v i d i n g t h e benefits t o w h i c h that State's social legislation refers for t h e p u r p o s e s of d e t e r m i n i n g t h o s e entitled t o a n d t h e a m o u n t of t h e allowance at issue o n the basis that t h e w o r k e r ' s s p o u s e resides n o t i o n a l l y in that State.

29 In that regard it should be noted that, as the Court stated in Schumacher (Case C-279/93 [1995] ECR 1-225, paragraph 45), Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation (OJ 1977 L 336, p. 15) provides for ways of overcoming administrative difficulties in taking into account the per- sonal and family circumstances of non-residents.

O n those grounds,

T H E C O U R T (Fifth Chamber),

in answer to the questions referred to it by the Sozialgericht Nürnberg by order of 26 April 1993, amended by order of 2 July 1993, hereby rules:

1. Article 73 of Council Regulation (EEC) N o 1408/71 of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended by Council Regulation (EEC) N o 3427/89 of 30 October 1989, is to be interpreted as meaning that where under the tax legislation of a Member State to which that State's social legislation refers entitlement to and the amount of benefits for dependent children is linked to their residence in the national territory that condition must be regarded as fulfilled if they reside in the territory of another Member State.

2. Article 73 of Regulation N o 1408/71 is to be interpreted as meaning that where under the tax legislation of a Member State to which that State's social legislation refers entitlement to and the amount of benefits for depen- dent children is linked to residence in the national territory of the worker's spouse that condition must be regarded as fulfilled where the spouse resides in the territory of another Member State. For the purposes of determining

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