C-336/96

1 1. The Tribunal Administratif, Strasbourg, Convention'), by the additional protocols has referred to the Court, pursuant to Article to the Convention dated 9 June 1969 and 28 177 of the EC Treaty, various questions con­ September 1989 and by Instruction cerning the interpretation of Articles 6, 48 14-B-2-93 of the French tax authorities con­ and 220 of the EC Treaty in order to give taining detailed rules for application. judgment in actions brought by Mr and Mrs Gilly against decisions of the Directeur des Services Fiscaux du Bas-Rhin requiring them to pay additional personal income tax for the years 1986, 1988, 1990, 1991, 1992 and 1993. 4. In the present case, Mrs Gilly's income from employment, which was paid by Land Baden-Württemberg, was taxed in Germany in accordance with the first sentence of Article 14(1) of the Franco-German Conven­ tion because it was public-service remunera­ tion and the recipient was a German 2. According to the findings of the national national. court in the order for reference, Mr Gilly is a French national and works as a teacher in the French State education system. His wife, who was originally a German national and acquired French nationality by marriage, is employed as a teacher in the German State education system. The couple reside in 5. To avoid double taxation, while Article France. 20(a) in the version of the Additional Proto­ col of 1969 was in force, France did not include Mrs Gilly's income in the couple's taxable income but took it into account when calculating the rate of tax applying to income received in France. When this provi­ sion was amended by the 1989 Protocol, 3. Mrs Gilly's income tax liability is gov­ such income was also taxed in France, erned by the Convention of 21 July 1959 although in respect of tax paid abroad there between the French Republic and the Fed­ eral Republic of Germany for the avoidance of double taxation ('the Franco-German 1 — Convention signed in Paris on 21 July 1959 between the French Republic and the Federal Republic of Germany for the avoidance of double taxation and the establishment of rules for mutual legal and administrative assistance in the field of income and wealth tax and in the field of business tax * Original language: Spanish. and land tax.

(3) 'as to the compatibility with Article 7 2 7. Taking the view that the outcome of the [now Article 6] of the Treaty of a tax proceedings depended on the interpretation of Articles 6, 48 and 220 of the Treaty, the Tribunal Administratif, Strasbourg, stayed 2 — Amended by Article G(8) of the Treaty on European Union.

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provision which lays down for frontier nationality and the public or private workers employed by persons governed nature of the post held and whether a tax by public law and residing in one of the credit regime applicable to a household living in one State which does not take Member States a tax regime which differs into account the exact amount of the tax according to whether they are nationals paid in another State but only a tax only of that State or have dual national­ credit, which may be lower, meets the ity'; objective assigned to the Member States of abolishing double taxation'; and

(6) on 'whether Article 48 must be inter­ preted as meaning that nationals of a (4) on 'whether the principle of freedom of Member State who are frontier workers movement for workers, as embodied in in another Member State may not, by the Treaty, is contravened by tax rules reason of a tax credit mechanism of the which are liable to affect the choice made type provided for by the Franco- by teachers in the contracting States as to German Convention, be taxed more whether to work on a more or less long- heavily than persons whose occupational term basis in another State having regard activity is pursued in their State of resi­ to the differences, based on the duration dence'. of employment, in the tax regimes of the States in question';

10. Article 14(1) sets out the criteria govern­ ing the taxation of public-service remunera­ tion. The first sentence lays down the general rule that remuneration paid by one of the 12. Article 20(2) lays down detailed rules for contracting States or by a Land or by a legal the avoidance of double taxation of persons person of that State governed by public law residing in France. As worded by the Addi­ to natural persons resident in the other State tional Protocol of 9 June 1969, it provided as in consideration for military or administra­ follows: tive services is taxable only in the first State.

'(a) Subject to the provisions of (b) and (c), income arising in the Federal Republic There is also an exception to this rule, set out which, under this Convention, is taxable in the second sentence, which is to the effect in the Federal Republic shall be that where remuneration is paid to persons excluded from the basis of assessment in having the nationality of the other State France. However, this rule shall not without being at the same time nationals of limit the right of France to take account the first State, the remuneration is taxable of the income thus excluded when only in the State where they reside. determining its rates of taxation.'

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Since the entry into force of the Additional tions relating thereto to which nationals of Protocol of 28 September 1989, the wording that other State are or may be liable in the of the provision for the avoidance of double same situation. taxation of persons residing in France has been as follows:

2. [Freedom of movement for workers] shall Member State, be treated differently from entail the abolition of any discrimination national workers by reason of his nationality based on nationality between workers of the in respect of any conditions of employment Member States as regards employment, and work, in particular as regards remunera­ remuneration and other conditions of work tion, dismissal, and should he become unem­ and employment. ployed, reinstatement or re-employment.

...'

2. He shall enjoy the same social and tax 'Article 220 advantages as national workers.

Member States shall, so far as is necessary, enter into negotiations with each other with a view to securing for the benefit of their nationals: ...'

The different views put forward in the pro­ — the abolition of double taxation within ceedings on the reference the Community;

16. Within the time-limit laid down for the purpose by Article 20 of the EC Statute of 15. In addition, Article 7 of Regulation No 3 the Court of Justice, written observations 1612/68 provides as follows: were submitted by the plaintiffs in the main proceedings, the Governments of Belgium, Denmark, Germany, France, Italy, Finland, Sweden and the United Kingdom, and the '1 . A worker who is a national of a Member Commission. During the oral procedure State may not, in the territory of another observations were submitted by the plaintiffs in the main proceedings and by the represen­ tatives of the Governments of Denmark, 3 — Regulation (EEC) No 1612/68 of the Council of 15 October France, Italy, the Netherlands and the 1968 on freedom of movement for workers within the Com­ munity (OJ, English Special Edition 1968(11), p. 475). United Kingdom, and by the Commission.

In addition, they assert, Mrs Gilly suffers double taxation in so far as, under the Franco-German Convention, her income from employment is taxable both in Ger­ many, where she is deemed to be a single taxpayer without children (whereas in fact she is married and has two dependent chil­ dren) and in France, where the income she Nor does Article 48 preclude, in the frame­ receives in Germany is added to her hus­ work of a convention between two States for band's income for the purpose of calculating the avoidance of double taxation, the State the total taxable income of the household. In where the taxpayer resides from taxing all his this connection the plaintiffs add that the tax income, including that received in the other credit for tax paid abroad, laid down by the Member State, and granting him, in relation Convention for income from work as to the latter, a tax credit for tax paid abroad employees, reduces the double taxation equal to the amount of the national tax on slightly but does not eliminate it. the relevant income.

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GILLY v DIRECTEUR DES SERVICES FISCAUX DU BAS-RHIN

20. The Commission begins with a detailed examination of the consequences of applying the Franco-German Convention to the tax situation of Mr and Mrs Gilly. On that basis, the Commission considers that in Germany Mrs Gilly's liability to tax should have regard to her marital status, so

4 — 'Splitting' consists in aggregating the spouses' income and notionally attributing 50% to each. If the income of one In France, where they reside, income tax is spouse is greater than that of the other, this system levels out the taxable income and reduces the progressive increase in payable on the entire income of the couple the scale of the tax.

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that her husband's income in France should Preliminary observations be taken into account. That would certainly ensure consistency in each State with regard to application of the progressive scale of its tax.

23. Before discussing the questions referred by the Tribunal Administratif, Strasbourg, I think it is necessary to comment on the fol­ lowing points:

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GILLY v DIRECTEUR DES SERVICES FISCAUX DU BAS-RHIN

A. The Court's jurisdiction, in the frame- victim of discrimination arising from the work of the procedure laid down by Article provisions of a bilateral convention for the 177, to give a ruling on the compatibility of avoidance of double taxation. In those cir­ the Franco-German Convention with Com- cumstances, the Court may give the national munity law court guidance on the interpretation of the area of Community law which will enable it 6 to give judgment in the main proceedings.

25. On this point I take the view that, just as the Court does not, within the framework of these proceedings, have jurisdiction to give a ruling on the compatibility of a national 5 I therefore propose that the Court reformu­ measure with Community law, nor can it late the questions from the national court. give a ruling on the compatibility with Com­ munity law of the provisions of an interna­ tional treaty concluded by two Member States for the avoidance of double taxation.

B. The admissibility of the fourth question from the national court, asking whether Moreover, as the treaty in question is a bilat­ Article 48 precludes a provision of the nature eral convention on a matter such as direct of Article 16 of the Franco-German Conven- taxation which is outside the Community's tion competence and which is regulated exclus­ ively by the Member States, the Court could not even undertake to interpret it.

26. Under Article 16 of the Franco-German Convention, teachers habitually residing in However, the rules governing freedom of one of the contracting States who, in the movement for workers arc within the ambit course of a temporary stay not exceeding of Community law and the parties to the two years in the other State, receive remu­ main proceedings are the tax authority of neration for teaching in a university, college, one of the Member States and a Community school or other teaching establishment are national who has exercised her freedom of taxable on that remuneration only in the first movement and who considers herself a State.

29. There is a body of settled case-law con­ cerning the respective roles of the national courts and the Court of Justice in the frame­ work of the cooperation procedure provided 27. In my opinion, the plaintiffs' purpose in for by Article 177 of the Treaty. According advancing this argument, which is echoed in to that case-law, the national court, which the national court's observation, in the order alone has direct knowledge of the facts of the for reference, that Article 16 may influence case, is in the best position to assess, having the choice made by teachers in the contract­ regard to the particular features of the case, ing States as to whether to work on a more whether a preliminary ruling is necessary to or less long-term basis in another State, is enable it to give judgment and the relevance 7 not so much to support a particular interpre­ of the questions to be put to the Court , tation of the principle of freedom of move­ whereas it is a matter for the Court of Jus­ ment for workers within the Community, as tice, in order to determine whether it has to obtain from the Court a ruling against jurisdiction, to examine the conditions under Article 16 of the Franco-German Conven­ which the case is referred to it by the tion, which has not been applied to them. national court. The spirit of cooperation which must prevail in the preliminary ruling procedure requires the national court to have regard to the function entrusted to the Court of Justice, which is to assist in the adminis­ tration of justice in the Member States and not to deliver opinions on general or hypo­ 8 thetical questions.

30. Taking account of this function, the purposes of deciding the case, the Court Court has held that it could not give a ruling must declare that there is no need to proceed on a question from a national court where to judgment. the request for interpretation or examination of the validity of a rule of Community law bore no relation to the actual nature of the case or to the subject-matter of the main 9 proceedings, or where it was asked to give a ruling on a hypothetical problem without having before it the matters of fact or law 31. In the light of this case-law, and as it necessary to give a useful answer to the appears that neither of the plaintiffs before 10 questions submitted to it. the national court has been in the situation covered by Article 16 of the Franco-German Convention — because neither of them has worked for less than two years in the con­ tracting State other than the one in which The Court has held that it 'does not have they reside — I consider that a reply from jurisdiction to reply to questions of interpre­ the Court interpreting the Community law tation which are submitted within the frame­ on freedom of movement for workers in the work of procedural devices arranged by the Community would be of no use to the parties in order to induce the Court to give national court in giving judgment in the case its views on certain problems of Community before it. For this reason I propose that the law which do not correspond to an objective Court rule the fourth question inadmissible. requirement inherent in the resolution of a 1 dispute'. 1

However, with regard to freedom of move­ ment for workers, the principle of equal 1. Firstly, whether Article 220 of the Treaty treatment has been given specific application is directly applicable. by Article 48(2) of the Treaty, which pro­ vides for the abolition of all discrimination as regards employment, remuneration and other conditions of work. Furthermore, Article 7 of Regulation No 1612/68, which provides that a worker who is a national of a 2. Secondly, whether the provisions of Member State is to enjoy, in the territory of Article 13(1) and (5) and Article 14 of other Member States, the same social and tax the Franco-German Convention are con­ advantages as national workers, is a specific trary to Article 48 of the Treaty and expression of the general principle of non­ Article 7(2) of Regulation No 1612/68 in discrimination against workers by means of so far as they lay down criteria for the tax measures. taxation of income from work as employees in one or the other State:

In this case, therefore, it is unnecessary to — by reference to the place where the refer to Article 6 of the Treaty in order to work is done; reply to the questions from the Tribunal Administratif, Strasbourg.

— according to whether the worker ful­ fils the conditions for being regarded Reformulation and discussion of the ques­ as a frontier worker for the purpose tions referred to the Court of the Convention;

33. So far as the other questions are con­ — according to whether the worker cerned, I conclude from the statements of the receives public-service remuneration and, if so, depending on whether he is a national of the State other than the one paying the remuneration, 13 — See the judgments in Case C-419/92 Scholz v Opera Uni- versitaria di Cagliari [1994] ECR 1-505, paragraph 6, and without at the same time being a Case C-193/94 Skanavi and Chryssanthakopoulos [1996] ECR 1-929, paragraph 20. national of the latter.

Furthermore the provision, as worded, does 34. The national court's question here con­ not lay down an absolute obligation but cerns the direct applicability of this provi­ leaves the Member States a wide discretion sion, which states that the Member States arc to decide whether to enter into negotiations. to enter, so far as is necessary, into negotia­ France and Germany exercised that discre- tions with each other with a view to securing for the benefit of their nationals the abolition of double taxation within the Community. 14 — Case 137/84 Mutsch [1985] ECR 2681, paragraph 11.

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tion when, in 1959, they signed the Conven­ 37. In referring the questions, the national tion for the avoidance of double taxation, court appears to assume that Mrs Gilly must which abrogated the 1934 Convention on the be deemed to have the status of a frontier same subject, and also when they amended it worker because she is domiciled in the French frontier area and her place of work is by successive additional protocols in 1969 situated in the German frontier area. and 1989. By signing such a Convention, France and Germany shared between them the power to tax income received by their respective residents which is earned in or paid by the other contracting State.

The term 'frontier worker' is defined in Article 13(5)(a) as covering those who work in the frontier area of one contracting State and have their permanent home in the fron­ tier area of the other contracting State to which they normally return each day. 'Fron­ Second question: equal treatment of workers tier area' is defined in Article 13(5)(b) and as regards taxation and the provisions of the (c). Franco-German Convention laying down criteria for the taxation of income from employment

frontier workers only in the State where they 39. Community law does not require the reside is an exception to that general rule. Member States to lay down a different crite­ rion for taxing the income from employment of frontier workers from that applying to other employed persons, State employees and persons treated as such, nor is this cus­ tomary when concluding conventions for the 15 avoidance of double taxation. Moreover, a recent comparative study of the bilateral tax conventions concluded by France shows Secondly, Article 14(1) of the Convention that, where a special tax regime is laid down lays down a lex specialis applying to 'public- for frontier workers, income is not always service remuneration'. That is to say, remu­ taxed in the State where the worker 16 neration paid by a State, a local or regional resides. authority or a public entity. This lex specialis consists in turn of a general rule and an exception. The general rule is set out in the first sentence of Article 14(1) and states that, if the employer is a legal person governed by public law and if the employee resides in the other State, remuneration and retirement pensions paid in consideration for adminis­ trative or military services are taxable in the State paying them. The exception is given in the second sentence, which is to the effect that this abovementioned rule does not apply where the remuneration is paid to persons who have the nationality of the other State 40. Nor does Community law prohibit the but are not at the same time nationals of the Member States from laying down rules for first State, in which case the remuneration is frontier workers which differ from those taxable only in the State where they arc resi­ applying to workers in general, employees of dent.

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public authorities and persons treated as conventions for the avoidance of double such, provided that this does not entail dis­ taxation concluded by the Member States. crimination against workers who are nation­ als of other Member States, by comparison with national workers. Furthermore, such a practice is not unknown in Community law itself.

The Member States which have submitted written observations in this case point out that this provision is based on the comity of nations and mutual respect for the sover­ eignty of each State. The commentary on For example, in Regulation (EEC) No Article 19 of the Model Convention points 17 1408/71, adopted by the Council pursuant out that the principle of giving the exclusive to its obligation under Article 51 of the right of taxation to the paying State is con­ Treaty, workers in general are, apart from tained in so many of the existing conventions certain exceptions, subject to the social secu­ between OECD Member States that it can rity legislation of the State where they work, be said to be already internationally whereas civil servants and persons treated as accepted. With regard to the exception, the such are subject to the social security legisla­ same commentary adds that it originates tion of the State to which the authority from the Vienna Convention of 18 April employing them belongs. For frontier work­ 1961 on Diplomatic Relations and the ers, the regulation has a whole catalogue of Vienna Convention of 24 April 1961 on special measures in chapters such as those Consular Relations, under which the host relating to sickness insurance, accidents at State has the right to tax the remuneration of work and occupational illnesses, unemploy­ the members of certain categories of the staff ment and family benefits. of foreign consular and diplomatic missions who reside permanently in that State or who are nationals thereof.

44. By signing a bilateral convention for the avoidance of double taxation, the two States concerned agree to limit their fiscal sover­ eignty and to waive part of it. It is not sur­ prising that, when sharing the power to tax the income of their respective residents from employment in the other State, they use cri­ teria such as those in Article 13(1) and (5) and Article 14 of the Franco-German Con­ 43. Therefore direct taxation still falls within vention, namely the place where the work is the competence of the Member States, as the performed, fulfilment of the conditions nec­ Court has found in its past judgments on the essary for being deemed a frontier worker, subject. However, the States must exercise whether the employer is a public-law entity that competence consistently with Commu­ and, if so, whether the taxpayer is a national nity law, refraining from any overt or covert of one State or the other. Nor are there many 22 discrimination on grounds of nationality. other possibilities. In the present case it is necessary to ascertain whether, in signing the Convention, the Member States exercised that competence consistently with Community law and, in particular, with the provisions governing the

45. It cannot be branded as discriminatory German Convention, but from German tax to provide that the remuneration of an law, which specifies a higher rate of tax on employed person is taxable in the State such income than the rate in France, while in where he works or in the State where he addition the tax systems and the progressive resides or by the State paying the remunera­ nature of the tax differ considerably in the tion, even if, in the case of public-service two States. remuneration, it is necessary in the final analysis to refer to the criterion of the recipi­ ent's nationality in order to decide which of the two States is to tax it, because for this purpose that is as neutral a criterion as the others. At the stage of applying the criteria for taxation, it is only necessary to decide in each case which of the two States is to tax Such differences will remain until the Coun­ the income. Then the State where the tax­ cil adopts directives for harmonising fiscal payer resides and to which it falls to tax his provisions applying to direct taxes. As total income will apply the legal procedure Article 100a(2) of the Treaty provides that agreed upon with the other State in order, Article 100a(1), which regulates the adoption when calculating the tax payable under its of measures by a qualified majority, is not to own law, to avoid taxing once again the apply to, inter alia, fiscal provisions, this is income from employment which has already unlikely to happen in the short or medium been taxed in the other State. I shall discuss term. the legal procedure applied by France in more detail when examining the third ques­ tion.

meaning of Article 14. Under Article 50. As interpreted by the Court in accord­ 20(2)(a)(cc), the procedure consists, firstly, in ance with Article 48(2) of the Treaty, free­ aggregating the income from employment dom of movement for workers entails the earned in Germany with the taxable income abolition of all discrimination based on calculated in accordance with French tax law, nationality between workers of the Member and then granting a tax credit in respect of States, particularly with regard to remunera­ the tax paid abroad, equal to the amount of tion. The principle of equal treatment with the French tax on the relevant income. regard to remuneration would be rendered ineffective if it could be undermined by dis­ criminatory national provisions on income tax. For that reason the Council laid down, in Article 7 of Regulation No 1612/68, that workers who are nationals of a Member State are to enjoy, in the territory of another Member State, the same tax advantages as 23 national workers.

49. Mrs Gilly contends that the application of this provision to the circumstances of her own case gives rise to discrimination on grounds of nationality, contrary to Article 48 of the Treaty and Article 7(2) of Regulation The Court has also repeatedly held that No 1612/68, because the income tax which Article 48 of the Treaty prohibits not only she has to pay in France, which is where all overt discrimination by reason of nationality the income of her tax household is taxed, is but also all covert forms of discrimination greater than she would have had to pay if it which, by the application of other distin­ had fallen to France to tax her income guishing criteria, lead in fact to the same 24 received in Germany. result.

same situation who has French nationality. State for work in Germany, who resides in In this connection it is irrelevant that France, who is married and, who in relation Mrs Gilly is also a national of the State to to his or her spouse, contributes to the fam­ which she attributes discriminatory treat­ ily income in the same proportion as ment because, as the Court has observed, Mrs Gilly. In practice, the public-service any Community national who, irrespective remuneration of such a person would be tax­ of his place of residence and his nationality, able in France, there would be no reason for has exercised the right to freedom of move­ using the procedure for avoiding double taxation and the amount paid by the couple ment for workers and who has been as income tax in France would be less than employed in another Member State, falls the total tax paid by Mrs Gilly in Germany within the scope of Article 48 of the 25 and her tax household in France. That is the Treaty. reasoning of the plaintiffs in the main pro­ ceedings to show that Mrs Gilly suffers dis­ crimination.

52. It must also be borne in mind that, according to the definition given by the Court, discrimination can arise only through the application of different rules to compa­ rable situations or the application of the 26 same rule to different situations.

56. If the second method is used, a perfect (a) Firstly, because, before applying Article parallel is obtained from the outset: income 20(2)(a)(cc) of the Convention, which from work as an employee received in Ger­ lays down the procedure whereby many by a person resident in France and France, as the State to which it falls to taxed in Germany, the person being in the tax the total income of its residents, same family situation as Mrs Gilly. In this avoids the double taxation of income way it can be shown that her tax treatment which has already been taxed in Ger­ in France is the same as that of a French per­ many, it is necessary, as a first and essen­ son in the same situation. tial step, to determine, by applying the taxation criteria of the Convention, which of the two States should tax income from employment. As I have mentioned when discussing the national court's second question, these criteria, which are the place where the work is done, fulfilment of the conditions for If the first method is used, however, the being deemed a frontier worker, whether starting-point is the result obtained after the remuneration is public-service remu­ application of the system for avoiding neration and, if so, whether the taxpayer double taxation. In other words, Mrs Gilly is a national of one State or the other, are pays more income tax in France than she neutral from the viewpoint of the Com­ would if she had French nationality, all else munity law relating to freedom of move­ being equal, and from this finding one works ment for workers. back to the beginning.

since the fact that the couple's family situa­ principle the overall taxation of taxpayers, tion is taken into account there affects only taking account of their personal and family Mr Gilly's income? circumstances, is a matter for the State of residence'. The Court added that 'the situa­ tion of a resident is different in so far as the major part of his income is normally concen­ trated in the State of residence. Moreover, that State generally has available all the infor­ mation needed to assess the taxpayer's over­ all ability to pay, taking account of his per­ 27 58. I consider that the reply in this case must sonal and family circumstances'. be in the negative. As the Court has previ­ ously observed, in relation to direct taxes, the situations of residents and non-residents are not, as a rule, comparable and the fact that a Member State does not grant a non­ resident certain tax benefits which it grants to a resident is not, as a rule, discriminatory since those two categories of taxpayer are not in a comparable situation. Accordingly 59. The only cases in which the Court has Article 48 of the Treaty does not in principle not followed this reasoning are those involv­ preclude the application of rules of a Mem­ ing workers who did not receive significant ber State under which a non-resident work­ income in their State of residence so that ing as an employed person in that State is their tax liability in that country was not suf­ taxed more heavily on his or her income ficient for their personal and family situation than a resident in the same employment. to be taken into account, and who received most of their income, and almost all their household income, in a different Member State. In such cases, there is discrimination against the worker in so far as his personal and family situation is not taken into account in the State of residence or the State 28 of employment. To reach that conclusion, the Court reasoned as follows: 'income received in the territory of a Member State by a non-resident is in most cases only a part of his total income, which is concentrated at his place of resi­ dence. Moreover, a non-resident's personal ability to pay tax, determined by reference to his aggregate income and his personal and However, this cannot be said to apply to family circumstances, is more easy to assess Mrs Gilly who, although as an individual she at the place where his personal and financial receives almost all her income in Germany in interests are centred. In general, that is the place where he has his usual abode. Accord­ ingly, international tax law, and in particular the Model Double Taxation Treaty of the 27 — Schumacher, cited in footnote 22, paragraphs 31 to 35.

In that connection the Court has observed that 'the provisions of the Treaty relating to freedom of movement for persons are intended to facilitate the pursuit by Commu­ nity citizens of occupational activities of all kinds throughout the Community, and pre­ clude [national] measures which might place Whether the consequences of a provision Community citizens at a disadvantage when such as that in question here are unfavour­ they wish to pursue an economic activity in able to workers depends, in the final analy­ 29 the territory of another Member State'. sis, on the tax rates charged in each Member State on certain income and I therefore con­ sider that those consequences are too uncer­ tain and indirect for the provision to be regarded as being capable of deterring a 61. Here again, the reply must be in the worker from exercising his or her freedom of negative because if Germany were simply to movement between the two Member States 30 in question.

29 — Sec the judgment in Case C-415/93 Union Royale Belge ¡Ics Sociétés dc Football Association and Others v Bosman and30 — See Case C-134/94 Esso Española v Comunidad Autónoma Others [1995] ECR I-4921, paragraph 94. de Canarias [1995] ECR I-4223, paragraph 24.

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63. Articles 23A and 23B of the Model Con­ vention for the avoidance of double taxation envisage two methods for achieving this result which, for the sake of clarity, are 65. The legal procedure used by France, worth examining in some detail. since the entry into force of the Additional Protocol of 1989, to avoid the further taxa­ tion in France of income from employment which has already been taxed in Germany under the Convention, consists in granting a tax credit equal to the amount of tax on the relevant income. The method previously used consisted in exempting income already taxed in Germany, although it was taken into 64. Article 23A lays down the rules for the account for determining the rate applying to 'exemption with progression' method. income received in France. In the final analy­ Where a resident of a contracting State sis these two methods, which at first appear receives income which, according to the to be different, produce the same result. Convention, may be taxed in the other State, the first State exempts the income from tax. However, it may take the income into account when determining the rate applying to the income received in the State of resi­ dence. In other words, although the income received in the source State does not form part of the taxable income in the State of residence, the total tax payable in the latter is 66. The object of a bilateral double taxation increased by the effect of progressive taxa­ convention is to prevent income which is tion in the country of residence. taxed in one State from being taxed again in

(B) reply as follows to the other questions :

(1) The second indent of Article 220 of the Treaty does not have direct effect.

(2) Articles 48 and 220 of the EC Treaty and Article 7 of Regulation ( EEC ) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community must be interpreted as meaning that they do not preclude a convention between two Member States for the avoidance of double taxation from laying down criteria for the taxation of income from employment in one or the other State:

— by reference to the place where the work is done ; or

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