C-229/98

VANDER ZWALMEN AND MASSART V BELGIAN STATE

OPINION OF ADVOCATE GENERAL RUIZ-JARABO COLOMER delivered on 25 March 1998 *

1. The Cour d'Appel (Court of Appeal), subject to income tax in that country Brussels, has referred to the Court of Justice because Article 14 of the Protocol, for a preliminary ruling two questions on relating to the tax domicile of officials, the interpretation of Article 13 of the is not applicable to her. Protocol on the Privileges and Immunities of the European Communities of 8 April 1965 (hereinafter 'the Protocol') in relation to fiscal legislation which takes into account, for income tax purposes, the earned income of the officials to whom Article 13 of the Protocol refers. — The Belgian tax authority refused to grant the spouses Vander Zwalmen and Massart the marital allowance — applicable to certain income earned by married couples who are subject to tax — on the ground that, under the amendments to the laws governing The facts, the proceedings and the ques- income tax, x for tax purposes they tions referred for a preliminary ruling could no longer be regarded as spouses but had to be treated as separate taxpayers. 2. As stated in the order for reference, the facts in the case are as follows:

— Mr Vander Zwalmen is a Belgian — In the complaints he lodged against official — Chief Registrar at the Cour that decision, Mr Vander Zwalmen de Cassation — and is subject to per- claimed that the tax had been deter- sonal income tax in Belgium. His wife, mined in breach of Article 13 of the Ms Massart, is an official of the Protocol, since that tax was, to the European Communities; having estab- extent to which Belgian law excluded lished her residence in Belgium before him from the benefit of the marital being appointed an official of the allowance, levied indirectly on the European Communities, she too is exempted income of Ms Massart.

(2) prohibiting a Member State from refus- ing, by recourse to the separate taxa- (1) prohibiting the Member States, under tion described under No 1, the benefit fiscal legislation applicable to personal of the marital allowance for the spouse tax, from creating, for the taxation of of a European official, with the excep- married couples and their children, a tion of those who declare that they distinct category of taxpayers by rea- receive earned income which is son of the fact that one of them is a exempted under a convention, without European official, receiving as such reservation as to progressive rates of earned income which is exempted taxation, of less than BEF 270 000 under a convention, without reserva- (indexed), who does not receive non- tion as to progressive rates of tax, and exempted income of a sufficient from making for that category two amount for the benefit of the marital separate assessments whereby the tax is allowance to be totally offset by the tax determined for each of them on the due by virtue of the aggregation of the basis of his own income and that of his spouses' income and the progressive children which is available to him by nature of the tax rates?' operation of law, whilst at the same time, where appropriate, each remains jointly and severally liable for the tax debt of the household 2 whereas, for married couples in which one spouse does not receive taxable earned income Legal provisions or receives insignificant earned income, under national law the assessment is made in the name of both spouses, and, 4. Article 13 of the Protocol provides: with the exception of earned income, the income of the spouses is aggregated with the income of the spouse who receives more, and, where the income of a spouse is less than 30% of the 'Officials and other servants of the Com- munities shall be liable to a tax for the benefit of the Communities on salaries, 2 — See Article 295 of the 1964 Income Tax Code and wages and emoluments paid to them by the Article 394 of the 1992 Income Tax Code. Communities ...

— Law of 28 December 1990 concerning various fiscal and non-fiscal provisions

1. spouses: married persons whose circum- stances are not any of those referred to in Article 75(1) of the Income Tax Code; Article 21

2. separate taxpayers: taxpayers not refer- 'Article 1 of the Law of 7 December 1988 red to in paragraph 1.' making changes regarding income tax and

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taxes assimilated to stamp tax shall be Article 88 supplemented by the following paragraph:

VANDER ZWALMEN AND MASSART V BELGIAN STATE

In such cases, there shall be two distinct according to the amount of income tax levies and the amount of tax shall be paid by the parents. The Court stated that determined, for each of the persons con- the exemption provided for in the Protocol cerned, on the basis of his own income and referred to all national taxes on salaries, no that of his children which is available to matter what form such taxes took or him by operation of law.' whatever they were called, but not to 'the charges and dues required as a considera- tion for a given service supplied by public authorities'. That was the case even if 'the amount of the charge to be paid is deter- mined by reference to the income of the Case-law of the Court of Justice concerning person concerned.' Therefore, the Dutch the exemption at issue (Article 13 of the authorities could take into account the Protocol and related provisions) salary paid to an EEC official when calcu- lating his liability for the charge.

6. The Court of Justice has given seven judgments 3on the scope of the exemption from national taxes contained in Article 13 of the Protocol (or in equivalent previous provisions) and its relation to certain national taxes. Rather than listing the cases 8. In its judgment of 3 July 1974 in chronologically, I shall group them together Brouerius van Nidek,6 the Court stated on the basis of their content. that death duties do not constitute 'national taxes on salaries, wages and emoluments paid by the Communities' as referred to in Article 13 of the Protocol. Therefore, suc- cession duty may be levied in a Member State on the survivor's pension paid by the (i) Judgments in which the Court has taken Community to an official's widow, even if the view that the exemption did not that pension is considered to be an emolu- preclude the levying of certain national ment paid by the Community. taxes

dwellings) conditional on its beneficiaries examined a Belgian surtax which was having a taxable income lower than a levied on the combined income of the certain tax band, which might include the spouses and which, in the case of Mr earned income of Community officials. Humblet, who was an ECSC official, meant Article 13 of the Protocol does not require that his net income was added to his wife's Member States to grant officials and other income for the purpose of calculating her servants of the Community the same sub­ tax liability. The Court of Justice held that sidies as those paid to beneficiaries deter­ this was contrary to the provision in mined in accordance with the relevant question, 1 0 which indicated 'clearly and national provisions. Article 13 merely unambiguously exemption from any fiscal requires that, whenever such persons are charge based directly or indirectly on the subject to certain taxes, they are able to exempted remuneration.' The Court con­ enjoy any tax advantage normally available sidered that it was necessary for the Com­ to taxable persons, so as to prevent those munity to be able to determine the net persons from being subject to a greater tax income of its officials, because only then burden. could the institutions evaluate the services of their officials and the officials assess the post offered to them. Moreover, exemption from national taxes was indispensable in order to guarantee the equality of remu­ 10. Finally, in its judgment of 25 May neration for officials of equal rank but 1993 in Kristoffersen, 8the Court of Justice different nationality. The judgment conclu­ held that the second paragraph of Arti­ ded by stating that 'any taxation, direct or cle 13 of the Protocol must be interpreted indirect, of income which is not within the as meaning that the application of income jurisdiction of the Member States' must be tax on the basis of the rental value of the excluded. home belonging to the official or servant of the Communities, in relation to immovable property owned by him, does not constitute indirect taxation of salaries, wages and emoluments paid by the Communities.

Treaty. With relevance to the present case, natural persons by virtue of international paragraph 19 added: 'As regards the special conventions' (which was the case when the position of an official of the Communities tenant or his spouse was a Community and his family it must be remembered that official). The Court held that that legisla- the official is bound by Article 20 of the tion was not compatible with Article 13 of Staff Regulations normally to reside in the the Protocol which 'precludes any national place in which he is employed. Moreover, tax, regardless of its nature and the manner although under the second paragraph of in which it is levied, which is imposed Article 13 of the Protocol ... he is exempt directly or indirectly on officials and other from national taxes on salaries, wages and servants of the Communities by reason of emoluments paid by the Communities, he is the fact that they are in receipt of remu- liable on the other hand, under the first neration paid by the Communities, even if paragraph of the same article, to a tax for the tax in question is not calculated by the benefit of the Communities on salaries, reference to the amount of that remunera- wages and emoluments from which the tion.' So, if the tenant or his spouse were host Member State, as a member of the Community officials but, on the other Communities, benefits indirectly.' hand, were entitled to a reduction, they had to bear an additional financial burden 'for the precise reason that they are in receipt of remuneration which is exempt from national taxes.'

cle 13 of the Protocol, 13 is now upholding exclusive power to determine the condi- the opposite view before this Court. tions of work — amongst them the finan- cial conditions — of its officials and ser- vants. The judgment in Humblet, in which this argument is developed, was given at a time when the Communities had not yet introduced their own specific tax on the 15. The fundamental difficulty lies in the salaries of Community officials. fact that the Belgian legislation has adopted a tax mechanism which, although not levied directly on the salaries of Commu- nity officials (a point on which all the parties are agreed), nevertheless takes them 17. The provisions of Article 13 of the into consideration for income tax purposes, Protocol in respect of that tax having now with adverse effects for the tax burden been implemented, the exemption from which those officials or their spouses have national taxes takes on its full significance, to bear. We therefore need to consider because it is no longer linked only to the whether the Belgian tax system has thereby above two objectives but also to the imposed an indirect levy on the salaries existence of a single levy on the salaries of received by Community officials. officials.

16. I think it is important to remember the 18. This line of argument is clearly ratio legis of Article 13 of the Protocol. At explained in the judgment in Brouerius first, 14 the Court of Justice linked the van Nidek, when the close connection exemption to the equality of remuneration between the first and second paragraphs for officials, irrespective of their nationality of Article 13 of the Protocol is examined: or domicile, and to the Community's

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that the article taken as a whole ensures a 20. Having described the ratio legis of the uniform treatment of the said salaries, provision, I think it is necessary to define its wages and emoluments for all the officials scope. Although the term applied to the and servants of the Communities, prevent- officials by Article 13 of the Protocol is ing, firstly and chiefly, their effective remu- 'exempt', a more appropriate fiscal term neration from differing according to their would be 'not liable' (or excluded from the nationality or fiscal domicile as a result of scope of the national tax law), because the the assessment of different national taxes, specific objective of Article 13 of the Pro- and secondly preventing this remuneration tocol is to keep the remuneration of from being inordinately taxed as a result of Community officials outside the scope of double liability.'15 national laws governing the taxation of earned income.

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stated that the parties are agreed on the 23. The Commission maintains that Arti- following points: cle 13 of the Protocol does not preclude a refusal to grant Community officials a tax benefit or relief in the nature of a marital allowance if those officials do not 'satisfy the objective conditions for qualifying for it.' That argument might be accepted if it were not the case that the specific cause of the exclusion under Belgian Law is the fact (a) The 'marital allowance' scheme consti- of being a Community official earning a tutes a tax relief or benefit for its salary from the Community of more than beneficiaries (taxpayers liable to Bel- BEF 270 000. gian income tax), whose income tax assessments are consequently reduced.

24. The fact of the matter is that Belgian law is creating a specific category 18 of taxpayers (to whom it gives the inconcise (b) Community officials are denied the description of recipients of 'income that is benefit of the scheme for the precise exempted under a convention, in excess of and sole reason that they receive a BEF 270 000 ...'), introduced ad hoc for Community salary of more than Community officials or similar people, by BEF 270 000: this circumstance is reason of their exempted incomes. By so taken into account by Belgian law to doing it modifies, in relation to them, the exclude them from the married couple's objective conditions which it usually tax scheme and regard them as separate requires to be met by taxpayers who receive or independent taxpayers and, there- the marital allowance. fore, as not qualifying for the marital allowance.

both spouses, subject to a maximum of married couples in which one of the BEF 270 000. As the 'ordinary'application spouses is a Community official who, in of those conditions could not include the that capacity, receives earned income of exempted income of the spouse who was a more than that amount? Community official, the Belgian legislation alters, in their respect, the often mentioned 'objectiveconditions' and opts for the tax fiction of deeming not to be spouses people who actually are. It thus solves the problem by abolishing, for this situation, the general category (spouses) and creating a fictitious, 28. I admit that, at first glance, this argu- sui generis category (married people who ment is attractive and seems to support the are not spouses) for Community officials or application of the principle of progressive other people in an equivalent situation. income tax, whereby the person who earns more must pay more. However, the sem- blance of equality fades when we consider the following key point: a married couple subject to Belgian tax, in which one of the spouses receives earned income of more than BEF 270 000, has not already had tax levied directly on that income. On the other hand, in a married couple made up of a 26. The direct result of that legislative Community official and his spouse, the mechanism is that Community officials, former's earned income has already been merely because they receive their salaries subject to a specific Community tax, also from the Community, are denied the oppor- with a progressivity component, which is tunity of receiving a tax benefit or relief equivalent to national income tax. Taking which they otherwise could receive (and this income, which has already been taxed, which, in fact, they had been receiving into account again as a decisive factor for without question until the law was amen- refusing its recipient a tax benefit to which ded in 1990). he would otherwise be entitled constitutes double taxation with regard to one type of tax (income tax). It is precisely to avoid this undesired effect that Article 13 of the Protocol provides that such income is to be exempt from national taxes.

determining the rate applicable to other taxpayers in similar situations but to create income, the abovementioned differentia­ a specific category of taxpayers character­ tion would be the result not only of ised only by the fact that they receive variations between the tax scales under earned income from the Community (or the different national laws, that is of factors because they are in a similar situation), outside the Community, but also of the who are deprived of a tax benefit only for application of different national laws to that reason. incomes which are covered by Community law and which Community law intended to be treated alike.' 19 The Court of Justice therefore concludes, in that case, 'it is therefore an infringement of the Treaty to take into account the remuneration referred to in Article 11(b) of the Protocol 2 0 in order to calculate the rate applicable to other income of the person concerned.' 2 1 31. It is not difficult to conclude that this situation is extremely similar to the one condemned by the Court of Justice in its judgment in Commission ν Belgium, cited above. In that case, too, the Belgian legisla­ tion:

32. In that judgment the Court replied that 34. For the rest, I have to admit that, in this the fact that a person received Community case, we are only talking about a possible remuneration, which is not subject to infringement of Community law and it is national taxes, could not mean that he pointless to analyse aspects such as the had to bear 'an additional charge, namely social, economic or cultural factors 22 the difference between the amount result- which have been the decisive cause of the ing from the application of the normal rate refusal to grant the 'marital allowance' to of tax and that resulting from the applica- married couples in which one of the tion of the reduced rate ... .' If we trans- spouses is a Community official. Indeed, pose that principle to the present case, once the Belgian authorities have referred ad the tax factor 'rate of tax' has been nauseam to the decisive nature of those replaced by the factor 'tax reduction or factors at various points in their documents advantage', the same reasoning is wholly and arguments but have not defined their applicable. character, scope or content, which is sur- prising.

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reply is far from convincing. The Council 36. I therefore suggest that the Court of of Ministers has said in this regard: 'First, it Justice replies to the first question referred cannot be maintained that, in 1988, the for a preliminary ruling by stating that legislature wished to grant the marital Article 13 of the Protocol, by establishing allowance in cases such as Mr Micha's. the exemption from national taxes on the Nevertheless, and even if that were the salaries, wages and emoluments paid by the position, there is nothing to preclude the Communities to their officials and servants, legislature, if it is in possession of more precludes the refusal by a national law to detailed information, from subsequently grant those officials and servants, or their adopting the contrary decision'. 25 spouses, a tax reduction or advantage for the sole reason that they receive that income, or that such income is of a certain amount. This conclusion is applicable to a tax law which, in order to achieve the same result, treats a married couple in which one member receives income of that kind as comprising 'separate taxpayers' and not spouses.

38. In my view, this argument is vitiated by a fundamental flaw, which is that it dis- regards the personal situation of each taxpayer in relation to the nature of his taxable income. Depending on the income, on the combined or separate treatment prescribed by the tax laws and on the other features peculiar to each case, separate taxation will be more or less advantageous for any given couple. Sometimes, but not always, the 'tax saving' made by keeping spouses' incomes separate and therefore subject to lower tax rates is greater than the result of applying the 'marital allowance'. Clearly, this was not the case for the applicants, as the order for reference acknowledges.

41. In my opinion, therefore, the preclusion by Community law of a tax law such as the one examined here is not affected by the fact that the separate taxation of the spouses, imposed by that law, may, in some cases, result in a reduction in the final tax assessment.

26 — Case 270/83 [1986] ECR 273. 39. The decisive point, however, is that the 27 —[1986] ECR 305, paragraph 21. 'Notwithstanding the removal of even the opportunity of apply- French Government's argument to the contrary, the difference in treatment also cannot be justified by any ing the marital allowance, which is a tax advantages which branches and agencies may enjoy vis-à- vis companies and which, according to the French advantage denied to Community officials Government, balance out the disadvantages resulting from by reason of their exempted incomes, is the failure to grant the benefit of shareholders' tax credits. Even if such advantages actually exist, they cannot justify a contrary to Article 13 of the Protocol. breach of the obligation laid down in Article 52 ...'.