C-364/01

2. The facts of this case took place before the entry into force of the Treaty of Maas- tricht. The relevant Community provisions 4. The following information is given in the are therefore those of the EEC Treaty. The documents in the case. following provisions are relied upon, in particular, with regard to freedom of movement for persons: Articles 48 and 52 of the EEC Treaty (subsequently Articles 48 and 52 of the EC Treaty, now, after amendment, Articles 39 EC and 43 EC) 5. Under Netherlands law, every estate is and Council Directive 90/364/EEC of subject to tax. Article 1(1) of the Succes- 28 June 1990 on the right of residence.2 siewet 1956 (1956 Law on Succession)4

1 — Original language: French. 3 — OJ 1988 L 178, p. 5. 2 —OJ 1990 L 180, p. 26. 4 — Stbl. 1956, p. 362, 'the 1956 SW'.

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draws a distinction according to whether I I — Facts and procedure the deceased resided in the Netherlands or abroad.

7. Mr Barbier, a Netherlands national who was born in 1941, died in Belgium, his last 1. If he resided in the Netherlands, the place of residence, on 24 August 1993. His assets he leaves are liable to inheritance heirs are his wife and his only son (together duty on the value of all the assets referred to as 'the heirs'). transferred.

6. However, under Article 13 of the Wet op de vermogensbelasting 1964 (1964 Law on inheritance tax 5 ), as interpreted by the Netherlands courts, when assessing the 9. In 1988 Mr Barbier concluded a number estate of a non-resident deceased person, of sales, by which he transferred most of his it is not possible to deduct, for the purposes properties to private Netherlands com- of calculating the basis of assessment, any panies which he controlled. debts other than those secured by a mort- gage on immovable property situated in the Netherlands. More particularly, that provi- sion applies where the deceased, before his death, has transferred the financial owner- ship of the property to a separate legal 10. Registration duty of 6% was avoided person under an agreement of sale/pur- on the transfer of the properties situated in chase. Unlike the heir of a deceased person the Netherlands by not entering the transfer who was a resident, the heir of a deceased of title in the appropriate register and person who was not a resident must declare merely assigning the 'financial' ownership the full value of that property regardless of of the properties. Mr Barbier had under- the fact that a third person has financial taken to transfer title to the properties sold ownership of it. (that is to say the right in rem) and pending such transfer relinquished all rights thereto. That obligation was not, however, subject 5 — Stbl. 1964, p. 520, 'the 1964 WB'. to a mortgage.

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11. Following Mr Barbier's death, his 2. Does Community law preclude a notary declared, for transfer duty purposes, Member State (the State in which the the value of three other properties held in property is situated) from levying on full ownership, less the mortgage debts the inheritance of immovable property incurred on their acquisition. The value of situated in that Member State a tax on the properties whose financial ownership the value of that property which allows had been transferred to the private com- the value of the obligation to transfer panies was not included in that declaration. title to that property to be deducted if, at the time of death, the deceased resided in the State where the property is situated but not if he resided in another Member State (the State of residence)?

A — Question 1 17. The Netherlands Government states, however, that the first question is irrel- evant. It points out in that regard that Article 18 EC does not apply rattorte 14. The national court observes that it is temporis and that Directive 90/364 is faced with a number of questions of intended inter alia to harmonise national Community law. If the existence or absence provisions relating to the right of nationals of cross-border economic activity is still of Member States to reside in a Member relevant, in view of the adoption of the State other than their own. In the present directive on the right of residence 6 and the case the provisions of the 1956 SW at issue provisions of the Treaty of Maastricht on in the main proceedings have no connection European citizenship, it must be ascer- with the conditions of access to and tained which of the fundamental freedoms residence in the territory of another is affected in the present case. Member State and have not in any way restricted or hindered the right of the Barbier family to establish themselves else- where than in the Netherlands.

23. As for Directive 90/364, I consider it also irrelevant, although not for the same 20. The claimants in the main proceedings reasons as those put forward by the Nether- maintain, on the contrary, that the free lands Government. That directive, which is movement of both persons and capital are based on Article 235 of the EC Treaty (now affected in the present case. In that regard Article 308 EC), requires Member States to they refer in particular to Baars 7 and grant, under certain conditions, the right of Verkooijen. 8In their view the Court of residence to nationals of other Member Justice considered, by implication, in Baars, States who do not enjoy that right 'under cited above, that there is no requirement of other provisions of Community law'. That cross-border economic activity, or that phrase means essentially the provisions on such activity exists where, as in the present freedom of movement for workers and case, cross-border investments are made in those on freedom of establishment. immovable property through a company, those investments generating income in the form of cross -border interest (comparable in essence to the cross-border dividends at issue in Verkooijen, cited above). 24. It cannot be excluded that Mr Barbier's right of residence was, in reality, based on that directive and that the same applies as regards his heirs, but so far as I know, those rights of residence in Belgium have never 21. What is to be made of those argu- been challenged. ments?

22. I share the view of the Netherlands 25. The issue raised in the present case is Government that Article 8a of the Treaty different. It is whether Mr Barbier's heirs does not apply ratione temporis. Indeed, as can infer from the Treaty provisions on that Government points out, it is necessary freedom of establishment and on the free movement of capital the right not to be liable to pay transfer duty which is different 7 — Case C-251/98 [2000] ECR 1-2787. from the inheritance tax which they would 8 — Case C-35/98 [2000] ECR 1-4071. have been liable to pay if the deceased had

29. It should also be pointed out that the 26. There is no question that, in matters of Netherlands provisions at issue are likely to inheritance duty and other similar taxes, affect an economic operator's freedom to the Netherlands tax authorities treat establish himself in another Member State immovable property situated in the Nether- even if, as the national court and the lands differently according to whether the Netherlands Government make clear, they deceased was or was not resident in the do not directly affect the right to enter or Netherlands at the time of death. stay in another Member State. Where such an economic operator owns, or envisages acquiring, immovable property in the Netherlands, he is likely to be deterred from exercising his right to freedom of movement since he is liable to suffer unfavourable treatment as regards taxation 27. Mr Barbier's estate is therefore affected of his estate. by his residence in Belgium. It is clear from the order for reference that after moving from the Netherlands to Belgium Mr Bar- bier had continued to pursue his activities as a director of a company established in the Netherlands. The order does not state, however, that he subsequently stopped doing so. 30. Naturally, the effects on inheritance duty of exercising freedom of movement are no longer, by definition, of direct interest to the person concerned. The fact remains, however, as the Commission rightly states, that those effects are likely to constitute an obstacle to the exercise of the abovementioned freedoms. Those 28. The case-law of the Court of Justice effects are among the considerations that according to which 'Article 52 nevertheless must be taken into account by any inter- cannot be interpreted in such a way as to ested person when deciding whether or not exclude a given Member State's own to exercise that freedom of movement. nationals from the benefit of Community law where by reason of their conduct they are, with regard to their Member State of 9 —See to this effect, Case 115/78 Knoors [1979] ECR 399, origin, in a situation which may be paragraph 24; Case C-61/89 Bouchoucha [1990] ECR I-3551, paragraph 13; Case C-19/92 Kraus [1993] ECR regarded as equivalent to that of any other 1-1663, paragraph 15; Case C-419/92 Scholz [1994] ECR I-505, and Case C-107/94 Asscher [1996] ECR I-3089, person enjoying the rights and liberties paragraph 32.

32. The Commission is correct in citing Directive 88/361, which applied at the 35. For the above reasons, I suggest that material time with regard to the facts at the first question should be answered as issue in the main proceedings, implement- follows: ing Article 67 of the Treaty concerning the free movement of capital. It follows that that directive applies to investments in real estate on national territory by non-resi- dents. The purchases of properties in the Netherlands made by Mr Barbier from his domicile in Belgium, as described in the order for reference, undoubtedly fall into — Article 1 of Directive 88/361 should be that category. interpreted as meaning that the free- dom established by that provision is at issue in circumstances such as those in the dispute in the main proceedings, concerning the estate of a resident of a Member State other than the Nether- 33. It should be observed in that regard lands who had acquired immovable that that categorisation is purely objective property situated in the Netherlands. and is wholly unconnected to the motives of the person who carried out the move- ments concerned. The possibility, as alleged by the Netherlands Government, that the transaction was carried out for tax reasons does not therefore mean that it thereby loses its character as a movement of capital within the meaning of Community law. — Articles 48 and 52 of the Treaty must be interpreted as meaning that the freedom established by those provi- sions is at issue in circumstances such as those in the dispute in the main proceedings, concerning the estate of a 34. One may, however, question whether Netherlands resident who had trans- there is not a contradiction in the argu- ferred his residence to another Member ments of the Netherlands Government, State whilst continuing his business which, on the one hand, states that the activities in the Netherlands and who transactions involving legal ownership had subsequently acquired immovable alone do not correspond to economic property situated in the Netherlands.

39. In that regard, it is necessary to apply the general principle of international tax 43. It should also be pointed out that the law concerning the allocation of the power categories of national law such as the to tax between States, under which obli- separation between obligations in rem and gations in rem are a matter for the State in personal obligations, or the supposed prin- which the property is situated, and personal ciples of international tax law, cannot obligations, such as the obligation at issue justify infringement of Community law. I - 15022

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44. It is true that, in theory, an heir who is the more serious since, as we have seen disadvantaged under Netherlands legis- above, there are doubts, such as those lation could obtain a 'compensating advan- expressed by the national court, as to the tage' under the law of his State of residence, universal nature of the principle of the assuming, of course, that the latter State allocation of fiscal competence applied by applied the same criteria with regard to the Netherlands authorities. fiscal competence as the Netherlands.

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50. In a case such as this, the Netherlands 53. At any event, it should be pointed out law allows the heirs of a person who was a that, contrary to what the Netherlands resident to be taxed in a manner which Government states, little support for its accords with economic reality, namely that view is to be found in case-law. the property encumbered by the obligation to transfer legal title is excluded from the basis on which the estate is calculated. On the other hand, the heirs of a non-resident, who are in exactly the same economic situation with regard to the property con- cerned, are taxed as if that property had remained fully in the deceased's ownership. 54. It insists in that regard that it is clear from Gilly 12 that a Member State is competent to determine the criteria govern- ing the taxes it levies and that in so doing it may use the model drawn up by the OECD. It may also take into account the place where immovable property is situated. 51. When faced with these identical econ- omic situations, it is not possible to make the question whether the obligations whose deduction is in issue are obligations in rem or personal obligations the deciding factor. What counts is that comparable economic situations, namely the existence of prop- 55. The Court has always held, however, erties encumbered with an obligation to that in the exercise of that competence transfer title, should be treated in the same Member States cannot free themselves from way and that their treatment should not their obligations under Community law. 13 depend solely on the place of residence of the deceased.

in a comparable situation with regard to situated in the Netherlands, the Nether- the national rules at issue. lands authorities consider that residents and non-residents are equally liable to tax. The authorities cannot therefore, as regards that tax, refuse to allow non-residents the deductions which they allow residents. 57. In particular, it is settled case-law that where a Member State treats residents and non-residents in the same way as regards a particular form of taxation it must do so also in respect of any deductions relating to such taxation. 15 61. On that point, the present situation has a striking parallel with Saint-Gobain ZN, cited above, in which the German Govern- ment relied on the fact that companies established in Germany were liable to tax on their global assets whereas the tax 58. By treating them in the same way for liability of companies established in taxation purposes, the legislature of that another Member State was limited merely Member State accepts that there is no to their assets situated in Germany. That objective difference between residents and consideration did not prevent the Court non-residents with regard to the terms and from ruling that for the purposes of the conditions of the tax which would justify a contested tax liabilities both categories difference in treatment. were in a comparable situation.

59. The Netherlands Government states in this regard that, according to the principle 62. We are therefore looking at a case of of territoriality, the estate of a person who treatment which differs according to the was resident in the Netherlands is taxed on place of residence, a criterion which is his global assets, whereas the liability of the likely to place nationals of other Member heirs of a person who was residing in States at a disadvantage. The Netherlands another Member State with regard to his Government fails to put forward any estate is restricted to those parts of the convincing justification for such discrimi- estate which are situated in the Nether- nation. lands.

66. It has thus been stated that, if the value 70. I also share the Commission's view that of the obligation to transfer legal title is it is not clear how the issue of supervision deducted, no tax would be levied, either on differs depending on the location of the the original transfer or on death. I share the residence of the deceased. If his residence Commission's view, however, that transfer was in the Netherlands the competent duty and inheritance duty are taxes which authorities would be satisfied with binding have no common link. agreements. I - 15026

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71. It follows from the above that the was no longer living in the State in which national legislation at issue produces indi- the immovable property concerned was rect discrimination akin to discrimination situated at the time he acquired that on grounds of nationality and that no property. overriding reason to justify such discrimi- nation is discernible.

75. According to the Netherlands Govern- ment, which was the only party to submit 72. Reliance on Article 73d of the EC observations specifically regarding that Treaty (now Article 58 EC) cannot provide question, there is no need to distinguish any support for the view taken by the between those two situations. The con- Netherlands Government. Not only was tested tax does not affect the actual that provision not in force at the time acquisition of the property but the inherit- material to the present case, as the Nether- ance thereof. It is only if the deceased was lands Government itself points out, more- living outside the Netherlands when he over, but it states specifically that it cannot died and if, at that time, the financial and constitute a means of arbitrary discrimi- the legal ownership were separate that a nation. 16 difference in treatment could occur.

D — Question 4 79. I consider, in fact, that it is to be inferred from my observations concerning that question that if the tax at issue related to a property acquired by the deceased during the time when he was still residing 82. By this question the national court in the Netherlands, a hypothesis which seeks to ascertain whether the distribution does not appear to apply in the present case of the deceased's capital as between the since the order for reference mentions only State of residence, the State where the the assets acquired after Mr Barbier moved property is situated and any other Member away, we should not on the face of it have a States is relevant as regards the answer to measure affecting the free movement of the second question referred for a prelimi- capital within the meaning of Directive nary ruling. 88/361, since in that case acquisition of the property would not have involved any movement of capital. It is not contended either that there is the slightest obstacle to the receipt of revenue from that property. 83. According to the Netherlands Govern- ment, this question should be answered in the affirmative, the criterion being that where the deceased's assets were exclus- ively or almost exclusively in a State other 80. It is clear, however, from my observa- than the State of residence, the State in tions in relation to the first question that in which the property is situated must take

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inter alia personal liabilities into account State by the need to make up for an when levying tax. It is interesting to note advantage they receive in that State. 17 that it is not clear from the documents in the case that such a criterion was provided for under the national legislation applicable to the dispute in the main proceedings.

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IV — Conclusion

90. For the reasons set out above, I suggest that the following answers be given to the Gerechtshof te 's-Hertogenbosch:

Question 1

'— Article 1 of Council Directive 88/361 of 24 June 1988 for the implementation of Article 67 of the Treaty should be interpreted as meaning that the freedom established by that provision is at issue in circumstances such as those in the dispute in the main proceedings, concerning the estate of a resident of a Member State other than the Netherlands who had acquired immovable property situated in the Netherlands.

'The issue of whether, at the time he acquired that property, the deceased was no longer living in the State in which the property was situated has no relevance as regards the answer to the second question.'

Question 4

'The issue of whether the deceased's capital was distributed between the State in which the property was situated, the State of residence and any other States has no relevance as regards the answer to the second question.'

Question 5

'There is no need to answer the fifth question.'

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