Orzeczenie: Komisja Europejska przeciwko Estonii
Komentarz (w j. angielskim) autorstwa Johanny Tuohino do wyroku TSUE Komisja Europejska p-ko Estonii. Postępowanie dotyczyło dyskryminacji podatników niebędącymi rezydentami.
Recently the Court of Justice gave an interesting judgment C-39/10 Commission v. Estonia concerning compatibility of discriminative provisions between resident and non-resident taxpayers. Citizen of Estonia residing in Finland made a complaint to the Commission concerning discriminative treatment of income taxation between residents and non-residents in Estonian tax law. The complainant got retirement pension from two different Member States of the European Union – from Finland and Estonia – almost the same amount from each. According Estonian law tax allowance threshold and the supplementary tax allowance threshold is applicable only in taxation of residents. The income of complainant was so small that as a resident she would have had tax free income but was treated in discriminatory way because of the fact that she was not living in Estonian territory.
According the Commission, by excluding non-resident pensioners from benefiting allowances provided in tax law Estonia has failed to fulfill its obligations under Article 45 of The Treaty on Functioning of the European Union (hereinafter TfEU) and Article 28 of the Agreement on the European Economic Area of 2 May 1992 (hereinafter EEA Agreement). Estonian law of income tax was considered being against the free movement of persons because the treatment between residents and non-residents tax-payers was different and therefor discriminative.
The Commission noted that principally in case law of the Court of Justice direct taxation is under competence of the Member States, but national rules must be in harmony with the European Union law and avoid discriminative treatment 1). In this particular case the income from state of residence was very low. Therefor a natural person should enjoy the same benefits before paying Member State than residents of that member state because the situation of person receiving only small income from another state is comparable with the situation of residents 2) .
The case cannot be considered clear. Estonian tax law was in line with the Recommendation 94/79 which should provide tools for interpretation in direct taxation cases with cross-border element. According this recommendation employment state should treat non-residents equally with residents in taxation when 75 % or more of person’s total taxable income is from employment state. In current case the percentage of total income was just 50 %. Therefore Estonia based its disagreement with the Commission especially on the Recommendation 94/79. Spain, Portugal and UK left intervene to support Estonia. However, the Commission stated that the recommendation is not binging and it doesn’t restrict the Commission’s power of assessment 3).
The case is interesting because it shows how much personal and special circumstances may effect to the assessment of compatibility between law of the Member State and European Union Law. Concerned applicable provisions of Union Law protect equality between residents and non-residents in case where non-residents receive “the preponderant part of their income” in the country of activity 4). The Court points out that “as far as direct taxes are concerned, residents and non-residents are generally not in comparable situations” 5). There may be discrimination if in certain situation, having regard to the purpose and content of the national provisions, non-residents and residents are in a comparable situation 6).
In this case the complainant doesn’t receive any significant income from the state of residence (Finland) and this income was not liable to tax according tax law of the state. He was not able to obtain tax relief in state of employment (Estonia) because national provisions required that at least 75 % share of his total taxable income should be received from paying state to get access for benefits. If complainant would receive all the income from one Member State he would get access to benefits, which in other words means that income would be taxed in a lower amount or it would be completely free from taxes. Moreover, complainant’s personal and family circumstances were not taken into account in any of those two member states.
Basically the problem was that Estonian tax law doesn’t provide exception in this kind of case. Special circumstances – small total income and the fact that the taxpayer would get better position if all the income would be taxed in one country – led to the situation which was considered to be contrary to article 45 TfEU and article 28 of EEA Agreement and moreover contrary to free movement of persons. Even though national provisions seemed prima facie comply with the Community law the situation led to discrimination and constituted obstacle on free movement of persons. Therefore treatment of non-resident taxpayer was in this particular case incompatible with the Union law.
At the end I would like to point out two remarks concerning the case reviewed in context of non-discrimination law of the Community. Firstly, even though the case is not particular European discrimination case, it should be noted that discrimination on grounds of place of residence falls within the scope European non-discrimination law 7). Secondly, principle of equal treatment has reached general principle status in EU law. European Court of Justice has repeatedly stated that principle of equal treatment requires that comparable situations must not be treated differently 8) .
Johanna Tuohino
1) C-39/10 Commission v. Estonia (2012), § 47. Also inter alia in cases C-279/93 Schumacker (1995), § 21; C‑446/03 Marks & Spencer (2005), § 29; and C‑540/07 Commission v Italy (2009), § 28.
2) Such intepretation was based on C 391/97 Gschwind (1999) and C 169/03 Wallentin (2004) cases.
3) C-39/10 Commission v. Estonia (2012), § 46.
4) Article 45 TfEU.
5) According so called Schumacker doctrine resident and non-resident are not generally in comparable situation but if major of income is earned from a host state situation may be comparable (C-279/93 Schumacker case). See also Fordham International Law Journal. Carl Otto Lenz: The Jurisprudence of the European Court of
Justice in Tax Matters, pp. 645-648.
6) See C-391/97 Gschwind, § 26.
7) ECHR have examined discrimination case on grounds of place of residence in Carson and Others v. UK (No. 42184/05)(2010). See also Fundamental Rights Agency of EU: Handbook on European non-discrimination law p. 118.
8) Inter alia C-300/04 Eman and Sevinger (2006) § 57; and C-227/04 Lindorfer (2007) § 63. See also Paul Graig, Grainne De Burca: EU law. Text, cases and materials. Oxford 2011, pp. 891-894.
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