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Brussels, 8 January 2007

The Commission refers Belgium to the Court of Justice over discrimination in Flemish registration tax

The European Commission has decided to refer Belgium to the European Court of Justice to end discrimination in the Flemish registration tax. Flanders deducts from the registration tax on the purchase of a house the amount of the registration tax paid earlier on another house provided it was in Flanders. Registration taxes paid in other Member States are not credited. The Commission considers that the Flemish rule is contrary to the EC Treaty. Belgium had not changed its legislation despite the Commission's formal request in the form of a Reasoned Opinion of 20 July 2005 (IP/06/1044).

"Rules which tax EU citizens moving from one Member State to another more heavily than citizens moving within a Member State are against the EC Treaty." said EU Taxation and Customs Commissioner László Kovács. "This principle affects the legislation of the central government as well as the rules approved by the regional authorities of the Member States."

Citizens who move from another Member State to Flanders and buy a house there cannot get a credit for the registration tax that they had paid on the purchase of a house in their Member State of origin, while residents of Flanders moving house within Flanders do get this kind of credit. The refusal to give credits for foreign taxes restricts citizens from moving to Flanders and from purchasing properties there.

Therefore, the Commission considers that the Flemish rule is a restriction of the right of every citizen of the European Union to move and reside freely within the territory of the Union (Article 18 EC Treaty), as well as a restriction of the freedom of establishment (Article 43 EC Treaty) and of the free movement of capital (Article 56 EC Treaty).

This case also illustrates the fact that the regional authorities of the Member States are bound by the EC Treaty in the same way as the central government of Member States themselves.

In its reply to the Reasoned Opinion, Belgium denied the restriction of the free movement of capital andclaimed that residents and non-residents could not be compared. The Commission rejects these arguments. It maintains that there is a restriction; it finds residents of Flanders buying a house in Flanders comparable with non-residents buying a house in Flanders.

The Commission's case reference number is 2005/2283.

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