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Brussels, 8 January 2007

Direct Taxation: Commission requests Belgium to end discriminatory taxation regarding houses outside Belgium

The European Commission has sent Belgium a formal request to amend its legislation concerning tax relief for owner-occupied and secondary houses. Belgium allows such relief on condition that the houses are located in Belgium. The Commission considers that this condition is contrary to the EC Treaty and the EEA Agreement, as it restricts the free movement of workers, the freedom of establishment and the free movement of capital. The request is in the form of a ‘reasoned opinion’ under Article 226 of the EC Treaty. If Belgium does not reply satisfactorily to the reasoned opinion within two months the Commission may refer the matter to the European Court of Justice.

Belgian legislation distinguishes between two kinds of houses: dwellings, that is owner-occupied houses, and secondary houses. For dwellings, articles 104, 115 and 145/17 of the Belgian Income Tax Code provide tax relief for mortgage interest, for capital repayment a mortgage loan and for contributions paid on a life insurance contract related to such mortgage loan. For secondary houses, article 145/1(3) provides tax relief for the payment of mortgage loans. In both cases the tax relief is only granted if the house is in Belgium.

A person resident in another Member State and owning a dwelling with a mortgage there and obtaining his income entirely or almost exclusively from work performed in Belgium will thus not be able to benefit from the tax relief related to his mortgage loan in the same way as a person resident in Belgium. As the Court of Justice ruled in Schumacker, Case C-279/93 of 14 February 1995, this constitutes an infringement of the free movement of workers guaranteed by Article 39 of the EC Treaty. Likewise, if the person is self-employed this would constitute an infringement of the freedom of establishment guaranteed by Article 43 of the EC Treaty.

The limitation of the tax relief for secondary houses to houses in Belgium restricts the free movement of capital as guaranteed by Article 56 of the EC Treaty. It dissuades Belgian residents from buying a secondary house outside Belgium.

The Commission sees no justification for these restrictions.

The Commission's case reference numbers is 2005/5061.

For the press releases issued on infringement procedures in the taxation or customs area see:

For the latest general information on infringement measures against Member States see:

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