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Brussels, 8 January 2007

Personal income tax: The Commission refers Belgium to the Court of Justice over discrimination regarding deductions of personal and family allowances for residents with income from foreign sources

The European Commission has decided to refer Belgium to the European Court of Justice for not amending the tax legislation which discriminates against Belgian residents with both Belgian and foreign income. Such residents cannot benefit from a full deduction of personal and family allowances. The Commission considers that this limited deduction of personal and family allowances is contrary to the EC Treaty. The European Court of Justice has already ruled on this issue in a case concerning the Netherlands (Case C-385/00 "De Groot"). Belgium had not changed its legislation despite the Commission's formal request in the form of a Reasoned Opinion of 20 July 2006 (IP/06/1048).

When a double tax convention is applicable, Belgium exempts foreign source income of Belgian residents from tax, but nevertheless takes such foreign source income into account for the purposes of determining the rate of tax applicable to the taxpayers' Belgian source income (exemption with progression method). This leads to a limited deduction of the personal and family allowances.

On the basis of a case decided by the European Court of Justice concerning identical rules in the Netherlands (Case C-385/00 "De Groot" of 12 December 2002), the Commission considers that the unavailability of full personal deductions contravenes the free movement of workers and self-employed persons guaranteed by Articles 39 and 43 of the EC Treaty and the corresponding provisions of the EEA Agreement and the right of every citizen of the Union to move and reside freely within the territory of each Member State of Article 18 of the EC Treaty.

In reply to the Reasoned Opinion of 20 July 2006 Belgium acknowledged the infringement, but did not indicate when and how it would effectively eliminate it, nor how it would apply EU law in the period before the new rules would enter into force.

The Commission's case reference number is 2005/4576.

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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