Brussels, 18 March 2010
Direct Taxation: Commission requests that Belgium, France, Greece, the Netherlands and Portugal change discriminatory rules
The Commission has today sent requests to Belgium, France, Greece, the Netherlands and Portugal to change various rules related to direct taxation which are disproportionate and/or discriminatory and infringe upon the fundamental freedoms set out in the Treaty of the Functioning of the EU (TFEU). The requests were sent in the form of Reasoned Opinions, the second step in the infringement procedure (Art. 258 TFEU). If there is no satisfactory reaction from the Member States in question within 2 months, the Commission may decide to refer the relevant matter to the Court of Justice.
Belgian rules on tax relief for pension savings
The Commission has formally requested that Belgium change an income tax rule which only allows tax relief to pension savings paid to Belgian institutions and, for collective pension savings, only if they are invested in Belgian funds. Belgium claims that these restrictions are necessary to safeguard the security of monies invested by the pension savers. However, Belgium could instead use the Mutual Assistance Directive (77/799/EC) as a basis for checking the information provided by foreign providers or funds. Moreover, insured savings are covered by the Third Life Insurance Directive (2002/83/EC). Therefore, the Commission considers the Belgian measures to be disproportionate and an infringement on the freedom to provide services and the freedom of capital movement.
Belgian requirement for fiscal representatives
The Commission has formally requested that Belgium change a tax provision which requires operators of foreign securities lending systems to appoint a fiscal representative in Belgium. According to the Commission, this requirement goes against the freedom to provide services, in line with Commission vs Belgium Case C-522/04 of 5 July 2007. As a legitimate alternative to the requirement in question, Belgium could use the Mutual Assistance Directive 77/799 to ensure the provision of information by operators of foreign securities lending systems. In fact, Belgium would not even have to rely on this Directive, but could directly ask the foreign provider for any information, as is done with domestic providers.
French discriminatory taxation of foreign pension and investment funds
The Commission has formally requested that France change its tax rules which discriminate against foreign pension and investment funds. Under these rules, dividends paid to foreign pension and investment funds (outbound dividends) are taxed more heavily than dividends paid to domestic pension and investment funds (domestic dividends). A withholding tax of 25% is levied on dividends paid to pension and investment funds in other Member States or EEA countries (this rate may be reduced by bilateral tax treaties), but no withholding or other tax is levied on domestic funds. The Commission considers this to infringe the free movement of capital, as set out in the Treaty of the Functioning of the EU (TFEU) and the EEA Agreement.
Portuguese discriminatory taxation of non-resident taxpayers
The European Commission has requested that Portugal amend its tax rules for non-resident taxpayers. Non-residents are in certain cases taxed on a gross base and according to flat rates, while residents are taxed on a net base (i.e. they have the right to deduct certain costs) and are taxed according to progressive rates. These differences in treatment may result in a less favourable tax treatment of non-residents than of resident taxpayers, which is contrary to the freedom to provide services and the free movement of capital.
Dutch law on donations, gifts and inheritances to foreign charities
The Commission has formally requested the Netherlands to change its rule that gifts, donations and inheritances to Dutch and foreign charities can only qualify for tax relief if the charities have registered themselves with the Dutch tax authorities. The Commission considers that this is unnecessarily restrictive, since it does not allow for the possibility of tax relief in case the foreign charity has not registered itself in the Netherlands. Nothing prevents the Dutch tax authorities from requiring the taxpayer to prove that the conditions for tax relief have been met. The Commission therefore considers the Dutch rule to be contrary to the free movement of capital.
Greek medical services
The European Commission has formally requested Greece to change its legislation on the tax deduction of medical expenses incurred in another Member State. Under Greek rules, the deduction is only possible if relevant receipts issued by foreign doctors or hospitals are authenticated by a Greek Consul. If there is no Greek Consul in the other Member State, the authentication may be done by the relevant local authority. No such requirement exists for receipts issued by Greek hospitals and/or doctors.
The difference in treatment between medical expenses incurred in Greece or in another Member State, and in particular the administrative burden caused by authentication by a Greek Consul, may deter Greek residents from exercising their right to receive medical services in another Member State, and therefore constitutes an obstacle to the freedom to provide services.
New: For more detailed information on each of the cases above, see: