Jun
13
Egon Schempp [2005]
June 13, 2007 | Leave a Comment
In its Schempp judgment of 12 July 2005 the ECJ denied a German taxpayer the right to deduct from his income tax the maintenance support to his divorced wife who lived in Austria, a country in which this maintenance is not taxable. It was clear for the ECJ that this problem falls into the sphere of application of article 12 EC Treaty, but it denied discrimination because the unfavorable treatment of Mr. Schempp was merely based on different tax laws. Discrimination requires that comparable situations are treated differently or different situations comparably: the payments to a recipient in Austria cannot be compared with payments to a recipient in Germany, as the German and Austrian tax systems differ in respect of the taxation of maintenance payments.
The ECJ also rejected the alleged breach of Article 18 EC Treaty (free movement and residence rights), thereby reasoning that the EC Treaty does not offer a guarantee to citizens that a transfer of activities to another Member State is neutral in respect of taxation.
The conclusion of this case is simple: the disadvantage experienced by the taxpayer because he has exercised his free movement right, and thus he is subjected to a more disadvantageous tax system, is not a prohibited restriction.
Text of the ECJ judgment
Text of the AG opinion