OPINION OF MR ADVOCATE-GENERAL REISCHL

DELIVERED ON 11 JUNE 1974 (*1)

Mr President,

Members of the Court,

By an order dated 30 January 1974 the Gerechtshof of The Hague has referred a series of questions on the interpretation of Article 13 of the Protocol on the Privileges and Immunities of the European Communities dated 8 April 1965.

These questions relate to the following facts.

Mr Eduard Rudolph von Geldern, Director-General in the General Secretariat of the Council of Ministers, died in December 1971, resident in Belgium. He left a widow and three children. Under his will his estate was divided equally between his three children, subject to the widow's life interest in the net estate. Besides this the widow was entitled to a life assurance, a pension resulting from a pension scheme of a former private employer of the deceased and a survivor's pension from the European Communities under the Staff Regulations of these Communities.

Having regard to Article 14 of the said Protocol, under which ‘in the application of income tax, wealth tax and death duties … officials … of the Communities who, solely by reason of the performance of their duties in the service of the Communities, establish their residence in the territory of a Member State other than their country of domicile for tax purposes at the time of entering the service of the Communities, shall be considered, both in the country of their actual residence and in the country of domicile for tax purposes, as having maintained a domicile in the latter country provided that it is a member of the Communities’, and because Mr von Geldern was previously domiciled in the Netherlands, the Dutch tax office proceeds on the basis that the Dutch Succession Law applies to the said estate.

The Dutch Succession Law, viz. the Law of 28 June 1956 as subsequently amended, provides that survivors' pensions, payable under an agreement contained in a contract of employment concluded by the deceased spouse, shall be treated as acquired by inheritance. On the other hand, pensions of a public law nature and pensions which are paid under a pension scheme are not subject to succession duty. Further, the Succession Law provides that the interest of a spouse up to an amount of Fl. 250000 is free of duty. However, the capital value of the pension which the spouse receives free of succession duty, is up to a maximum of Fl. 240000, deducted from the duty-free amount.

On applying these provisions and having regard to the value of the pensions paid by the former private employer and also by the European Communities, the Dutch Revenue came to the conclusion that the free allowance of the widow of the deceased Mr van Geldern had been used up to the extent of the full legal amount of Fl. 240000. Having regard to the remaining free allowance amounting to Fl. 10000 and the value of Mrs von Geldern's interest (life assurance and the capital value of her life interest) the Revenue assessed some Fl. 15000 succession duty.

Mrs von Geldern does not agree with this. She does not agree that the capital value of the survivor's pension paid by the European Communities should be taken into account in the assessment of the free allowance due to her. This is prohibited in her view by the second paragraph of Article 13 of the aforesaid Protocol, in which it is stated that officials and other servants of the Communities ‘shall be exempt from national taxes on salaries, wages and emoluments paid by the Communities’.

She therefore made a complaint against the notice of assessment served on her and since this met with no success she appealed to the Gerechtshof at The Hague.

Having regard to the objections based on Community law the Gerechtshof stayed the proceedings by the aforementioned order and referred four questions, the exact terms of which I will not read out now, for a preliminary ruling. The parties to the main proceedings, the Government of the Kingdom of the Netherlands and the Council and the Commission of the European Communities have submitted observations on these questions.

The Court making the reference seeks to know by the first question whether the second paragraph of Article 13 of the Protocol applies to a survivor's pension paid by the Communities. Regulation No 549/69 of the Council of 25 March 1969 (OJ L 74 of 27. 3. 1969) provides expressly with regard to this, that the exemption from taxation shall apply to persons receiving survivor's pensions paid by the Communities. The question raised can therefore in truth only be understood as meaning that it must be examined whether the said Regulation of the Council is valid, that is, covered by the provisions of the Protocol. But even on this interpretation in my opinion the question asked by the Gerechtshof of The Hague may be answered without difficulty in the affirmative. Under Article 16 of the Protocol, the Council may ‘on a proposal from the Commission and after consulting the other institutions concerned, determine the categories of officials and other servants of the Commission to whom the provisions of Article 12, the second paragraph of Article, 13, and Article 14 shall apply in whole or in part’. The Council thus has in this connexion a certain discretion.

In exercising it, it must in particular be guided by the basic principle of the second paragraph of Article 13. As was stressed in Case 6/60 (Humblet v State of Belgium Rec. 1960, p. 1196) on Article 11 (b) of the ECSC Protocol on Immunities, a provision corresponding to the second paragraph of Article 13, this principle is to ensure that the organs of the Community can effectively exercise their power of fixing the effective amount of the salaries of their officials to ensure equality of the net salaries between officials of various nationalities. This objective can be attained without considerable complications arising from the diversity of the national tax systems only if the salary from the Community is liable to no national tax but only Community tax.

This applies not only to salaries paid to officials in active service. The principle must, as the Council has rightly observed, extend to all the basic elements of the conditions of employment and thus also to pensions. According to the scheme of the Staff Regulations they represent in truth a continued payment of salary, for they are not dependent on contributions paid, are calculated on the basis of the last salary received and, like salaries, are adapted from time to time to changed circumstances.

On the first question I therefore think that for the Revenue to treat survivors' pensions in the same way as salary, in respect of which regard must also be had to the fact that they are likewise liable to Community tax under Regulation of the Council No 260/68 (OJ L. 56 of 4.3.1968), accords with the principle in the second paragraph of Article 13 of the Protocol, and that in consequence the validity of Regulation No 549/69 of the Council (OJ L 74 of 27. 3.1969) cannot be questioned.

The second question of the court making the reference is whether national taxes from which a survivor's pension from the Communities is exempt in principle include succession duty.

I think this question too can without any great difficulty be answered in the affirmative.

As regards the question of principle, it is on this point not of decisive importance what the defendant in the main action and the Netherlands Government have submitted, namely the fact that Article 14 of the Protocol refers to death duties being applied by the Member State in which the official concerned had his last domicile before entering the service of the Communities, and that death duties are not levied by the Communities. By the same token the use of different terms is without relevance, namely in the French and English versions of the second paragraph of Article 13 on the one hand and of Article 14 of the Protocol on the other (‘impôts nationaux sur le traitement …’ — “droits de succession”; “national taxes on salaries…” — “death duties”). In the same way the question of principle cannot depend on whether the tax in question is one on salary and other emoluments from the Community akin to the Community tax, which may be regarded as a kind of income tax.

The answer to the question depends solely on the aforementioned principle underlying the second paragraph of Article 13, i.e. the endeavour to ensure equality of the net emoluments paid by the Communities by excluding national taxes. From this doubtless a broad interpretation of the second paragraph of Article 13 in relation to kinds of taxes is called for.

The Court has already made this sufficiently clear in respect of Article 11 (b) of the ECSC Protocol, which speaks expressly of “all taxes”. I refer once again to the dictum in Case 6/60 that Article 11 (b) of the Protocol prohibits all taxation of income which is paid by the Community. Further I can refer to the judgments in Cases 32/67 (Van Leeuwen v City of Rotterdam, Rec. 1968, p. 75) and 23/68 (Klomp v Inspektie der Belastingen, Rec. 1968, p. 51). In respect of Article 11 (b) of the ECSC Protocol and the second paragraph of Article 12 of the former EEC Protocol, these judgments make it clear that the said provisions cover national taxes on salaries and emoluments “in whatever form and under whatever description they are levied” so long as it is only a question of charges which are intended to provide for the general expenses of the public authorities, i.e. not contributions or fees for services of the public administration.

This basic view must certainly be maintained. Since death duties obviously come into the category of charges which are intended to cover the general financial needs of the State, it can only be observed, in respect of the second question from the court making the reference, that death duties are also covered in principle by the second paragraph of Article 13 of the Protocol, and this of course quite independently of whether it is a question of single or periodical charges.

Finally, the third and fourth questions from the court making the reference can be dealt with together. Basically it is a question, if I see it rightly, only of whether Community law precludes the capital value of a pension of a widow of a Community official from being taken into consideration by way of reduction of the free allowance which the national succession duty law provides for such a taxpayer.

On this the defendant in the main action and the Netherlands Government have taken the view that the provisions of the Protocol do not have such an effect, since it is obviously not a question of a tax charge on the capital value of the survivor's pension but the amount of the duty which the rest of the estate has to bear. On the other hand, the Commission takes the view that the Protocol on the Privileges of the Community must be given a wide interpretation on this point as well, and excludes an indirect taxation of the capital value of the survivor's pension, as would happen if the capital value were taken into account in the assessment of the free allowance.

As regards this dispute it may first be said that arguments in favour of the Commission's view may be deduced from the aforementioned judgment in Case 6/60. In that case — let me shortly remind you — it was, as you know, a question of whether the salary of an official of the European Coal and Steel Community could be taken into consideration in determining the rate of a Belgian progressive surtax which is levied on the whole income of the married couple (in the case in question excluding the income from the Community). The Court in fact answered this question in the negative, because it perceived that such a procedure would involve indirectly taxing emoluments from the Community. It stated on this that a strict separation should be made between income subject to the fiscal sovereignty, of the Member States and the salaries which the Community pays. The latter were excluded from the tax sovereignty of the Member States; they fell, as regards their obligation to tax, exclusively under Community law. From this it followed that Community salaries may not provide the legal basis for national taxation and that it was not possible to allow a causal connexion between the income from the Community and the amount of the national taxes owed by the taxpayer.

It may nevertheless appear questionable whether this legal view, which was developed with regard to questions of income tax, and in my opinion is certainly right in that connexion, can automatically be transferred to the sphere of the law of death duties. Whereas there is a Community tax which may be equated with income tax, there are no death duties under Community law.

In this connexion it appears interesting to me that in the judgment in Case 32/67 it was stated that the second paragraph of Article 12 of the EEC Protocol on Privileges, which corresponds to the second paragraph of Article 13 of the present Protocol, may not be separated from the first paragraph, under which ‘officials and other servants of the Communities shall be liable to a tax for the benefit of the Communities on salaries, wages and emoluments paid to them by the Communities, in accordance with the conditions and procedure laid down by the Council’. ‘As a consequence of this provision’, the judgment continues, ‘by the second paragraph the salaries, wages and emoluments taxed by the Community are exempt from national taxes…’. I understand the reference to this connexion as meaning that the broad interpretation, which the said judgment in Case 6/60 gave to the Protocol, that indirect taxation was also ruled out, appears appropriate only in the case of national taxes which correspond to those in the first paragraph of Article 13 of the Protocol, i.e. where the subject of taxation is income. As regards other taxes on the other hand, only direct taxation of the said salaries, wages and emoluments is precluded by the second paragraph of Article 13 of the Protocol, since this alone has the same effect as the Community tax and leads to an undesirable double taxation.

If Member States retain the power to tax estates — naturally always excluding the capital value of Community pensions — then no compelling reasons can be discerned in Community law for precluding the value of the pension from being taken into consideration in the assessment of the duty on the estate — and with this I return to the question which concerns us now. Considerations of the appropriate national law must prevail here, such as the consideration in the Netherlands that a free allowance in favour of a surviving spouse is appropriate where provision for his or her old age requires it, but not where provision for old age is secured by other means and from other sources. Further, death duties are not a tax on income but on estates. Since there are no death duties under Community law, then, in so far as the charge on the whole estate is concerned the national legislature must be left a discretion as to whether it has regard to the pension claims under Community law in fixing the amount of the charge on the estate.

Contrary to the view of the Commission, I am therefore inclined to state, in reply to the third group of questions from the court making the reference, that the Protocol does not prevent the capital value of a survivor's pension paid by the Communities from being taken into account in the assessment of the free allowance under a national law on death duties.

The questions referred may therefore be answered as follows:

(a)The provision in Article 2 of Regulation No 549/69 of the Council, under which claims to survivor's pension are covered by the second paragraph of Article 13 of the Protocol, accords with the principle of this Protocol and is therefore valid.

(b)The words ‘national taxes’ in the second paragraph of Article 13 of the Protocol in principle include national death duties.

(c)The second paragraph of Article 13 of the Protocol does not preclude the capital value of a survivor's pension paid by the Communities from being taken into account in determining the exemption which is provided under the national law on death duties.

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(1) Translated from the German.