24 February 2015 (*1)

Reference for a preliminary ruling — Free movement of capital — Direct taxation — Income tax — Deductibility of support payments made in consideration for a gift by way of anticipated succession — Exclusion of non-residents’

In Case C‑559/13,

REQUEST for a preliminary ruling under Article 267 TFEU from the Bundesfinanzhof (Germany), made by decision of 14 May 2013, received at the Court on 30 October 2013, in the proceedings

Josef Grünewald,

THE COURT (Grand Chamber),

composed of V. Skouris, President, K. Lenaerts, Vice-President, A. Tizzano, R. Silva de Lapuerta, M. Ilešič, A. Ó Caoimh, J.-C. Bonichot (Rapporteur), Presidents of Chambers, A. Arabadjiev, C. Toader, M. Safjan, D. Šváby, M. Berger, A. Prechal, E. Jarašiūnas and C.G. Fernlund, Judges,

Advocate General: P. Mengozzi,

Registrar: M. Aleksejev, Administrator,

having regard to the written procedure and further to the hearing on 16 September 2014,

after considering the observations submitted on behalf of:

—the Finanzamt Dortmund-Unna, by S. Lorenz, acting as Agent,

—the German Government, by T. Henze and K. Petersen, acting as Agents,

—the French Government, by D. Colas and J.-S. Pilczer, acting as Agents,

—the European Commission, by G. Braun and W. Roels, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 18 November 2014,

gives the following

This request for a preliminary ruling concerns the interpretation of Article 63 TFEU.

The request has been made in proceedings between the Finanzamt Dortmund-Unna (Dortmund-Unna Tax Office; ‘the Finanzamt’) and Mr Grünewald concerning the Finanzamt’s refusal, on the ground that Mr Grünewald is not resident in Germany, to allow the deductibility, for the purposes of tax on income from shares in a partnership under civil law received as a gift by way of anticipated succession, of support payments that Mr Grünewald had made to his parents in consideration for that transfer of shares.

Legal context

European Union law

Directive 2011/92

Recitals 7 to 9 of Directive 2011/92 state:

Development consent for public and private projects which are likely to have significant effects on the environment should be granted only after an assessment of the likely significant environmental effects of those projects has been carried out. …

Projects belonging to certain types have significant effects on the environment and those projects should, as a rule, be subject to a systematic assessment.

Projects of other types may not have significant effects on the environment in every case and those projects should be assessed where the Member States consider that they are likely to have significant effects on the environment.’

Article 2(1) of that directive provides:

‘Member States shall adopt all measures necessary to ensure that, before development consent is given, projects likely to have significant effects on the environment by virtue, inter alia, of their nature, size or location are made subject to a requirement for development consent and an assessment with regard to their effects on the environment. Those projects are defined in Article 4.’

Under Article 3(1) of that directive:

‘The environmental impact assessment shall identify, describe and assess in an appropriate manner, in the light of each individual case, the direct and indirect significant effects of a project on the following factors:

…

biodiversity, with particular attention to species and habitats protected under [Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora (OJ 1992 L 206, p. 7), as amended by Council Directive 2013/17/EU of 13 May 2013 (OJ 2013 L 158, p. 193) (“Directive 92/43”)] and Directive 2009/147/EC [of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (OJ 2010 L 20, p. 7)];

…’

Article 4 of Directive 2011/92 provides:

Subject to Article 2(4), projects listed in Annex I shall be made subject to an assessment in accordance with Articles 5 to 10.

Subject to Article 2(4), for projects listed in Annex II, Member States shall determine whether the project shall be made subject to an assessment in accordance with Articles 5 to 10. Member States shall make that determination through:

a case-by-case examination;

thresholds or criteria set by the Member State.

Member States may decide to apply both procedures referred to in points (a) and (b).

Where a case-by-case examination is carried out or thresholds or criteria are set for the purpose of paragraph 2, the relevant selection criteria set out in Annex III shall be taken into account. Member States may set thresholds or criteria to determine when projects need not undergo either the determination under paragraphs 4 and 5 or an environmental impact assessment, and/or thresholds or criteria to determine when projects shall in any case be made subject to an environmental impact assessment without undergoing a determination set out under paragraphs 4 and 5.

Where Member States decide to require a determination for projects listed in Annex II, the developer shall provide information on the characteristics of the project and its likely significant effects on the environment. The detailed list of information to be provided is specified in Annex IIA. The developer shall take into account, where relevant, the available results of other relevant assessments of the effects on the environment carried out pursuant to Union legislation other than this Directive. The developer may also provide a description of any features of the project and/or measures envisaged to avoid or prevent what might otherwise have been significant adverse effects on the environment.

The competent authority shall make its determination, on the basis of the information provided by the developer in accordance with paragraph 4 taking into account, where relevant, the results of preliminary verifications or assessments of the effects on the environment carried out pursuant to Union legislation other than this Directive. The determination shall made available to the public and:

where it is decided that an environmental impact assessment is required, state the main reasons for requiring such assessment with reference to the relevant criteria listed in Annex III; or

where it is decided that an environmental impact assessment is not required, state the main reasons for not requiring such assessment with reference to the relevant criteria listed in Annex III, and, where proposed by the developer, state any features of the project and/or measures envisaged to avoid or prevent what might otherwise have been significant adverse effects on the environment.

Member States shall ensure that the competent authority makes its determination as soon as possible and within a period of time not exceeding 90 days from the date on which the developer has submitted all the information required pursuant to paragraph 4. In exceptional cases, for instance relating to the nature, complexity, location or size of the project, the competent authority may extend that deadline to make its determination; in that event, the competent authority shall inform the developer in writing of the reasons justifying the extension and of the date when its determination is expected.’

Annex II.A of that directive contains the list of ‘information to be provided by the developer on the projects listed in Annex II’. That list reads as follows:

A description of the project, including in particular:

a description of the physical characteristics of the whole project and, where relevant, of demolition works;

a description of the location of the project, with particular regard to the environmental sensitivity of geographical areas likely to be affected.

A description of the aspects of the environment likely to be significantly affected by the project.

A description of any likely significant effects, to the extent of the information available on such effects, of the project on the environment resulting from:

the expected residues and emissions and the production of waste, where relevant;

the use of natural resources, in particular soil, land, water and biodiversity.

ECLI:EU:C:2025:140

JUDGMENT OF 6. 3. 2025 – CASE C-41/24 WALTHAM ABBEY RESIDENTS ASSOCIATION

The criteria of Annex III shall be taken into account, where relevant, when compiling the information in accordance with points 1 to 3.’

Directive 2014/52

Recitals 11 and 29 of Directive 2014/52 state:

The measures taken to avoid, prevent, reduce and, if possible, offset significant adverse effects on the environment, in particular on species and habitats protected under [Directive 92/43] and Directive 2009/147 …, should contribute to avoiding any deterioration in the quality of the environment and any net loss of biodiversity, in accordance with the [European] Union’s commitments in the context of the [United Nations Convention on Biological Diversity, signed in Rio de Janeiro on 5 June 1992,] and the objectives and actions of the Union Biodiversity Strategy up to 2020 laid down in the [Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions] of 3 May 2011 entitled ‘Our life insurance, our natural capital: an EU biodiversity strategy to 2020’ [(COM(2011) 244 final)]

When determining whether significant effects on the environment are likely to be caused by a project, the competent authorities should identify the most relevant criteria to be considered and should take into account information that could be available following other assessments required by Union legislation in order to apply the screening procedure effectively and transparently. In this regard, it is appropriate to specify the content of the screening determination, in particular where no environmental impact assessment is required. Moreover, taking into account unsolicited comments that might have been received from other sources, such as members of the public or public authorities, even though no formal consultation is required at the screening stage, constitutes good administrative practice.’

Directive 92/43

Article 6(3) of Directive 92/43 provides:

‘Any plan or project not directly connected with or necessary to the management of the site but likely to have a significant effect thereon, either individually or in combination with other plans or projects, shall be subject to appropriate assessment of its implications for the site in view of the site’s conservation objectives. In the light of the conclusions of the assessment of the implications for the site and subject to the provisions of paragraph 4, the competent national authorities shall agree to the plan or project only after having ascertained that it will not adversely affect the integrity of the site concerned and, if appropriate, after having obtained the opinion of the general public.’

Article 12(1) of that directive provides:

‘Member States shall take the requisite measures to establish a system of strict protection for the animal species listed in Annex IV(a) in their natural range, prohibiting:

all forms of deliberate capture or killing of specimens of these species in the wild;

deliberate disturbance of these species, particularly during the period of breeding, rearing, hibernation and migration;

deliberate destruction or taking of eggs from the wild;

deterioration or destruction of breeding sites or resting places.’

Point (a) of Annex IV to that directive mentions ‘all species’ of bats belonging to the suborder of ‘microchiroptera’.

Irish law

‘Does Article 63 of the Treaty on the Functioning of the European Union (TFEU) preclude legislation of a Member State under which private support payments by non-resident taxable persons which are connected with a transfer of revenue-producing domestic assets in the course of an “anticipated succession” are not tax deductible, whereas such payments are deductible in the case of full liability to taxation, but the deduction results in a corresponding tax liability for a (fully taxable) recipient of the payments?’

Consideration of the question referred for a preliminary ruling

The existence of a restriction on the free movement of capital

15It must be noted that the case that led to the judgment in Schröder (EU:C:2011:198) concerned the same national legislation as that whose application is the subject of the present request for a preliminary ruling. In that judgment, the Court held that Article 63 TFEU, which prohibits restrictions on capital movements, must be interpreted as precluding legislation of a Member State which, while allowing a resident taxpayer to deduct the annuities paid to a relative who transferred to him immovable property situated in the territory of that Member State from the rental income derived from that property, does not grant such a deduction to a non-resident taxpayer, in so far as the undertaking to pay those annuities results from the transfer of that property.

16The matters of fact and law which, according to the referring court, make the present request for a preliminary ruling necessary relate to the combination of circumstances in the present case and, specifically, to the fact that (i) the income taxed in the hands of the non-resident taxpayer comes from shares in a partnership and not from the letting of immovable property and (ii) the national tax regime at issue in the main proceedings is based on the principle of correspondence, according to which the deduction of the annuity paid by the debtor must correspond to the taxation of the income derived from that annuity in the hands of the recipient.

17In those circumstances, it must be held that, by its question, the referring court is asking, in essence, whether Article 63 TFEU is to be interpreted as precluding legislation of a Member State which does not permit a non-resident taxpayer who has received in that Member State commercial income generated by the activity of a business, the shares in which were transferred to him by a relative in the course of a gift by way of anticipated succession, to deduct from that income the annuities which he has paid to that relative in consideration for that gift, whereas that legislation allows a resident taxpayer to make such a deduction on the ground that those annuities are taxed in the hands of the recipient.

18In that regard, it should first be observed that, in accordance with settled case-law, inheritances and gifts constitute movements of capital for the purposes of Article 63 TFEU, with the exception of cases in which their constituent elements are confined within a single Member State (see, to that effect, inter alia, judgment in Schröder, EU:C:2011:198, paragraph 26). Consequently, it must be held that the transfer of shares in a company established in Germany in the context of anticipated succession to a natural person residing in another Member State is covered by Article 63 TFEU.

19Secondly, the measures prohibited by Article 63(1) TFEU as restrictions on the movement of capital include those which are liable to discourage non-residents from making investments in a Member State or from maintaining such investments (see, inter alia, judgment in Schröder, EU:C:2011:198, paragraph 30).

20As regards the legislation at issue in the main proceedings, a natural person who is not domiciled or habitually resident in Germany is liable, under Paragraph 49 of the EStG, to income tax in that Member State in respect of income derived from the commercial activity conducted in Germany by a business in which that person holds shares. By contrast with resident taxpayers, pursuant to Paragraph 50 of the EStG, a non-resident taxpayer may not, as a person with limited liability for tax, only on domestic income, deduct from that income an annuity, such as that paid by Mr Grünewald in the context of the anticipated succession inter vivos, as special expenditure within the meaning of Paragraph 10(1)(1a) of the EStG. The less favourable tax treatment thus reserved for non-residents might deter them from accepting shares in companies established in Germany by way of anticipated succession. It might also deter German residents from naming, as beneficiaries of an anticipated succession inter vivos, persons resident in a Member State other than the Federal Republic of Germany (see, to that effect, judgment in Schröder, EU:C:2011:198, paragraph 32).

21Such legislation therefore constitutes a restriction on the movement of capital.

22Thirdly, it is true that, under Article 65(1)(a) TFEU, Article 63 TFEU is without prejudice to the right of Member States to distinguish, in their tax law, between taxpayers who are not in the same situation with regard to their place of residence (judgment in Schröder, EU:C:2011:198, paragraph 34).

23However, it is important to distinguish unequal treatment permitted under Article 65(1)(a) TFEU from arbitrary discrimination or disguised restrictions prohibited under Article 65(3) TFEU. In order for national tax legislation such as that at issue in the main proceedings, which distinguishes between resident and non-resident taxpayers, to be regarded as compatible with the FEU Treaty provisions on the free movement of capital, the difference in treatment must relate to situations which are not objectively comparable or must be justified by an overriding reason in the public interest (see, inter alia, judgment in Schröder, EU:C:2011:198, paragraph 35).

The comparability of the situations

24It is necessary to determine whether, in circumstances such as those of the dispute before the referring court, the situation of non-residents is comparable to that of residents.

25It is settled case-law that, in relation to direct taxes, the situations of residents and of non-residents are generally not comparable, because the income received in the territory of a Member State by a non-resident is in most cases only a part of his total income, which is concentrated at his place of residence, and because a non-resident’s personal ability to pay tax, determined by reference to his aggregate income and his personal and family circumstances, is easier to assess at the place where his personal and financial interests are centred, which in general is the place where he has his usual abode (see, inter alia, judgment in Schröder, EU:C:2011:198, paragraph 37).

26Thus, the fact that a Member State does not grant to a non-resident certain tax benefits which it grants to a resident is not, as a rule, discriminatory, given the objective differences between the situations of residents and of non-residents, from the point of view both of the source of their income and of their personal ability to pay tax or their personal and family circumstances (see, inter alia, judgment in Schröder, EU:C:2011:198, paragraph 38).

27The position is different, however, where the non-resident receives no significant income in the State of his residence and obtains the greater part of his taxable income from an activity performed in the other Member State concerned (see, to that effect, judgment in Schumacker, C‑279/93, EU:C:1995:31, paragraph 36).

28Therefore, if it transpires in the present case — a point for the referring court to ascertain — that the income which Mr Grünewald earned in Germany from 1999 to 2002 constituted the greater part of his overall income during that period, his situation should be regarded as objectively comparable to that of a resident of that Member State.

STARTSTART

JUDGMENT OF 6. 3. 2025 – CASE C-41/24 WALTHAM ABBEY RESIDENTS ASSOCIATION

The Court has also held, in relation to expenses directly linked to an activity which has generated taxable income in a Member State, that residents of that State and non-residents are in a comparable situation (see, inter alia, judgment in Schröder, EU:C:2011:198, paragraph 40 and the case-law cited).

30Thus, expenses occasioned by the activity in question are directly linked to that activity and are accordingly necessary in order to carry out that activity (see, to that effect, judgments in Gerritse, C‑234/01, EU:C:2003:340, paragraphs 9 and 27, and Centro Equestre da Lezíria Grande, C‑345/04, EU:C:2007:96, paragraph 25).

31That being so, although the income which Mr Grünewald earned in Germany in the years concerned did not constitute the greater part of his overall income, it could not be accepted that his situation was comparable with that of a resident unless the annuity which he paid were to be regarded as an expense directly linked to the income from the activity of the business established in Germany, the shares in which were transferred to him by way of anticipated succession.

32It must be observed that it is ultimately for the national court, which has sole jurisdiction to determine the facts in the case before it and to interpret the national legislation, to determine whether that is the case. However, in preliminary ruling proceedings, the Court, which is called on to provide answers of use to the national court, may provide guidance based on the documents in the file and on the written and oral observations submitted to it, in order to enable the national court to give judgment (see, inter alia, judgment in Alakor Gabonatermelő és Forgalmazó, C‑191/12, EU:C:2013:315, paragraph 31 and the case-law cited).

33In that regard, it is clear from all the evidence adduced before the Court that the commitment to pay the annuity at issue in the main proceedings stems directly from the transfer of the shares in the fruit and vegetable business, which gave rise to the income taxed in Germany, and that commitment, described by the referring court as the consideration for the transfer by way of anticipated succession, was a necessary condition for that transfer. If that was indeed the case, Mr Grünewald’s situation should be regarded as comparable to that of a resident taxpayer.

34It does not appear that that assessment may be called into question by considerations set out to that end in the order for reference or in the observations presented by the German Government before the Court.

35First, the existence of the link between the expenses borne by the non-resident taxpayer and his taxable income in the Member State concerned cannot be dependent on the nature of the income generated by the assets thus transferred. Although the income in the case that led to the judgment in Schröder (EU:C:2011:198) came from letting immovable property transferred by way of anticipated succession, while the income concerned in the present case comes from shares in a fruit and vegetable business, and although, as a consequence, that income comes under different categories of taxation, the end result is not that the link between the expenditure and the income at issue in the main proceedings has to be characterised differently, since the nature of that income is of no relevance in that respect.

36Secondly, even assuming that the amount of an annuity, such as that paid by Mr Grünewald, is determined on the basis of the debtor’s ability to pay and the recipient’s personal needs, the fact remains that the existence of a direct link within the meaning of the case-law cited in paragraph 29 above results, not from a correlation, of whatever kind, between the amount of the expenditure in question and that of the taxable income, but from the fact that that expenditure is inextricably linked to the activity which gives rise to that income (see, to that effect, judgment in Schröder EU:C:2011:198, paragraph 43).

37Thirdly, it is common ground in the present case, as in the case that led to the judgment in Schröder (EU:C:2011:198), that the payment of the annuity by the non-resident taxpayer was made in the context, not of a transfer for valuable consideration of an asset but a transfer by way of anticipated succession, free of charge. In that regard, the fact that that transfer was not for valuable consideration, moreover, renders ineffective ab initio the argument referred to by the national court to the effect that the annuity should not be deductible in the case of the acquisition of an asset for valuable consideration unless divided into acquisition costs and an interest portion. In any event, that argument concerns the amount of the deduction and not the principle of deduction, which is the only matter at issue in the present case.

38In those circumstances, national legislation which, in relation to income tax, does not permit non-residents to deduct an annuity paid in circumstances such as those of the case before the referring court, but which by contrast does allow residents to make that deduction, even though the situation of the non-residents and the residents is comparable, infringes Article 63 TFEU if that refusal is not justified by overriding reasons in the general interest.

The existence of overriding reasons in the general interest

39First, it is necessary to ascertain, as the referring court requests, whether the difference in treatment at issue in the main proceedings may be justified by the need to preserve the balanced allocation of powers of taxation between the Member States, as the German Government claims.

40It should be recalled in that regard that preservation of the balanced allocation of powers of taxation between Member States is a legitimate objective recognised by the Court. Moreover, it is settled case-law that, in the absence of any unifying or harmonising measures adopted by the European Union, the Member States retain the power to define, by treaty or unilaterally, the criteria for allocating their powers of taxation, particularly with a view to eliminating double taxation (judgment in DMC, C‑164/12, EU:C:2014:20, paragraphs 46 and 47).

41However, in circumstances such as those of the case before the referring court, that justification does not appear to be established.

42First of all, it must be held that, although, in accordance with the ‘principle of correspondence’ (Korrespondenzprinzip), mentioned in paragraph 13 above, the tax legislation of the Member State concerned precludes a non-resident debtor from deducting the annuities paid, since the income derived from those annuities for the recipient could not be taxed in the hands of that recipient, in particular because he is not himself a resident, that argument — raised by the referring court and by the German Government — appears, as the Advocate General observed in point 69 of his Opinion, in any event to be hypothetical and does not relate in any way to the circumstances of the case before the referring court.

43Next, the fact that the annuities may not be deducted by a non-resident debtor where he has limited liability for income tax stems from Paragraph 50 of the EStG, regardless of the creditor’s place of residence and whether or not those annuities are taxed in the hands of the creditor.

44There is no basis, therefore, for considering that the aim of the legislation at issue in the main proceedings is to maintain the balanced allocation, between the Member States, of powers to impose taxes.

45Secondly, the German Government also relies on the ‘principle of correspondence’ (Korrespondenzprinzip) in order to argue that the refusal to deduct the annuities paid by a non-resident who has limited liability for income tax is prompted by the need to safeguard the coherence of the national tax regime.

46That argument cannot succeed.

47Since no direct link has been established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy, the legislation at issue cannot be justified by the need to preserve the coherence of the national tax regime.

48It is true that the Court has recognised that the need to maintain the coherence of a tax system can justify a restriction on the exercise of the freedoms of movement guaranteed by the Treaty. However, for an argument based on such a justification to be accepted, the Court requires a direct link to be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy, with the direct nature of that link falling to be examined in the light of the objective pursued by the rules in question (see, to that effect, judgments in Papillon, C‑418/07, EU:C:2008:659, paragraphs 43 and 44, and Commission v Germany, C‑211/13, EU:C:2014:2148, paragraph 55).

49There is no such direct link when it is a question, in particular, of different taxes or the tax treatment of different taxpayers (judgment in DI. VI. Finanziaria di Diego della Valle & C., C‑380/11, EU:C:2012:552, paragraph 47). That is the position in the present case, since the deduction of the annuities by the debtor and the taxation of those annuities in the hands of the recipient necessarily concerns different taxpayers.

50The German Government argues, however, that if the deduction of the private support payments were authorised in Germany without those payments being taxed at the same time in the hands of the recipients, a double advantage would accrue to the entire group, made up of the parents and their descendants, within which an anticipated succession takes place (‘Generationennachfolgeverbund’) and which must, according to the German Government, be treated as a ‘quasi’ single tax entity since a transfer of the ability to pay tax takes place within that group.

51However, in addition to the fact that the non-taxation of the annuities in the hands of the recipients does not fit with the circumstances of the case before the referring court, as was stated in paragraph 42 above, it is common ground that in all cases, pursuant to Paragraph 50 of the EStG, non-resident taxpayers are not permitted to deduct support payments, whether or not those payments are taxed in Germany. Accordingly, the non-resident taxpayer is treated as such by the national legislation, and not as a member of the single tax entity referred to in the preceding paragraph, since that legislation makes no provision for the deduction of payments that that taxpayer has made if those payments are taxed in the hands of the recipient.

52Lastly, in relying without further explanation on the risk of the payments being deducted a second time in the recipient’s State of residence, the German Government does not enable the Court to assess the implications of that argument when it has not been claimed that that risk could not have been avoided through the application of Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation and taxation of insurance premiums (OJ 1977 L 336, p. 15), in force at the time.

53Consequently, the German Government cannot rely on its argument concerning the preservation of the tax regime applicable to the single tax entity, in order to justify the discriminatory treatment of the non-resident taxpayer.

54In the light of all the foregoing considerations, the answer to the question referred is that Article 63 TFEU must be interpreted as precluding legislation of a Member State which does not permit a non-resident taxpayer who has received in that Member State commercial income generated by shares in a business which were transferred to him by a relative in the course of a gift by way of anticipated succession to deduct from that income the annuities which he has paid to that relative in consideration for that gift, whereas that legislation allows a resident taxpayer to make such a deduction.

Costs

55Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Grand Chamber) hereby rules:

Article 63 TFEU must be interpreted as precluding legislation of a Member State which does not permit a non-resident taxpayer who has received in that Member State commercial income generated by shares in a business which were transferred to him by a relative in the course of a gift by way of anticipated succession to deduct from that income the annuities which he has paid to that relative in consideration for that gift, whereas that legislation allows a resident taxpayer to make such a deduction.

[Signatures]

* * *

(*1) Language of the case: German.