Opinion of the Advocate-General

I – Introduction

II – The relevant legislation

A – Community law

4. Article 56(1) EC (formerly Article 73b(1) of the EC Treaty) provides:

‘Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited.’

‘1. The provisions of Article 56 [EC] shall be without prejudice to the right of Member States:

(a) to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested;

…

‘…

D – Inheritances and legacies

…’

B – National law

‘The following taxes are hereby established:

(1) a inheritance duty on the value, after deduction of debts, of the whole of the gathered estate of an inhabitant of the Kingdom of Belgium;

(2) a duty on the transfer of property mortis causa on the value of immovable property situated in Belgium and pertaining to the gathered estate of a person who is not an inhabitant of the Kingdom of Belgium.

A person shall be deemed to be an inhabitant of the Kingdom of Belgium if, at the time of his death, he is domiciled in the Kingdom of Belgium or his assets are based there.’

9. Under Article 15 of the WS, inheritance duty is payable, after deduction of debts, on all the property, wherever located, owned by the deceased.

10. Article 18 of the WS, relating to non-residents, is worded as follows:

‘Duty on the transfer of property mortis causa shall be payable on all immovable property situated in Belgium and owned by the deceased …, without account being taken of debts and liabilities of the estate.’

12. Article 40 of the WS provides that the period within which a declaration of estate must be filed is five months from the date of death, where death takes place in the Kingdom of Belgium, and six months from the date of death where death takes place in another country in Europe.

‘The period within which the declaration of estate must be filed may be extended by the Director-General of Registration and Public Property.

A declaration filed within the period prescribed by statute or extended by the Director-General may be rectified provided that that period has not expired, unless the interested parties have expressly waived that right in a statement lodged in due accordance with legal requirements.’

14. Article 48(1) of the WS provides tables showing the rates which apply to inheritance duty and to the duty on the transfer of property mortis causa (transfer duty). The fourth subparagraph of Article 48(2) is worded as follows:

‘Debts and funeral expenses shall be deducted as a matter of priority from the movable property and the assets referred to in Article 60a, unless the declarants prove that a debt was specially incurred for the purpose of acquiring or preserving immovable property.’

15. As regards succession duties, there is no agreement between Belgium and Germany for the avoidance of double taxation.

III – Factual background, procedure and the question referred for a preliminary ruling

16. Hans, Natalie, Monica, Saskia, Thomas, Jessica and Joris Eckelkamp, the appellants in the main proceedings (together referred to as ‘the heirs’) are the heirs of Ms Reintges Hildegard Eckelkamp (‘Ms Eckelkamp’), who died in Düsseldorf on 30 December 2003.

17. On 13 November 2002, Ms Eckelkamp had signed a document containing acknowledgement of a debt owed by her to Hans Eckelkamp. Moreover, by notarial act of 5 June 2003, Ms Eckelkamp had granted a mandate to encumber an immovable property situated in Knokke-Heist (Belgium) with a mortgage as security for repayment of that debt in the amount of EUR 220 000, plus EUR 11 000 in interest.

18. On 29 June 2004, the heirs made a declaration of Ms Eckelkamp’s estate (‘the declaration of estate’ or ‘the declaration’) showing, under assets, that property as having a value of EUR 200 000. Under liabilities, the declaration showed ‘nihil’.

19. On the basis of the declaration – and thus without taking account of Ms Eckelkamp’s debt to Hans Eckelkamp – the transfer duties payable were estimated by decision of 14 July 2004 at EUR 110 000.04.

21. After they had paid the succession duties, the heirs filed a tax claim on 7 October 2004 seeking, inter alia, annulment of the decision of 14 July 2004. That claim was dismissed by judgment of the Rechtbank van Eerste Aanleg te Brugge (Court of First Instance, Bruges) of 30 May 2005. In its judgment, the Rechtbank considered that the period prescribed in Article 40 of the WS for filing a declaration of estate had in any event expired on 1 July 2004, whereas the fiscal claim was not filed until 7 October 2004, which meant that the declaration of estate was final and no account could be taken of a liability which was not mentioned therein. The Rechtbank also took the view that the appellants should have included the debt concerned in the declaration as a liability in respect of which the rule laid down in Articles 1 and 2 of the WS, read in conjunction with Article 18 thereof, falls not to be applied, as being contrary to Community law.

22. The heirs thereupon brought appeal proceedings before the Hof van Beroep in respect of the judgment of the Rechtbank. In support of their appeal, they essentially submit that Community law has direct effect and that administrative authorities are obliged to reconsider decisions taken contrary to Community law. Article 41 of the WS cannot prevent Community law from producing its full effect. Relying on Barbier, (6) they further claim that the distinction drawn in Article 2(1) of the WS, read in conjunction with Article 18 thereof, between residents and non-residents of Belgium is contrary to the Treaty provisions on the free movement of capital. They maintain also that those rules of the WS are prejudicial to the freedom to take up residence in another Member State and are contrary to Article 12 EC, read in conjunction with Articles 17 EC and 18 EC. The Belgian State, the respondent in the main proceedings, disputes the restriction on the free movement of capital and contends that the situations of residents and non-residents are not comparable.

23. In the order for reference, the Hof van Beroep states that it is satisfied that Ms Eckelkamp actually had a debt of EUR 220 000 on the day of her death.

24. In those circumstances, the Hof van Beroep te Gent decided to stay the proceedings and to request the Court of Justice to give a preliminary ruling on the following question:

‘Do Article 12 EC, in conjunction with Articles 17 EC and 18 EC, and Article 56 EC, in conjunction with Article 57 EC, preclude national rules of a Member State under which, in the context of the acquisition, through inheritance, of immovable property situated in a Member State (the State in which the property is situated), that State imposes a tax on the value of the immovable property situated in that State, in respect of which that State allows a deduction corresponding to the value of charges on that immovable property (such as debts secured by the right conferred on a creditor to take out a mortgage against that immovable property) if the testator, at the time of his demise, was resident in the State in which the property is situated, but not if the testator, at the time of his demise, was living in a different Member State (the State of residence)?’

IV – Legal analysis

A – Main submissions of the parties

25. In the present proceedings, observations have been submitted by the heirs, the Belgian Government and the Commission, all of which were also represented at the hearing on 13 December 2007.

26. The heirs submit, first, that the Belgian legislation on the taxation of the acquisition of immovable property through inheritance is discriminatory and infringes Article 56 EC, read in conjunction with Article 58 EC, in that – for the purposes of calculating the basis of assessment – it allows account to be taken of certain debts if the deceased was resident in Belgium at the time of death, but not if the deceased was resident elsewhere. The heirs maintain that the situations of a resident and a non-resident are comparable in this context. They submit in that regard that the Belgian legislation in principle considers both residents and non-residents to be taxable persons for the purposes of levying succession duties. Referring to the case-law of the Court, (7) the heirs argue that, as a consequence, residents and non-residents must also be treated alike as regards the deductibility of charges or debts.

27. Secondly, the heirs submit – relying mainly on Barbier (8) – that the legislation at issue constitutes a restriction on the free movement of capital, as the provisions preventing the deduction of debts relating to immovable property have the effect of reducing the value of the inheritance where the deceased was a non-resident, while there is no such reduction if the deceased was resident in Belgium. Thus, a person resident in another Member State may be discouraged from investing in an immovable property situated in Belgium, knowing that his heirs will have to pay higher succession duties than if he had not invested in Belgium or if he had invested in a different way.

28. Thirdly, and on the basis of similar arguments, the heirs submit that the Belgian legislation at issue runs counter to the rights of Union citizens, as laid down in Articles 12 EC and 18 EC, to take up residence in another Member State and not to be discriminated against.

29. Opposing the argument put forward by the Belgian Government that the present reference for a preliminary ruling should be declared inadmissible, the heirs argued at the oral hearing that the debt at issue is – also according to Belgian law – sufficiently closely linked with the immovable property in question. There is no relevant difference in that regard between a mortgage and the mortgage mandate at issue. They also emphasised that the debt of EUR 220 000 was not included in the declaration because, under Belgian law, it is prohibited to do so where the deceased was a non-resident and, what is more, because they had been told not to by the competent national authority (that being a source of information on which they could rely for the purposes of the principle of protection of legitimate expectations). (9)

30. The Belgian Government maintains, by contrast, that the present reference for a preliminary ruling should be declared inadmissible on the ground that the question referred is hypothetical and not relevant for the purposes of deciding the dispute in the main proceedings. It emphasises that the debt in question was not mentioned in the declaration of estate, which became final on expiry of the period allowed under the WS for filing it. Thus the central issue is in fact the expiry of the period for filing or correcting the declaration of estate, and the Hof van Beroep has not shown how, in those circumstances, it could take account of a preliminary ruling on the question referred. It appears from the case-law of the Court that, as a rule, Community law does not prevent the application of procedural rules provided for under national law, such as time-limits. (10)

31. On the substance of the case, the Belgian Government submits that the difference in treatment as regards debts, according to whether it is the inheritance of a resident or a non-resident, does not constitute an infringement of the Treaty provisions invoked in the present case. It emphasises that in relation to direct taxes, in particular as regards the taxation of acquisition through inheritance, the situations of residents and non-residents are, as a rule, not comparable.

32. The Belgian Government contends that only the Member State in which the deceased was resident is in a position to assess his economic situation in its entirety and to take account of all assets and debts in the calculation of succession duties. A debt such as that at issue is thus, in principle, always taken into account by the Member State of residence of the deceased. However, there is no legal framework at Community level for the coordination of the powers of the Member States in the area of inheritance taxation. The deduction of a debt such as that in issue in the Member State where the immovable property is situated could in fact lead to double-deduction, which Member States are allowed to prevent. In the present case, all debts forming part of the estate of the deceased are taken account of in Germany, the Member State where she resided.

33. According to the Belgian Government, the present case must be distinguished from Barbier (11) on the ground that in the latter case the debt that the heirs wanted to deduct constituted an inherent element of the immovable property taxable in the Member State where it was situated. In the present case, by contrast, there is no indication that the debt in question – which is only secured by a mortgage mandate and not a mortgage – would be sufficiently closely linked with the immovable property within the meaning of Barbier. That mortgage mandate relates in fact to all present and future estates of the person concerned.

34. In the event that the Member State in which the immovable property is situated should have to allow the deduction of debts attributable to that property, the Belgian Government contends that this should apply only if the debt is closely associated with the immovable property and if it is not also deductible in the Member State of residence of the deceased.

B – Appraisal

68Against that background, it should be noted in the present case, first, that for the purposes of inheritance taxation with respect to immovable property situated in Belgium, both the estate of a resident and that of a non-resident are subject to tax under the WS. Although, in formal terms, it is ‘inheritance duty’ that is levied in the case of a resident and ‘transfer duty’ in the case of a non-resident, the fact remains, in my view, that residents and non-residents are in principle considered comparable, under Belgian inheritance tax legislation, as regards liability to succession duties on immovable property situated in Belgium.

69Secondly, although the applicable succession duties are formally levied on the value of the immovable property forming part of the estate of a non-resident, the fact that the inheritance is taxed in the hands of the heirs is not to be overlooked. Thus, the case does not exclusively concern the personal situation of the deceased and the responsibility of his Member State of residence to take account, in accordance with the residence principle invoked by the Belgian Government, of all his personal circumstances and obligations, as it is the heirs who are the taxable persons under the WS and liable to tax according to their share in the inheritance.

70In particular, in a situation where the heirs were themselves resident in Belgium, and to whom the same non-deductibility rule would apparently apply as regards the inheritance of immovable property from a non-resident, one might well ask if the deceased’s State of residence would really be in a better position to take into account obligations such as that in issue. In addition, as the Commission has pointed out, the burden of proof as to the existence of the debt concerned lies in any event with the heirs, whether or not the person to whose estate the debt belongs was a resident or not.

71Finally, it should be noted that the debt at issue in the main proceedings is secured – according to the information provided by the parties and the referring court – by a mortgage mandate which enables the immovable property inherited to be encumbered with a corresponding mortgage.

72Although, as the Belgian Government has emphasised, the link in the present case between the immovable property and the obligation in question is obviously technically different from that, for example, between the obligation to transfer title and the estate at issue in Barbier , (29) I do not regard that difference as relevant in this context, nor do I consider it sufficient to enable the Court to distinguish the present case from that case. The fact remains that there is a link, in that the debts thus secured can in any event burden the immovable property concerned which is subject to tax. (30)

73In the light of the foregoing considerations, it has not been shown that the mere fact that the deceased was not, at the time of death, resident in the Member State where immovable property forming part of his estate is situated could provide objective justification for denying an heir, in a situation as that before the referring court, the deduction of such a debt, if an heir in the same situation but inheriting from a resident would have the right to avail himself of such a tax advantage.

74As regards, finally, the argument put forward by the Belgian Government that the taking account of the debt at issue may lead to double-deduction, it is settled case-law that a Community national cannot be deprived of the right to rely on the provisions of the Treaty on the ground that he is profiting from tax advantages which are legally provided by the rules in a Member State other than his State of residence. (31)

75Since also no overriding reasons in the general interest have been advanced which could justify the legislation at issue, it must be concluded that the difference in tax treatment entailed amounts to arbitrary discrimination within the meaning of Article 58(3) EC and the abovementioned case-law (32) and is therefore incompatible with the Treaty provisions on the free movement of capital.

76It is clear from the foregoing that it is unnecessary to examine the question referred in so far as it concerns the provisions of the Treaty relating to the freedom of Union citizens to take up residence in another Member State. (33)

77To my mind, the answer to the question referred must therefore be that the Treaty provisions on the free movement of capital preclude national legislation such as that at issue in the main proceedings, under which – for the purposes of determining the basis of assessment of the tax due on the inheritance of an immovable property situated in the territory of the Member State concerned – account may be taken of certain charges, such as debts secured by the right conferred on a creditor to take out a mortgage against the immovable property inherited, if the person from whom the property has been inherited was resident, at the time of death, in that Member State, but not if that person was resident in another Member State.

V – Conclusion

The Treaty provisions on the movement of capital preclude national legislation such as that at issue in the main proceedings, under which – for the purposes of determining the basis of assessment of the tax due on the inheritance of an immovable property situated in the territory of the Member State concerned – account may be taken of certain charges, such as debts secured by the right conferred on a creditor to take out a mortgage against the immovable property inherited, if the person from whom the property has been inherited was resident, at the time of death, in that Member State, but not if that person was resident in another Member State.

(2)– Arens-Sikken , pending before the Court.

(3)– Case C‑364/01 [2003] ECR I‑15013.

(4)– Case C‑513/03 [2006] ECR I‑1957.

(5)– OJ 1988 L 178, p. 5.

(6)– Cited in footnote 3.

(7)– In particular Case 270/83 Commission v France [1986] ECR 273; Case C‑307/97 Saint-Gobain [1999] ECR I‑6161; and Barbier , cited in footnote 3.

(8)– Cited in footnote 3, paragraph 62.

(9)– In that regard, reference was made to Joined Cases C‑181/04 to C‑183/04 Elmeka [2006] ECR I‑8167.

(10)– With reference to Case 45/76 Comet [1976] ECR 2043, paragraph 19.

(11)– Cited in footnote 3.

(12)– Case C‑512/03 Blanckaert [2005] ECR I‑7685, paragraph 42.

(13)– See to that effect in particular Case C‑275/06 Promusicae [2008] ECR I‑0000, paragraph 36; Case C‑236/98 Jämställdhetsombudsmannen [2000] ECR I‑2189, paragraph 30; and Case C‑261/95 Palmisani [1997] ECR I‑4025, paragraph 18.

(14)– See to that effect, in particular Promusicae , cited in footnote 13, paragraph 37, and Case C‑217/05 Confederación Española de Empresarios de Estaciones de Servicio [2006] ECR I‑11987, paragraph 16 and the case-law cited.

(15)– See to that effect in particular Palmisani , cited in footnote 13, paragraph 28; Case C‑453/00 Kühne & Heitz [2004] ECR I‑837, paragraph 24; and Comet , cited in footnote 10, paragraph 18.

(16)– In addition, the dispute in the main proceedings may raise, as the heirs have argued, issues of the protection of legitimate expectations.

(17)– That is to say, resident at the time of death in a Member State other than the Member State where the immovable property concerned is situated.

(18)– Cf. in that regard inter alia Barbier , cited in footnote 3, paragraphs 57, 58 and 75. The following assessment corresponds, in so far as the two cases are structurally similar, essentially to that in my Opinion in Arens-Sikken , cited in footnote 2, to which I may refer where appropriate.

(19)– See, inter alia, Case C‑319/02 Manninen [2004] ECR I‑7477, paragraph 19; Case C‑386/04 Centro di Musicologia Walter Stauffer [2006] ECR I‑8203, paragraph 15; and Case C‑347/04 Rewe Zentralfinanz [2007] ECR I‑2647, paragraph 21.

(20)– See, to that effect, inter alia Case C‑256/06 Jäger [2008] ECR I‑0000, paragraph 25, and van Hilten-van der Heijden , cited in footnote 4, paragraph 42.

(21)– See to that effect Barbier , cited in footnote 3, paragraph 62; van Hilten-van der Heijden , cited in footnote 4, paragraph 44; and, most recently, Jäger , cited in footnote 20, paragraph 30.

(22)– Case C‑279/93 [1995] ECR I‑225.

(23)– See to that effect Schumacker , cited in footnote 22, paragraphs 31 and 33.

(24)– See, for example, Case C‑446/03 Marks & Spencer ?2005? ECR I‑10837, paragraph 37; Manninen , cited in footnote 19, paragraph 28; and Jäger , cited in footnote 20, paragraph 40.

(25)– See to that effect, inter alia, Manninen , cited in footnote 19, paragraphs 28 and 29; Case C‑35/98 Verkooijen ?2000? ECR I‑4071, paragraph 43; Case C‑376/03 D. [2005] ECR I‑5821, paragraph 25; and Blanckaert , cited in footnote 12, paragraph 42.

(26)– See, as to that, in greater detail my Opinion in Arens-Sikken , cited in footnote 2, points 73 to 77.

(27)– See, to this effect, Commission v France , cited in footnote 7, paragraph 20; Case C‑170/05 Denkavit [2006] ECR I‑11949, paragraph 35; see also Opinion of Advocate General Lenz in Case C‑250/95 Futura Participations and Singer [1997] ECR I‑2471, points 38 and 39.

(28)– See, to that effect, inter alia Case C‑234/01 Gerritse [2003] ECR I‑5933, paragraphs 27 and 28; Case C‑265/04 Bouanich [2006] ECR I‑923, paragraph 40; and Jäger , cited in footnote 20, paragraph 44.

(29)– Cited in footnote 3.

(30)– See in that regard my Opinion in Arens-Sikken , cited in footnote 2, point 79 and footnote 35.

(31)– Inter alia Barbier , cited in footnote 3, paragraph 71. See, as to that, in greater detail also my Opinion in Arens-Sikken , cited in footnote 2, points 66 and 86 to 89.

(32)– See point 67 above.

(33)– See to that effect Barbier , cited in footnote 3, paragraph 75.