Suministro e instalación de grupo electrógeno TABLA 6.8: Cuadro de cargas

The general rule in international tax law is that residents are subject to unlimited tax liability (worldwide taxation), while non-residents are subject to limited tax liability (source state taxation).135 _{EC law allows for a comparison between resident and non-}

resident taxpayers. This comparison is derived from the non-discrimination doctrine and is often assessed from a host state perspective. Examples where the ECJ has found that residents and non-residents are considered to be in comparable situations are pre- sented below.

4.2.1 The Schumacker Case

The Schumacker case136 _{concerned Schumacker, a Belgian national living in Belgium,}

but working and earning all his employment income in Germany. Belgium was not in a position to grant him personal and family benefits since Schumacker received no significant income there. He therefore claimed that his personal and family circum- stances should be taken into consideration in Germany, but this was only available to German residents. The legal issue was whether German legislation, which treated taxpayers differently on grounds of the place of residence, was in compliance with the free movement of workers.

The ECJ stated that “discrimination can arise only through the application of differ- ent rules to comparable situations or the application of the same rule to different situations”.137 _{Furthermore, the ECJ stated that in relation to direct taxes, the situa-}

tions of residents and non-residents are not generally comparable.138 _{The ECJ based}

this opinion on several grounds.139 _{Income received by a non-resident in another}

Member State is often only a part of his total income, which is concentrated to his

134 _{Schuch, J., ‘Will EC Law Transform Tax Treaties into Most-Favoured-Nation Clauses?’, in Gassner,}

Lang and Lechner (eds.), Tax Treaties and EC Law, p. 98.

135 _{Terra B., and Wattel P., European Tax Law, 3}rd _{edition, p. 45.}

136 _{Case C-279/93 Finanzamt Köln-Altstadt v Roland Schumacker[1995] ECR I-225.}

137_{Ibid., para. 30.} 138_{Ibid., paras. 31-32.} 139_{Ibid., para. 32.}

place of residence. A non-resident’s ability to pay tax and the possibility to take into account personal and family circumstances are easier to assess where the financial and personal interests are concentrated, i.e. the state of residence. Moreover, the ECJ re- ferred to the OECD Model Convention, which recognises that it is a matter for the state of residence to determine the overall taxation of taxpayers, including taking into account personal and family circumstances.

The main rule is therefore that non-residents cannot demand the same treatment available to residents. This means that national legislation which does not grant non- residents certain tax benefits is not as a rule discriminatory.140 _{However, there are ex-}

ceptions to this rule. The ECJ reasoned that there was no objective difference be- tween the situations of a non-resident and a resident taxpayer, engaged in comparable employment, to justify the difference in treatment.141 _{Schumacker was subject to dis-}

crimination since his personal and family circumstances were not taken into consid- eration neither in the state of residence nor in the state of source.142 _{The ECJ there-}

fore concluded that a non-resident who receives the major part of his income and al- most all his family income in a Member State other than that of his residence, could be considered to be in the same situation for taxation purposes as a resident tax- payer.143 _{Hence, the German legislation violated the free movement of workers.}

4.2.2 The Wielockx Case

In the Wielockx case144_{, the ECJ extended the comparable situations of residents and}

non-residents to self-employed persons. This case concerned Wielockx, a Belgian na- tional living in Belgium, but working as a physiotherapy practitioner in the Nether- lands where he earned all his income. Wielockx was under Dutch legislation denied to deduct contributions to a pension reserve from his taxable income, since he was not a Dutch resident. The legal issue was whether Dutch legislation, which treated taxpayers differently on grounds of their place of residence, was compatible with the freedom of establishment.

The ECJ repeated its statement in the Schumacher case by stating that discrimination arises only through the application of different rules to comparable situations or the application of the same rule to different situations.145 _{Moreover, the ECJ confirmed}

that the situations of residents and non-residents are not generally comparable.146

However, the ECJ then stated that a non-resident, whether employed or self- employed, who receives all or almost all of his income in the state where he works, is objectively in the same situation for taxation purposes as a resident of that state who does the same work there. Both taxpayers have the same taxable income, which is

140_{Ibid., para. 34.} 141_{Ibid., para. 37.} 142_{Ibid., para. 38.} 143_{Ibid., paras. 36-38.}

144 _{Case C-80/94 Wielockx v Inspecteur der Directe Belastingen [1995] ECR I-2493.}

145_{Ibid., para. 17.} 146_{Ibid., para 18.}

taxable in the same state.147 _{If a non-resident is denied deductions from his taxable in-}

come, his personal situation will not be taken into consideration in the state where he works because he is not resident there, and not in the state of residence because he re- ceives no income there. Consequently, a non-resident will have a heavier tax burden than a resident.148 _{Therefore, discrimination arises when a non-resident taxpayer re-}

ceives all or almost all of his income in the state where he works, but is not entitled to deductions under the same conditions as a resident taxpayer.149 _{The ECJ concluded}

that the Dutch legislation violated the freedom of establishment.

4.2.3 The Royal Bank of Scotland Case and the Saint-Gobain Case

In the Royal Bank of Scotland case150_{, the legal issue was whether the Greek tax legisla-}

tion, which imposed a higher tax burden for branches of foreign banks than for Greek established banks, was compatible with the freedom of establishment. The ECJ stated that for companies, the corporate seat determines the state of residence, like nationality does for natural persons. The freedom of establishment would be meaningless if a Member State in which a company seeks to establish itself can freely apply different treatment solely because it has its seat in another Member State.151

The ECJ repeated its statements in Schumacker that although the situations of resi- dents and non-residents are not generally comparable, a denial of tax advantages to non-residents may constitute discrimination, if there is no objective difference to jus- tify the difference in treatment.152 _{The fact that companies incorporated in Greece}

were taxed on their worldwide income and that foreign controlled branches were taxed only on the profits of the branch in Greece did not prevent them from being in comparable situations.153 _{The Greek legislation could not justify the difference in}

treatment154 _{and violated therefore the freedom of establishment.}

In the Saint-Gobain case155_{, the ECJ extended the comparable situations of foreign}

controlled PEs and resident companies in terms of tax treaty benefits concluded with third countries. This case is of fundamental importance since a subsidiary, but not a PE is considered as a resident of a contracting state under a tax treaty.156 _{The German}

tax authorities refused to grant foreign controlled PEs certain tax concessions relating to the taxation of dividends from shares in foreign companies, since those concessions were restricted to companies subjected to unlimited tax liability in Germany. The ECJ found that non-resident companies having a PE in Germany and German resi-

147_{Ibid., para 20.} 148_{Ibid., para 21.} 149_{Ibid., para 22.}

150 _{C-311/97 Royal Bank of Scotland plc v Elliniko Dimosio (Greek State) [1999] ECR I-2651.}

151_{Ibid., para. 23, which refers to Case 270/83 Commission v. France (Avoir fiscal) [1986] ECR 273, para} 18.

152 _{C-311/97 Royal Bank of Scotland plc v Elliniko Dimosio (Greek State) [1999] ECR I-2651, para. 27.}

153_{Ibid., para. 29.} 154_{Ibid., para. 30.}

155 _{Case C-307/97 Compagnie de Saint-Gobain, Zweigniederlassung Deutschland v Finanzamt Aachen-}

Innenstadt [1999] ECR I-6161.

dent companies were in objectively comparable situations since both were liable to tax dividends received from shares in foreign subsidiaries. There was therefore no rea- son for treating a PE differently than a German resident company.157 _Accordingly,

the ECJ concluded that Member States must grant PEs of non-resident companies, the same tax treaty benefits, including those with third countries, on the same condi- tions as those applicable to resident companies.158

4.3 Two Resident Taxpayers – One of whom has Exercised