Court of Justice of the European Union
Judgment of 23 January 2014 (Case C‑296/12)

Failure of a Member State to fulfil obligations – Freedom to provide services – Free movement of capital – Income tax – Contributions paid to a savings pension – Tax reduction solely in respect of payments to institutions or funds established in that Member State

In this judgment, issued following an infringement proceedings brought against Belgium, the Court of Justice of the European Union concluded that national legislation providing for an income tax reduction in respect of contributions paid to a savings pension only in respect of payments made to institutions or funds established in that Member State , breaches the freedom to provide services, provided for in article 56 of the Treaty on the Functioning of the European Union.

The Court also considered that the coherence of the tax system does not justify such restriction, In fact, since Belgian legislation provides for the taxation of income from savings pension where the payments made benefited from a tax reduction and exempts from tax income from savings pension whose payments did not benefit from this reduction on account of their being made to institutions established in other Member States, it is concluded that the fact liable to adversely affect the coherence of the Belgian tax system is not the location of the managing company of the savings pension but rather the change of the taxpayer’s State of residence between the time of payment of the contributions and the time the income is received, no direct link existing between the tax benefit and the corresponding advantage.

On the other hand, the need of effective fiscal supervision can be overcome by resorting to the existing mechanisms on gathering of information required for a correct assessment of taxes (in particular Council Directive 77/799/EEC of 19 December 1977, concerning mutual assistance by the competent authorities of the Member State in the field of direct taxation).

Finally, Belgium did not present any arguments based on which it could be concluded that the restriction was proportional for the purpose of consum ers’ protection.