Case C‑155/09, Commission v Greece

An interesting case on Arts 12 EC, 18 EC, 39 EC and 43 EC regarding a tax exemption granted solely to persons residing in Greece and to persons of Greek origin not residing in Greece at the date of purchase. The Commission argued that Greece had failed to fulfil its obligations under these provisions by, first of all, granting exemption from a Greek tax on the transfer of immovable property solely to persons permanently resident in Greece but not to non-residents who intended to settle in Greece in the future, and, secondly, by granting, on certain conditions, exemption from the tax solely to Greek nationals on the purchase of a first home in Greece, expressly discriminating against persons resident abroad who were not Greek nationals.

The Court first of all reiterated its – famous wording - that although direct taxation fell within their competence, the Member States must none the less exercise that competence consistedently with EU law (see, inter alia, C-347/04, Rewe Zentralfinanz [2007] on which I wrote this post).

The Court of Justice has – since 1974 – rather consistently held that the rules regarding equal treatment forbade not only overt discrimination by reason of nationality but also all covert formed of discrimination which, by the application of other criteria of differentiation, led in fact to the same result (see, inter alia, Case 152/73 Sotgiu [1974]; or, more recently, Case C‑103/08 Gottwald [2009]).

In the present case, the national provision concerned reserved entitlement to the tax exemption solely to permanent residents in Greece. Although it applied irrespective of the nationality of the purchaser of immovable property, the requirement that a person be resident in Greece in order to be eligible for the tax exemption was, according to the Court of Justice, liable to operate particularly to the detriment of persons who were not Greek nationals – the reason being that in most cases those were the persons whose residence would be outside Greece.

According to the Court, the provision concerned therefore placed at a disadvantage persons not residing in Greece who purchased a first home with a view to settling in Greece in the future, since it did not admit that such persons were entitled to the exemption from the tax due on the purchase of a first home, whereas persons already residing in Greece who purchased a first home there might benefit from the exemption.

The Court held that, in those circumstances, the provision had a deterrent effect in relation to persons not residing in Greece who wished to purchase a first home there.

However , as is well known, national measures which are liable to hinder or made less attractive the exercise of fundamental freedoms guaranteed by the Treaty may nevertheless be allowed provided that they pursue an objective in the public interest, are appropriate for attaining that objective and do not go beyond what is necessary to attain the objective pursued (see inter alia: Case C‑345/05 Commission v Portugal [2006])

In the present case, Greece argued that the permanent residence requirement was justified inter alia by objectives consisting, on the one hand, in facilitating the purchase of a first home by individuals and preventing any property speculation and, on the other, in restricting tax evasion and preventing abuse. Furthermore, it argued that such a requirement was part of the more general context of Greece’s social policy, in relation to which the national practices pertaining to the implementation of social objectives were covered by the discretion which Member States retained in determining their social policy, with regard to the nature and extent of social protection which they applied, provided that their actions were proportionate to the objective pursued.

The Court, however, held that even supposing that such arguments might be relied on to justify an obstacle to the freedom of movement of persons, the requirement for residence on Greek territory laid down in the provision concerned did not, in any event, secure the objectives which that law purportedly pursued and, in addition, went beyond what was necessary to attain those objectives.

The Court furthermore held that there were other less restrictive methods which would allow the Greek authorities to ensure that a purchaser of immovable property complied with all the conditions for entitlement to the tax exemption by satisfying themselves that he did not own another property in Greece. They included entry on the tax register or the land register, a requirement for declarations as to tax or accommodation or the implementation of checks by the tax authorities, supplemented by statements under oath by purchasers, the latter being criminally liable for the content and accuracy of their statements.

The Court furthermore held that as regards persons who were not resident in Greece and who were not carrying out any economic activity there, the same conclusion applied, for the same reasons, to the complaint relating to Art. 18 EC (see Case C‑522/04 Commission v Belgium [2007])

As regards the Commission’s second complaint concerning the fact that the tax exemption was granted only to Greek nationals or persons of Greek origin, the Court held that the provision concerned drew a distinction based on the criterion of nationality.

The Court reiterated that  Article  12 EC or Arts 39 EC or 43 EC, required that comparable situations must not be treated differently and that different situations must not be treated in the same way. Such treatment might be justified only if it was based on objective considerations independent of the nationality of the persons concerned and was proportionate to the objective being legitimately pursued (see, to that effect, Case C-164/07 Wood [2008] and Case C‑524/06 Huber [2008]).

In the present case, Greek nationals and nationals of Member States other than Greece who intended to settle in Greece were, so far as the purchase of a first residence in that Member State was concerned, in a comparable situation. Only Greek nationals or persons of Greek origin were entitled to the exemption. Thus, that different treatment, expressly and solely based on nationality, constituted direct discrimination. It followed that the exemption constituted discrimination prohibited by the first paragraph of Art. 12 EC and by Arts 39 EC and 43 EC.

The Court concluded that by granting, on certain conditions, exemption from the tax solely to Greek nationals or persons of Greek origin on the purchase of a first residence in Greece, Greece had failed to fulfil its obligations under Arts 12 EC, 39 EC and 43 EC.