Action brought on 5 April 2005 by the Commission of the European Communities against the Federal Republic of Germany

(Case C-152/05)

(2005/C 132/33)

Language of the case: German

An action against the Federal Republic of Germany was brought before the Court of Justice of the European Communities on 5 April 2005 by the Commission of the European Communities, represented by R. Lyal and K. Gross, with an address for service in Luxembourg.

The Commission claims that the Court should:

Pleas in law and main arguments

In the European Commission's view, the owner-occupied home allowance granted by the German State has discriminatory features. Persons subject to unlimited taxation in Germany who acquire a flat or house for the purpose of habitation in Germany are entitled to owner-occupied home allowance. Persons subject to unlimited taxation in Germany who live outside Germany and want to acquire a property there for the purpose of habitation are, by contrast, not granted owner-occupied home allowance.

Three groups of people are placed at a disadvantage by the German rules: (i) State employees who are resident abroad; (ii) frontier workers at least 90 % of whose income is subject to German income tax; and (iii) diplomats and European Union officials from Germany.

The Commission regards this, according to the status of the affected group of persons, as infringing freedom of movement for workers (Article 39 EC), freedom of establishment (Article 43 EC) or freedom of movement under Article 18 EC. All the cases have a sufficient cross-border element to justify the applicability of the relevant Treaty provision.

The Commission considers that the decision of the Court of Justice in Case C-279/93 Schumacker can be transposed to the present instance. Every person who is subject to unlimited taxation in Germany — and thus in principle pays tax on his worldwide income in Germany and in this way participates in the financing of Germany society — must be able to benefit from advantages financed out of taxation in the same way as a person resident in Germany. It is necessary to avoid a situation where the persons concerned are not granted advantages connected with their personal situation either in the State where they reside or in the State where they pursue their occupation.

In practice it is not very likely that a person subject to unlimited taxation in Germany will subject to unlimited taxation in another State. Account can be taken of that exceptional situation by prohibiting concurrent receipt of the German owner-occupied home allowance and comparable foreign assistance.

The restriction of owner-occupied home allowance to properties situated in Germany is not justified. The housing situation in Germany can also be improved if, for example, frontier workers acquire residential property not far over the border instead of moving to Germany. The German Government did not explain adequately in the pre-litigation procedure what purpose is ultimately served by limiting the assistance to German territory. Even if it were permissible for a Member State to promote housing construction in its territory alone, the German rules are not in themselves logical. If the Federal Republic of Germany wishes to promote every form of housing construction in Germany, it is not evident why the assistance is restricted to persons subject to unlimited taxation in Germany. Persons subject to limited taxation in Germany can also acquire residential accommodation there and thus promote housing construction.

Community law does not in any way require that the acquisition of second homes in other Member States be supported financially. It is for the national legislature alone to determine the scope of the assistance. Its freedom of decision is, however, limited by the fundamental freedoms enshrined in the EC Treaty.