On 24 October 2019, the Court of Justice of the European Union (ECJ) delivered the judgement between BU and État belge concerning the disability allowance, free movement of workers and freedom to provide services.
Summary of the facts
The applicant, a Belgium national, has suffered an accident in Belgium on her way to work in Limburg (the Netherlands), which led to incapacity for work followed by the dismissal from her employment. The applicant has received an allowance under the Law on insurance against incapacity for work (‘the WAO allowance’) and an allowance of the Pension fund for civil servants including old-age, survivors’ and invalidity pensions (‘the ABP allowance’) covered by Netherlands social security.
The Belgian tax authorities sent the applicant a revised assessment of her personal income tax return stating that those allowances are received as pensions and are taxable in Belgium as such. The applicant lodged a complaint against that decision claiming that those allowances are exempt from taxation in Belgium since the WAO allowance is not a pension but a disability allowance, just as the ABP allowance is a pension linked to disability. The complaint was rejected on the ground that those allowances are classified as ‘allowances for incapacity to work’, which is included among the pensions that are taxable in Belgium. The applicant challenged the decision of the Belgian tax authorities before the Court of First Instance (Tribunal de première instance de Liège, Belgium).
Questions referred to the ECJ
Does Article 38[(1)(4) of the Income Tax Code 1992, in the version applicable to the facts in the main proceedings] infringe Article 45 TFEU et seq. (principle of free movement of workers) and Article 56 TFEU et seq. (principle of freedom to provide services) […] in so far as it exempts disability allowances from tax only if those allowances are paid by the State Treasury, that is to say, by the Belgian State, in accordance with Belgian legislation, thereby giving rise to discrimination between taxpayers resident in Belgium who receive disability allowances paid by the Belgian State, which are exempt from tax, and taxpayers resident in Belgium who receive allowances intended to compensate for a disability paid by another Member State of the European Union, which are not exempt from tax?
Conclusion by the ECJ
The Court upheld that the Article 45 TFEU must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, which, without providing justification in that regard, a matter which is however for the referring court to verify, provides that the tax exemption applicable to disability allowances is subject to the condition that those allowances are paid by a body of the Member State concerned and, therefore, excludes from that exemption allowances of the same nature paid by another Member State, even where the recipient of those allowances is a resident of the Member State concerned.
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Franco Falzon C.P.A. LL.M
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