(February 26, 2015)

On February 26, 2015 the European Court of Justice (CJEU) ruled in Case C-623/13 Ministre de l’Économie et des Finances versus Gérard de Ruyter (ECLI:EU:C:2015:123).

Do the tax levies on income from assets, such as the social contribution on income from assets, the social debt repayment contribution based on that same income, the social levy of 2% and the additional contribution to that levy, have, by virtue of the mere fact that they contribute to the financing of compulsory French social security schemes, a direct and relevant link with some of the branches of social security listed in Article 4 of Regulation [No 1408/71], and do they thus fall within the scope of that regulation?’

The disputes in the main proceedings and the questions referred for a preliminary ruling

·        Mr de Ruyter, a Netherlands national resident in France, is employed by Vermeer Verenigde Bedrijven BV, a Netherlands company.

·        In respect of the years from 1997 to 2004, Mr de Ruyter declared in France his income from Netherlands sources. That income was made up of his salary, income from investment capital, industrial and commercial profits and income from purchased life annuities paid by two Netherlands insurance companies.

·        The French tax authorities took the view that Mr de Ruyter’s income from purchased life annuities constituted income from assets and declared him subject, in relation to those annuities, to the CSG, the CRDS, the social levy of 2% and the additional contribution of 0.3% to that levy.

·        Mr de Ruyter lodged complaints with those authorities challenging the merits of those levies, submitting that the obligation imposed on him to contribute, on the basis of the same income, to two separate social security schemes was contrary to the principle, pursuant to Article 13 of Regulation No 1408/71, that the legislation of a single Member State is to apply in matters of social security, since that income had already been subject to similar levies in the Netherlands. Following the dismissal both of those complaints and of the subsequent actions brought before the administrative courts of Marseilles and Nîmes, Mr de Ruyter appealed against the judgments delivered by those courts to the cour administrative d’appel de Marseille (Administrative Court of Appeal of Marseilles).

·        By judgments of 15 October 2009 and 1 July 2010, the cour administrative d’appel de Marseille released Mr de Ruyter from the contributions in respect of the life annuities which he had received between 1997 and 2000 and between 2001 and 2004 respectively, holding that the levying of the contested taxes on the life annuities disregarded the principle of free movement of workers established by Article 39 EC.

·        The ministre du Budget, des Comptes publics, de la Fonction publique et de la Réforme de l’État (Minister for the Budget, Public Accounts, the Civil Service and State Reform) appealed against those judgments on a point of law to the Conseil d’État (Council of State).

·        By judgment of 17 July 2013, the Conseil d’État set aside the judgment of the cour administrative d’appel de Marseille of 15 October 2009 in part and set aside that court’s judgment of 1 July 2010 in its entirety. It held that the mere fact that the life annuities at issue had been subject to the same type of taxation in the Netherlands as they were in France was not enough to find an infringement of the freedom of movement for workers, since the EC Treaty which was then applicable did not lay down any general criteria for the attribution of areas of competence between the Member States in relation to double taxation within the European Union.

·        Since the Conseil d’État decided to rule on the merits of the two cases before it and Mr de Ruyter claimed that the levies at issue in the main proceedings were contrary to Article 13 of Regulation No 1408/71, it held that — in order to assess the scope of the principle, laid down by that article, that the legislation of a single Member State is to apply — it was necessary to ascertain whether those levies have a direct and relevant link with some of the branches of social security listed in Article 4 of Regulation No 1408/71 and thus fall within the scope of that regulation.

·        In that regard, the Conseil d’État noted, first, that those levies contribute to the financing of compulsory French social security schemes.

·        Secondly, and unlike the situations giving rise to the judgments in Commission v France (C‑34/98, EU:C:2000:84) and Commission v France (C‑169/98, EU:C:2000:85), the Conseil d’État observed that the levies at issue in the main proceedings are not imposed on employment income and substitute income, thus operating in part as a substitute for social security contributions, but are imposed only on income from the assets of the taxpayer concerned, irrespective of pursuit of a professional activity by that person.

·        The Conseil d’État also observed that those levies do not have any link at all with the acquisition of a right to a benefit or an advantage provided by a social security scheme and are, for that reason, regarded as having the nature of taxation and not that of social security contributions, within the meaning of the national constitutional and legislative provisions.

·        It was on that basis that the Conseil d’État decided to stay proceedings and to refer the following question to the Court for a preliminary ruling:

‘Do the tax levies on income from assets, such as the social contribution on income from assets, the social debt repayment contribution based on that same income, the social levy of 2% and the additional contribution to that levy, have, by virtue of the mere fact that they contribute to the financing of compulsory French social security schemes, a direct and relevant link with some of the branches of social security listed in Article 4 of Regulation [No 1408/71], and do they thus fall within the scope of that regulation?’

The CJEU ruled as follows:

Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons, to self-employed persons and to members of their families moving within the Community, as amended and updated by Council Regulation (EC) No 118/97 of 2 December 1996 and as amended by Council Regulation (EC) No 1606/98 of 29 June 1998, must be interpreted as meaning that levies on income from assets, such as those at issue in the main proceedings, have, when they contribute to the financing of compulsory social security schemes, a direct and relevant link with some of the branches of social security listed in Article 4 of that regulation and thus fall within the scope of the regulation, even though those levies are imposed on the income from assets of taxable persons, irrespective of the pursuit by them of any professional activity.

For further information click here to be forwarded to the text of the ruling as published on the website of the Court of Justice, which will open in a new window.

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