Commission v. Belgium: Belgium's Tax Law Prevents Free Movement of Capital

• Author: John Gramlich
• Position: John Gramlich is a candidate for Juris Doctor, class of 2020, at SMU Dedman School of Law. John played basketball at St. Edward's University, in Austin, Texas.
• Pages: 149-158

Commission v. Belgium: Belgium’s Tax Law

Prevents Free Movement of Capital

J

OHN

G

RAMLICH

*

I. Introduction

In Commission v. Belgium, the Court of Justice of the European Union

(CJEU) held that Article 7 of Wetboek van de inkomstenbelastingen 1992

[Income Tax Code] (ITC ’92) of Belgium is in violation of both the

European Union law under Article 63 Treaty on the Functioning of the

European Union (TFEU) and Article 40 of the Agreement on the European

Economic Area of 2 May 1992 (the EEA Agreement).

1

Income Tax under

Article 7 varies depending on whether property is held within Belgium or

outside of Belgium, which contradicts the requirements of both the TFEU

and the EEA Agreement.

2

The Court found that Belgium is restricting the

“free movement of capital” in direct conflict with Article 63 TFEU and

Article 40 of the EEA.

3

This restriction on the free movement of capital is

discouraging Belgium residents from investing in property residing in other

Member States within the European Union because there can be higher tax

consequences for investing money in property abroad rather than in

Belgium.

4

The Court further found that Belgium must pay the court costs

to the Commission in accordance with Article 138(1) of the Rules of

Procedure of the Court of Justice.

5

In this case, on “7 November 2007, the Commission pointed out that

Belgian tax provisions on income from immovable property located abroad

might be incompatible with the obligations arising from Article 63 TFEU

and Article 40 of the EEA Agreement.”

6

That incompatibility was found

when the Commission observed different procedures for calculating taxable

income on “property located in Belgium versus property located [outside of

Belgium.]”

7

The ITC ’92 requires that a Belgian resident’s tax base for

property located in Belgium is calculated on the basis of the cadastral value,

while the tax base from property located outside of Belgium is calculated on

* John Gramlich is a candidate for Juris Doctor, class of 2020, at SMU Dedman School of

Law. John played basketball at St. Edward’s University, in Austin, Texas.

1. See Case C-110/17, Belgium v. Comm’n, 2018 E.C.R. 250.

2. See id. ¶ 65.

3. See id. ¶¶ 55, 63.

4. See id. ¶¶ 23, 53.

5. See id. ¶ 66.

6. See id. ¶ 12.

7. Linda Thompson, “Belgian Residents With Rental Property in Tax Limbo,” B

LOOMBERG

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(Aug. 28, 2018).

THE INTERNATIONAL LAWYER

A TRIANNUAL PUBLICATION OF THE ABA/SECTION OF INTERNATIONAL LAW

PUBLISHED IN COOPERATION WITH

SMU DEDMAN SCHOOL OF LAW