Judgment of the Court (First Chamber) of 1 December 2011.

— The existence of restrictions of Articles 39 EC and 43 EC

46 The Treaty provisions on freedom of movement for persons are intended to facilitate the pursuit by EU nationals of occupational activities of all kinds throughout the European Union, and they preclude measures which might place those nationals at a disadvantage when they wish to pursue an economic activity in the territory of another Member State (see Case C-464/02 Commission v Denmark [2005] ECR I-7929, paragraph 34 and case-law cited; Commission v Portugal, paragraph 15; Commission v Sweden, paragraph 17; Commission v Germany, paragraph 21; and Commission v Greece, paragraph 43).

47 The freedom of establishment conferred on nationals of one Member State in the territory of another Member State includes in particular access to and exercise of activities of self-employed persons under the same conditions as are laid down by the law of the Member State of establishment for its own nationals (see, inter alia, Case 270/83 Commission v France [1986] ECR 273, paragraph 13; Case C-47/08 Commission v Belgium [2011] ECR I-4105, paragraph 79; and, to the same effect, Case C-161/07 Commission v Austria [2008] ECR I-10671, paragraph 27). In other words, Article 43 EC prohibits a Member State from laying down in its laws conditions for the pursuit of activities by persons exercising their right of establishment there which differ from those laid down for its own nationals (Case C-161/07 Commission v Austria, paragraph 28, and Case C-47/08 Commission v Belgium, paragraph 79).

48 In the present case, the Commission submits that, as a result of the difference in tax treatment which it establishes between taxable persons – be they foreign or Hungarian citizens – who sell property situated in Hungary and taxable persons who sell property situated outside Hungarian territory, the legislation at issue is discriminatory and may discourage the latter from exercising their right to freedom of movement and of establishment.

49 The Commission therefore submits that the discrimination arises out of the less favourable tax treatment of transfers of residence from another Member State to the Republic of Hungary in comparison with transfers of residence within Hungarian territory, and essentially takes the view that pursuant to the principle of fiscal equality, the first situation, which involves a cross-border element, must receive the same treatment as the second situation, and that it should give rise to entitlement to the tax advantage at issue.

50 In that connection, it should be recalled that it is settled case-law that discrimination can arise only through the application of different rules to comparable situations or the application of the same rule to different situations (see, inter alia, Schumacker, paragraph 30; Case C-383/05 Talotta [2007] ECR I-2555, paragraph 18; and Case C-182/06 Lakebrink and Peters-Lakebrink [2007] ECR I-6705, paragraph 27).

51 Accordingly, a difference in treatment between two categories of taxable person may be categorised as discrimination within the meaning of the Treaty provided that the situations of those categories of taxable person are comparable in the light of the taxation rules concerned.

52 It follows that, in the present case, the Republic of Hungary is required to make available the tax advantage at issue to taxable persons selling property outside Hungarian territory only if their situation is to be regarded as being objectively comparable, in the context of the tax at issue, to the situation of taxable persons selling property situated within Hungary.

53 In that connection, the Republic of Hungary disagrees with the Commission’s conclusion and claims that the situations are not comparable. It asserts that it is possible not to confer the tax advantage at issue on property for which a government tax had to be – or ought to have been – paid beforehand in another Member State if that Member State had established such a tax. Since, given the nature of that government tax, the scope of the legislation at issue extends only to property situated in Hungary, those persons not having purchased a property beforehand in Hungary and those already owning such a property there are not in a comparable situation, so that the fact of applying different rules to those two categories of person does not constitute discrimination within the meaning of the Treaty.

54 However, that argument cannot be accepted.

55 Admittedly, the Court has held, in relation to direct taxes, that the situations of residents and of non-residents in a Member State are generally not comparable, because the income received in the territory of a Member State by a non-resident is in most cases only a part of his total income, which is concentrated at his place of residence, and because a non-resident’s personal ability to pay tax, determined by reference to his aggregate income and his personal and family circumstances, is easier to assess at the place where his personal and financial interests are centred, which in general is the place where he has his usual abode (Schumacker, paragraphs 31 and 32; Case C-391/97 Gschwind [1999] ECR I-5451, paragraph 22; and Case C-169/03 Wallentin [2004] ECR I-6443, paragraph 15).

56 Furthermore, the fact that a Member State does not grant to a non-resident certain tax benefits which it grants to a resident is not, as a rule, discriminatory, having regard to the objective differences between the situations of residents and of non-residents from the point of view both of the source of their income and of their personal ability to pay tax or their personal and family circumstances (Schumacker, paragraph 34; Gschwind, paragraph 23; Case C-234/01 Gerritse [2003] ECR I-5933, paragraph 44; and Wallentin, paragraph 16).

57 However, it must be stated that those principles were developed by the Court in the context of case-law on income tax, an area in which objective differences between taxable persons, such as source of income, personal ability to pay tax or personal and financial circumstances, may affect the taxation of a taxpayer and are, as a rule, taken into account by the legislature. That is not true of the tax at issue, which is determined in relation to the sale price of real property. Moreover, the Republic of Hungary has not argued – and nor is there any evidence to that effect in the Court file – that the personal circumstances of a taxpayer are taken into account when the tax in question is paid.

58 In those circumstances, in the light of the tax at issue, the only difference between the situation of non-residents in Hungary (including Hungarian nationals who have exercised their right to move freely within the European Union) and that of residents in Hungary (Hungarian nationals, or the nationals of another Member State, purchasing a new principal residence in that Member State) relates to the location of their previous principal residence. In both situations, the persons in question will have bought a property in Hungary in order to settle there and, when purchasing their previous principal residence, will have paid a tax of the same nature as that at issue, either in the Member State in which that residence was situated or in Hungary.

59 In such circumstances, acceptance of the proposition that a Member State may freely apply a different treatment solely by reason of the fact that an EU citizen’s first principal residence is situated in another Member State would deprive the rules relating to the freedom of movement for persons of all meaning (see, to that effect, Case 270/83 Commission v France, paragraph 18, Joined Cases C-397/98 and C-410/98 Metallgesellschaft and Others [2001] ECR I-1727, paragraph 42; and Case C-418/07 Papillon [2008] ECR I-8947, paragraph 26).

60 In the light of the foregoing considerations – and as the Commission correctly observes – all those moving their principal residence within the European Union or the European Economic Area, whether that be just within Hungary itself or be from the Member State where the previous residence was situated to Hungary, are in a comparable situation.

61 That being the case, it should be recalled that in order to establish whether discrimination exists, the comparability of a Community situation with a purely domestic situation must be examined also by taking into account the objective pursued by the national provisions at issue (see, in particular, Papillon, paragraph 27).

62 In that connection, the file shows that, in the present case, the objective of the national legislation is to impose on all property purchases a tax whose basis of assessment is the total market value of the property being purchased, while preventing the assets taxed upon the purchase of the property now being sold from being taxed again on the subsequent purchase.

63 As regards the comparability of the situations, that objective of taxing only once the capital invested for the purchase of real property may, as a rule, be achieved both where the property sold is situated in Hungary and where it is situated in another Member State.

64 In the light of the objective of the Law on taxes, both of those situations are therefore objectively comparable.

65 Consequently, the tax regime at issue creates a difference in treatment on the basis of the location of the real property sold.

66 As regards the dissuasive effect of the legislation at issue alleged by the Commission, it should be remembered that – as has been noted – by refusing to grant the tax advantage at issue to those purchasing a property in Hungary for use as their principal residence when they have sold or are about to sell their previous principal residence situated in another Member State, that legislation results in a heavier tax burden for those persons than for those benefiting from that advantage.

67 In those circumstances, it cannot be ruled out that the legislation at issue may, in certain cases, dissuade those relying on their right to freedom of movement (and to freedom of establishment) under Articles 39 EC and 43 EC from purchasing a property in Hungary.

68 In the light of the foregoing considerations, it must be held that Paragraph 2(2), in conjunction with Paragraph 21(5), of the Law on taxes constitutes a restriction on the freedoms of movement for persons enshrined in Articles 39 EC and 43 EC, in that they have a dissuasive effect – in terms of the property purchase tax – on persons wishing to settle in Hungary by buying real property there, in comparison with persons moving within that Member State, by denying the former the benefit of the tax advantage at issue when purchasing a property.

– Whether the restrictions are justified

69 According to well-established case-law, national measures which are liable to hinder or make 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, in particular, Commission v Greece, paragraph 51).

70 It is appropriate therefore to examine whether the difference in treatment between those two categories of taxpayer may be justified by an overriding reason in the public interest, in particular the need to preserve the coherence of the tax system.

71 The Court has already accepted that the need to preserve the coherence of a tax system may justify legislation restricting fundamental freedoms (see, inter alia, Bachmann, paragraph 21; Manninen, paragraph 42; Case C-157/07 Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt [2008] ECR I-8061, paragraph 43; and Case C-182/08 Glaxo Wellcome [2009] ECR I-8591, paragraph 77).

72 However, for an argument based on such a justification to succeed, a direct link must be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy (see, in particular, Manninen, paragraph 42; Case C-524/04 Test Claimants in the Thin Cap Group Litigation [2007] ECR I-2107, paragraph 68; and Amurta, paragraph 46).

73 In that connection, it must be noted that the tax regime laid down by the Law on taxes is based on the concept that the purchaser of a property situated in Hungary for use as his principal residence who sells his previous residence also situated in that Member State, within the time-limit laid down by that Law, must pay the tax not on the entire value of the property bought, but only on the difference in market value between the property bought and the property sold. Tax is therefore levied only on the hitherto untaxed part of the assets invested for the purchase of the property.

74 By contrast, when the property sold is situated in a Member State other than Hungary, the Republic of Hungary has no power to tax the transaction entered into in that other Member State by the person deciding to purchase a property in Hungary for his principal residence. In those circumstances, by providing that only those who have already paid the tax at issue on the purchase of such property in Hungary may benefit from the tax advantage in question when purchasing property of the same nature, the configuration of the tax advantage in question reflects a logic of symmetry within the meaning of the case-law (see, to that effect, Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt, paragraph 42).

75 If taxpayers not having paid the tax at issue previously were able, under the tax regime at issue, to benefit from the tax advantage concerned, they would take unfair advantage of taxation that was not applicable to their previous purchase outside Hungary.

76 It follows that, under the tax regime in question, there is a direct link between the tax advantage granted and the initial levy. First, that advantage and the tax levy are applied to one and the same person and, second, they both relate to the same tax.

77 In that context, it should be noted that the two requirements that the levy be identical and applied to one and the same person have been found to be sufficient to establish the existence of such a link (see, inter alia, Case C-35/98 Verkooijen [2000] ECR I-4071, paragraph 58; Case C-168/01 Bosal [2003] ECR I-9409, paragraphs 29 and 30; and Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt, paragraph 42). In addition, it must be noted that the Commission has not expressly disputed that the tax advantage in question is granted to the same taxpayer in relation to the same tax.

78 In the light of the foregoing, it must be found that the restriction stemming from Paragraphs 2(2) and 21(5) of the Law on taxes is justifiable by the need to preserve the coherence of the tax system.

79 However, in order for that restriction to be justified on that basis, it must also be appropriate and proportionate to the objective pursued, as noted in paragraph 69 above.

80 In that respect, it should be noted that, in the light of the Court’s case-law, the restriction in question is appropriate to achieve such an objective, in that it operates in a symmetrical manner, since only the difference in value between the property sold which is situated in Hungary and the value of the property purchased may be taken into account in the tax system at issue (see, to that effect, Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt, paragraph 44).

81 In addition, the restriction in question is proportionate to the objective pursued. It should be remembered, first, that the objective of the legislation at issue is to avoid – upon the purchase of a second principal residence in Hungary – the double taxation of the capital invested in the purchase of the previous residence that has been sold. Second, as noted in paragraph 74 above, the Republic of Hungary has no power to tax real property transactions carried out in other Member States.

82 Accordingly, taking the transactions carried out in other Member States into account for the purposes of reducing the basis of assessment for the tax at issue would result in those transactions being treated as already having been subject to the tax at issue, even though that was not the case. That situation would clearly be contrary to the abovementioned objective of avoiding double taxation under the Hungarian tax system.

83 While the property transactions carried out in other Member States might also have been subject to similar or even identical taxes to that at issue, it must be noted, however, that in the current stage of the development of EU law, the Member States enjoy a certain autonomy in the area of taxation provided they comply with EU law, and are not obliged therefore to adapt their own tax systems to the different systems of tax of the other Member States in order, inter alia, to eliminate the double taxation (see, by analogy, Case C-298/05 Columbus Container Services [2007] ECR I-10451, paragraph 51, and Case C-67/08 Block [2009] ECR I-883, paragraph 31).

84 That assessment cannot be called into question by the fact that, because of the method of calculating the basis of assessment for the tax on property, a taxpayer may be exempted from payment of that tax when subsequently purchasing a property situated in Hungary. Indeed, where the value of the second property purchased is lower than that of the property being sold, the capital invested in that second purchase is not then subject to tax, and the taxpayer is not entitled to any rebate of any part of the tax paid on the first purchase. As a result of such a mechanism, the regime in question may indeed be regarded as constituting an advantage and not as a disguised exemption for the sole benefit of Hungarian residents.

85 It follows that the restriction of the freedom of movement for persons and of freedom of establishment may be justified in order to preserve the coherence of the tax system.

– Whether Article 18 EC is restricted

86 As regards persons not resident in Hungary and not pursuing an economic activity there, it should be recalled that national legislation which places certain nationals of the Member State concerned at a disadvantage simply because they have exercised their freedom to move and to reside in another Member State constitutes a restriction of the freedoms conferred by Article 18(1) EC on every citizen of the Union (see Case C-406/04 De Cuyper [2006] ECR I-6947, paragraph 39; Case C-192/05 Tas-Hagen and Tas [2006] ECR I-10451, paragraph 31; and Joined Cases C-11/06 and C-12/06 Morgan and Bucher [2007] ECR I-9161, paragraph 25).

87 In the present case, it cannot reasonably be denied that the exclusion from the benefit of the reduction in the basis of assessment of persons moving within the European Union for reasons not connected with the pursuit of an economic activity may, in some cases, be likely to discourage those persons from exercising the fundamental freedoms guaranteed by Article 18 EC.

88 However, the Court has held that such a restriction can be justified in the light of EU law if it is based on objective considerations of public interest independent of the nationality of the persons concerned and if it is proportionate to the legitimate objective pursued by the provisions of national law (see De Cuyper, paragraph 40; Tas-Hagen and Tas, paragraph 33; and Morgan and Bucher, paragraph 33).

89 In that connection, it should be noted that the same conclusion as that reached in paragraphs 69 to 85 above for justifying the restriction in relation to Articles 39 EC and 43 EC applies, for the same reasons, to the complaint alleging infringement of Article 18 EC (see Case C-522/04 Commission v Belgium [2007] ECR I-5701, paragraph 72; Commission v Germany, paragraph 30; and Commission v Greece, paragraph 60).