CJEU – Recent Developments in Direct Taxation 2016

1. S. 80Facts and legal Background of the Case

Mr and Mrs Bechtel are German residents. Mr Bechtel worked as a civil servant in Germany while Mrs Bechtel worked as a civil servant for the French tax administration in France. As a married couple their income was jointly assessed in Germany. Mrs Bechtel was also taxed in France as a non-resident. According to Article 14(1) in connection with Article 20(1)(a) of the French-German DTC (1959/2001), Germany had to exempt the income earned by Mrs Bechtel in France. However, Germany took the French income into account when calculating the tax rate to be applied to the couple (proviso safeguarding progression).

In France, Mrs Bechtel was obliged to make contributions to the French pension fund and to the French health insurance plan. These contributions reduced her income tax liability in France. However, in Germany, these contributions were not taken into account, either for reducing the tax base or for reducing the tax rate in the framework of the proviso safeguarding progression. In a purely domestic situation, similar contributions would have reduced both the tax base and the tax rate. The German tax administration refused to grant a deduction...