ECJ - Recent Developments in Direct Taxation 2012

S. 89Germany II: The Petersen and Petersen, DMC Beteiligungsgesellschaft, Welte and Van Caster and Van Caster Cases

S. 911. Petersen and Petersen (C-544/11)

1.1. Introduction

The Petersen and Petersen case concerns the taxation of wages which were paid in the course of a development aid project carried out abroad. It deals with seemingly discriminatory criteria for a switch-over from foreign tax credit to the exemption method. The ECJ can be expected to examine the relevant national provisions in the light of Art. 45 TFEU (free movement of workers). The most interesting question associated with the case is whether the selective application of the exemption method based on considerations of promoting the national economy can be classified as a restriction of a fundamental freedom, or even State aid within the meaning of Art. 107 TFEU. In addition, the case raises some issues regarding the scope of application of several free movement rights, and the ECJ should clarify to what extent Member States may promote their own development aid policy through discriminatory tax incentives.

1.2. Relevant legislation

In conformity with international taxation practice, the German Income Tax Act (ITA) distinguis...