CJEU - Recent Developments in Direct Taxation 2024

1. Background

The case AB v Finanzamt Köln-Süd, which was decided by the CJEU in May 2024, concerns the guarantees under the EU-Swiss Agreement on the Free Movement of Persons (AFMP) as it pertains to the taxation of cross-border employees. The AFMP was concluded between the European Communities and its Member States on the one hand and the Swiss Confederation on the other, and forms part of the Union legal order (Arts. 216 and 217 TFEU). It is binding upon the institutions of the EU and its Member States (Art. 216 para. 2 TFEU).

Employees working in Germany are subject to German wage tax which is levied as a withholding tax. German resident employees may opt for voluntary tax assessment. If they choose to do so, income-related expenses can be deducted, and the wage tax previously paid is credited to the final tax liability. Following the CJEU’s judgement in Schumacker, cross-border commuters can - under certain conditions - also choose to file a tax assessment. They can then deduct income-related expenses, and in particular profit from joint tax assessment with a non-S. 2resident spouse. In its 2013 judgement in Ettwein, the CJEU decided that this privilege had to be extended to cross-b...