CJEU - Recent Developments in Direct Taxation 2024

1. Facts of the case

This case involves a Croatian national and resident (the applicant), who is employed and liable to pay income tax in Croatia. The applicant receives resident-based tax advantages in Croatia, including an increase in her basic income tax allowance for having a dependent child who was, at the time of the case, a full-time master student in Finland during a five-month period, under the Erasmus+ S. 240program. Under the program the student received a mobility grant intended to cover costs adjusted to the living and subsistence costs of the host country.

In 2015, the Croatian Tax Office informed the applicant that the mobility support that her child received under the Erasmus+ program exceeded the threshold set by national law for treating the child as a dependant family member. This meant that the applicant was no longer entitled to the tax allowance increase for the year 2014. The applicant disagreed, arguing that the mobility support should not be counted as taxable income because it was social assistance, which should be exempt from this rule and therefore not be taken into account when determining entitlement to the increased allowance.

The applicant’s appeal was reject...