The EU Commission has decided to refer Belgium, Greece, the Netherlands and Poland to the European Court of Justice (CJEU) over some of their tax practices, which are considered to be breaching the Union’s laws.

The legal action taken by the EU Executive aims to ensure that member-states respect their obligations under EU law, for the benefit of citizens and businesses.

According to the Commission, Belgium is penalising non-resident taxpayers through its legislation on the deductibility of alimony payments from the taxable income of non-residents. Deduction of alimony payments, also known as spousal or maintenance payments, from the taxable income of non-residents who earn less than 75% of their worldwide income in the country are refused by Belgium. It is also refused in cases where the taxpayer has no significant taxable income in the state of residence, making it impossible to deduct the above payments from taxable income in the state of residence.

The Commission supports that non-resident taxpayers have exercised the right of freedom of movement of workers, however Belgium does not allow the deduction of alimony payments neither from their taxable income in their state of residence, not in Belgium, which is considered as the state of employment. CJEU had already ruled that such legislation is contrary to the freedom of movement for workers.

Concerning Greece, the Commission’s move targets the country’s income tax legislation, which differentiates tax treatment between business losses incurred domestically and losses in another EU/EEA state. While both businesses are subject to taxation in Greece, the treatment of losses incurred abroad is limited, with the EU supporting that the move constitutes a restriction to the right of establishment.

The Commission took the first step of infringement proceedings in 2018, by sending a letter of formal notice to Greece, while a reasoned opinion followed one year later.

When it comes to the Netherlands, the action concerns three different Dutch rules related to cross-border pension tax regime. In particular, foreign service providers are required to provide guarantees to the Dutch authorities if pension capital is transferred from the Netherlands to a foreign provider or if foreign providers want to provide services on the Dutch market. Same applies to former employees who transfer pension capital to a foreign service provider or who seek to buy pension services from a foreign provider. The third case refers to mobile workers employed outside the country. The transfer of pension capital to foreign providers are tax exempt only if the foreign providers assume the responsibility for any tax claims, or the taxpayers themselves provide a guarantee.

The conditions imposed by the Netherlands severely restrict the free movement of citizens and workers, the freedom of establishment, the freedom to provide services and the free movement of capital as well, according to the Commission.

Another member-state to be referred to CJEU is Poland, as the country breaches EU rules on the exemption of imported alcohol used in the production of medicines. EU rules foresee a mandatory exemption from excise duty for imports of ethyl alcohol used in the production of medicines, however Poland does not grant this exemption when the alcohol importers do not choose to use a duty suspension arrangement.

In the case of Poland, the Commission supported that Warsaw breaches the EU provisions on the harmonisation of the structures of excise duties on alcohol and alcoholic beverages and the principle of proportionality, by not refunding excise duty paid on the import of ethyl alcohol used to produce medicines after the duty has been paid.