Luxembourg, 22/03/2007 (Agence Europe) - The European Court of Justice does not agree with the advocate general's opinion on the extent to which the European Commission should be exempt from member states' taxation. In a decision issued on Thursday 22 March, it ruled that various tax obligations on Belgian real estate could be applied to EU institutions without infringing the EC Treaty (case C-437/04).
In February 1988, the European Commission signed a lease contract with the company Vita SA for a building in the Ixelles areas of Brussels. The contract stipulated that all costs and taxes relating to the building were to be borne by the tenant, which in this case was the Commission. Vita's request that the Commission pay taxes levied by the Brussels Capital Region between 1992 (the date when a new tax on buildings of a certain surface area was introduced) and 1997, was rejected.
Vita SA took the Commission to court (the 'juge de la paix du premier canton d'Ixelles') which issued a ruling on 26 May 1998, ordering the Commission to pay Vita 20,000,277 Belgian francs and 290,211 Belgian francs. The Commission appealed to the Brussels court of first instance, which rejected its appeal. It then appealed again, this time to another Belgian court, the 'Cour de cassation', which did not consider it necessary to refer to the Court of Justice for a preliminary ruing on the point of law suggested by the Commission.
The Commission therefore launched legal proceedings against Belgium for failing to respect Article 226 of the EC Treaty. The Belgian government continued to defend itself against the letter of formal notice and the reasoned opinion sent by the Commission, and in October 2004 the Commission took Belgium to the European Court of Justice, asking it to rule that Article 2 of the Belgian court order of 23 July 1992 on the regional tax to be paid by the occupants of buildings in Brussels does not conform with EU law.
The Commission based its argument on Article 3 of the Protocol on the European Union's privileges and immunities, which rules that: 'The Communities, their assets, revenues and other property shall be exempt from all direct taxes'. The advocate general's conclusions favoured this view but the Court finally decided that the challenged taxes levied by the Brussels Capital Region did not infringe EU law because they were not direct taxation, and were neither directly nor indirectly aimed at international institutions but rather a contract freely entered into between an EU institution and a third party. It also ruled that 'the introduction of the regional tax is not contrary either to the wording or to the objectives of the first paragraph of Article 3 of the Protocol.' The Commission's appeal was therefore rejected and it was ordered to pay the costs. (cd)