E-11/22 - RS v Steuerverwaltung des Furstentums Liechtenstein
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Deadlines: Motivation ministry: 21 December 2022
Written observations: 21 December 2022
Keywords: taxes, discrimination, equal treatment, tax rate
Subject: Article 4 and Article 28(2) of the EEA Agreement
Facts of the case:
The applicant, RS, is a German national residing in Switzerland. In the relevant period from 1 January 2019 to 31 December 2019 he worked in the Liechtenstein public service and on that basis he is subject to (limited) tax liability in Liechtenstein under the Double Taxation Convention between Switzerland and Liechtenstein in respect of income he earns from employment in Liechtenstein. By tax assessment of 11 December 2020, the applicant was assessed for the 2019 tax year in respect of income he had earned from an activity as an employed person in Liechtenstein. The tax was assessed at CHF. The applicant is contesting the tax assessment before the Administrative Court. He maintains that he is discriminated against compared to persons who are domiciled and resident for tax purposes in Liechtenstein (Article 4 and Article 28(2) of the EEA Agreement) because he is subject to a higher tax rate than persons who are resident in Liechtenstein. Act). According to the Tax Act in its original version of LGBl. 2010 No 340, all taxable persons, including persons with limited tax liability, are required to pay both a national tax and a municipal tax. In 2014 the legislature amended the Tax Act inter alia with regard to the municipal surcharge. Persons with limited tax liability are now no longer subject to a municipal surcharge, but a ‘surcharge’ (LGBl. 2014 No 344, which applied for the first time to the assessment for the 2014 tax year). In 2019 the municipal surcharges fixed by the municipalities ranged between 150% and 180%. The majority of municipalities levied a surcharge of 150%. The result was that persons with limited tax liability, like the applicant, were subject to a higher tax rate for earnings from activity as an employed person carried on in Liechtenstein than taxable persons resident in Liechtenstein, that is, the tax rate under Article 19 of the Tax Act plus a 200% surcharge, whereas a taxable person resident in Liechtenstein was ‘only’ subject to the tax rate under Article 19 of the Tax Act plus a surcharge between 150% and 180%. The provision governing the entry into force of the Act of 11 June 2021, LGBl. 2021 No 256, gives rise to equal treatment (possibly more favourable treatment) of taxable persons resident abroad for the 2021 tax year and subsequent years if the legislature fixes the surcharge at the level of the lowest municipal surcharge in the annual Finance Act. The provision governing entry into force does not, however, eliminate less favourable treatment of taxable persons resident abroad in respect of the past, that is to say, in so far as is relevant to the proceedings before the Administrative Court, for the 2019 tax year. In this respect there is an infringement of the principle of non-discrimination under Articles 4 and 28(2) of the EEA Agreement. The question thus arises whether such discrimination is exceptionally permitted in respect of the past, that is to say, tax years prior to 2021, and in the case at issue the 2019 tax year. The Administrative Court understands the case-law of the Court of Justice of the European Union as meaning that a national provision may exceptionally run counter to a provision of EU law where this is necessary for appropriate reasons, in particular overriding considerations of legal certainty. The Administrative Court can see certain arguments to justify such discrimination and thus an exceptional primacy of the national provision: the vast majority of tax proceedings involving persons with limited tax liability in Liechtenstein for the 2020 tax year and previous years have been finally concluded. This also applies to the date of entry into force of the Act of 11 June 2021 amending the Tax Act, LGBl. 2021 No 256, on 20 August 2021, subject to the proviso in respect of the 2020 tax year that there is no doubt that at that time a much smaller proportion of tax proceedings had been finally concluded than for the tax years prior to 2020. It would be discriminatory, unfair and unjust for all those taxable persons whose tax assessments for past tax years were finally concluded on 20 August 2021 if a lower tax rate for the past tax years was now applied retrospectively to the few taxable persons, like the applicant, whose tax assessments for past tax years have not yet been finally concluded.
Request for an advisory opinion:
Must Articles 3, 4 and 28(2) of the EEA Agreement be interpreted as precluding the application of a higher tax rate to the taxation of earnings gained by activity in Liechtenstein as an employed person by nationals of an EEA Member State who are not resident for tax purposes on national territory (Liechtenstein), compared to persons liable to tax who are resident for tax purposes on national territory (Liechtenstein), when assessing taxes in respect of the tax years up to 2020, insofar as they have not yet been finally assessed?
Cited (recent) case-law: UH (C-64/20)
Policy Area: FIN-fiscaal