European Union: Direct Taxation of Cross-Border Workers to Be Reviewed
On April 2, 2012, the European Commission announced its intention to review direct tax measures imposed by member states on cross-border workers. The Commission will carry out a thorough review of national direct taxes to determine whether they create unfair disadvantages for individuals who live in one member state and work in another.
The Commission will concentrate on identifying situations where:
• individuals who earn most of their income in a member state other than their member state of residence are taxed more heavily than residents of the first state;
• member states apply different rules – e.g., expense deductibility, tax rates, etc., – to nonresidents who occasionally work in their territory, compared to the rules applied to resident taxpayers.
The review will cover employees, self-employed individuals, and retired employees. In performing this review, the Commission will apply principles established in landmark decisions of the Court of Justice of the European Union (CJEU), for example Schumacker (C-279/93), Wielockx (C-80/94), Turpeinen (C-520/04) and Gerritse (C-234/01).
The Commission estimates that there are more than 1.2 million cross-border workers in the EU and considers that tax obstacles are one of the most common restrictions to cross-border mobility. Algidiras Šemeta (Commissioner for Taxation), indicated that the Commission will take the necessary action to foster the elimination of any discrimination against cross-border workers or any breaches of EU freedoms.2
EU Tax Centre Note
The Commission’s review may result in a number of restrictions and discriminations being identified. Depending on the problem areas identified and the response of the respective member states, the outcome of this review