Language of document :

Action brought on 20 November 2013 – European Commission v Federal Republic of Germany

(Case C-591/13)

Language of the case: German

Parties

Applicant: European Commission (represented by: W. Mölls, W. Roels, acting as Agents)

Defendant: Federal Republic of Germany

Forms of order sought

The applicant claims that the Court should:

declare that, by adopting and retaining provisions under which the tax on hidden reserves, which have been realised upon the sale for consideration of certain capital assets, is deferred by ‘transfer’ to newly purchased or produced capital assets until their sale, in so far as the latter assets belong to the capital assets of a taxpayer’s domestic permanent establishment, whereas such a deferral is not possible in so far as the same assets belong to the capital assets of a taxpayer’s permanent establishment which is located in another Member State or in another State of the European Economic Area, the Federal Republic of Germany has failed to fulfil its obligations under Article 49 TFEU and Article 31 of the EEA Agreement 1 ;

order the Federal Republic of Germany to pay the costs.

Pleas in law and main arguments

Under the German provisions, the resulting profit on the sale of certain capital assets of a business is not immediately taxed where the taxpayer goes on to purchase anew or produce certain capital assets of the business within a certain time period. In that case, the taxation of the aforementioned profit from the sale of the original assets is deferred by way of a ‘transfer’ of the corresponding hidden reserves until the sale of the newly purchased or produced assets. That deferral can, however, be granted only where the newly purchased or produced assets belong to the capital assets of a domestic permanent establishment, and not, however, where the permanent establishment concerned is located in another Member State or in another State of the European Economic Area. According to the Commission, that rule infringes the freedom of establishment.

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1 Agreement of 2 May 1992 on the European Economic Area, OJ 1994 L 1, p. 3.