Language of document : ECLI:EU:C:1999:22

JUDGMENT OF THE COURT

26 January 1999 (1)

(Freedom of movement for workers — Combined assessment covering incometax and social security contributions — Non-applicability to workers who transfertheir residence from one Member State to another of a social contributionsceiling applicable to workers who have not exercised their right to freedom ofmovement — Possible offsetting by income tax advantages — Possibleincompatibility with Community law — Consequences)

In Case C-18/95,

REFERENCE to the Court under Article 177 of the EC Treaty by the Gerechtshofte 's-Hertogenbosch, Netherlands, for a preliminary ruling in the proceedingspending before that court between

F.C. Terhoeve

and

Inspecteur van de Belastingdienst Particulieren/Ondernemingen Buitenland

on the interpretation of Articles 7 and 48 of the EEC Treaty and Article 7(2) ofRegulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom ofmovement for workers within the Community (OJ, English Special Edition 1968(II), p. 475),

THE COURT,

composed of: P.J.G. Kapteyn, President of the Fourth and Sixth Chambers, actingfor the President, G. Hirsch and P. Jann, Presidents of Chambers, G.F. Mancini(Rapporteur), J.C. Moitinho de Almeida, C. Gulmann, J.L. Murray, L. Sevón,M. Wathelet, R. Schintgen and K.M. Ioannou, Judges,

Advocate General: D. Ruiz-Jarabo Colomer,


Registrar: D. Louterman-Hubeau, Principal Administrator,

after considering the written observations submitted on behalf of:

—    Mr Terhoeve, by F.W. van Eig and S. Feenstra, tax consultants at MoretErnst & Young,

—    the Netherlands Government, by A. Bos, Legal Adviser in the Ministry ofForeign Affairs, acting as Agent, and

—    the Commission of the European Communities, by B.J. Drijber andI. Martínez del Peral Cagigal, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Mr Terhoeve, represented by S. Feenstra, theNetherlands Government, represented by M. Fierstra, Legal Adviser in the Ministryof Foreign Affairs, acting as Agent, and the Commission, represented byP.J. Kuijper, Legal Adviser, acting as Agent, at the hearing on 17 March 1998,

after hearing the Opinion of the Advocate General at the sitting on 30 April 1998,

gives the following

Judgment

1.
    By order of 30 December 1994, received at the Court on 23 January 1995, theGerechtshof te 's-Hertogenbosch (Regional Court of Appeal, 's-Hertogenbosch)referred to the Court for a preliminary ruling under Article 177 of the EC Treatya number of questions on the interpretation of Articles 7 and 48 of the EEC Treatyand Article 7(2) of Regulation (EEC) No 1612/68 of the Council of15 October 1968 on freedom of movement for workers within the Community (OJ,English Special Edition 1968 (II), p. 475).

2.
    Those questions were raised in proceedings between Mr Terhoeve and theInspecteur van de Belastingdienst Particulieren/Ondernemingen Buitenland (TaxInspector for Foreign Individuals and Undertakings; hereinafter 'the Inspector‘)concerning a combined assessment, covering income tax and social securitycontributions, for 1990.

National law

3.
    Under Netherlands law — in particular, the Algemene Ouderdomswet (General Lawon old-age insurance), the Algemene Weduwen- en Wezenwet (General Law oninsurance for widows and orphans), the Algemene Arbeidsongeschiktheidswet(General Law on insurance against incapacity for work) and the Algemene WetBijzondere Ziektekosten (General Law on special medical expenses) — compulsoryinsurance schemes apply in principle to all persons residing in the Netherlands.

4.
    The levying of social security contributions is closely connected to the levying of taxon wages and other income. Until 1990 taxable income for income tax purposeswas subject to two levies, one for the collection of social security contributions andthe other for the collection of income tax properly so called. In order to preventa disparity from arising between the contributions paid and the social securitybenefits which could be expected, social security legislation provided thatcontributions were not to be levied in so far as income exceeded a certain limit. It was also laid down that the maximum income for the purpose of calculating thecontributions had to be reduced pro rata where the person concerned had beenliable to pay contributions for only part of the year.

5.
    A special situation arises where a person resides in the Netherlands for part of acalendar year and abroad for another part and, during those two periods, hastaxable income in the Netherlands.

6.
    Until 1990 the legislation did not settle whether one or two assessments in respectof income in the calendar year had to be issued to such a taxpayer. In practice,two assessments were issued for the purpose of levying income tax: one relating tothe period during which the taxpayer was resident and the other relating to theperiod during which he was non-resident. Social security contributions, by contrast,were collected by a single levy.

7.
    In 1990 the 'Oort‘ legislation, designed to simplify the national system for levyingincome tax and social security contributions, entered into force in the Netherlands. Since then, those different payments have been levied by a single combinedassessment, in the case of both resident and non-resident taxpayers.

8.
    Article 62 of the Wet op de Inkomstenbelasting (Income Tax Law; hereinafter 'theWIB‘) henceforth states that where, in a calendar year, a person is liable to tax

both at home and abroad, the tax on the foreign income and the tax on theNetherlands income are to be levied separately. If the taxpayer is also liable tosocial security contributions, the rules relating to the levying and recovery of incometax apply mutatis mutandis.

9.
    The levying of social security contributions in the Netherlands is governed by theWet Financiering Volksverzekering (Law on the financing of social security;hereinafter 'the WFV‘). Under Article 8 of the WFV, the income taken intoaccount for the purpose of calculating contributions is equal to taxable income ordomestic taxable income within the meaning of the WIB. However, since the socialsecurity benefits to which taxpayers are entitled are not linked to the amount ofcontributions paid, Article 10(6) of the WFV states that those contributions arelevied only on an amount corresponding to the initial income tax band and thus,in principle, do not exceed a specified level (hereinafter 'the ceiling‘).

10.
    Article 8 of the WVF provides no legal basis for levying contributions where aperson subject to compulsory insurance has income which is not subject to domesticincome tax. However, under Article 6 of the Uitvoeringsregeling PremieheffingVolksverzekeringen (Regulation on the implementation of the levying of socialsecurity contributions), an insured person carrying on activities in respect of whichthe revenue is not liable to income tax is deemed, for the purposes of Article 8 ofthe WFV, to be liable to income tax on that revenue as well. Net income arisingfrom activities by virtue of which such persons are insured is, for the purposes ofArticle 8 of the WFV, counted as domestic taxable income.

11.
    Accordingly, where a person has been liable in the same year to tax as a residentand as a non-resident, he is sent two combined notices of assessment. However,where such a taxpayer remains subject to the compulsory social security schemethroughout the year, the maximum basis of assessment for the levying of socialsecurity contributions is used for each of those two notices of assessment. Depending on the circumstances of the case, the effect of that scheme may be thatthe contributions for which the taxpayer is liable exceed the ceiling correspondingto the initial band of the income tax scale. In certain cases that disadvantage maybe offset, indeed more than offset, by other advantages relating to the fact that theincome from each period is subject to income tax separately, which may result inlower tax rates being applied.

The main proceedings

12.
    From 1 January 1990 to 6 November 1990 Mr Terhoeve, a Netherlands national,lived and worked in the United Kingdom because his employer, established in theNetherlands, had posted him there. Under Netherlands law, he was regardedduring that period as non-resident for income tax purposes. The income from hisactivities in the United Kingdom during those few months was therefore not subject

to Netherlands income tax. On the other hand, he continued to be insured underthe compulsory Netherlands social security scheme.

13.
    On 7 November 1990 Mr Terhoeve transferred his residence to the Netherlandswhere, until the end of that year, he was resident for income tax purposes. At thehearing before the national court he stated, without being challenged, that he hadnot earned the bulk of his income in a single Member State in 1990.

14.
    On 29 April 1992 the Inspector issued Mr Terhoeve with a combined assessmentto income tax and to social security contributions in respect of the period duringwhich he had been a resident taxpayer. That assessment was calculated on thebasis of taxable income of NLG 15 658 and included NLG 1 441 by way of socialsecurity contributions, calculated on the basis of a sum of NLG 6 552. MrTerhoeve withdrew the objection which he had initially entered against thatassessment and it thus ceased to be challengeable.

15.
    On 30 June 1992 the Inspector issued Mr Terhoeve, in respect of the period duringwhich he had been a non-resident taxpayer, with a further combined assessment to,first, income tax, calculated on the basis of domestic income of NLG 16 201 arisingfrom employment in the Netherlands and from real property there, and secondly,to social security contributions, calculated on the basis of a sum of NLG 98 201 andamounting to NLG 9 309, which corresponded to the maximum amount referredto in Article 10(6) of the WFV.

16.
    The Inspector arrived at that amount in contributions because he took account ofthe income — not subject to Netherlands income tax — which Mr Terhoeve hadearned in 1990 from his employment in the United Kingdom.

17.
    It follows from the above that the social security contributions claimed fromMr Terhoeve in the two notices of assessment amounted to NLG 10 750 (that isto say, NLG 1 441 for the period in which he had enjoyed resident status andNLG 9 309 for the period in which he had enjoyed non-resident status). Bycontrast, under the applicable provisions of Netherlands law a taxpayer withresident status or non-resident status throughout the year would have paid socialsecurity contributions only up to the ceiling of NLG 9 309.

18.
    It is common ground that the payment of a contribution in excess of the ceilingdoes not lead to any entitlement to additional benefits, because the social securitybenefits to which taxpayers are entitled are not linked to the amounts paid by wayof contributions. Thus, Mr Terhoeve had to pay an amount in excess of the ceilingfor 1990 but did not acquire greater entitlement than persons who paidcontributions corresponding to the ceiling.

19.
    Mr Terhoeve initially lodged an objection against the second notice of assessmentwith the Inspector, who rejected it.

20.
    He then brought an action before the Gerechtshof te 's-Hertogenbosch, claimingin particular that the Netherlands legislation, which makes provision for twoseparate assessments while the ceiling laid down for the levying of social security contributions is not reduced to reflect the period covered, is incompatible withArticle 48 of the Treaty. Mr Terhoeve states, with regard to the calculation of thesocial security contributions for the period from 1 January to 6 November 1990inclusive, that there is indirect discrimination on grounds of nationality in that theemigrants and immigrants subject to a heavier contributions burden are mainlynationals of the other Member States.

21.
    The Inspector contended before the national court, without providing more precisesupporting data, that nearly half of the taxpayers who were actually or notionallynon-resident were Netherlands nationals. Mr Terhoeve did not consider himselfable to put forward grounds to contradict that contention.

22.
    It is apparent from the order for reference that, under the rules of evidenceapplicable in the Netherlands in tax cases, Mr Terhoeve's argument must thereforebe rejected.

23.
    In the first place, the national court is unsure whether the main proceedings, ontheir facts, fall within the scope of Article 48 of the Treaty. Second, it is uncertainwhether the rules of evidence in the Netherlands can be applied without restrictionor whether certain rules and principles in this area are imposed by Community law. Third, it asks what the effect is of the Community provisions on freedom ofmovement for workers. Finally, it raises the question as to the consequences whichwould need to be drawn should the provisions of Netherlands law be incompatiblewith Community law.

24.
    The Gerechtshof te 's-Hertogenbosch, considering that it was necessary to ask theCourt to interpret Community law, stayed proceedings and referred the followingquestions to it for a preliminary ruling:

'1.    Are the provisions of Community law on freedom of movement for workersapplicable to a national of a Member State who transfers his residence inthe course of a year from another Member State to the Member State ofwhich he is a national and who is successively employed in that year in eachof those Member States, and who did not earn most of his income duringthat year in one of those two Member States?

2.(a)    Does it follow from Community law, in particular Articles 7 and 48(2) of theEEC Treaty and Article 7(2) of Regulation No 1612/68, that in theapplication of legislation operating to the disadvantage of emigrants andimmigrants as regards liability to make social security contributions there isa presumption that such disadvantage mainly affects nationals of otherStates?

(b)    If question (a) is answered in the affirmative, is that presumption rebuttableor not?

(c)    If the presumption in question is rebuttable, is the possibility of doing sogoverned solely by national procedural law, in particular the rules ofevidence of the Member State concerned, or does Community law also laydown requirements in that regard?

(d)    If Community law makes the rebuttal of such a presumption subject tocertain requirements, what significance attaches in the present case to thefollowing circumstances:

    —    the respondent authority has stated that, of the very much broadercategory of taxpayers residing abroad, almost one-half are its ownnationals, without adducing any evidence in support of that assertion;

    —    the appellant, who pleads indirect discrimination on grounds ofnationality, has not contested the correctness of that assertion by theauthority;

    —    the respondent authority is in an appreciably better position than theappellant to collect information capable of rebutting theaforementioned presumption?

3.    Is there any rule of Community law precluding a Member State, regardlessof any question of (indirect) discrimination on grounds of nationality, fromimposing, in a given year, a heavier social security contributions burden onan employee who transfers his residence during that year from that MemberState to another Member State, or vice versa, than on an employee who, inotherwise identical circumstances, continues to reside throughout the wholeyear in a single Member State?

4.    If the imposition of a heavier contributions burden, as referred to in theprevious question, is in principle incompatible with Article 7 or Article 48(2)of the EEC Treaty, or with any other rule of Community law, can it bejustified by one or more of the following circumstances, whether or not theyare linked with each other:

    —    the measure results from legislation whereby the levying of income taxand social security contributions is intended, in order to simplifymatters, to coincide to a very great extent, if not entirely;

    —    solutions which, whilst maintaining that link, preclude the impositionof the heavier contributions referred to above, result in technicalproblems of implementation or in possible over-compensation;

    —    in certain cases, albeit not in the present case, overall liability toincome tax and social security contributions is lower for immigrantsand emigrants in the year in which they move than for persons who,in otherwise identical circumstances, retain the same residencethroughout the whole year?

5.(a)    If a heavier contributions burden, as referred to in Question 3, isincompatible with Article 7 or Article 48(2) of the EEC Treaty, or with anyother rule of Community law, should there be taken into account, indetermining whether in any specific case a heavier burden is actuallyinvolved, only income from employment or, in addition, other incomereceived by the person concerned, such as profits from real property?

(b)    If other income apart from earnings from employment is to be left out ofconsideration, how is it to be determined whether, and to what extent, thelevying of contributions on income from employment places the migrantworker concerned at a disadvantage?

6.(a)    If in the present case there was an infringement of any rule of Communitylaw, is the national court obliged to bring that infringement to an end evenif to do so would require a choice between different alternatives each ofwhich entails advantages and disadvantages?

(b)    If the national court in this case does bring an infringement of EC law toan end, does Community law provide any directions as to the choice whichthe national court should make between different conceivable solutions?‘

Question 1

25.
    By its first question, the national court essentially seeks to ascertain whetherArticle 48 of the Treaty and Article 7 of Regulation No 1612/68 may be relied onby a worker against the Member State of which he is a national where he hasresided and been employed in another Member State.

26.
    It is settled case-law that the Treaty rules governing freedom of movement forpersons and measures adopted to implement them cannot be applied to activitieswhich have no factor linking them with any of the situations governed byCommunity law and which are confined in all respects within a single MemberState (Case C-332/90 Steen v Deutsche Bundespost [1992] ECR I-341, paragraph 9;Case C-134/95 USSL No 47 di Biella v INAIL [1997] ECR I-195, paragraph 19;Joined Cases C-64/96 and C-65/96 Land Nordrhein-Westfalen v Uecker and Jacquetv Land Nordrhein-Westfalen [1997] ECR I-3171, paragraph 16; and Joined CasesC-225/95, C-226/95 and C-227/95 Kapasakalis and Others v Greek State [1998] ECRI-0000, paragraph 22).

27.
    However, as the Court has stated, in particular in Case C-419/92 Scholz v OperaUniversitaria di Cagliari and Cinzia Porcedda [1994] ECR I-505, at paragraph 9, anyCommunity national who, irrespective of his place of residence and his nationality,has exercised the right to freedom of movement for workers and who has beenemployed in another Member State falls within the scope of the aforesaidprovisions.

28.
    It follows that, in the main proceedings, even though Mr Terhoeve, a Netherlandsnational, seeks to rely on the rules relating to freedom of movement for workersagainst the Netherlands authorities, that does not affect the application of thoserules. His complaint is precisely that he was placed at a disadvantage because heworked in another Member State.

29.
    The answer to the first question must therefore be that Article 48 of the Treaty andArticle 7 of Regulation No 1612/68 may be relied on by a worker against theMember State of which he is a national where he has resided and been employedin another Member State.

Questions 2 and 3

30.
    By its second and third questions, which it is appropriate to deal with together, thenational court essentially asks whether Articles 7 and 48 of the Treaty orArticle 7(2) of Regulation No 1612/68 preclude a Member State from levying, ona worker who has transferred his residence in the course of a year from oneMember State to another in order to take up employment there, greater socialsecurity contributions than those which would be payable, in similar circumstances,by a worker who has continued to reside throughout the year in the Member Statein question, where the first worker is not also entitled to additional social benefits. Should the answer to that question depend on whether workers who are nationalsof other Member States are discriminated against, the national court further seeksto ascertain whether, in circumstances of that kind, such discrimination must bepresumed and, if so, whether and under what conditions that presumption may berebutted.

31.
    It should be noted at the outset, first, that under Article 14(1)(a) of CouncilRegulation (EEC) No 1408/71 of 14 June 1971 on the application of social securityschemes to employed persons, to self-employed persons and to members of theirfamilies moving within the Community, as amended and updated by CouncilRegulation (EEC) No 2001/83 of 2 June 1983 (OJ 1983 L 230, p. 6), a personemployed in the territory of a Member State by an undertaking to which he isnormally attached who is posted by that undertaking to the territory of anotherMember State to work there for that undertaking is to continue to be subject to thelegislation of the first Member State, provided that the anticipated duration of that

work does not exceed 12 months and that he is not sent to replace another personwho has completed his term of posting.

32.
    It follows that, as regards the social security scheme, a person in Mr Terhoeve'sposition continues in principle to be covered by Netherlands legislation for theperiod during which he works in the United Kingdom.

33.
    Secondly, it is necessary to consider the argument put forward by the NetherlandsGovernment at the hearing. After pointing out that Community law does notdetract from the powers of the Member States to organise their social securityschemes (Case 238/82 Duphar and Others v Netherlands State [1984] ECR 523;Joined Cases C-159/91 and C-160/91 Poucet and Pistre v AGF and Cancava [1993]ECR I-637; Case C-238/94 García and Others v Mutuelle de Prévoyance Socialed'Aquitaine and Others [1996] ECR I-1673; and Case C-70/95 Sodemare and Othersv Regione Lombardia [1997] ECR I-3395), it stated that the national authorities mayfreely determine the detailed rules for financing those schemes.

34.
    However, while it is true that, in the absence of harmonisation at Community level,it is for the legislation of each Member State to determine the conditions governingthe right or duty to be insured with a social security scheme, the Member Statesmust nevertheless comply with Community law when exercising that power (see, inparticular, Case C-120/95 Decker v Caisse de Maladie des Employés Privés [1998]ECR I-1831, paragraphs 22 and 23, and Case C-158/96 Kohll v Union des Caissesde Maladie [1998] ECR I-1931, paragraphs 18 and 19).

35.
    Thus, the fact that the national rules at issue in the main proceedings concern thefinancing of social security does not exclude the application of Treaty rules, inparticular those relating to freedom of movement for workers.

36.
    As regards Article 48 of the Treaty, which it is appropriate to consider first, theCourt has stated time and again that that provision implements a fundamentalprinciple contained in Article 3(c) of the EC Treaty, under which, for the purposesset out in Article 2, the activities of the Community are to include the abolition, asbetween Member States, of obstacles to freedom of movement for persons (see,in particular, Case 118/75 Watson and Belmann [1976] ECR 1185, paragraph 16,and Case C-370/90 The Queen v Immigration Appeal Tribunal and Surinder Singh[1992] ECR I-4265, paragraph 15).

37.
    The Court has also held that the Treaty provisions relating to freedom ofmovement for persons are intended to facilitate the pursuit by Community nationalsof occupational activities of all kinds throughout the Community, and precludemeasures which might place Community nationals at a disadvantage when they wishto pursue an economic activity in the territory of another Member State (Case143/87 Stanton v INASTI [1988] ECR 3877, paragraph 13; Singh, cited above,paragraph 16; and Case C-415/93 Union Royale Belge des Sociétés de FootballAssociation and Others v Bosman [1995] ECR I-4921, paragraph 94).

38.
    In that context, nationals of Member States have in particular the right, which theyderive directly from the Treaty, to leave their State of origin to enter the territoryof another Member State and reside there in order there to pursue an economicactivity (see, inter alia, Case C-363/89 Roux v Belgian State [1991] ECR I-273,paragraph 9; Singh, cited above, paragraph 17; and Bosman, cited above,paragraph 95).

39.
    Provisions which preclude or deter a national of a Member State from leaving hiscountry of origin in order to exercise his right to freedom of movement thereforeconstitute an obstacle to that freedom even if they apply without regard to thenationality of the workers concerned (Case C-10/90 Masgio v Bundesknappschaft[1991] ECR I-1119, paragraphs 18 and 19, and Bosman, cited above, paragraph 96).

40.
    A national of a Member State could be deterred from leaving the Member Statein which he resides in order to pursue an activity as an employed person, for thepurposes of the Treaty, in the territory of another Member State if he wererequired to pay greater social contributions than if he continued to reside in thesame Member State throughout the year, without thereby being entitled toadditional social benefits such as to compensate for that increase.

41.
    It follows that national legislation of the kind at issue in the main proceedingsconstitutes an obstacle to freedom of movement for workers, prohibited in principleby Article 48 of the Treaty. It is therefore unnecessary to consider whether thereis indirect discrimination on grounds of nationality, liable to be prohibited byArticles 7 and 48 of the Treaty or by Article 7(2) of Regulation No 1612/68, or toconsider the set of presumptions which might apply in that regard.

42.
    The answer to the second and third questions must therefore be that Article 48 ofthe Treaty precludes a Member State from levying, on a worker who hastransferred his residence in the course of a year from one Member State to anotherin order to take up employment there, greater social security contributions thanthose which would be payable, in similar circumstances, by a worker who hascontinued to reside throughout the year in the Member State in question, wherethe first worker is not also entitled to additional social benefits.

Question 4

43.
    In the light of the answer given to the preceding questions, the national court mustbe considered, by its fourth question, to be seeking to ascertain whether a heaviercontributions burden on a worker who transfers his residence from one MemberState to another in order to take up employment there, which is in principleincompatible with Article 48 of the Treaty, may be justified, first, by the fact thatit stems from legislation whose objective is to simplify and coordinate the levyingof income tax and social security contributions, secondly, by difficulties of a

technical nature linked to the adoption of other methods of collection or, thirdly,by the fact that, in certain circumstances, other advantages relating to income taxmay offset, or indeed outweigh, the disadvantage as to social contributions.

44.
    As regards the first justification referred to, it should be noted that the MemberStates in principle retain the freedom to lay down the detailed rules for levying taxand social security contributions and may indeed pursue the objective of simplifyingand coordinating those rules. Nevertheless, that objective, however desirable itspursuit may be, cannot justify undermining the rights which individuals derive fromthe Treaty provisions in which their fundamental freedoms are enshrined.

45.
    The same holds true for the second justification referred to. Considerations of anadministrative nature cannot justify derogation by a Member State from the rulesof Community law. That principle applies with even greater force where thederogation in question amounts to preventing or restricting the exercise of one ofthe fundamental freedoms of Community law (see, to that effect, Case 205/84Commission v Germany [1986] ECR 3755, paragraph 54).

46.
    So far as concerns the third justification mentioned by the national court, sufficeit to state that, in the light of the documents before the Court, a person inMr Terhoeve's position does not enjoy any advantage relating to the calculation ofincome tax. The fact that other workers who have transferred their residence inthe course of the year and whose circumstances are different may derive anadvantage with regard to the calculation of income tax can neither eliminate norcompensate for the obstacle to freedom of movement described above (see, to thateffect, Case 20/85 Roviello v Landesversicherungsanstalt Schwaben [1988] ECR2805).

47.
    The answer to the fourth question must therefore be that a heavier contributionsburden on a worker who transfers his residence from one Member State to anotherin order to take up employment there, which is in principle incompatible withArticle 48 of the Treaty, may not be justified either by the fact that it stems fromlegislation whose objective is to simplify and coordinate the levying of income taxand social security contributions, or by difficulties of a technical nature preventingother methods of collection, or else by the fact that, in certain circumstances, otheradvantages relating to income tax may offset, or indeed outweigh, the disadvantageas to social contributions.

Question 5

48.
    By its fifth question, the national court essentially asks whether, when assessingwhether the burden of social security contributions borne by a worker who hastransferred his residence from one Member State to another in order to take upemployment there is heavier than that borne by a worker who has continued toreside in the same Member State, account must be taken only of income arising

from employment or also of other income, such as income arising from realproperty.

49.
    It should be noted, first, that Article 48 of the Treaty applies only to employees andto persons who move in order to seek employment. Thus, persons who deriveincome from other sources, including real property, do not fall as such within thatprovision.

50.
    Nevertheless, a person covered by Article 48 may rely on that provision tochallenge national legislation entailing an obstacle to his freedom of movement,whatever mechanism gives rise to that obstacle.

51.
    Secondly, in the absence of Community harmonisation of national laws, it is inprinciple for the Member States to specify the income to be taken into accountwhen calculating social security contributions.

52.
    However, if national legislation sets the level of social security contributions bytaking into account not only income from employment but also other income, thatlegislation cannot thereby result in workers who move in the course of a year inorder to work in another Member State being penalised compared with those whocontinue to reside in the same Member State. That being so, the nature of theincome taken into account to determine social security contributions is irrelevantin the main proceedings.

53.
    The answer to the fifth question must therefore be that, when assessing whetherthe burden of social security contributions borne by a worker who has transferredhis residence from one Member State to another in order to take up employmentthere is heavier than that borne by a worker who has continued to reside in thesame Member State, all income relevant under national law for determining theamount of contributions, including, as the case may be, income arising from realproperty, must be taken into account.

Question 6

54.
    In the light of the answers given to the preceding questions, the sixth question isconcerned with the consequences which would attach to a finding by the nationalcourt that the contested national legislation is incompatible with Article 48 of theTreaty.

55.
    As the Court first held in Case 41/74 Van Duyn v Home Office [1974] ECR 1337,Article 48 of the Treaty has direct effect in the legal orders of the Member Statesand confers on individuals rights which the national courts must protect.

56.
    It is also settled case-law that every national court must apply Community law inits entirety and protect rights which the latter confers on individuals, wherenecessary disapplying any provision of national law which may conflict with it.

57.
    Furthermore, where national law lays down that a number of groups of persons areto be treated differently, in breach of Community law, the members of the groupplaced at a disadvantage must be treated in the same way and made subject to thesame arrangements as the other persons concerned, arrangements which, for wantof the correct application of Community law, remain the only valid point ofreference (see, mutatis mutandis, Case 71/85 Netherlands v Federatie NederlandseVakbeweging [1986] ECR 3855; Case 286/85 McDermott and Cotter v Minister forSocial Welfare and Attorney-General [1987] ECR 1453; Case C-102/88 Ruzius-Wilbrink v Bedrijfsvereniging voor Overheidsdiensten [1989] ECR 4311; Case C-33/89Kowalska v Freie und Hansestadt Hamburg [1990] ECR I-2591; and Case C-184/89Nimz v Freie und Hansestadt Hamburg [1991] ECR I-297).

58.
    It follows that the social security contributions payable by a worker who transfershis residence from one Member State to another in order to take up employmentthere must be set at the same level as that for the contributions which would bepayable by a worker who has continued to reside in the same Member State.

59.
    The answer to the sixth question must therefore be that, if the contested nationallegislation is incompatible with Article 48 of the Treaty, a worker who transfers hisresidence from one Member State to another in order to take up employmentthere is entitled to have his social security contributions set at the same level asthat of the contributions which would be payable by a worker who has continuedto reside in the same Member State.

Costs

60.
    The costs incurred by the Netherlands Government and the Commission, whichhave submitted observations to the Court, are not recoverable. Since theseproceedings are, for the parties to the main proceedings, a step in the actionpending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT,

in answer to the questions referred to it by the Gerechtshof te 's-Hertogenboschby order of 30 December 1994, hereby rules:

1.    Article 48 of the EEC Treaty and Article 7 of Regulation (EEC) No 1612/68of the Council of 15 October 1968 on freedom of movement for workers

within the Community may be relied on by a worker against the MemberState of which he is a national where he has resided and been employed inanother Member State.

2.    Article 48 of the Treaty precludes a Member State from levying, on aworker who has transferred his residence in the course of a year from oneMember State to another in order to take up employment there, greatersocial security contributions than those which would be payable, in similarcircumstances, by a worker who has continued to reside throughout theyear in the Member State in question, where the first worker is not alsoentitled to additional social benefits.

3.    A heavier contributions burden on a worker who transfers his residencefrom one Member State to another in order to take up employment there,which is in principle incompatible with Article 48 of the Treaty, may not bejustified either by the fact that it stems from legislation whose objective isto simplify and coordinate the levying of income tax and social securitycontributions, or by difficulties of a technical nature preventing othermethods of collection, or else by the fact that, in certain circumstances,other advantages relating to income tax may offset, or indeed outweigh, thedisadvantage as to social contributions.

4.    When assessing whether the burden of social security contributions borneby a worker who has transferred his residence from one Member State toanother in order to take up employment there is heavier than that borneby a worker who has continued to reside in the same Member State, allincome relevant under national law for determining the amount ofcontributions, including, as the case may be, income arising from realproperty, must be taken into account.

5.    If the contested national legislation is incompatible with Article 48 of theTreaty, a worker who transfers his residence from one Member State toanother in order to take up employment there is entitled to have his socialsecurity contributions set at the same level as that of the contributionswhich would be payable by a worker who has continued to reside in thesame Member State.

Kapteyn                 Hirsch                             Jann

Mancini             Moitinho de Almeida     Gulmann

Murray

Sevón             Wathelet         Schintgen            Ioannou

Delivered in open court in Luxembourg on 26 January 1999.

R. Grass

P.J.G. Kapteyn

Registrar

For the President


1: Language of the case: Dutch.