Who added the tax on social security

OPINION OF THE ADVOCATE GENERAL

JÁN MAZÁK

of June 26, 2012 (1)

Case C-137/11

Partena ASBL

against

Les Tartes de Chaumont-Gistoux SA

(Request for a preliminary ruling from the Cour du travail de Bruxelles [Belgium])

"Social security - Regulation (EEC) No. 1408/71 - Art. 13 and 14c - Member State in which an activity is carried out - Prohibition of discrimination - Freedom of movement - Right of establishment"

I - introduction

1.

The reference for a preliminary ruling concerns the interpretation of Articles 13 and 14c of Council Regulation (EEC) No 1408/71 of 14 June 1971 on the application of social security systems to employed and self-employed persons and their family members who move to and from the Community migrate (2), as amended by Council Regulation (EC) No. 1606/98 of 29 June 1998 (3) and Art. 21 TFEU.

2.

The submission is part of a legal action brought by Partena ASBL (hereinafter: Partena), the social security office for the self-employed in Belgium, against Les Tartes de Chaumont Gistoux SA (hereinafter: the company) and in which it pays the social security contributions claims that Mr. Rombouts, a company official, owed it for the period from the first quarter of 1999 to the fourth quarter of 2007.

3.

The referring court wishes to clarify whether the management of a company from abroad that is subject to the tax law of a Member State can be regarded as carrying out an activity in that Member State from the point of view of the obligation to pay social security contributions. The referring court also asks whether Article 21 TFEU precludes an irrefutable legal presumption according to which a mandate holder of a company who runs a company from abroad that is subject to tax in a Member State is subject to the social security system established by that Member State for the self-employed is subordinate to.

II - Legal framework

A - Union law

4.

In my opinion, Articles 45 TFEU and 49 TFEU are relevant in the present case. Articles 13 and 14 of Regulation 1408/71, which are part of Title II (“Determination of the applicable legal provisions”), are also applicable.

B - national law

5.

In Belgian law, the self-employed are subject to the social status of the self-employed in accordance with Royal Decree No. 38 of July 27, 1967 introducing the self-employed social status (4), in particular by the Royal Decree of November 18, 1996 laying down financial and other Provisions relating to the social status of the self-employed, in application of Title VI of the Law of 26 July 1996 on the modernization of social security and the safeguarding of statutory pension schemes and Article 3 of the Law of 26 July 1996 on the fulfillment of budgetary criteria for Belgian participation on the European Economic and Monetary Union (5).

6.

According to Art. 3 (1), Royal Decree 38 for the application of the social security statute applies “as self-employed to any natural person who pursues an occupation in Belgium for which he or she is not bound by an employment contract or statute”.

7.

By Royal Decree of November 18, 1996, Art. 3 Para. 1 of Royal Decree No. 38 became a sub-paragraph. 4 added, which reads as follows:

"... a person who has been appointed as a mandate holder in a company or association subject to Belgian corporation tax or non-resident tax is irrefutably presumed to be self-employed in Belgium."

8.

In judgment 176/2004 of November 3, 2004, the Constitutional Court declared (6) Art. 3 (1) subpara. 4 of Royal Decree No. 38 is unconstitutional in so far as it affects representatives of Belgian corporation tax or the Belgian tax of non-resident companies that do not operate the company in question from abroad. The irrefutable presumption applicable in relation to such persons is disproportionate, since it prevents a mandate holder who may have ceased his activity from proving this termination by other means than a termination of the mandate and from ending the obligations arising from the application of the social status of the self-employed would result. The Constitutional Court, however, considered the provision in question to be constitutional insofar as it affects mandate holders who run such companies from abroad. Irrefutable could be considered necessary to ensure that such elected officials are subject to the social status of the self-employed, since the national authorities do not have the information and powers they have over those who run companies in Belgium.

9.

According to Art. 15 para. 1 subpara. 3 of Royal Decree No. 38, the companies are jointly and severally liable for the payment of the contributions of their mandate holders.

III –The main proceedings and questions referred

10.

The company was founded on April 17, 1993. It is subject to Belgian tax as its registered office is located there. At the time of the general assembly on October 12, 1995, Mr. Rombouts and Mr. van Acker each held half of the share capital. At the General Assemblies of June 7, 2000 and June 7, 2006, her mandate as a member of the Executive Board was extended.

11.

Mr Rombouts has been in Portugal since the end of 1999. From January 1, 2001 to July 2005, he worked there as an employee or received unemployment benefits. The referring court states that he was self-employed in Portugal from November 2007. However, the company claims that this activity began in November 2005.

12.

On May 28, 2008, Partena had Mr. Rombouts and the Company sent a payment order instructing them to pay an amount of 125,696.50 euros, which was the amount owed by Mr. Rombouts for the period from the first quarter of 1999 to the fourth quarter of 2007 Contributions correspond.

13.

In a letter dated August 5, 2008, the company filed an objection to this order for payment with the Tribunal du Travail Nivelles. By judgment of December 14, 2009, the Tribunal du travail et al. the contradiction for well-founded.

14.

On January 29, 2010, Partena appealed to the Cour du travail de Bruxelles (Belgium). In the course of the proceedings, Partena admitted that, taking into account his employment relationship in Portugal, since 1 January 2001 Mr Rombouts could only be subject to the Belgian social status of the self-employed. Therefore, the amount currently requested by Partena is EUR 68,317.61 plus interest instead of EUR 125,696.50.

15.

The company seeks confirmation of the judgment of the Tribunal du travail and that Partena be ordered to pay the costs. She is against the view that Mr Rombouts is subject to the social status of the self-employed in Belgium. In the alternative, it seeks a reference for a preliminary ruling to the Court of Justice, inter alia. regarding the question of the compatibility of Art. 3 para. 1 subpara. 4 of Royal Decree No. 38 with Art. 18 EC (now Art. 21 TFEU).

16.

In these circumstances, the Cour du travail de Bruxelles (Belgium) referred the following two questions to the Court of Justice for a preliminary ruling:

1.

With regard to the application of Articles 13 et seq. Of Regulation No 1408/71 and, in particular, Article 14c, a Member State can, within the limits of its competence to determine the conditions for submission to the social security system it has set up for the self-employed equate the "management of a company from abroad that is subject to the tax law of this state" with the exercise of an activity in its national territory?

2.

If Art. 3 para. 1 subpar. 4 of the decree no. 38 of July 27, 1967 introducing the social status of the self-employed is compatible with the law of the European Union, in particular with the freedom of movement and residence guaranteed by Art. 21 TFEU, insofar as it is a person who is in resides in another Member State and runs a company subject to Belgian tax law from abroad, is not allowed to reverse the presumption of subordination to the social status of the self-employed, while a member of the management of the company who lives in Belgium and not such a company from abroad leads, has the opportunity to reverse this presumption and provide evidence that there is no self-employed activity within the meaning of Art. 3 Para. 1 subpara. 1 of Royal Decree No. 38?

IV –Proceedings before the Court of Justice

17.

The company, the Belgian government and the Commission have submitted written observations. At the meeting on March 22, 2012, they also made oral statements.

V appreciation

A - On admissibility

18.

The Belgian Government raises two objections of inadmissibility.

19.

First, it considers the two questions referred to be inadmissible because the irrefutable presumption in question does not apply in the case of Mr Rombouts. The presumption only applies to mandate holders who run companies abroad with their registered office in Belgium, who do not report any income from this activity in Belgium and who justify this with the fact that their mandate was free of charge. In this way the obligation to pay social security contributions should be avoided, since the position of a self-employed person in Belgium inter alia. presupposes that the person concerned has a professional activity, which in turn requires that the activity be performed for remuneration.

20.

In the relevant period in the main proceedings, according to Art. 2 Para. 1 Subpara. 1 (a), Article 227 (1) and Article 228 (1) of the 1992 Income Tax Act and Article 16 of the Double Taxation Agreement between Belgium and Portugal (7) as non-residents due to his activity as a mandate holder of the company subject to Belgian tax.

21.

Moreover, Mr Rombouts did not deny that he was subject to Belgian income tax. His social contributions were calculated on the basis of his income as a mandate holder, which the tax administration took into account and communicated to the Institut National d’Assurances Sociales pour Travailleurs Indépendants (Inasti). Neither Mr Rombouts nor the company could therefore plead that his mandate was free of charge and accordingly claim that the requirement to exercise a professional activity was not met.

22.

Second, the Belgian Government considers the questions referred to be inadmissible because they seek to assess the compatibility of national law with Union law.

23.

In my opinion, the Belgian Government's first objection of inadmissibility is unfounded. The interpretation of national and international tax law which it advocates may be correct, but I believe that the order for reference shows that the dispute to be decided by the national court concerns the question of whether the Belgian rules on social security apply to Mr Rombouts are applicable. Such an assessment must necessarily be based on the provisions of Title II of Regulation No 1408/71, which concern the determination of the applicable legislation. In addition, the referring court asks for guidance on the interpretation of the provisions on freedom of movement laid down in the contract. In view of the above, the questions referred for a preliminary ruling are admissible.

24.

As regards the second objection of inadmissibility, based on the fact that the questions are aimed at assessing the compatibility of national law with Union law, suffice it to say that, in view of the wording of these questions, it is clearly an interpretation of Union law, here various provisions of the regulation No. 1408/71 as well as the freedom of movement regulations.

B - To the point

1. First question

25.

By its first question, the referring court essentially seeks to know whether a Member State may, in accordance with Articles 13 and 14c of Regulation No 1408/71, provide that a mandate holder of a company subject to tax in that Member State Carries out an activity although he runs the company from abroad. The aim is to clarify which place, according to the above-mentioned regulations, is considered to be the place where dependent employment or self-employed activity is carried out.

26.

Articles 13 and 14c of Regulation 1408/71 are part of Title II (“Determination of the applicable legal provisions”). According to settled case law, the provisions of Regulation No. 1408/71 to determine the applicable legal provisions form a closed system of conflict-of-law rules that deprive the individual national legislators of the power to determine the scope and conditions of application of their national legal provisions with regard to which persons are subject to them and in which area they should be effective (10).

27.

The purpose of the provisions of Title II of Regulation No 1408/71 is not only to prevent persons covered by that regulation from being deprived of social security protection because national legislation is not applicable to them, but is intended to do so with them it also avoids the simultaneous application of legislation by several Member States and the difficulties that may arise from it (11).

28.

The conflict-of-law rules in Regulation No 1408/71 are mandatory for the Member States and their application depends only on the objective situation in which the worker concerned finds himself.

29.

In view of the mandatory nature of the provisions in question and, in particular, in view of the regulatory purpose of Title II of Regulation No 1408/71, a Member State cannot, in my opinion, grant itself the power to determine whether an employee is subject to its legal provisions by providing that the employee is working in this Member State if this does not correspond to the objective situation in which the employee concerned finds himself and the mandatory provisions for determining the applicable legal provisions.

30.

As the Court of Justice observed in Aldewereld, (13) the applicable legislation results objectively from the provisions of Title II of Regulation No 1408/71, taking into account the links between the situation in question and the legislation of the Member States. Otherwise, in my opinion, there would be a risk that Title II of Regulation No 1408/71 on determining the legislation to be applied would become pointless and ineffective, in particular if several Member States acted in this way.

31.

In the present case, it appears from the files before the Court that, in addition to his work as a mandate holder of the company, Mr Rombouts was self-employed in Portugal from November 2007 (even if the company claims that the period of his self-employed activity began in November 2005) and that he was employed or unemployed in Portugal from January 1, 2001 to July 2005.

32.

Even if it is disputed when exactly Mr Rombouts took up self-employment in Portugal, it is clear that from the time he took up self-employment in Portugal he was no longer subject to the Belgian social security regulations with regard to his activity as a representative of the company (14). The dispute pending before the national court therefore relates essentially to periods during which Mr Rombouts was employed or unemployed in Portugal. In that regard, I believe that the referring court is seeking information on the applicability of Article 14c (b) (15) and Article 13 (2) (b) (16) of Regulation No 1408/71 to the activity carried out by Mr Rombouts exercised as a mandate holder of the company while residing in Portugal.

33.

It appears from the file before the Court - subject to the review by the referring court - that Mr Rombouts, taking into account his objective situation, carried out his duties as a representative of the company de facto or specifically 'in the territory' (17) of Portugal. The exercise of this mandate may have consequences in Belgium, as the Belgian Government contends (18), but these cannot change the objective situation in which Mr Rombouts found himself. The determination of its objective situation is a factual finding which the referring court has to make on the basis of a case-by-case examination in accordance with Title II of Regulation No 1408/71 and not on the basis of an irrefutable presumption which is set out in advance and abstractly in national law.

34.

Taking into account both the purpose and the clear wording of Article 13 (2) (b) and Article 14c (b) of Regulation No.1408/71, which are one of the mandatory provisions of Title II of the Regulation on the determination of the applicable legal provisions, the above-mentioned articles are, in my opinion, to be interpreted as preventing a Member State from “running a company subject to the tax law of that State from the Abroad ”is to be equated with the exercise of an activity in its national territory if this equation does not correspond to the objective situation in which the employee concerned finds himself and the activity is de facto carried out in the territory of another Member State.

2. Second question

35.

By its second question, the referring court asks the Court of Justice whether Article 21 TFEU precludes national legislation which provides for an irrefutable presumption such as that at issue in the main proceedings.

36.

In my opinion, Article 45 TFEU with regard to the free movement of workers and Article 49 TFEU with regard to the right of establishment are more likely to apply to the facts of the main proceedings set out by the referring court in the order for reference than Article 21 TFEU. Art. 21 TFEU, in which the right of every EU citizen to move and reside freely within the territory of the Member States is laid down in a general form, is specifically expressed in Art. 45 TFEU and 49 TFEU (20).

37.

It is established case law that all provisions of the FEU Treaty on the free movement of persons are intended to make it easier for Union citizens to pursue professional activities of all kinds in the territory of the Union and oppose measures which could disadvantage Union citizens if they are gainfully employed in the territory of another Member State want to exercise. As a result, Articles 45 TFEU and 49 TFEU preclude any measure which, even if applicable without discrimination on grounds of nationality, is likely to hinder the exercise of the fundamental freedoms guaranteed by the Treaty by Union citizens or to make them less attractive ( 21).

38.

In the main proceedings - subject to the review by the referring court - it appears that, in accordance with Art. 3 (1) subpara. 4 of Royal Decree No. 38 intervening presumption is not differentiated according to the nationality of the elected officials concerned. However, this national legislation seems to have the effect that company mandate holders who find themselves in a situation like Mr Rombouts are disadvantaged by virtue of the exercise of their right to move freely within the Union compared to those who have not made use of this right.

39.

Firstly, a mandate holder who has exercised his right to freedom of movement and runs a company from abroad is irrefutably assumed to be working in Belgium and is therefore obliged to pay social security contributions for this activity, while a mandate holder who runs a company and has not made use of the right of free movement, according to the judgment 176/2004 of the Belgian Constitutional Court of November 3, 2004, has the opportunity to provide evidence that he is not self-employed within the meaning of Art. 3 para. 1 subpara. 1 of Royal Decree No. 38.

40.

Secondly, it is even more decisive that, if the irrefutable presumption in question intervenes, elected officials who run companies subject to Belgian tax and exercise this mandate de facto or specifically from another Member State run the risk of paying social security contributions in two Member States for the same activity to have to pay.

41.

It is precisely this risk that the provisions of Title II of Regulation No 1408/71 seek to prevent.

42.

The Belgian Government submits that the purpose of the national legislation in question, and in particular of the irrefutable presumption, is to prevent social fraud in Belgium through artificial displacement. Thanks to modern means of communication, company mandate holders are in a position to exercise their mandate for profit-making companies based in Belgium from abroad. Since they did not disclose their income from mandating to the Belgian tax administration and declaring that they were performing their mandate free of charge, these persons would have the option of avoiding the mandatory social security contributions as self-employed in Belgium.

43.

Although the prevention of social fraud is a laudable undertaking, which must be supported in particular by coordination or harmonization measures adopted in accordance with Union law, I believe that the irrefutable presumption in question, which is intended to prevent social fraud in Belgium, is related to this The purpose is completely unsuitable if elected representatives of companies are subject to the social security system of another Member State due to their objective situation and the mandatory provisions of Title II of Regulation No. 1408/71.

44.

Subject to the national court's review of the facts and circumstances of the main proceedings, and specifically the objective situation of Mr Rombouts, there is no question of social fraud in Belgium in relation to his activity as a company mandate holder, which he appears to be exercising in Portuguese territory.

45.

I am therefore of the opinion that Articles 45 TFEU and 49 TFEU are to be interpreted as allowing a Member State to adopt legal provisions such as Article 3 (1) subpara. 4 of Royal Decree 38, in so far as they do not allow a person who resides in another Member State and de facto runs a company that is subject to the tax law of the first Member State from there, to prove that he is in fact doing that activity in the territory of the other Member State, thereby rebutting the presumption that he is subject to the self-employed social security system established by the first Member State.

VI result

46.

For the above reasons, I believe that the questions put by the Cour du travail de Bruxelles (Belgium) should be answered as follows:

Regulation (EEC) No. 1408/71 of the Council of June 14, 1971 on the application of social security systems to employees and self-employed persons and their family members who immigrate and leave within the Community, in which Regulation (EC) No. 1606/98 of the Council of June 29, 1998, as amended, which are part of the mandatory provisions of Title II of the Regulation, is to be interpreted as prohibiting a Member State from “running a company from abroad which is subject to the tax law of this state “To be equated with the exercise of an activity in his national territory if this equation does not correspond to the objective situation in which the worker concerned finds himself and the activity is de facto carried out in the territory of another Member State.

Articles 45 TFEU and 49 TFEU are to be interpreted as allowing a Member State to adopt legal provisions such as Article 3 (1) subpara. 4 of Royal Decree No. 38 of July 27, 1967, to the extent that they do not allow a person who resides in another Member State and de facto runs a company from there that is subject to the tax law of the first Member State, to provide evidence that he actually carries out this activity in the territory of the other Member State, thereby rebutting the presumption that he is subject to the self-employed social security system set up by the first Member State.


(1) Original language: English.

(2) OJ L 149, p. 2.

(3) OJ L 209, p. 1.

(4) Moniteur belge of July 29, 1967, p. 8071.

(5) Monitor belge of 12 December 1996, p. 31.018 (hereinafter: Royal Decree 38).

(6) Which at that time was called the Arbitration Court.

(7) Moniteur belge of March 2, 1971, p. 2613, and of April 5, 2001, p. 11473.

(8) See below, no.36.

(9) See above, No. 10.

(10) Cf. in this sense, inter alia. Judgments of 12 June 1986, Ten Holder (302/84, ECR 1986, 1821, paragraph 21) and of 10 July 1986, Luijten (60/85, ECR 1986, 2365, paragraph 14).

(11) See by analogy the judgment of 7 July 2005, van Pommeren-Bourgondiën (C-227/03, 2005 ECR I-6101, paragraph 34).

(12) See judgment of October 14, 2010, van Delft et al. (C-345/09, ECR 2010, I-9879, para. 52).

(13) Judgment of 29 June 1994 (C-60/93, 1994 ECR I-2991, paragraph 20). As the Commission has pointed out in its observations, although a Member State is free to define the terms 'employed' and 'self-employed' used in Regulation No 1408/71, it cannot decide whether these persons carry out their activities in its own Exercise territory.

(14) Even if one wanted to regard his activity as a mandate holder of the company as a self-employed activity in Belgium, Mr. Rombouts would therefore be subject to the Portuguese regulations of the social security - see judgment of 30 January 1997, de Jaeck (C-340/94, 1997 ECR I-461, paragraph 11).

(15) Article 14c (b) of Regulation No 1408/71 provides that in the cases listed in Annex VII of the Regulation, a person who is employed in one Member State and at the same time is self-employed in another Member State, simultaneously is subject to the laws of each of these states. This person is therefore obliged to pay the contributions that may be imposed on him by the legal provisions of one and the other of the two countries - judgment of March 9, 2006, Piatkowski (C-493/04, ECR 2006, I-2369 , Paragraph 22).

(16) Under Article 13 (2) (b) of Regulation No 1408/71, a person who is self-employed in the territory of a Member State is subject to the legislation of that State, even if he is in the territory of another Member State lives - see judgment of 19 November 2009, Filipiak (C-314/08, ECR 2009, I-11049, paragraph 64).

(17) See the wording of Article 13 (2) (b), Article 14c (b) and, incidentally, also Article 14a (2) of Regulation No. 1408/71, in which the wording is repeated in each case.

(18) The Belgian Government points out that the acts carried out by a mandate holder of the company have legal effects in Belgium. According to Article 14c (b) of Regulation No 1408/71, the professional activity in question is therefore carried out in Belgium, even if the acts originated in another Member State (in this case Portugal) using modern means of communication. Incidentally, the actions of Mr. Rombouts are attributable to the company as its own actions.

(19) The order for reference shows that Mr Rombouts left Belgium to stay in Portugal and that he was employed, unemployed and self-employed there.

(20) See, accordingly, judgment of 1 October 2009, Leyman (C-3/08, 2009 ECR I-9085, paragraph 20 and the case law cited).

(21) See judgment of 1 April 2008, Gouvernement de la Communauté française and gouvernement wallon (C-212/06, ECR 2008, ECR I-1683, paragraphs 44 et seq. And the case-law cited).