The CFE ECJ Task Force has issued an Opinion Statement on the the EFTA Court’s decision of 4 July 2023 in case Case E-11/22, RS, concerning compatibility with the fundamental freedoms of a municipal surcharge distinguishing between residents and non-residents for the purposes of the applicable rate.
At issue in the RS case was the question whether and to what extent municipal surcharges are compatible with the fundamental freedoms. In Liechtenstein, workers were subject to an income tax at national level. In addition, the income of resident workers was also taxable at the level of the municipality in the form of a municipal surcharge. The tax rates for the municipal surcharge varied from municipality to municipality. Non-resident workers were not subject to the municipal surcharge but to a surcharge which was a supplementary national tax. The tax rate for the supplementary national tax was higher than the highest municipal tax rate. The EFTA Court ruled that such surcharge infringed the fundamental freedoms and that a deferral of the application of the fundamental freedoms was not permissible in that case.
The CFE ECJ Task Force welcomes the decision of the EFTA Court in the RS case. Although the EFTA Court had to interpret the EEA Agreement, the case is equally relevant for the interpretation of the fundamental freedoms of the EU. The EFTA Court clarifies the compatibility of municipal surcharges with the fundamental freedoms. In essence, non-resident taxpayers may not be taxed at a higher rate than resident taxpayers in a similar situation. If the tax rate of municipal surcharges varies between municipalities the maximum tax rate for the non-resident taxpayer is the lowest municipal tax rate. The CFE ECJ Task Force agrees with the findings and the reasoning of the EFTA Court. It believes that the judgment can be equally applied in an EU context.
We invite you to read the Opinion Statement and remain available for any queries you may have.