Background
BT and CY, spouses with German and Swiss nationality, lived in their Swiss home. In 2019, they paid Swiss tradespeople and a gardening company for work there. BT worked in Germany, maintained a German flat during the week, and returned to Switzerland at weekends; the couple was jointly assessed for German income tax.
They sought Germany’s tax reduction for household and craftsperson services. German law limited that relief to services performed in households in the European Union or European Economic Area. The Finanzamt Siegburg refused the claim because the relevant household was in Switzerland, and the Finanzgericht Köln referred the compatibility of that restriction with the EU-Switzerland Agreement on the Free Movement of Persons (AFMP) to the CJEU.
The Court’s Holding
The Court held that the AFMP precludes Germany from denying the tax relief to an employed frontier worker whose household is in Switzerland while granting it for households in the EU or EEA. BT was an employed frontier worker under Annex I to the AFMP because he resided in Switzerland, worked in Germany, and returned home at least weekly. His dual German-Swiss nationality and his German work flat did not take him outside the Agreement’s scope.
The household-location condition was liable in practice to disadvantage Swiss-resident frontier workers in the same way as a residence condition, amounting to prohibited indirect nationality discrimination in respect of tax concessions. The Court rejected Germany’s reliance on combating undeclared work: extending the relief to Swiss households would not undermine that objective, particularly because the law already required invoices and bank payment. The asserted cohesion-of-the-tax-system justification also failed because no direct link with a particular offsetting tax levy was shown.
Key Takeaways
- Swiss-resident workers employed in an EU Member State may invoke AFMP equal-treatment protections even if they also hold that Member State’s nationality.
- A tax advantage tied to the location of a household can indirectly discriminate against Swiss frontier workers.
- Combating undeclared work did not justify excluding Swiss households from Germany’s household-service tax relief.
Why It Matters
The judgment extends practical tax equal treatment for Swiss-resident frontier workers covered by the AFMP. Member States cannot exclude Swiss households from a tax concession where the territorial restriction effectively disadvantages those workers and lacks a proportionate justification.