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In the recent case of Gschwind v Finanzamt Aachen-Aussenstadt the taxpayer and his wife were resident in the Netherlands. He claimed that the conditions imposed on the availability of the “splitting procedure” to couples not resident in Germany constituted discrimination contrary to Article 48 (now Article 39) of the EC Treaty; the German tax advantage would be denied and the taxpayer`s personal and family circumstances would not be taken into account.

The splitting procedure involves each spouse being taxable on half their total income. It does not apply where one spouse was not resident in Germany unless 90% of the total taxable income is taxable in Germany or, if less, their income from foreign sources not subject to tax in Germany did not exceed a specified amount. The taxpayer was a Netherlands national and worked in Germany. His income accounted for 58% of the couple`s total income. His wife worked in the Netherlands.

The European Court of Justice (ECJ) ruled that there was no discrimination as the splitting procedure conditions were not contrary to article 48 (now article 39) of the EC Treaty. The conditions imposed on non-residents reflected the position where the couple`s tax base was in another member state. The couple`s personal and family circumstances would be taken into account in their state of residence.


In the earlier case of Finanzamt Koln-Altstadt v Schumaker the taxpayer was resident in Belgium but employed in Germany and he did not receive relief in either state. The German legislation was held to be discriminatory, and it was subsequently changed. However, in the present case the taxpayer would receive the relief allowable to his circumstances in the Netherlands.


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