Kieback: When Schumacker Emigrates . . .

Abstract:

When taxing a non-residents income, a source state does not have to grant tax correctives on account of civil status or family responsibilities, applicable for its own residents, unless the income is the almost exclusive taxable income of the non-resident. This socalled Schumacker-principle, although dating from 1995, still raises questions.

This article critically analyses the judgment of the Court of Justice in the Kieback-case, where the Court had to decide about its application for the deduction of costs, linked to a foreign immovable property, in case of a non-resident earning all his taxable income during a part of a tax year in the source state and then moving to a third state. The court insisted that the Schumacker-principle can include costs which, according to the tax legislation of the source state, are in particular linked to foreign income, the possibility of discrimination has to be considered exclusively from a tax perspective, but the comparison can be made taking into account an entire tax year. Based on these premises the Court concluded that the foreign negative income did not have to be taken into account in the source state.