In this article, the author critically discusses the recently decided Renneberg case. In substance, the Court ignored completely the DTC allocation rule, that allocated exclusively income, both positive and negative income, from an owner–occupied dwelling situated in Belgium of a resident in Belgium to Belgium.The author concludes that the Court wrongly treated the negative income from Renneberg’s dwelling situated in Belgium like a personal circumstance.Furthermore he argues that, erroneously, the Court hardly paid any attention to the arguments that this is a case of dislocation of the taxable base. Next to this, the Court misinterpreted the rule for elimination of double taxation. By allocating the negative income at issue to the Netherlands if a non–resident obtains all or almost all of his employment income in the Netherlands, the Court seriously undermines a balanced allocation of the power to impose taxes between the Member States. As result, the Netherlands and Member States in a similar position become a dumping place of losses. The Court’s observation that no possible justification had been put forward is amazing. The Netherlands Hoge Raad could consider clarifying its position to the Court in a second round before deciding the case itself. If no justifications are accepted by the Court, DTCs between Member States should be adjusted: they should include a claw–back mechanism in respect of non–residents if Community law obliges the state of source to take into account negative income from outside that state.
EC Tax Review