The recent ECJ judgment in the case of the Commission v Hellenic Republic, C-155/09, has found that Greek tax legislation which grants exemption from the tax payable on the purchase of a first residential property only to persons residing in Greece is contrary to European Union principles. It acts as a deterrent with regard to persons who are not resident in Greece and thus restricts their right to freedom of movement within the European Union.

Greek legislation provides, subject to certain conditions, for an exemption from the tax payable on the purchase of a first residential property, which is granted only to buyers who are permanently resident in Greece and, by way of exception, to non-resident Greeks who have worked abroad for at least six years.

The Commission brought an action against Greece before the Court of Justice, maintaining that, by granting exemption from the tax, first, solely to persons permanently resident in Greece – and not to non-residents who intend to settle in Greece in the future – and, second, on certain conditions, solely to Greek nationals on the purchase of a first home in Greece, Greece expressly discriminated against persons resident abroad who are not Greek nationals.

In its judgment, the Court noted that although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with European Union law. The rules which the Treaty lays down regarding equal treatment forbid not only overt discrimination by reason of nationality but also all covert forms of discrimination which, by the application of other criteria of differentiation – such as residence or ordinary residence, lead in fact to the same result, since persons who are not resident on the national territory are in the majority of cases foreigners.

Accordingly, the Greek legislation, by deterring persons not residing in Greece from purchasing, in pursuance of the right to freedom of movement, a first home there, impedes the freedom of movement of workers and the freedom of establishment.

Full details of the case are available from http://curia.europa.eu/jcms/upload/docs/application/pdf/2011-01/cp110001en.pdf