EU High Court Probes Tax and Residency Fraud in Rulings

(CN) – France can’t force a couple to pay social security taxes when they’re already insured under the Swiss social security scheme, while the Netherlands may be able to kick out a family living there thanks to fraud, the European Court of Justice ruled Thursday.

FILE – In this Oct. 5, 2015, file photo, a man walks by the European Court of Justice in Luxembourg. (AP Photo/Geert Vanden Wijngaert, File)

A couple living in France and paying income taxes there spent their adult lives in Switzerland, where the husband worked and paid into the Swiss social security scheme.

When the couple made some money in France in 2015, the French tax authority ordered them to make a contribution to France’s social security system. The couple balked and filed a lawsuit, prompting the French court to ask the EU high court whether two aspects of the French scheme – a “personal independence allowance” and disability compensation – could be considered social security.

In its preliminary ruling, the Luxembourg-based high court noted that in order to qualify as a social security benefit under EU law, the compensation must be made without assessment of personal need and must relate to any of the risks identified by the law. In the case of the two aspects of the French scheme at issue in the case, both are handed out regardless of the recipient’s resources.

Furthermore, the court found any assessments that are done to determine eligibility for compensation are done by doctors using predefined scales and guidelines. The two aspects of the French scheme are therefore considered social security and because the couple is covered by Switzerland, they don’t need to pay social security taxes to France, the high court ruled.

A second preliminary ruling issued by the EU high court Thursday found the Netherlands can revoke residency permits for two Chinese nationals who obtained the permits using falsified documents – even though they were unaware of the fraud – but authorities must first assess the situation since family reunification is involved.

More than a dozen years after granting Chinese national Y.Z. a residency permit for work purposes, Dutch authorities discovered Y.Z. didn’t actually work for the company he claimed to have worked for and the company didn’t even do business in the Netherlands. In the meantime, however, Y.Z. had brought his wife and child to the Netherlands and they had been given long-term residency on grounds of family reunification.

Dutch authorities moved to strip the family of their residency permits, finding it irrelevant that the wife and child knew nothing of Y.Z.’s fraud. The family appealed, and the Dutch court asked the European Court of Justice to weigh in on whether – given the wife and child’s ignorance of the scheme – the residency permits could be taken away since they were issued with an eye to keep the family together and were long-term permits.

The EU high court agreed residency obtained by fraud can be taken away, regardless of who knew about the scheme. However, the withdrawal of residency cannot occur automatically in this case because a family is involved.

Instead, Dutch authorities must consider the facts of the case, including how long the mother and child have lived in the Netherlands, how old the child was when he was brought there, their ties to both the Netherlands and their home country and the fact they knew nothing of Y.Z.’s fraud.

Finally, the court noted that while their long-term status is automatically lost because it was obtained through fraud, their right of residence isn’t necessarily lost and can’t be taken away without the aforementioned examination.

Both preliminary rulings issued Thursday are binding on the national courts hearing the cases.

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