SECOND SECTION
DECISION
Application no. 24728/15
B.M.
against Croatia
The European Court of Human Rights (Second Section), sitting on 28 March 2023 as a Committee composed of:
Pauliine Koskelo, President,
Lorraine Schembri Orland,
Davor Derenčinović, judges,
and Dorothee von Arnim, Deputy Section Registrar,
Having regard to:
the application (no. 24728/15) against the Republic of Croatia lodged with the Court under Article 34 of the Convention for the Protection of Human Rights and Fundamental Freedoms (“the Convention”) on 15 May 2015 by a Croatian national, Mr B.M. (“the applicant”), born in 1974 and living in Zagreb (“the applicant”), who was represented by Mr M. Ivanišević, a lawyer practising in Zagreb;
the decision to give notice of the complaints concerning property, family life, prohibition of discrimination and general prohibition of discrimination to the Croatian Government (“the Government”), represented by their Agent, Ms Š. Stažnik, and to declare inadmissible the remainder of the application;
the decision not to have the applicant’s name disclosed;
the parties’ observations;
Having deliberated, decides as follows:
SUBJECT MATTER OF THE CASE
1. The case concerns the domestic authorities’ refusal to grant the applicant’s tax exemption request.
2. The applicant was the owner of a flat measuring 64.99 square meters in which he lived with his unmarried partner, their daughter and his stepson. In October 2007 he purchased a larger flat measuring 82.27 square meters as his existing flat was too small for his family of four.
3. On 11 November 2007 the applicant applied to the relevant first‑instance tax authority seeking to be exempted from the real estate transfer tax levied on such purchase.
4. He relied on section 11(9) of the Real Estate Transfer Tax Act, which granted tax exemption to taxpayers who were buying their first flat or a house to solve their housing needs, provided that its surface area, depending on the number of members of their immediate family, did not exceed a certain size. Taxpayers were not eligible for the tax exemption if they or members of their immediate family owned another accommodation which met their housing needs or owned any other real estate of greater value. Accommodation meeting taxpayer’s housing needs (hereafter “adequate accommodation”) was defined as “any accommodation which is equipped with basic amenities and satisfies hygiene-technical requirements”. Immediate family members were defined as the taxpayer’s “spouse and children registered at the same address as him or her.”
5. The applicant lodged his tax exemption request on the application form provided by the tax authorities. The form contained a part in which applicants were required to provide information concerning their earlier accommodation. The applicant ticked the box next to the option “owner of an inadequate flat”. That option included a reference to a footnote explaining that a flat was inadequate, inter alia, if its size was inadequate in view of the number of family members. The applicant specified that the smaller flat he owned (see paragraph 2 above) was, because of its size, inadequate for his family of four.
6. The applicant sold this smaller flat in May 2008.
7. By a decision of 15 June 2010, the first-instance tax authority dismissed the applicant’s tax exemption request and ordered him to pay 83,925.06 Croatian kunas (HRK) in real estate transfer tax. On 18 January 2011 the Ministry of Finance dismissed his appeal against that decision. Those authorities found that the applicant had not qualified for the tax exemption given that his unmarried partner and his stepson could not be considered his immediate family members and because the size of his previous flat satisfied his and his daughter’s housing needs.
8. On 6 May 2011 the applicant brought an action for judicial review, arguing that he had been discriminated against on the basis of his marital and family status.
9. By a judgment of 3 July 2014, the High Administrative Court dismissed the applicant’s action. It held that the size of his previous flat was irrelevant given that the applicable provision did not prescribe that the surface area, in relation to the number of family members, was a criterion for assessing whether a previous accommodation owned by a taxpayer was adequate (see paragraph 4 above). The applicant’s previous flat had constituted adequate accommodation as it had been equipped with basic amenities and had satisfied hygiene-technical requirements. He had therefore not been entitled to the tax exemption.
10. The applicant then lodged a constitutional complaint. He contended that he had been discriminated against on the basis of his marital and family status and that the domestic authorities’ decisions had been in breach of his right to respect for his family life. Furthermore, the High Administrative Court’s judgment had been contrary to the longstanding domestic practice according to which the ownership of another accommodation had not been an obstacle to tax exemption if its size had been inadequate considering the number of family members. Based on that practice he had had a legitimate expectation that his request for tax exemption would be granted.
11. On 5 November 2014 the Constitutional Court declared the applicant’s constitutional complaint inadmissible, finding that the case did not raise any constitutional issue. The applicant’s representative was notified of that decision on 19 November 2014.
12. Meanwhile, on 5 March 2013, the applicant paid HRK 107,743.00 to the tax authorities. That amount consisted of the principal amount of his tax debt (see paragraph 7 above) and of the accrued statutory default interest.
13. For the reasons stated in paragraph 10 above the applicant complained of discrimination based on his marital and family status and of inconsistent application of domestic tax legislation. He relied on Article 8 of the Convention and Article 1 of Protocol No. 1 thereto, both taken alone and in conjunction with Article 14 of the Convention, as well as on Article 1 of Protocol No. 12.
THE COURT’S ASSESSMENT
Complaint under Article 1 of Protocol No. 114. The Court considers that the tax authorities’ decision ordering the applicant to pay real estate transfer tax constituted an interference with his property rights, which aimed to secure the payment of taxes, within the meaning of the second paragraph of Article 1 of Protocol No. 1 (see, for example, Bežanić and Baškarad v. Croatia, nos. 16140/15 and 13322/16, § 60, 19 May 2022). The interference had a legal basis in domestic law, namely in the relevant provisions of the Real Estate Transfer Act.
15. The main issue to be examined is whether that law was foreseeable in its application having regard to the conflicting interpretations by domestic authorities as to what constituted adequate accommodation, it being understood that the owners of such accommodation were ineligible for the tax exemption in question (see paragraph 4 above). Specifically, the domestic authorities differed as to whether the size of a flat or a house already owned by a taxpayer, in relation the number of his or her family members, was a criterion for determining whether that accommodation was adequate.
16. Both parties submitted various materials (opinions, brochures, manuals and instructions) issued by the tax authorities at the relevant time which either expressly stated or strongly suggested that the ownership of another accommodation did not disqualify its owner from tax exemption and that its size, in relation to the number of family members, had to be taken into account for assessing whether it was adequate within the meaning of section 11(9) of the Real Estate Transfer Tax Act. That was also indicated in the application form on which the applicant lodged his tax exemption request (see paragraph 5 above).
17. Its earlier judgments (no. Us-10229/2009-4 of 21 March 2012 and no. Usž-269/2012 of 23 January 2013), which were adopted before the judgment in the applicant’s case, suggest that the High Administrative Court at the time accepted such interpretation by the tax authorities.
18. Such interpretation was also endorsed and confirmed by Parliament when on 26 February 2011 the Amendments to the Real Estate Transfer Tax Act entered into force, the aim of which was, inter alia, to ensure an unambiguous interpretation of the entitlement to the tax exemption. Those Amendments, which were not applicable to the applicant’s situation, replaced section 11(9) of the Real Estate Transfer Tax Act with a new provision which expressly provided that an owner of a flat or house was eligible for the tax exemption if the size of that property had been inadequate considering the number of his or her family members.
19. However, in the Court’s view, those Amendments only highlighted the fact that before their adoption section 11(9) of the Real Estate Transfer Tax Act evidently did not mention the size of a flat or house already owned by a taxpayer, in relation to the number of his or her family members, as a criterion for assessing whether that accommodation was adequate. The clear wording of that provision was emphasised by the High Administrative Court in the applicant’s case (see paragraphs 9 above). That court confirmed this interpretation in a later case no. Usž-520/16-2 of 3 March 2016, in which it also expressly stated that it was not bound by the opinions of the tax authorities.
20. The Court considers that administrative courts cannot be bound by the administrative (including tax) authorities’ interpretations of relevant legislation as the task of those courts is precisely to review the lawfulness of those authorities’ decisions. It also reiterates that, while the role of the legislator is crucial in building the national legal system, the role of national courts to interpret and apply the law is fundamental for its functioning (see CBC-Union, s.r.o. v. the Czech Republic (dec.), no. 68741/01, 20 September 2005).
21. The timing of the High Administrative Court’s judgments (see paragraphs 17 and 19 above) suggests that in the applicant’s case it departed from its earlier case-law (which followed a more generous approach of the tax authorities) and adopted an interpretation more consonant with the wording of the relevant provision. In this regard the Court reiterates that the requirement of legal certainty does not confer an acquired right to consistency of case-law (see Nejdet Şahin and Perihan Şahin v. Turkey [GC], no. 13279/05, § 58, 20 October 2011), and that, if events in the past were to be judged according to jurisprudence prevailing at the time when the events occurred, virtually no change in case-law would be possible (compare Lucky Dev v. Sweden, no. 7356/10, § 50, 27 November 2014).
22. It is true that the existence of well-established jurisprudence normally imposes a duty on higher courts to give reasons justifying the departure from the existing case-law (see, in the context of Article 6 of the Convention, Atanasovski v. the former Yugoslav Republic of Macedonia, no. 36815/03, § 38, 14 January 2010). However, the Court also reiterates that States may be afforded some degree of additional deference and latitude in the exercise of their fiscal functions under the lawfulness test (see, for example, Bežanić and Baškarad, cited above, § 64).
23. In view of the foregoing, and especially of the clear wording of the relevant provision at the relevant time, the Court finds that the interference in the present case was foreseeable for the applicant.
24. As for the proportionality of the interference, the tax rate amounted to 5% of the market value of the purchased real estate and was therefore not particularly high (ibid., § 77). Even though the amount of the tax the applicant eventually had to pay was significant (partly because he had failed to pay it in time, see paragraph 12 above) and, according to him, corresponded to seven of his monthly salaries or nine housing loan instalments, the Court considers that it had not imposed an excessive individual burden on him, having regard to the wide margin of appreciation enjoyed by the State in the tax sphere. The Court is therefore satisfied that the interference did not upset the fair balance which must be struck between the protection of the applicant’s property rights and the legitimate aim of securing the payment of taxes.
25. It follows that this complaint is manifestly ill-founded and that it must therefore be rejected pursuant to Article 35 §§ 3 (a) and 4 of the Convention.
26. In view of this conclusion, the Court does not find it necessary to examine the Government’s objection based on non-exhaustion of domestic remedies.
Remaining complaints27. As for the applicant’s complaints under Article 14 taken in conjunction with Article 8 and Article 1 of Protocol No. 1 and under Article 1 of Protocol No. 12, the Court notes that, ultimately, the domestic authorities refused the applicant’s tax exemption request irrespective of whether his unmarried partner and stepson could be considered as members of his immediate family (see paragraph 9 above). The applicant was therefore not treated differently, much less discriminated against, on the basis of his marital or family status.
28. The applicant’s complaint under Article 8 taken alone is wholly unsubstantiated and there is nothing to suggest a breach of that provision in the present case.
29. In these circumstances, the Court finds that this part of the application is also manifestly ill-founded and that it must therefore be rejected pursuant to Article 35 §§ 3 (a) and 4 of the Convention.
For these reasons, the Court, unanimously,
Declares the application inadmissible.
Done in English and notified in writing on 20 April 2023.
Dorothee von Arnim Pauliine Koskelo
Deputy Registrar President