AMOUNT PAID TO A STUDENT UNDER AN ERASMUS+ SCHOLARSHIP SHOULD NOT BE TAKEN INTO ACCOUNT WHEN CALCULATING THE INCOME TAX OF THE PARENT ON WHOM THE STUDENT IS DEPENDENT

#141Amount paid to a student under an Erasmus+ scholarship should not be taken into account when calculating the income tax of the parent on whom the student is dependent

In case C-277/23 of 16th January 2025 the Court of Justice ruled in its judgment that the amount paid to a student under an Erasmus+ scholarship should not be taken into account when calculating the income tax of the parent on whom the student is dependent.

A student from Croatia was a recipient of an Erasmus+ study grant for a study stay at a university in Finland. The tax authorities in Croatia therefore informed the student's mother, due to the receipt of this Erasmus+ study grant, that in this case the basic personal allowance for a dependent child had been increased and thus the statutory thresholds had been exceeded, resulting in its cancellation in the relevant year.

The student's mother brought the dispute before the relevant Croatian courts. The Croatian Constitutional Court, which ruled on the case, referred the matter to the Court of Justice asking whether the tax legislation in question was by EU law.

The Court of Justice responded negatively in its decision and stated that, if a Member State participates in the Erasmus+ programme, it is its duty to set the rules for the provision and taxation of financial contributions under this programme in such a way as not to create a restriction on the right to free movement and residence within the territory of the Member States. At the time of the decision on the case in question, the financial contribution for education under the Erasmus+ programme was not subject to taxation in Croatia, but was taken into account for the purposes of calculating the income tax of the student's mother, which placed her at a disadvantage.

According to the Court, the national tax legislation at issue is incompatible with EU law and constitutes a restriction on the right to freedom of movement and residence. The Court further stated that, even in the light of the economic ties between a child and its parent, a dependent child who has exercised his freedom of movement, as well as the parent of the child who is directly disadvantaged by the effects of that restriction, may rely on the effects of that restriction. The Court also stated that the purpose of the financial contribution under the Erasmus+ programme is to contribute to covering additional costs which would not have arisen in the absence of that programme.

The Court of Justice concluded that restrictions on the right to free movement and residence are possible provided that the principle of proportionality is observed, the restriction must be proportionate to the legitimate aim pursued and can only be justified if it is based on objective considerations of general interest independent of the nationality of the persons concerned.