## Facts

- S and G, German nationals, sought certain tax benefits in Germany that were afforded to residents of other Member States working in Germany.
- The denial of these benefits was based on a double taxation treaty between Germany and another Member State.
- S and G argued they suffered reverse discrimination due to their German residency, as they were excluded from benefits granted to other EU citizens.
- The German government maintained that the situation arose from international treaty obligations, not EU law.

## Issues

1. Whether Article 18 TFEU applies when a Member State's nationals are treated less favourably than other EU citizens due to national law or international agreements.
2. Whether denial of tax benefits to S and G amounted to reverse discrimination prohibited by EU law.
3. Whether Member States must extend cross-border tax benefit regimes to purely internal situations.

## Decision

- The CJEU found the differential treatment did not amount to reverse discrimination prohibited by Article 18 TFEU.
- The Court determined S and G’s less favourable treatment resulted from national law and an international agreement, not from EU law.
- Article 18 TFEU does not require Member States to extend cross-border benefit regimes to domestic situations.
- Purely internal situations fall outside the scope of Article 18 TFEU unless EU law is directly applicable.

## Legal Principles

- Reverse discrimination under EU law arises only when the disadvantage is directly caused by the application of EU law.
- Article 18 TFEU is inapplicable to purely internal situations and does not mandate harmonization between domestic and cross-border measures.
- Member States retain competence over the structure of their tax systems, provided they do not discriminate against persons exercising EU free movement rights.
- Differential treatment deriving solely from national or international rules, not attributable to EU law, does not breach Article 18 TFEU.

## Conclusion

The CJEU held that Article 18 TFEU does not prohibit reverse discrimination originating from national or international legal provisions unless such treatment is directly attributable to EU law, confirming the discretion of Member States in purely internal taxation matters.


S and G v Finanzamt Darmstadt (Case C-457/12) [2014] ECR I-0000