# C_2007269EN.01003401.xml

| 10.11.2007 | EN | Official Journal of the European Union | C 269/34 |
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Action brought on 4 September 2007 — Commission of the European Communities v Hellenic Republic

(Case C-406/07)

(2007/C 269/58)

Language of the case: Greek

Parties

Applicant: Commission of the European Communities (represented by: D. Triandafillou, acting as Agent)

Defendant: Hellenic Republic

Form of order sought

The Court is asked to

| — | declare that the Hellenic Republic is in breach of
(a)
its obligations under Articles 56 and 43 of the Treaty establishing the European Community and Articles 40 and 31 of the EEA Agreement, in applying a tax regime for dividends from abroad that is less favourable than the regime for domestic dividends; (b)
its obligations under Article 43 of the Treaty establishing the European Community and Article 31 of the EEA Agreement in maintaining in force the provisions of the Kodika Forologias Eisodimatos (Income Tax Code) (Law 2238/1994, as last amended by Law 3296/2004), by which foreign partnerships in Greece are taxed more heavily than domestic partnerships; | (a) | its obligations under Articles 56 and 43 of the Treaty establishing the European Community and Articles 40 and 31 of the EEA Agreement, in applying a tax regime for dividends from abroad that is less favourable than the regime for domestic dividends; | (b) | its obligations under Article 43 of the Treaty establishing the European Community and Article 31 of the EEA Agreement in maintaining in force the provisions of the Kodika Forologias Eisodimatos (Income Tax Code) (Law 2238/1994, as last amended by Law 3296/2004), by which foreign partnerships in Greece are taxed more heavily than domestic partnerships; |
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| (a) | its obligations under Articles 56 and 43 of the Treaty establishing the European Community and Articles 40 and 31 of the EEA Agreement, in applying a tax regime for dividends from abroad that is less favourable than the regime for domestic dividends; | | | | |
| (b) | its obligations under Article 43 of the Treaty establishing the European Community and Article 31 of the EEA Agreement in maintaining in force the provisions of the Kodika Forologias Eisodimatos (Income Tax Code) (Law 2238/1994, as last amended by Law 3296/2004), by which foreign partnerships in Greece are taxed more heavily than domestic partnerships; | | | | |

| — | order the Hellenic Republic to pay the costs. |
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Pleas in law and main arguments

The Commission considers that the Member States may not tax dividends from abroad at a higher rate than that applicable to domestic dividends.

The tax exemption provided for by Greek tax legislation is aimed at avoiding the double taxation of company profits distributed to shareholders, but is applied only to domestic dividends.

The Greek tax legislation accordingly results in discouraging persons subject to full tax obligations in Greece from investing their capital in companies established in another Member State.

The provisions of the Greek legislation also have a restrictive effect in relation to companies established in another Member State, since it constitutes an obstacle to the centralising of capital in Greece by such companies.

Since income from capital of non-Greek origin receives less favourable tax treatment than dividends distributed by companies established in Greece, the shares of companies established in other Member States are less attractive to investors resident in Greece than the shares of companies whose seat is in Greece.

It follows from the above that legislative provisions such as that under scrutiny constitute a restriction on the free movement of capital which, in principle, is prohibited by Article 56 EC.

In the case of persons who are subject to full tax obligations in Greece and who hold foreign shares which afford them the possibility of exercising a manifest influence on the decisions of the undertaking and determining its activities, it is similarly a restriction on freedom of establishment which is prohibited by Article 43 EC.

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