Summary;Judgment — ECLI:EU:C:2020:806
Date: 2020-10-08
Language of the case: Romanian
Court formation: Sixth Chamber
Subject matter: Right of establishment;Free movement of capital
Procedure: Reference for a preliminary ruling
Origin: Romania

Translation C-558/19 — 1 
Case C-558/19 
Request for a preliminary ruling 
Date lodged: 
23 July 2019 
Referring court: 
Tribunalul Cluj (Romania) 
Date of decision to refer: 
3 July 2019 
Applicant: 
Impresa Pizzarotti & C SPA Italia Sucursala Cluj 
Defendant: 
Agenția Națională de Administrare Fiscală — Direcția Generală de 
Administrare a Marilor Contribuabili 
  
[omissis] 
TRIBUNALUL CLUJ 
SECȚIA MIXTĂ DE CONTENCIOS ADMINISTRATIV ȘI FISCAL, DE 
CONFLICTE DE MUNCĂ ȘI ASIGURĂRI SOCIALE (Regional Court, 
Cluj, Romania — Mixed Section for Administrative and Tax, Labour and 
Social Security Disputes) 
[omissis] 
Public hearing of 3 July 2018 
[omissis] 
The administrative and tax case between the applicant IMPRESA PIZZAROTTI 
& C SPA ITALIA SUCURSALA CLUJ (Impresa Pizzarotti & C SPA Italia, Cluj 
branch) and the defendant AGENȚIA NAȚIONALĂ DE ADMINISTRARE 
FISCALĂ — DIRECȚIA GENERALĂ DE ADMINISTRARE A MARILOR 
CONTRIBUABILI (National Tax Administration Office — Directorate-General 
EN 
REQUEST FOR A PRELIMINARY RULING OF 3.7.2019 — CASE C-558/19 
 
2  
for the Administration of Large-scale Taxpayers, Romania), concerning a 
complaint against a fiscal administrative act, has been registered. 
[omissis] 
[omissis] On 2 July 2018, the applicant placed on the case-file a hearing note 
concerning the defendant’s procedural status with which the latter had requested 
that the application for a reference for a preliminary ruling to the Court of Justice 
of the European Union (‘the Court of Justice’) be dismissed. 
In the light of the defendant’s procedural status [the applicant] notes that it 
reworded the question to the effect that, if Articles 11(2) and 29(3) of the Codul 
fiscal (‘the Romanian Tax Code’) were interpreted as the tax authority argues, 
they would infringe Articles 49 and 63 TFEU [omissis] in that it would be found 
that transfers of money between a company branch resident in one Member State 
and the parent company resident in another Member State constituted transactions 
that could be subject to the rules on transfer pricing. 
THE CLUJ REGIONAL COURT 
In deliberating on the request for a reference for a preliminary ruling to be made 
to the Court of Justice and having examined the documents in the case, hereby 
finds as follows: 
1. Circumstances of the case — Procedural context — Facts 
The Cluj Regional Court was seised at first instance of the application (i) for 
annulment of decision [omissis] of 23 November 2017 concerning the 
administrative complaint brought against the notice of assessment [omissis] of 
20 September 2017 [omissis] [and (ii) for annulment of the] notice of assessment 
[omissis] of 20 September 2017, issued by the Directorate-General for the 
Administration of Large-scale Taxpayers, which established in respect of the 
applicant additional corporation tax in the amount of 297 141.92 Romanian lei 
(RON) and an additional taxable amount of RON 1 857 137. [OR. 1] 
It was noted that the applicant company was the subject of a tax inspection 
relating to corporation tax, in the period from 29 July 2016 to 11 September 2017, 
by the Activitatea de Inspecție Fiscală (service for tax inspection activities) of the 
Directorate-General for the Administration of Large-scale Taxpayers, which led to 
the drawing up of the tax inspection report [of] [omissis] 20 September 2017, 
which formed the basis for the notice of assessment [of] [omissis] 20 September 
2017 establishing in respect of that company additional payment obligations 
amounting to RON 297 141.92 and an additional taxable amount of 
RON 1 857 137. 
During the tax inspection it was found that the applicant Impresa Pizzarotti & C 
SPA Italia Sucursala Cluj had concluded, as lender, two loan agreements with SC 
Impresa Pizzarotti & C SPA Italia [as borrower]: the agreement [omissis] [of] 
IMPRESA PIZZAROTTI 
 
3 
6 February 2012 concerning the granting of a loan by [the lender] of 
EUR 11 400 000, and the agreement [omissis] [of] 9 March 2012 concerning the 
granting of a loan by [the lender] of EUR 2 300 000. Those amounts were loaned 
for an initial period of one year, which could be extended by an addendum to the 
agreement. The loan agreements do not contain any clause regarding the receipt of 
interest by the applicant. As at 1 January 2013, the outstanding amount to be 
repaid was EUR 11 250 000. The two loans in question were repaid in full by 
9 April 2014. 
In the light of those considerations, and having regard to Articles 11(2) and 29(3) 
of Legea nr. 571/2003 privind Codul fiscal (Law No 571/2003 establishing the 
Tax Code), the tax inspection authorities concluded that the applicant company is 
a person related to the parent company, that the loans granted constitute transfers 
which should, in accordance with the rules on transfer pricing, have been effected 
at the market price, namely the average interest rate of the Banca Națională a 
României (National Bank of Romania), and that, as a result, additional tax of 
RON 297 141.92 must be paid and an additional taxable amount of 
RON 1 857 137 established. 
By Decision No 114/23.11.2017, issued by the Directorate-General for the 
Administration of Large-scale Taxpayers, the complaint brought by the applicant 
concerning the amount at issue was rejected as unfounded and the action in the tax 
proceedings brought by the applicant against that decision was entered in the 
register of the Cluj Regional Court on 15 December 2017. 
The applicant argues that the provisions of law on which the tax authority relies 
infringe Articles 49 TFEU and 63 TFEU in so far as they provide that transfers of 
money [between a] company branch resident in one Member State and the parent 
company resident in another Member State constitute transactions which may be 
subject to the rules on transfer pricing, since those rules are not applicable where a 
company branch and the parent company are situated in the territory of the same 
State. 
In conclusion, the applicant considers that the action of the authorities infringes 
EU law. 
2. Law 
The Cluj Regional Court considers that the point of law under consideration in the 
administrative proceedings concerns the lawfulness of the fiscal administrative 
acts establishing corporation tax on transactions involving the transfer of financial 
resources between a branch and the parent company where they are resident in 
two different Member States. 
In this context, it is necessary to clarify whether this method of determining the 
tax liability constitutes a correct application of EU law for the purposes of 
Articles 49 and 63 TFEU. 
REQUEST FOR A PRELIMINARY RULING OF 3.7.2019 — CASE C-558/19 
 
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3. In deliberating on the requests for a reference to be made, the Regional Court 
Cluj concluded that in order for the case to be resolved properly [omissis] it is 
necessary to refer to the Court of Justice fundamental points which arise in 
connection with the question referred. [OR. 2] 
4. [omissis] 
5. Relevant provisions of law and case-law 
I. Provisions of national law applicable to the dispute 
Law No 571/2003 establishing the Tax Code 
– Article 7 — Definitions of general terms 
‘(1) For the purposes of this Code, with the exception of Title VI, the terms and 
expressions listed below shall have the following meanings: 
… 
20. person — any natural or legal person; 
21. related persons — one person is related to another where the relationship 
between them is defined by at least one of the following cases: 
… 
(c) a legal person is related to another legal person if at least: 
(i) the first legal person directly or indirectly holds, including the shares held 
by the related persons, at least 25% of the value/number of the shares of capital 
or voting rights of the other legal person, or if it controls that legal person; 
(ii) the second legal person directly or indirectly holds, including the shares 
held by the related persons, at least 25% of the value/number of the shares of 
capital or voting rights of the first legal person; 
(iii) a third person directly or indirectly holds, including the shares held by the 
related persons, at least 25% of the value/number of shares of capital or voting 
rights of both the first and second legal person; 
… 
32. transfer — any sale, assignment or alienation of the right of ownership, the 
exchange of a right of ownership for services or for another right of ownership, 
and the transfer of fiduciary assets in connection with a trust transaction within 
the meaning of the Civil Code.’ 
IMPRESA PIZZAROTTI 
 
5 
– Article [11] — Special provisions for the application of the Tax Code 
‘(2) In connection with a transaction between Romanian and related persons not 
resident in Romania, and between related Romanian persons, the tax authorities 
may adjust the amount of income or expenditure of each person, as necessary, to 
reflect the market price of the goods or services supplied as part of the 
transaction. In establishing the market price of the transactions between related 
persons, the most appropriate of the following methods shall be used: …’ 
– Article 29 — Income of a permanent establishment 
‘(3) The taxable profit of a permanent establishment shall be determined by 
regarding it as a separate person and applying the rules on transfer pricing when 
establishing the market price of a transfer between a foreign legal person and its 
permanent establishment. Where the permanent establishment does not have an 
invoice for the expenditure attributed to it by its headquarters, [OR. 3] the other 
supporting documents must contain evidence that the costs have actually been 
incurred and reasonably attributed to the permanent establishment, the rules on 
transfer pricing being applied.’ 
II. EU law: 
Treaty on the Functioning of the European Union 
Article 49 
(ex Article 43 TEC) 
‘Within the framework of the provisions set out below, restrictions on the freedom 
of establishment of nationals of a Member State in the territory of another 
Member State shall be prohibited. Such prohibition shall also apply to restrictions 
on the setting-up of agencies, branches or subsidiaries by nationals of any 
Member State established in the territory of any Member State. 
Freedom of establishment shall include the right to take up and pursue activities 
as self-employed persons and to set up and manage undertakings, in particular 
companies or firms within the meaning of the second paragraph of Article 54, 
under the conditions laid down for its own nationals by the law of the country 
where such establishment is effected, subject to the provisions of the Chapter 
relating to capital.’ 
Article 63 
(ex Article 56 TEC) 
1. Within the framework of the provisions set out in this Chapter, all 
restrictions on the movement of capital between Member States and between 
Member States and third countries shall be prohibited. 
REQUEST FOR A PRELIMINARY RULING OF 3.7.2019 — CASE C-558/19 
 
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2. Within the framework of the provisions set out in this Chapter, all 
restrictions on payments between Member States and between Member States and 
third countries shall be prohibited.’ 
6. Reasons leading the referring court to make a reference for a preliminary 
ruling 
[omissis] 
In the present case, the court is called upon to establish the lawfulness of the fiscal 
administrative acts issued by the tax authority which established in respect of the 
applicant additional tax liabilities in the form of corporation tax because it 
transferred liquid assets to the parent company in Italy and the tax authority 
considered that, in the light of the national legislation referred to above, such 
transactions must be regarded as transactions between related persons to which the 
rules on transfer pricing apply. The tax authorities took this view because 
Article 11(2) of the Romanian Tax Code, cited above, provides that transactions 
between Romanian persons and related persons not resident in Romania are to be 
subject to the rules on transfer pricing and the concept of ‘Romanian person’ 
includes the branch which is a permanent establishment of a person not resident in 
Romania in the light of Article 29(3) of the Romanian Tax Code. 
On the other hand, if such transactions had been effected between a branch and [a] 
parent company in Romania, they could not have been classified as transactions 
subject to the rules on transfer pricing, since the Romanian Tax Code does not 
regard branches as separate persons where they are not a permanent establishment 
of a non-resident legal person. 
The Cluj Regional Court considers that the right of establishment laid down in 
Article 49 TFEU is restricted in the case under consideration in the present 
proceedings, since transfers of liquid assets between a branch resident in a 
Member State and the non-resident parent company [OR. 4] are effected under 
more onerous conditions than the same type of transfers which take place between 
a branch and the parent company which are located in the same State Member. 
On those grounds, given that the Court of Justice has yet to rule on this matter and 
the dispute must be resolved at first instance, and in the light of 
Article 267 TFEU, the Cluj Regional Court considers it necessary to refer the 
matter to the Court of Justice [omissis]. 
[omissis] 
ON THOSE GROUNDS 
IN THE NAME OF THE LAW 
ORDERS 
IMPRESA PIZZAROTTI 
 
7 
That the following question be referred to the Court of Justice for a preliminary 
ruling under Article 267 TFEU: 
Do Articles 49 and 63 of the Treaty on the Functioning of the European Union 
preclude national legislation such as that at issue in the present case 
(Articles 11(2) and 29(3) of Legea nr. 571/2003 privind Codul fiscal (Law 
No 571/2003 establishing the Romanian Tax Code)), which provides that a bank 
transfer of money from a company branch resident in one Member State to the 
parent company resident in another Member State may be reclassified as a 
revenue-generating transaction, with the consequent obligation to apply the rules 
on transfer pricing, whereas, if the same transaction had been effected between a 
company branch and a parent company, both of which were resident in the same 
Member State, that transaction could not have been reclassified in the same way 
and the rules on transfer pricing would not have been applied? 
[omissis]