Order;Information — ECLI:EU:C:2020:19
Date: 2020-01-21
Language of the case: Portuguese
Court formation: Sixth Chamber
Subject matter: Free movement of capital
Procedure: Reference for a preliminary ruling
Origin: Portugal

Translation C-613/18 — 1 
Case C-613/18 
Request for a preliminary ruling 
Date lodged: 
28 September 2018 
Referring court: 
Tribunal Tributário de Lisboa (Portugal) 
Date of the decision to refer: 
5 July 2018 
Applicant: 
State of Canada 
Defendant: 
Autoridade Tributária e Aduaneira, on behalf of the Fazenda 
Pública 
  
Tribunal Tributário de Lisboa 
I. Background to the dispute: 
The State of Canada, … represented by the Canada Pension Plan Investment 
Board … has brought an action for ANNULMENT, pursuant to Article 99 of the 
Código de Procedimento e de Processo Tributário (Code on Taxation Procedure 
and Proceedings) (‘the CPPT’), against the dismissal of an application for the ex 
officio review of measures withholding tax at source on dividends distributed 
between 1 January 2009 and 31 December 2009 in relation to the shares which it 
holds in the Portuguese companies, Jerónimo Martins SGPS, SA., Cimpor, S.A, 
Galp Energia SGPS, S.A., and EDP Energias de Portugal, S.A. 
The applicant’s submissions are summarised below. 
- As part of the investments made in 2009 via the General Reserve Fund, the 
applicant earned dividends distributed by various Portuguese companies, from 
which tax was definitively withheld at source at the rate of 20%. 
EN 
REQUEST FOR A PRELIMINARY RULING OF 5. 7. 2018 — CASE C-613/18 
 
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- It submits that tax should have been withheld over 50% of the dividends 
which it received, given that that is the tax arrangement which applies to the 
Portuguese State. 
- The State of Canada is subject to public law and, like the Portuguese State, it 
does not, primarily, carry on a commercial, industrial or agricultural activity. 
- Given that it has been treated differently for tax purposes from the 
Portuguese State, this amounts to an infringement of the provisions laid down in 
the TFEU with regard to non-discrimination and the free movement of capital. 
- The State of Canada is a third country to which Article 63 TFEU applies 
(that is to say, the free movement of capital rule). 
- It is clear from the decisions of the CJEU that EU law does not preclude 
residents and non-residents of a particular State from being treated unequally, but 
that it does preclude them from being treated in a discriminatory manner. 
- The CJEU has required that restrictive measures imposed by Member States 
must be suitable for ‘securing the attainment of the objective pursued and do not 
go beyond what is necessary in order to attain it’. 
- The residence criterion may justify taxation, but it does not justify charging 
higher taxation or discrimination compared with the Portuguese State which 
should be treated in the same way at every level as the State of Canada. 
- For that reason, the State of Canada submits that Article 48(3) of the 
[Código do Imposto sobre o Rendimento das Pessoas Colectivas, Corporation Tax 
Code, ‘the CIRC’] (now Article 53) infringes the provision in the TFEU on the 
principle of free movement of capital which should also apply to relations 
between a resident entity in a Member State and a resident entity in a third State. 
It concludes by request that this action be upheld and consequently that the State 
of Canada be reimbursed for the excess tax withheld in the sum of 
EUR 58 868.84. 
* 
The representative of the Fazenda Pública (Portuguese State Treasury) referred, 
in its statement of defence, to the pleas of fact and law drawn up by the 
Contentious Proceedings Division of the Lisbon Finance Directorate of the Tax 
and Customs Authority, and contended that the action should be dismissed … 
* 
II. Procedural requirements: 
1. … 
CANADA 
 
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2. … 
3. … 
4. … 
5. … 
* 
III. Reasons: 
3.1 Facts 
Having examined the case-file and analysed the evidence, this court has 
established the facts set out below, which are relevant to the decision in this 
case. 
(A) The investments made by the State of Canada are managed by an 
independent body, the Canada Pension Plan, which is responsible for 
administering, on behalf of the State of Canada, the pension funds allocated 
to it for management in accordance with the provisions of the Canada 
Pension Plan Act … 
(B) The Canada Pension Plan was created in 1965 with the passing of the 
Canada Pension Plan Act … 
(C) The Canada Pension Plan Investment Board is an entity which is overseen 
by the Government of Canada and is resident in Canada for the purposes of 
Canada’s tax treaties …  
(D) The Canada Pension Plan Investment Board … does not, primarily, carry on 
a commercial, industrial or agricultural activity …  
(E) In 2009, the State of Canada, through Canada Pension Plan Investment, 
earned the sum of EUR 35 948.00 in dividends from the 326 800 shares it 
held in the company Jerónimo Martins SGPS, S.A. … 
(F) In 2009, the State of Canada, through Canada Pension Plan Investment, 
earned the sum of EUR 71 238.14 in dividends from the 385 071 shares it 
held in the company Cimpor Cimentos de Portugal, SGPS, S.A. … 
(G) In 2009, the State of Canada, through Canada Pension Plan Investment, 
earned the sum of EUR 426 793.36 in dividends from the 3 048 524 shares it 
held in the company EDP — Energias de Portugal, S.A. … 
REQUEST FOR A PRELIMINARY RULING OF 5. 7. 2018 — CASE C-613/18 
 
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(H) In 2009, the State of Canada, through Canada Pension Plan Investment, 
earned the sum of EUR 54 709.06 in dividends from the 535 800 shares it 
held in the company Galp Energia SGPS, S.A. … 
(I) On 10 May 2012, the applicant submitted to the tax authority four 
applications for the ex officio review of the withholding tax on the dividends 
distributed in 2009 relating to the shares which it owned at that date in 
Jerónimo Martins, Galp Energia, EDP — Energias de Portugal and 
Cimpor — Cimentos de Portugal … 
(J) On 10 December 2012, the applications for ex officio review referred to 
above were refused by order of the Director of the International Relations 
Services of the Customs and Tax Authority … 
(K) The present action was lodged at the Administrative and Financial Court of 
Lisbon on 23 August 2013 … 
* 
… … 
… 
Evidence has not been provided of any other facts capable of affecting the final 
decision, in terms of possible legal solutions; any other facts must therefore be 
deemed to be unproven. 
* 
3.2 Law 
Following the investments made by the State of Canada in Portugal in 2009, 
through its general reserve fund, Canada Pension Plan Investment, the State of 
Canada earned dividends distributed by various Portuguese companies, from 
which tax was definitively withheld at source at the rate of 20% on all income 
earned. 
The applicant disputed that tax assessment and submitted a number of applications 
for ex oficio review which were refused, for which reason it initiated the present 
action. 
First the applicant claims that the withholding tax should have been applied only 
to 50% of the dividends which it received, given that that is the tax arrangement 
which applies to the Portuguese State. 
Furthermore, it submits that, since it has been treated differently for tax purposes 
compared with the Portuguese State, this amounts to an infringement of the 
CANADA 
 
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provisions laid down in the TFEU with regard to non-discrimination and the free 
movement of capital. 
It submits that the residence criterion may justify taxation, but it does not justify 
charging higher taxation or discrimination compared with the Portuguese State 
which should be treated in the same way at every level as the State of Canada. For 
that reason the State of Canada argues that Article 48(3) of the [CIRC] (now 
Article 53) infringes the provisions of the TFEU, that is to say, the principle of 
free movement of capital which should also apply to relations between a resident 
entity in a Member State and a resident entity in a third country. 
The State Treasury contends that the provision in the CIRC relating to the form 
of taxation of non-residents based on income received on Portuguese territory 
does not infringe the provisions of Article 63 TFEU, because it is permitted under 
Article 65(1)(a) of that treaty. 
Analysis of the substance of the case 
To begin with, it should be borne in mind that Article 80(4)(c) of the [CIRC], 
under the heading ‘Rates of Taxation’, in the version in force at the material time, 
provided as follows: ‘With regard to the income of entities which have neither 
their headquarters nor their effective management in Portuguese territory, and 
therefore do not have a fixed establishment for which they may be taxed, the 
corporation tax shall be 25%, with the exception of the following income: 
... 
(c) income from securities and other income from capital not specifically taxed 
at a different rate, for which the rate shall be 20%’. 
In addition, Article 88 of the CIRC (in the version in force at that time) provided 
the following: 
‘1 — Corporation tax is subject to withholding tax in relation to the following 
income received on Portuguese territory: 
... 
(c) income from capital investments not included in the preceding 
subparagraphs and income from real estate, as defined for personal income tax 
purposes, where the debtor is taxable for corporation tax purposes or where, in 
the course of their business or professional activity, the income is paid out by 
taxable persons, for personal income tax purposes, who keep or are required to 
keep accounts; 
3 — The withholding tax has the nature of an advance tax payment, with the 
exception of the following cases where it is final: 
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... 
(b) in cases which do not concern income from real estate, where the person 
receiving the income is a non-resident entity which does not have a fixed 
establishment on Portuguese territory or, if it does, that income is not taxable. 
... 
5 — The provisions in the preceding paragraph shall not apply to withholding 
taxes which, pursuant to paragraph 3, are final, and to which the corresponding 
taxes laid down in Article 80 shall apply ... 
Finally, Article 48 of the [CIRC] provides the following: ‘In relation to legal 
persons and entities referred to in Article 3(1)(b), a deduction shall be applied 
corresponding to 50% of the income included in the taxable base for profits 
distributed by entities resident on Portuguese territory, and which are subject to 
and not exempt from corporation tax, and in respect of income which is 
received by participants in a joint venture, provided that that income has 
actually been taxed.’ 
On that basis, and since the applicant is a legal person under public law which 
does not, primarily, carry on an economic activity, it claims that it must be treated 
on the same basis as entities resident in Portugal and thus benefit from that 
deduction. 
To that end, the applicant relies on Article 63(1) TFEU, which provides: ‘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’. 
* 
At this juncture, it is important to bear in mind that these proceedings relate to the 
correct interpretation of Article 63 [TFEU]. 
In the present proceedings, it is necessary to examine whether the legal 
arrangement for the measures definitively withholding corporation tax at source 
are compatible with the rule precluding restrictions on movements of capital 
between Member States and third countries. 
It is clear from Article 63 TFEU that all restrictions on the movement of capital 
between Member States and between Member States and third countries are 
prohibited. 
However, it is also true that Article 65 TFEU provides that the provisions of 
Article 63 are to be without prejudice to the right of Member States to apply the 
relevant provisions of their tax law which distinguish between taxpayers who are 
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not in the same situation with regard to their place of residence or with regard to 
the place where their capital is invested. 
Similarly, it is also clear from the case-law of the [CJEU] that, despite the fact that 
direct taxation comes within the remit of the Member States, its exercise is limited 
by respect for the principles of the European Union, and in particular the 
fundamental freedoms. 
Therefore, after hearing the parties, this court considers it necessary to make a 
reference for a preliminary ruling to the Court of Justice of the European Union, 
pursuant to Article 267 TFEU, in relation to the following questions: 
- In the context of taxation of dividends distributed by a company 
established in the national territory to a non-resident entity, is it compatible 
with the principle precluding restrictions on movements of capital between 
Member States and third countries for there to be an effective rate of 
corporation tax which is applied more disadvantageously to entities resident 
in a third country than to a resident in the national territory which is similar 
in nature? 
* 
In the light of the foregoing, it is ordered that the proceeding be suspended until 
the CJEU makes its ruling … … 
Lisbon, 5 July 2018 
…