Judgment — ECLI:EU:C:2008:24
Date: 2008-01-17
Language of the case: Dutch
Court formation: Fourth Chamber
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Right of establishment;Free movement of capital;Anti-discrimination;Non-discrimination on grounds of nationality
Concepts: General
Procedure: Reference for a preliminary ruling
Origin: Belgium

Summary of the Judgment 1. Freedom of movement for persons – Freedom of establishment (Art. 43 EC) 2. Freedom of movement for persons – Freedom of establishment – Tax legislation – Corporation tax (Arts 43 EC and 48 EC) 1. The mere fact that a resident company is granted a loan by a related company which is established in another Member State cannot be the basis of a general presumption of abusive practices and justify a measure which compromises the exercise of a fundamental freedom guaranteed by the Treaty. Conversely, a national measure restricting freedom of establishment may be justified on the ground of prevention of abusive practices where it specifically targets wholly artificial arrangements which do not reflect economic reality and are designed to circumvent the legislation of the Member State concerned and, in particular, to escape the tax normally due on the profits generated by activities carried out on national territory. (see paras 26-28) 2. Articles 43 EC and 48 EC preclude national legislation under which interest payments made by a company resident in a Member State to a director which is a company established in another Member State are reclassified as dividends and are, on that basis, taxable, where, at the beginning of the taxable period, the total of the interest-bearing loans is higher than the paid-up capital plus taxed reserves, whereas, in the same circumstances, where those interest payments are made to a director which is a company established in the same Member State, those payments are not reclassified as dividends and are, on that basis, not taxable. Such a difference in treatment between resident companies according to the place of establishment of the company which, as director, has granted them a loan constitutes an obstacle to the freedom of establishment if it makes it less attractive for companies established in other Member States to exercise that freedom and they may, in consequence, refrain from managing a company in the Member State which enacts that measure, or even refrain from acquiring, creating or maintaining a subsidiary in that Member State. Even if the application of a limit such as the limits laid down under that legislation seeks to combat abusive practices, it goes in any event beyond what is necessary to attain that objective, since it also affects situations in which the transaction concerned cannot be regarded as a purely artificial arrangement. If interest payments made to non‑resident companies are reclassified as dividends as soon as they exceed such a limit, it cannot be ruled out that that reclassification will also apply to interest paid on loans granted on an arm’s length basis. (see paras 23, 32-34, operative part)