Opinion of the Advocate General — ECLI:EU:C:2026:423
Date: 2026-05-21
Language of the case: Lithuanian

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Translation C-203/25 – 1 
Case C-203/25 
Request for a preliminary ruling 
Date lodged: 
17 March 2025 
Referring court: 
Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės 
(Lithuania) 
Date of the decision to refer: 
26 February 2025 
Applicant: 
‘NEO GROUP’ UAB 
Defendant: 
Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų 
ministerijos 
  
MOKESTINIŲ GINČŲ KOMISIJA 
PRIE LIETUVOS RESPUBLIKOS VYRIAUSYBĖS (Tax Disputes 
Commission under the Government of the Republic of Lithuania) 
DECISION 
ON REFERENCE TO THE COURT OF JUSTICE 
IN THE CASE OF ‘NEO GROUP’ UAB 
[…] [date, place, number] 
The Tax Disputes Commission under the Government of the Republic of 
Lithuania (‘the Tax Disputes Commission’), […] [composition of the Tax 
EN 
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Disputes Commission] has examined the action brought by ‘NEO GROUP’ 
[UAB] (‘the applicant’) of 19 November 2024 against the decision of the 
Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos 
(State Tax Inspectorate under the Ministry of Finance of the Republic of 
Lithuania; ‘the Inspectorate’) of 30 October 2024 approving the inspection report 
[…] (‘the Decision’). 
The Tax Disputes Commission has established as follows: 
1 […] [standard procedural wording] 
2 The dispute between the applicant and the Inspectorate arose regarding the factual 
basis and the legal presumptions for relying on the provisions of Articles 1(2) and 
(3) of Council Directive 2011/96/EU of 30 November 2011 on the common 
system of taxation applicable in the case of parent companies and subsidiaries of 
different Member States (‘Directive 2011/96/EU’), which establish a general anti-
abuse rule, and the provisions of Article 32(6) of the Law of the Republic of 
Lithuania on Corporate Income Tax No IX-675 of 20 December 2001 (‘the Law 
on CIT’) ([version of Law No XII-2262 of 22 March 2016]) implementing the 
provisions of Directive 2011/96/EU in national law. 
3 […] [right to make a request for a preliminary ruling under Article 267 TFEU] In 
its judgment of 21 October 2010 in Nidera Handelscompagnie BV v the 
Inspectorate (C-385/09, […] EU:C:2010:627, paragraph 40), CJEU concluded 
that the Tax Disputes Commission is a court or tribunal within the meaning of 
Article 234 of the Treaty establishing the European Community (and therefore 
also within the meaning of Article 267 TFEU). 
Legal framework 
European Union law 
4 According to [the third paragraph of] Article 288 TFEU, a directive shall be 
binding, as to the result to be achieved, upon each Member State to which it is 
addressed, but shall leave to the national authorities the choice of form and 
methods of its implementation. 
5 The objective of Directive 2011/96/EU is to exempt dividends and other profit 
distributions paid by subsidiary companies to their parent companies from 
withholding taxes and to eliminate double taxation of such income at the level of 
the parent company ([recital 3]). 
6 Directive 2011/96/EU [recitals 4 and 5] establishes: 
‘(4) The grouping together of companies of different Member States may be 
necessary in order to create within the Union conditions analogous to those of an 
internal market and in order thus to ensure the effective functioning of such an 
internal market. Such operations should not be hampered by restrictions, 
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disadvantages or distortions arising in particular from the tax provisions of the 
Member States. It is therefore necessary, with respect to such grouping together of 
companies of different Member States, to provide for tax rules which are neutral 
from the point of view of competition, in order to allow enterprises to adapt to the 
requirements of the internal market, to increase their productivity and to improve 
their competitive strength at the international level. 
(5) Such grouping together may result in the formation of groups of parent 
companies and subsidiaries.’ 
7 Directive 2015/121/EU of 27 January 2015 (‘Directive 2015/121/EU’) amending 
Directive 2011/96/EU [recitals 5 to 8] states: 
‘(5) Therefore, the inclusion of a common minimum anti-abuse rule in Directive 
2011/96/EU would be very helpful to prevent misuse of that Directive and to 
ensure greater consistency in its application in different Member States. 
(6) The application of anti-abuse rules should be proportionate and should serve 
the specific purpose of tackling an arrangement or a series of arrangements which 
are not genuine, that is, which do not reflect economic reality. 
(7) To that end, when assessing whether an arrangement or a series of 
arrangements are abusive, Member States’ tax administrations should undertake 
an objective analysis of all relevant facts and circumstances. 
(8) While Member States should use the anti-abuse clause to tackle arrangements 
which are, in their entirety, not genuine, there may also be cases where single 
steps or parts of an arrangement are, on a stand-alone basis, not genuine. Member 
States should be able to use the anti-abuse clause also to tackle those specific steps 
or parts, without prejudice to the remaining genuine steps or parts of the 
arrangement. That would maximise the effectiveness of the anti-abuse clause 
while guaranteeing its proportionality. The ‘to the extent approach’ can be 
effective in cases where the entities concerned, as such, are genuine but where, for 
example, shares from which the profit distribution arises are not genuinely 
attributed to a taxpayer that is established in a Member State, that is, if the 
arrangement based on its legal form transfers the ownership of the shares but its 
features do not reflect economic reality.’ 
8 In accordance with Article 1(1)(b) of Directive 2011/96/EU, each Member State is 
to apply that Directive, inter alia, to distributions of profits by companies of that 
Member State to companies of other Member States of which they are 
subsidiaries. 
9 Articles 1(2) to (3) of Directive 2011/96/EU (as amended by Directive 
2015/121/EU) establishes a general anti-abuse rule which provides that: 
‘2. Member States shall not grant the benefits of this Directive to an 
arrangement or a series of arrangements which, having been put into place for the 
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main purpose or one of the main purposes of obtaining a tax advantage that 
defeats the object or purpose of this Directive, are not genuine having regard to all 
relevant facts and circumstances. An arrangement may comprise more than one 
step or part. 
3. For the purposes of paragraph 2, an arrangement or a series of arrangements 
shall be regarded as not genuine to the extent that they are not put into place for 
valid commercial reasons which reflect economic reality.’ 
10 Article 3(1) of Directive 2011/96/EU establishes that ‘for the purposes of applying 
this Directive: 
(a) the status of parent company shall be attributed: 
(i) at least to a company of a Member State which fulfils the conditions set out in 
Article 2 and has a minimum holding of 10% in the capital of a company of 
another Member State fulfilling the same conditions; […]; 
(b) “subsidiary” means that company the capital of which includes the holding 
referred to in point (a).’ 
11 According to Article 5 of Directive 2011/96/EU, ‘profits which a subsidiary 
distributes to its parent company shall be exempt from withholding tax’. 
12 Article 6 of Directive 2011/96 provides that ‘the Member State of a parent 
company may not charge withholding tax on the profits which such a company 
receives from a subsidiary’. 
National law of the Republic of Lithuania 
13 The Law on CIT provides that: 
13.1. Article 3(1) of the Law on CIT provides that corporate income tax is payable 
by Lithuanian entities and foreign entities. Article 2(3) of the Law on CIT 
provides that a foreign entity is a foreign legal person or organisation having its 
registered office in a foreign State and established or otherwise organised under 
the laws of that foreign State, as well as any other taxable entity established, 
incorporated or otherwise organised abroad; 
13.2. Article 4(3)(2) of the Law on CIT provides that the tax base of a foreign 
entity is to be ‘income sourced in the Republic of Lithuania and received by a 
foreign entity otherwise than through permanent establishments in the territory of 
the Republic of Lithuania’, and Article 4(4)(2) of the Law on CIT provides that 
‘income sourced in the Republic of Lithuania and received by a foreign entity 
otherwise than through permanent establishments in the territory of the Republic 
of Lithuania shall include income from distributed profits’. 
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13.3. Article 34(1) of the Law on CIT (version of Law No XII-2262 of 22 March 
2016) states that ‘dividends received by foreign entities for the shares, portion of 
capital or other rights held in a Lithuanian entity shall be subject to a corporate 
income tax rate of 15%. The tax shall be calculated, withheld and paid to the 
budget by the Lithuanian entity paying the dividends not later than by the [tenth] 
day of the month following the month during which the dividends were paid’. 
Article 34(2) provides that ‘dividends paid by a Lithuanian entity to a foreign 
entity which holds for an uninterrupted period of at least 12 months, including the 
moment of distribution of dividends, at least 10% of voting shares (interests, 
member shares) in the Lithuanian entity shall not be subject to taxation, except for 
the cases where the foreign entity receiving the dividends is registered or 
otherwise organised in target territories’. 
13.4. Article 32(6) of the Law on CIT (version of Law No XII-2262 of 22 March 
2016) states that ‘the provisions of Article 34(2) … of this Chapter […] relating to 
non-taxation of dividends shall not apply to an arrangement or a series of 
arrangements which, having been put into place for the main purpose or one of the 
main purposes of obtaining a tax advantage that defeats the object or purpose of 
Council Directive 2011/96/EU of 30 November 2011 on the common system of 
taxation applicable in the case of parent companies and subsidiaries of different 
Member States, are not genuine having regard to all relevant facts and 
circumstances. An arrangement may comprise more than one step or part. An 
arrangement or a series of arrangements shall be regarded as not genuine to the 
extent that they are not put into place for valid commercial reasons which reflect 
economic reality’. 
Double Taxation Convention between the Republic of Lithuania and the 
Republic of Cyprus 
14 Paragraphs 1 and 2 [of Article [10] of the Convention between the Government of 
the Republic of Lithuania and the Government of the Republic of Cyprus for the 
avoidance of double taxation and the prevention of fiscal evasion with respect to 
taxes on income (‘the Lithuania Cyprus Convention’) of 21 June 2013 provide for 
the allocation of the competence for the taxation of dividends between these two 
Member States. Paragraph 1 of that Article provides that ‘dividends paid by a 
company which is a resident of a Contracting State to a resident of the other 
Contracting State may be taxed in that other State’. Article 10(2) of the Lithuania 
Cyprus Convention provides that ‘such dividends may also be taxed in the 
Contracting State of which the company paying the dividends is a resident and 
according to the laws of that State, but if the beneficial owner of the dividends is a 
resident of the other Contracting State, the tax so charged shall not exceed: 
(a) 0 per cent of the gross amount of the dividends if the beneficial owner is a 
company (other than a partnership) which holds directly at least 10 per cent of the 
capital of the company paying the dividends; 
(b) 5 per cent of the gross amount of the dividends in all other cases. 
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This paragraph shall not affect the taxation of the company in respect of the 
profits out of which the dividends are paid’. 
Facts of the main proceedings and arguments of the parties 
15 It has been established in the case as follows: 
15.1. The applicant is a legal person with limited civil liability incorporated in the 
Republic of Lithuania, 100% of whose shares have been held by RETAL 
INDUSTRIES LIMITED (‘RETAL INDUSTRIES’), a company incorporated in 
Cyprus, from 10 August 2005 to the present date and during the period in which 
dividends were paid; 
15.2. By decisions of its sole shareholder RETAL INDUSTRIES dated 
27 October 2016 and 30 October 2017, the applicant, allocated and paid 
EUR 15,000,000 as dividends to its shareholder RETAL INDUSTRIES. In 
addition, another Lithuanian company, in which RETAL INDUSTRIES also has a 
100% shareholding, by two decisions of its sole shareholder RETAL 
INDUSTRIES dated 31 October 2016 and 30 October 2017, allocated and paid 
EUR 13,485,032 as dividends to its sole shareholder RETAL INDUSTRIES. In 
total, EUR 28,485,032 in dividends was paid to RETAL INDUSTRIES. At the 
time of the allocation and payment of the dividends, RETAL INDUSTRIES held 
100% of the shares of the applicant, and the applicant applied the ‘participation 
exception’ rule laid down in Article 34(2) of the Law on CIT and did not withhold 
the corporate income tax in Lithuania; 
15.3. Having carried out a tax inspection of whether the calculation, declaration 
and payment of the applicant’s corporate income tax for the years 2016 to 2017 
was correct, the Inspectorate noted that the amount of dividends paid to the 
applicant’s shareholder RETAL INDUSTRIES in the years 2016 to 2017 (in total 
EUR 15,000,000), in accordance with the provisions of Article 32(6) of the Law 
on CIT, establishing the national anti-abuse rule for the exemption of dividends 
(‘the national anti-abuse rule’), ought to have been subject to corporate income tax 
at a rate of 15% withheld in Lithuania. 
16 The Inspectorate based its conclusion on the following basic facts as regards the 
national anti-abuse rule applied in the case: 
16.1. As regards the business of RETAL INDUSTRIES. The majority of RETAL 
INDUSTRIES’ total operating income in 2016 and 2017 consisted of dividend 
income (95% in 2016 and 93.04% in 2017), and the majority of dividend income 
consisted of dividends received from the applicant and another Lithuanian 
company (approximately 88% in 2016 and nearly 74% in 2017); according to the 
corporate income tax returns of RETAL INDUSTRIES submitted by the Cypriot 
tax authorities for the years 2016 to 2017, RETAL INDUSTRIES attributed the 
dividends received by it in the amount of EUR 35,530,446 to the income which is 
exempt from corporate income tax. 
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16.2. As regards the transfer of shares in RETAL INDUSTRIES. The shares in 
RETAL INDUSTRIES were sold to PPH for an amount of EUR 310,400,000, 
with payment deferred until 18 January 2027 and with no security for settlement. 
That is to say, on 18 January 2017, the shareholder of RETAL INDUSTRIES 
changed from the Belizean company CLENDON HOLDINGS INC 
(‘CLENDON’), a former shareholder of RETAL INDUSTRIES between 
21 September 2007 and 18 January 2017, to PPH (a company incorporated in 
Cyprus on 24 October 2016, with a share capital of EUR 1,000). In 2016 to 2017, 
RETAL INDUSTRIES did not pay dividends to its shareholder CLENDON. On 
the change of ownership of the shares in RETAL INDUSTRIES from CLENDON 
to PPH, the ultimate beneficiary, i.e. PG (the shareholder and beneficiary of 
CLENDON, ‘PG’), remained the same. 
16.3. As regards the business of PPH. PPH owned 100% of the shares in RETAL 
INDUSTRIES and 0.0155% of the shares in JSC RETAL (the remaining 99.845% 
of the shares were held indirectly by PPH through RETAL INDUSTRIES). PPH 
had no employees; PPH’s income between 24 October 2016 and 31 December 
2018 consisted of: dividend income of EUR 59,152,418 (over 99% of total 
income), classified as income exempt from corporate income tax; PPH did not 
distribute any of its profits to shareholders in the period from 24 October 2016 to 
31 December 2018. 
16.4. As regards the amounts of payments and liabilities overlapping that is to say, 
being the same. The Inspectorate found that the total amount of dividends paid by 
the applicant and another Lithuanian company to RETAL INDUSTRIES in 2016 
to 2017 amounted to EUR 28,485,032, which was, in essence, the same as the 
amount of dividends paid by RETAL INDUSTRIES to the Cypriot company PPH, 
i.e. EUR 28,880,865.12, in accordance with the decisions of the sole shareholder 
dated 20 September 2017, 13 October 2017, 23 October 2017, 16 November 2017 
and 22 March 2018. It has been established that, as at 31 December 2017, PPH’s 
long-term liabilities to PG in the amount of EUR 310,400,000 consisted of PPH’s 
liabilities (for the shares in RETAL INDUSTRIES) to CLENDON, which, 
according to the Inspectorate, were transferred by CLENDON to the ultimate 
beneficiary PG in direct transactions, taking into account the overlapping amounts 
and time at which payment of the liabilities was due It was found that in 2017 to 
2018 PPH granted loans to PG in the amount of EUR 21,540,865 and that PG 
assigned rights to debts owed by debtors of PPH in the amount of EUR 7,374,463 
(the total amount of EUR 28,915,328). In addition, loans of EUR 21,540,865 
granted by PPH to PG between 2017 and 2018 (under loan agreements dated 
20 September 2017, 16 November 2017 and 22 March 2018) and a liability of PG 
towards PPH in the amount of EUR 7,374,463 for the assignment of the rights to 
the debts owed by PPH’s debtors of EUR 7,374,463 were offset in 2018 against a 
cash liability of PPH to PG. 
17 Taking into account those four sets of circumstances and the fact that the applicant 
paid the first dividend of EUR 5,000,000 to RETAL INDUSTRIES in November 
2016, i.e. three months before the transfer of 100% of RETAL INDUSTRIES 
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shares to PPH and one month after the incorporation of PPH, the Inspectorate 
concluded that the chain of transactions, where the shares in REAL 
INDUSTRIES, which owns 100% of the shares in the applicant and RETAL 
LITHUANIA, were sold to PPH, a newly established company, in a short period 
of time (less than three months after its establishment) for EUR 310,400,000 (at 
the same price paid by CLENDON ten years earlier, i.e. in 2007, for 100% of the 
shares in RETAL INDUSTRIES from an unrelated person), while the ultimate 
beneficiary, that is to say, PG, remained the same and was paid significant sums 
of money (in the form of loans and assignments of rights) as a result of these 
transactions, the source of which was dividends paid by the Lithuanian 
companies – the applicant and another Lithuanian company – do not reflect the 
economic reality and those transactions were carried out artificially in order to 
create a formal indebtedness of PPH to CLENDON for the acquisition of the 
shares in RETAL INDUSTRIES, and subsequent indebtedness also to PG, so as to 
create the impression that the dividends received from the Lithuanian companies 
were used to cover those debts. 
18 The Inspectorate found that, in accordance with the provisions of the national anti-
abuse rule, a group of economic transactions was considered an arrangement 
which is not genuine, as PPH acquired the shareholding in RETAL INDUSTRIES 
from CLENDON, thereby formally creating PPH’s debt to CLENDON, and 
subsequently to PG, while after the acquisition all these companies were indirectly 
managed by the same person, PG, and the applicant paid dividends to PPH 
through RETAL INDUSTRIES with the aim of obtaining a tax advantage by 
avoiding the payment of tax on the dividend. Accordingly, the applicant has 
infringed Article 34(2) of the Law on CIT and has unjustifiably avoided corporate 
income tax by taking advantage of the exemption from taxation of dividends 
provided for in that Article (by applying a 0% corporation tax rate). 
The applicant’s main arguments 
19 The applicant takes the position that the dividends paid to its shareholder RETAL 
INDUSTRIES in 2016 to 2017 are not subject to corporate income tax at source 
and relies on the following main considerations: 
19.1. The national anti-abuse rule does not apply to the applicant because: […] 
RETAL INDUSTRIES was not and is not an arrangement which is not genuine, 
its activities are in line with economic reality, i.e. it is a real company with a real 
business substance (in the Decision the Inspectorate does not argue to the 
contrary); the mere fact of having the status of a real recipient of dividends should 
not mean that an arrangement which is not genuine does not exist in the 
relationship between the payer of the dividend and the actual recipient of the 
dividend, and therefore there is no reason to apply the anti-abuse rule laid down in 
Directive 2011/96/EU. 
19.2. The conclusion of the transactions referred to by the Inspectorate did not 
give rise to any new advantage for the dividends paid to RETAL INDUSTRIES 
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by the applicant and RETAL LITHUANIA which did not exist before the 
conclusion of those transactions, since RETAL INDUSTRIES has been a 
shareholder of the applicant since 2005 and has received dividends in the past, and 
therefore the applicant did not obtain any tax advantage necessary for the 
application of the national anti-abuse rule. 
19.3. RETAL INDUSTRIES is not and cannot be considered as ‘an arrangement 
which is not genuine’ also in the light of the interpretation in the CJEU’s 
judgment (judgment of 26 February 2019, Danmark and Y Denmark Aps, joined 
cases C-116/16 and C-117/16, […] EU:C:2019:135). 
19.4. RETAL INDUSTRIES is a company which has been in existence since 
2000, the content of which was not questioned by the Inspectorate, which receives 
various types of income (not only dividends) from a number of companies it 
manages, and which uses the proceeds for the discretionary activities it carries out 
(including investments, lending, etc.), while the chain of transactions listed in the 
Decision and the identification of the ultimate beneficiary does not in any way 
contradict the fact that RETAL INDUSTRIES is the real beneficiary and owner of 
the dividends paid by the applicant in the years 2016 to 2017. 
19.5. The dividends paid by the applicant to RETAL INDUSTRIES in 2016-2017 
could not have been taxed in Lithuania under national law (the Law on CIT) on 
the basis of the provisions of Article 10(1)(a) of the Lithuania Cyprus Convention, 
and the Inspectorate bases the additional taxation of the applicant’s dividends 
exclusively on the provisions of national (and EU) law, unjustifiably ignoring the 
provisions of the Lithuania Cyprus Convention and their legal supremacy in 
relation to the national rules. In accordance with the commentary to the 
Organisation for Economic Co-operation and Development (OECD) Model Tax 
Convention on Income and on Capital (the ‘OECD Model Convention’), 1 RETAL 
INDUSTRIES is the beneficial owner of the payment of dividends as provided for 
in the Lithuania Cyprus Convention, i.e. it is the economic owner of all the funds 
it receives (including the disputed dividends), which it had the right to use and 
used at its own discretion. 
19.6. In its Decision, the Inspectorate presents an unsubstantiated assessment of 
the facts and follows an unsubstantiated assumption that the dividends received 
from the applicant and RETAL LITHUANIA were not used for the business of 
RETAL INDUSTRIES. The case file clearly confirms the opposite. The dividends 
paid by the applicant were used specifically for the business of RETAL 
INDUSTRIES, therefore the conclusions of the Inspectorate’s Decision conflict 
with the objective factual findings in the case. 
19.7. According to the information available to the applicant, the transactions 
which the Inspectorate regards as non-genuine transactions fully reflect the 
 
1 Link: https://www.oecd.org/en/publication/model-tax-convention-on-income-and-on-capital-
condensed version-2017_mtc_cond-2017-en.html 
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economic reality and were determined by the ultimate beneficiary’s objective  to 
exclude from the group’s corporate structure any companies located in the 
offshore territories and to transfer the management of the group’s parent company 
to the European Union (Cyprus), and for that reason the Inspectorate failed to 
substantiate either who obtained the alleged tax benefit or how it was obtained, 
nor did it substantiate the alleged tax benefit. 
20 The applicant is of the view that the Inspectorate, in calculating the additional 
amount of corporate income tax, has (i) misinterpreted and misapplied both the 
national anti-abuse rule (Article 32(6) of the Law on CIT) and the provisions of 
EU law (Articles 1(2) and (3) of Directive 2011/96/EU [as amended]), (ii) ignored 
the interpretations given in the aforementioned CJEU judgment which were 
submitted to prove abuse for the purposes of Directive 2011/96/EU, and (iii) has 
failed to demonstrate any tax benefit for the applicant. In addition, the 
Inspectorate breached Article 10(2)(a) of the Lithuania Cyprus Convention and 
the principle of primacy of international treaties. The applicant therefore requests 
the Inspectorate’s Decision be set aside as unlawful and invalid. 
Reasons for the request for a preliminary ruling 
21 The common minimum anti-abuse rule in Directive 2011/96 was included in order 
to prevent misuse of Directive 2011/96 and to ensure greater consistency in its 
application in different Member States ([recital 5] of Directive 2015/121/EU). 
Questioning whether a practice such as that in the case in the main proceedings is 
compatible with the objectives of Directive 2011/96/EU, the Tax Disputes 
Commission has decided that it is appropriate to refer the matter to the CJEU for 
clarification of the application of the anti-abuse rule of Directive 2011/96/EU 
relevant to the dispute. 
In deciding to refer the matter to the CJEU, the Tax Disputes Commission noted 
that diverging or conflicting positions on the interpretation of EU law and CJEU 
case-law were clearly reflected in the parties’ pleadings and in the views 
expressed during the hearing of the Tax Disputes Commission. The Inspectorate 
and the applicant diverge, in essence, on the interpretation and application of the 
anti-abuse rule of Directive 2011/96/EU in the case in the main proceedings, i.e. 
on the purpose and scope of the application of the anti-abuse rule and on the 
conditions for, and the consequences of, recognising an arrangement which is not 
genuine. 
The CJEU has already examined situations involving arrangements which are not 
genuine using intermediary companies which transfer the dividends received to 
another company within the group, which is the beneficial owner (see, for 
example, judgment of 26 February 2019, Danmark and Y Denmark Aps, joined 
cases C-116/16 and C-117/16, […] EU:C:2019:135). However, in the case before 
the Tax Disputes Commission, the dividends are paid to a real entity which, in the 
tax authorities’ view, is a participant in a chain of non-genuine transactions. The 
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CJEU has not yet ruled on the interpretation of the provisions of the anti-abuse 
rule of Directive 2011/96/EU in a case such as that at issue in the main 
proceedings. The clarifications provided would contribute to a more consistent 
application of the anti-abuse rule from one Member State to another. 
Recital 8 of Council Directive (EU) 2015/121 of 28 January 2015 amending 
Directive 2011/96/EU on the common system of taxation applicable in the case of 
parent companies and subsidiaries of different Member States (‘Directive 
2015/121/EU’) […] states that Member States should be able to use the anti-abuse 
clause also to tackle those specific steps or parts, without prejudice to the 
remaining genuine steps or parts of the arrangement. That would maximise the 
effectiveness of the anti-abuse clause while guaranteeing its proportionality. Thus, 
the application of the anti-abuse rule, which is enshrined both in Directive 
2011/96/EU and in Lithuanian national law, must respect the principles of 
effectiveness and proportionality, as well as the general logic of the rule. 
22 The first question referred. The CJEU has held that where a tax authority of the 
source Member State seeks, on a ground relating to the existence of an abusive 
practice, to refuse to grant the exemption provided for in Article 5 of Directive 
90/435 to a company that has paid dividends to a company established in another 
Member State, it has the task of establishing the existence of elements constituting 
such an abusive practice while taking account of all the relevant factors, in 
particular the fact that the company to which the dividends have been paid is not 
their beneficial owner; in that regard such an authority has the task not of 
identifying the beneficial owners of those dividends but of establishing that the 
supposed beneficial owner is merely a conduit company through which an abuse 
of rights has been committed (see, for example, judgment of 26 February 2019, 
Danmark and Y Denmark Aps, joined cases C-116/16 and C-117/16, […] 
EU:C:2019:135, paragraphs 117-118). 
The fact that a company acts as a conduit company may be established where its 
sole activity is the receipt of dividends and their transmission to the beneficial 
owner or to other conduit companies. The absence of actual economic activity 
must, in the light of the specific features of the economic activity in question, be 
inferred from an analysis of all the relevant factors […] (see, for example, 
judgment of 26 February 2019, Danmark and Y Denmark Aps, joined cases 
C-116/16 and C-117/16, […] EU:C:2019:135, paragraph 104). 
If the above-mentioned interpretations of the CJEU are applied to the 
circumstances of the case in the main proceedings, the fact that the company to 
which the dividends were paid is not the beneficial owner of the dividends would 
appear to be relevant to the finding of abuse. However, the status of RETAL 
INDUSTRIES as a genuine economic operator has not been contested in the 
dispute. The Inspectorate does not believe RETAL INDUSTRIES, as an entity, to 
be an arrangement which is not genuine created for reasons which do not 
correspond to the economic reality. 
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The taxation of the applicant’s dividends is based on a chain of onward payments 
of dividends from one EU Member State to another EU Member State made in 
that other EU Member State by tax residents of that other EU Member State, and 
taking into account the change of shareholders and the use of the dividends. 
According to its Decision, in the case in the main proceedings the Inspectorate 
considers as an arrangement which is not genuine a chain of transactions, where a 
newly established company, PPH, to which the shares of RETAL INDUSTRIES, 
owner of 100% of the shares of the applicant, were sold in a short period of time, 
less than three months after its establishment, for EUR 310,400,000, while the 
ultimate beneficiary, that is to say, PG, remained the same and was paid 
significant sums of money (in the form of loans and assignments of rights) as a 
result of those transactions, the source of which was dividends paid by Lithuanian 
companies, including the applicant. 
In its Decision, the Inspectorate maintains that the transactions were not genuine, 
did not reflect economic reality and were intended to formally create a formal 
indebtedness of PPH to CLENDON for the acquisition of the shares in RETAL 
INDUSTRIES, and subsequently to create a formal indebtedness of PPH to PG, as 
a result of which the dividends received from Lithuanian companies, including the 
applicant, were used to cover those debts. The Inspectorate argues that that was 
done in order to obtain a tax advantage by avoiding the payment of tax on 
dividends, and that the Inspectorate has therefore, in accordance with the national 
anti-abuse rule, calculated the amount of EUR 2,250,000 of corporate income tax 
due by the applicant on the dividends paid in 2016 - 2017 to the parent company 
RETAL INDUSTRIES. 
The applicant, disagreeing with the Inspectorate’s position, points out that RETAL 
INDUSTRIES did pursue actual economic activities, used the dividends received 
for its usual business (granting and repaying loans, paying for goods), and acted as 
the real (beneficial) owner of the dividends, it was not bound by any of the 
features characteristic of intermediary companies, such as the obligation to 
transfer the dividends received immediately or within a very short period of time 
to third parties who would be regarded as the beneficial owners of the dividends, 
not to use dividends for its own business, etc. In addition, the applicant notes that 
RETAL INDUSTRIES is the beneficial owner of the dividends paid by the 
applicant between 2016 and 2017, as understood under the Lithuania Cyprus 
Convention and the OECD Model Convention, that is to say, it is the economic 
owner of all the funds received by it (including the disputed dividends) and had 
the right to use and did actually use the funds at its own discretion. As the 
Inspectorate established, RETAL INDUSTRIES is a company which is actually 
operating, has held the shares of the applicant since 2005, is engaged in 
investment and other activities related to the production and marketing of plastic 
products, registered as an employer in Cyprus since 2015, and has sufficient 
resources to ensure the pursuit of those activities. The case files contain no 
evidence that RETAL INDUSTRIES was obliged to use the dividends it received 
for a predetermined purpose (for example, to pay dividends to PPH). 
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In the light of the uncertainties which have arisen as to the significance of the 
status of a recipient of dividends, by its first question the Tax Disputes 
Commission is seeking to establish whether a practice, such as that which has 
arisen in the case in the main proceedings, in which the tax authorities apply the 
anti-abuse rule to the applicant when taxing the latter, where the recipient of 
dividends, RETAL INDUSTRIES, is a company which is actually active, but 
where dividends paid through that company have been used as a source for the 
purpose of effecting non-genuine transactions, is compatible with the objectives of 
Directive 2011/96/EU. 
[…] [the first question referred] 
23 The second question referred. The Inspectorate identifies as one of the criteria 
determining the tax authorities’ conclusion (i) the similarity between the amounts 
of dividends paid by the applicant and another Lithuanian company to the 
dividends paid by RETAL INDUSTRIES to PPH and (ii) the similarity of the 
amounts of the liabilities of PPH and PG and those of PPH and CLENDON. The 
majority of the dividends received by RETAL INDUSTRIES consisted of 
dividends paid by Lithuanian companies (the applicant and another Lithuanian 
company). Of the total amount of dividends received by RETAL INDUSTRIES in 
2016, approximately 88% were from Lithuanian companies, and in 2016 the 
amount was approximately 74%. The total amount of dividends paid to RETAL 
INDUSTRIES amounted to EUR 28,485,032, which was, in essence, the same as 
the amount of dividends of EUR 28,880,865 paid by RETAL INDUSTRIES to 
PPH pursuant to the decisions of its sole shareholder. The amount of dividends 
received by PPH from RETAL INDUSTRIES pursuant to the decisions of the sole 
shareholder was, in essence, the same as the amount of loans received by PG from 
PPH and the amount of the rights assigned by PPH to PG in respect of debts owed 
by PPH debtors (EUR 28,915,328). 
By its the second question, the Tax Disputes Commission is seeking to clarify 
whether a chain of dividend transfers can be presumed on the basis of the amounts 
of dividends transferred in the chain of transactions corresponding (similar 
amounts in similar periods). 
[…] [the second question referred] 
24 The third question referred. With regard to the taxation of the applicant’s 
dividends, the Inspectorate does not rely in its Decision on RETAL INDUSTRIES 
as an entity being artificial or genuine, but on a chain of transactions which took 
place essentially before and after the cross-border payment of dividends from one 
EU Member State to another, carried out in that other EU Member State by tax 
residents of that other EU Member State. 
By its third question, the Tax Disputes Commission seeks to clarify whether, for 
the purposes of the anti-abuse rule, it is compatible for the effect to apply in the 
first chain of dividend payments, where (i) the non-genuine transactions which 
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lead to the chain of transactions being recognised as an arrangement involving 
persons from other EU Member States, took place in another EU Member State, 
and (ii) the source of those transactions was dividends paid by Lithuanian entities. 
The Tax Disputes Commission has doubts regarding the extent to which the 
actions of the Inspectorate, taken to investigate the subsequent actions of the 
shareholders and the group companies, are justified and in line with the principle 
of proportionality and effectiveness. 
[…] [the third question referred] 
25 The fourth question referred. One of the preconditions for the application of the 
national anti-abuse rule and, consequently, of the general anti-abuse rule laid 
down in Articles 1(2) and (3) of Directive 2011/96/EU, is the need to determine 
that the main purpose or one of the main purposes for which the arrangement is 
established is to obtain a tax advantage. 
The parties’ positions on the question of a tax benefit differ. 
The Inspectorate argues that a tax advantage was sought by avoiding tax on 
dividends, as the dividends during the period under review were paid through a 
chain of transactions which was artificially created, not for economic gain, and 
which corresponded to an arrangement which is not genuine and which was set up 
for reasons other than for sound commercial reasons. The applicant argues that the 
tax advantage cannot consist in the non-payment of a tax which would not apply if 
the chain of transactions were eliminated. On the other hand, in the applicant’s 
view, even if the question of possible evasion or non-payment of taxes at the level 
of the ultimate beneficiary were to be raised, such questions should first be 
investigated, examined and answered by the Cypriot tax authorities, in whose 
jurisdiction both the beneficial owner of the dividends, RETAL INDUSTRIES, 
and its shareholder, PPH, as well as, likely, the ultimate beneficiary, PG, are 
domiciled. 
The Tax Disputes Commission therefore seeks to clarify whether a tax benefit for 
the applicant, as a participant in a chain of transactions, can be recognised if, due 
to the creation of such a chain, the ultimate beneficiary PG received a tax benefit, 
where the dividends paid by the applicant are used to earn that benefit. 
[…] [the fourth question referred] 
26 The fifth question referred. The CJEU has found that an indication of the 
existence of an arrangement intended to obtain improper […] exemption […] is 
that all or almost all of the aforesaid dividends are, very soon after their receipt, 
passed on by the company that has received them to entities […] (see e.g. 
judgment of 26 February 2019, Danmark and Y Denmark Aps, joined cases 
C-116/16 and C-117/16, […] EU:C:2019:135, paragraph 101). In the case at issue, 
it is established that the first dividends were paid by the applicant to RETAL 
INDUSTRIES for the audited period between 2016 and 2017 on a continuous 
basis (from one year to one month). By its fifth question, the Tax Disputes 
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Commission seeks to clarify whether it is relevant for the assessment of whether 
such an arrangement exists that the dividends of the parent company RETAL 
INDUSTRIES were paid over a continuous period rather than immediately. 
[…] [the fifth question referred] 
27 The sixth question referred. The applicant submits that neither the applicant nor 
the parent company RETAL INDUSTRIES knowingly (voluntarily and/or on its 
own initiative) participated in the transactions which were found not to be 
genuine. 
The tax authorities did not assess whether the applicant knew and/or could have 
known of the existence of the non-genuine transactions, but, the applicant is a 
subsidiary within a group of companies which is dependent on the decisions taken 
by its shareholder. 
The Tax Disputes Commission seeks to clarify the extent to which the applicant’s 
knowledge of its involvement in a chain of non-genuine transactions may have an 
impact on the application of the anti-abuse rule laid down in Directive 
2011/96/EU. 
[…] [the sixth question referred] 
28 With regard to a request for a preliminary ruling, the CJEU may, if necessary, 
provide the national legislation and national courts with guidance to assist them in 
their assessment of the specific case. 
29 According to the Tax Disputes Commission, a request to the Court of Justice at 
the pre-litigation stage of the tax dispute is appropriate in order to expedite the 
examination of tax disputes. 
The Tax Disputes Commission […][request to procedural law] decides as follows: 
1. […] [standard procedural wording] 
2. The following questions are referred to the Court of Justice of the European 
Union for a preliminary ruling: 
1. In circumstances such as those in the case in the main proceedings, is it 
compatible with the objectives of the anti-abuse rule of Directive 2011/96/EU for 
a national practice to exclude, in the State of the dividend payer, the possibility of 
exemption from withholding tax on dividends, where the dividends are paid to a 
genuine parent company operating in a different EU Member State, which, as 
such, is not an entity which is not genuine in so far as it carries on business, and 
the dividends are paid to it as the beneficial owner of the dividends, but which is 
recognised by the tax authorities as a participant in a chain of non-genuine 
transactions by reason of the payment/transfer of the dividends through it to the 
beneficial owner of the entire group of companies? 
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2. If the answer to the first question is in the affirmative, could the transfer of 
dividends in a chain be based on the correspondence of the amounts of dividends 
(similar and identical) transferred in a chain of transactions? 
3. In circumstances such as those in the case in the main proceedings, are the 
objectives of the anti-abuse rule of Directive 2011/96/EU, including the principle 
of proportionality referred to in [the recitals of] Directive 2015/121/EU, 
compatible with a national practice in which the tax authorities apply the anti-
abuse rule in the State in which the dividends are paid, even though the 
transactions, which have led to a chain of transactions being recognised as an 
arrangement (which the tax authorities regard as not genuine), were carried out in 
another EU Member State by tax residents in that another EU Member State? 
4. Does the anti-abuse rule in the State of the dividend payer give rise to a right 
to withholding tax on dividends where the tax benefit arises at any stage of the 
chain of transactions? Can the applicant be considered to have received a tax 
benefit contrary to the subject or purpose of Directive 2011/96/EU if, as a result of 
the creation of such a chain of transactions, a tax benefit is obtained by the 
ultimate beneficiary who uses the dividends paid by the applicant to earn such 
benefit? 
5. In circumstances such as those in the case in the main proceedings, can the 
provisions of Article 1(2) of Directive 2011/96/EU be interpreted as meaning that 
the application of the ‘participation exemption’ rule, which implements the 
provisions of Article 5 of Directive 2011/96/EU in national law, can be excluded 
on the grounds of the abuse of the right due to the use of dividends received, 
where the receipt and use of the dividends (the subsequent distribution of the 
profits) took place over a continuous period? 
6. In circumstances such as those in the case in the main proceedings, is a 
national practice in which the effect of the tax authority is applied to a dividend 
payer, without assessing whether the dividend payer was and/or could have been 
aware of the existence of a chain of non-genuine transactions, compatible with the 
objectives of the anti-abuse rule laid down in Directive 2011/96/EU? 
3. […] [standard procedural wording and composition of the Tax Disputes 
Commission]