Opinion of the Advocate General — ECLI:EU:C:2021:372
Date: 2021-05-06
Language of the case: Portuguese
Subject matter: Free movement of capital;Freedom to provide services
Procedure: Reference for a preliminary ruling
Origin: Portugal

summary, the applicant’s arguments are as follows. 
[Or. 2] Under Article 20(1)(c) of the Corporation Tax Code, dividends are classed 
as income from financial returns. 
Under national law, all dividends distributed by a resident company to a taxable 
person who is also resident in Portugal are subject to a 25% withholding tax at 
source.  
However, at the time the taxable events occurred, collective investment 
undertakings formed under national law were exempt from paying corporation tax 
on the dividends received, under Article 22(3) of the EBF as amended by Decree-
Law No 7 of 13 January 2015, which applied to income received from 1 July 
2015. 
In order to be formed as an investment undertaking under national law (the 
Regime Geral dos OIC (General Provisions governing Collective Investment 
Undertakings)) approved by Law No 16/2015, amended by Decree-Law No 124 
of 7 July 2015), an investment fund must be resident in Portugal. This means that 
a collective investment undertaking resident in another [omissis] EU Member 
State cannot be formed under national law and benefit from the exemption in 
Article 22 of the EBF. 
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While the formation of a collective investment undertaking in Portugal does not 
require prior authorisation from the Comissão do Mercado de Valores Mobiliários 
(Securities Market Commission, ‘CMVM’) under Article 19(1) of the General 
Provisions governing Collective Investment Undertakings, a collective investment 
undertaking must comply with numerous requirements, under the supervision of 
the CMVM. The same does not apply to collective investment undertakings 
formed under the law of [omissis] other [Member States of the European Union] 
[omissis], which come under the supervisory powers of the relevant regulatory 
authority in their own country. 
In 2015 (from July) and 2016, a collective investment undertaking formed under 
the General Provisions on Collective Investment Undertakings, which received 
dividends paid by companies which have their seat in Portugal was subject to 
more favourable tax rules than those that applied to a collective investment 
undertaking formed under the law of any other [omissis] EU [Member State] 
which received Portuguese dividends. 
This fact is all the more important when it comes to the applicant, which cannot 
obtain a refund in its State of residence (Germany) of the tax withheld at source 
(in Portugal), because it has tax-exempt status. 
As the Court of Justice held in [omissis] Verkooijen, C-35/98, dividends paid to 
the applicant by companies resident in Portugal can be classed as a movement of 
capital within the meaning of Article 63 TFEU and Directive 88/361/EEC of 
24 June 1988. 
According to the case-law of the Court of Justice, under EU law the following 
criteria are relevant for the purposes of determining the existence of 
discrimination: (i) comparable situations may not be [Or. 3] treated differently 
unless such treatment is objectively justified and is proportionate to the objective 
pursued by the national legislation ([omissis] Ruckdeschel, [omissis] 16/77, 
[omissis]; [omissis] Bachmann, [omissis] C-204/90); (ii) an appearance of 
discrimination in form may correspond in fact to an absence of discrimination in 
substance ([omissis] 13/63, [Commission v Italy] [omissis]); (iii) all 
discrimination on grounds of nationality is prohibited, because it restricts the 
fundamental freedoms established in the TFEU, and the prohibition therefore 
applies to any form of discrimination and any other criteria of differentiation 
which may lead to the same result (Commerzbank, [omissis] C-330/91); and (iv) 
in order to determine whether a provision of national law is discriminatory it is not 
necessary for the provision in question to affect a significant proportion of 
nationals from other Member States ([omissis] O’Flynn, [omissis] C-237/94, 
1996, [omissis]). 
It can be seen from EU case-law that the general prohibition established in 
Article 63 TFEU covers both direct and indirect restrictions, including 
administrative measures and practices regarding any type of investment.  
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According to the applicant, in this particular case one might think that, as it is not 
an undertaking formed in Portugal, the applicant is not in a comparable situation 
to that of a national collective investment undertaking. However, the applicant 
argues that it is a case of discriminatory treatment solely on grounds of nationality 
in respect of the free movement of capital and access to the capital market and 
that, therefore, for these purposes, the applicant and collective investment 
undertakings established in Portugal are indeed in comparable situations.  
Although the national legislation is not intended to introduce anti-abuse measures, 
the applicant considers that the legislation prevents it from benefiting from the 
exemption from corporation tax, because by law it cannot form an investment 
fund in Portugal because its management company does not have its seat in that 
country.  
It can be seen from the above that the treatment is discriminatory and a clear 
restriction on the free movement of capital, which is prohibited by Article 63 
TFEU and by Article 1 of Directive 88/361, because the applicant in these 
proceedings pays tax in Portugal on dividends received in that country, whereas 
collective investment undertakings formed under Portuguese law are exempt from 
paying tax on the same income (see the judgments of the Court of Justice in Cases 
C-338/11 to C-347/11 — [omissis] Santander Asset Management SGIIC, S.A. and 
C-480/16 — [omissis] Fidelity Funds). 
In that regard, the applicant considers that the provision in Article 22 of the EBF 
[omissis] is contrary to EU law, since it conflicts with the provisions in the TFEU 
[Or. 4] on the principle of non-discrimination on grounds of nationality and with 
the provisions on the free movement of capital in Article 63 TFEU. 
For its part, the Tax and Customs Authority argues as follows. 
The applicant has omitted two key aspects required for a comprehensive definition 
of the tax framework governing collective investment undertakings: 
– The first aspect relates to the decision by the legislature to ‘lighten’ the 
corporation tax burden on the taxable persons in question by deducting from 
the taxable amount the types of income generally received by collective 
investment undertakings, namely income from capital (Article 5 of the 
Corporation Tax Code), income from property (Article 8 of the Code) and 
capital gains (Article 10 of the Code), under Article 22(3) of the EBF, and 
also by providing an exemption from the municipal component of 
corporation tax and the national surcharge, under Article 22(6) of the EBF, 
with taxation being transferred onto stamp duty. (The general scale of stamp 
duty rates includes item 29, which establishes a quarterly tax at a rate of 
0.0025% of the net book value of collective investment undertakings that 
invest in money-market instruments and deposits, and at a rate of 0.0125% 
of the net book value of other collective investment undertakings. In this 
case, the taxable amount may therefore include dividends and it only applies 
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to collective investment undertakings that come within the scope of 
Article 22 of the EBF; collective investment undertakings formed and 
operating under foreign law are excluded.) 
– The other omission concerns the specific tax which, pursuant to 
Article 88(11) [omissis] of the Corporation Tax Code and Article 22(8) 
[omissis] of the EBF, is payable at a rate of 23% on dividends paid to 
collective investment undertakings which have their seat in Portugal where 
the shares on which the dividend was paid have not been held by the same 
taxable person for a continuous period of one year prior to the date on which 
the dividends become available and are not retained long enough to 
complete that period. 
With regard to the tax rules that applied until 31 December 2017 to investment 
funds formed in Germany, based on information taken from the Deloitte 
tax@hand website, available at 
www.taxathand.com/article/9698/Germany/2018/Taxation-of-investment-fund-
income-revised, the defendant tax authority argues as follows: 
(a) Until the above date, investment funds formed under German law were 
treated as tax-transparent investment vehicles. Consequently, investors in the 
investment fund in Germany were liable for tax on the income generated, 
regardless of whether the income was distributed. 
[Or. 5] (b) Distributed income and deemed distributed income (and also 
interim earnings) were generally classed as income from capital and taxed at 
a flat rate of 25%, plus a solidarity surcharge and, where applicable, church 
tax, which produced a maximum tax rate of 28.625%. The investment fund 
was required to publish daily and annual reports containing relevant 
information for tax purposes. 
Consequently, in the view of the Tax Authority, the tax rules applicable to 
collective investment undertakings formed under Portuguese law and those 
formed and established in Germany are not generally comparable, given that 
[omissis] the former are taxed under the corporation tax framework on taxable 
profits that include marginal returns, and are taxed primarily through the 
provisions on stamp duty, whereas the latter were exempt from tax on income and 
also, it would seem, from other taxes.  
Moreover, [omissis] although, because of its tax-exempt status, the applicant 
cannot obtain a refund in its State of residence (Germany) of the tax withheld at 
source (in Portugal), it has not been demonstrated that the part of the tax that was 
not refunded to the investment fund cannot be reclaimed by the fund’s investors. 
The purpose of Article 63 [omissis] TFEU [omissis] is to ensure the free 
movement of capital both within the European internal market and between that 
market and third countries, and there is a prohibition on any restrictions or 
discrimination that are the result of national legislation that treats institutions from 
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[other Member States] [omissis] or third countries differently for tax purposes and 
creates economic conditions that are more disadvantageous for such institutions 
and could dissuade them from investing in Portugal.  
The Tax Authority goes on to argue that, in the present case, the situations cannot 
be said to be objectively comparable, because the taxation of dividends is 
governed by different mechanisms, and there is nothing to indicate that the tax 
burden on the dividends received by collective investment undertakings to which 
Article 22 [omissis] of the EBF [omissis] applies is lower than the tax burden on 
dividends received by the applicant in Portugal. 
There is indeed an appearance of discrimination in the form in which dividends 
distributed by resident companies to non-resident collective investment 
undertakings are taxed, but this does not correspond to discrimination in 
substance. 
In conclusion, the Tax Authority maintains that, although the tax rules that apply 
to collective investment undertakings formed under national law establish an 
exemption for dividends distributed by resident companies, that does not mean 
that the income in question is not taxed, whether specifically (through corporation 
tax) or under the stamp duty framework, when the income in question constitutes 
part of the net book value of the collective investment undertakings in question. 
Therefore, in essence, the situation of those collective investment undertakings 
and the situation of investment [Or. 6] funds formed and established in other 
[Member States] [omissis] which receive Portuguese dividends cannot be said to 
be objectively comparable.  
Facts 
Following an examination of the documentary evidence submitted in the 
proceedings, with the agreement of the parties, the following facts are judged to 
be proven. 
1. The applicant is a collective investment undertaking formed under a contract 
made under German law. It has its seat in Germany and is managed by an 
investment fund management company, which also has its seat in Germany. It is 
liable for corporation tax in Portugal as a non-resident with no permanent 
establishment in that country.  
2. The undertaking is an independent open-ended investment fund, based on a 
contract between the management company, the investors and the bank 
responsible for holding the securities, the sole purpose of which is to administer, 
manage and invest its assets.  
3. As the applicant investment fund is not constituted as a company there is no 
requirement for it to register with the German companies registry, as it cannot 
hold rights and obligations. 
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4. Under the provisions of German law by which they are governed, the investment 
fund’s assets are jointly owned with the investors; the management company 
invests the fund’s capital in its own name.  
5. The shares or units acquired by investors do not give them voting rights or power 
to dispose of the assets of the applicant collective investment undertaking: that 
power belongs solely to the management company, and the investors’ only rights 
are to receive dividends and to request repayment of the value of their shares or 
units at any time.  
6. Both the applicant investment fund and its management company come under the 
supervision of the Bundesanstalt fur Finanzdienstleistungsaufsicht (Federal 
Financial Supervisory Authority, ‘BaFin’). 
7. The applicant is a collective investment undertaking that is resident in Germany 
for tax purposes and subject to corporation tax in that country, although it is 
exempt from payment of the tax under Paragraph 1(1) of the German Corporate 
Income Tax Code and Paragraph 11(1),(2) of the German Investment Tax Act. 
This means that it cannot reclaim tax paid abroad in the form of a tax credit on 
grounds of international double taxation or apply for a refund of the tax payments.  
[Or. 7] 8. During 2015 and 2016, the applicant held shares in various companies 
resident in Portugal. The shares were deposited with BNP Paribas Securities 
Services, which was the custodian of the securities held in Portugal.  
9. The dividends received by the applicant in 2015 and 2016 were taxed at source in 
full discharge of its liability at a rate of 25% under Article 87 [omissis] (4)(c) of 
the Corporation Tax Code. The total amount of tax was EUR 39 371.29, which 
was paid to the Government under tax returns No 80447153102 (December 2015) 
and No 80460582763 (May 2016). 
10. For 2015, the applicant obtained a refund of EUR 5 065.98 under the Convention 
for the Avoidance of Double Taxation between Portugal and Germany, which 
establishes a tax rate of 15% for dividends. 
11. On 29 December 2017, the applicant lodged an administrative appeal against the 
acts withholding corporation tax at source in 2015 and 2016. In its appeal, it 
sought to have those acts overturned on the ground that they were in direct breach 
of Community law; it also sought a ruling that it was entitled to a refund of the tax 
incorrectly paid in Portugal.  
12. The applicant was notified on 13 November 2018 that its administrative appeal 
had been rejected. 
13. The application [omissis] [for arbitration] was received by the Centre for 
Administrative Arbitration on 12 February 2019. 
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14. The applicant is seeking to have the withholding at source of the remaining 
amount, namely EUR 34 305.31, declared void. 
Portuguese tax legislation in force at the time the events took place that is 
relevant to a decision in the proceedings 
– Statute of Tax Benefits 
‘Article 22 — Collective Investment Undertakings 
1 — The following shall be liable for corporation tax in accordance with the 
terms of this article: funds investing in transferable securities, property 
investment funds, transferable securities investment companies and property 
investment companies that are formed and operate under national law. 
[omissis]  
3 — For the purposes of determining taxable profits, the following shall be 
disregarded: the income referred to in Articles 5, 8 and 10 of the Corporation Tax 
Code, unless it comes from undertakings whose residence or seat is in a country, 
territory or region where significantly more favourable tax rules apply and which 
is included on the list approved by Order of the Government Minister [Or. 8] 
responsible for finance and revenue; any costs in connection with such income or 
provided for in Article 23A of the Corporation Tax Code; and income ― 
including discounts ― and costs in respect of management fees or other fees paid 
to the undertakings referred to in paragraph 1. 
[omissis] 
6 — The undertakings referred to in paragraph 1 shall be exempt from payment of 
the municipal component and national surcharge [on corporation tax]. 
7 — In the case of mergers, demergers and subscriptions in kind involving any 
undertakings referred to in paragraph 1, including those lacking legal 
personality, Articles 73, 74, 76 and 78 of the Corporation Tax Code shall apply, 
mutatis mutandis; the rules on contributions of assets in Article 73(3) of the 
Corporation Tax Code shall apply to subscriptions in kind. 
8 — The specific tax rates established in Article 88 of the Corporation Tax Code 
shall apply, mutatis mutandis, to these arrangements.  
[omissis] 
10 — There shall be no requirement to withhold corporation tax at source in 
respect of income obtained by the taxable persons referred to in paragraph 1.  
[omissis] 
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14 — The provisions in paragraph 7 shall apply to the transactions referred to in 
that paragraph which involve undertakings whose seat, effective management or 
registered office is in Portuguese territory or in another Member State of the 
European Union or in the European Economic Area and, in the latter case, 
provided that there is an administrative cooperation obligation over the exchange 
of information and assistance in the recovery of taxes equivalent to that which 
exists within the European Union.  
15 — The undertakings that manage the investment companies or funds referred 
to in paragraph 1 shall be jointly and severally liable for the tax debts of the 
investment companies or funds they manage. 
[omissis].’ 
– Corporation Tax Code 
‘Article 3 — Taxable amount 
1 — Corporation tax shall be payable on: 
[omissis] 
(d) income in the categories to which personal income tax applies, and capital 
gains obtained by the undertakings listed in paragraph 1(c) of the previous article 
which do not have a permanent establishment or which have a permanent 
establishment but cannot attribute the said gains to that establishment . 
[omissis]’ 
‘Article 4 — Scope of the tax liability 
[omissis] 
[Or. 9] 2 — Legal persons and other undertakings that do not have either their 
seat or their centre of effective management in Portuguese territory shall be liable 
for corporation tax only in respect of the income they obtain in the said territory. 
3 — For the purposes of the previous paragraph, income obtained in Portuguese 
territory shall mean income attributable to a permanent establishment situated in 
Portuguese territory and income which does not satisfy this requirement but 
which is listed below: 
[omissis] 
(c) the categories of income listed below where the person making the payment 
has his residence, seat or centre of effective management in Portuguese territory 
or where payment of the income is attributable to a permanent establishment 
situated in Portuguese territory: 
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[omissis] 
(3) other income from capital; 
[omissis]’ 
‘Article 87 — Tax rates 
[omissis] 
4 — The rate of corporation tax applicable to income obtained by undertakings 
which do not have their seat or their centre of effective management in 
Portuguese territory and which do not have a permanent establishment in 
Portuguese territory to which they can attribute such income shall be 25% ...’ 
‘Article 88 — Specific tax rates 
… 
11 — A specific tax rate of 23% shall apply to income distributed by undertakings 
liable for corporation tax that is received by taxable persons who benefit from a 
total or partial exemption; in this case, this includes income from capital where 
the shares in respect of which the income was received have not been held by the 
same taxable person for a continuous period of one year before payment became 
available and are not retained long enough to complete that period.  
[omissis]’ 
‘Article 94 — Withholding at source  
1 — Corporation tax shall be withheld at source in respect of the following types 
of income obtained in Portuguese territory: 
… 
(c) income on capital not included within the previous sub-paragraphs and 
income from property, in accordance with the definitions of these concepts 
established for personal income tax purposes, where the person liable for payment 
of the said income is liable for corporation tax or where the income constitutes an 
expense in connection with the business or professional activities of persons liable 
for personal income tax who maintain accounts or are required to maintain 
accounts; 
[omissis] 
3 — Sums withheld at source are classed as payments on account of the tax, 
except in the circumstances set out below, where they constitute full discharge of 
liability: 
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[omissis] 
[Or. 10] (b) where the owner of the income, with the exception of property 
income, is a non-resident undertaking which does not have a permanent 
establishment in Portuguese territory or which has a permanent establishment 
there but cannot attribute the income to that establishment. 
[omissis] 
5 — The previous paragraph shall not apply to sums withheld which, under 
paragraph 3, constitute [omissis] full discharge of liability, to which the tax rates 
established in Article 87 shall apply. 
6 — The requirement to withhold corporation tax at source arises on the date on 
which the same requirement arises under the Code governing personal income tax 
or, failing that, on the date on which the income is made available to the 
beneficiary. The sums withheld must be paid to the Government before the 20th 
day of the month following that in which the withholding was made, in 
accordance with the terms laid down in the Code governing personal income tax 
or its implementing regulations.  
[omissis]’ 
– Code on stamp duty — General rate 
‘29 — Net book value of collective investment undertakings that come within 
Article 22 of the EBF: 
29(1) — collective investment undertakings that invest solely in money-market 
instruments and deposits: 0.0025% of the net book value for each quarter; 
29(2) — other collective investment undertakings: 0.0125% of the net book value 
for each quarter.’ 
In the light of all the foregoing, this single-person court [omissis] [of arbitration] 
asks [omissis] the Court of Justice of the European Union to reply to the following 
questions referred for a preliminary ruling under Article 267(a) [omissis] TFEU: 
(1) Does either Article 56 [EC] (now Article 63 TFEU) on the free movement of 
capital or Article 49 [EC] (now Article 56 TFEU) on freedom to provide 
services preclude tax rules such as those at issue in the main proceedings, 
contained in Article 22 of the Estatuto dos Benefícios Fiscais (Statute of Tax 
Benefits), which provide for a withholding to be made, in full discharge of 
liability, from dividends distributed by Portuguese companies and received 
by collective investment undertakings not resident in Portugal and 
established in other EU [omissis] [Member States], whereas collective 
investment undertakings formed under Portuguese tax law and resident for 
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tax purposes in Portugal can benefit from an exemption from the 
withholding at source made on the said income? 
(2) In providing for a withholding to be made at source in respect of dividends 
paid to non-resident collective investment undertakings and in making the 
possibility of obtaining an exemption from such a withholding at source 
available only to resident collective investment undertakings, does the 
national legislation at issue in the main proceedings treat dividends paid to 
non-resident collective investment undertakings [Or. 11] less favourably, in 
that such undertakings are wholly unable to take advantage of the aforesaid 
exemption? 
(3) For the purposes of assessing whether the Portuguese legislation that 
establishes specific and different tax treatment for (i) (resident) collective 
investment undertakings and for (ii) the shareholders or unitholders in 
collective investment undertakings is discriminatory, are the tax rules that 
apply to the shareholders or unitholders in the collective investment 
undertaking relevant? Or, bearing in mind that the tax rules for resident 
collective investment undertakings are not affected or altered in any way by 
whether or not their shareholders or unitholders are resident in Portugal, in 
order to determine whether situations are comparable for the purposes of 
assessing whether the said legislation is discriminatory, should regard be had 
only to tax treatment at the level of the investment vehicle?  
(4) Is the difference in treatment between collective investment undertakings 
resident in Portugal and not resident in Portugal permissible, having regard 
to the fact that natural or legal persons resident in Portugal who hold shares 
or units in collective investment undertakings (whether resident or non-
resident) are, in both cases, subject in the same way to tax on income 
distributed by collective investment undertakings (and are generally not 
exempt), even if non-resident shareholders or unitholders are liable to a 
higher level of tax? 
(5) Having regard to the fact that the discrimination at issue in these 
proceedings concerns a difference in the taxation of dividend income 
distributed by resident collective investment undertakings to their 
shareholders or unitholders, when it comes to assessing whether the taxation 
of the income is comparable, is it lawful to take account of other taxes, 
levies or charges payable in respect of the investments made by collective 
investment undertakings? In particular, in order to analyse whether the 
situations are comparable, is it lawful and permissible to take account of the 
impact of taxes on assets or costs, or of other types of tax, rather than 
limiting the examination strictly to the tax on the income of collective 
investment undertakings, including any specific taxes? 
In view of this request for a preliminary ruling, to which are to be appended 
copies of the application [omissis] [for arbitration] and the reply by the Tax 
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Authority, these proceedings are stayed pursuant to Article 269(1)(c) and 
Article 272(1) of the Código de Processo Civil (Portuguese Code on Civil 
Procedure). 
Lisbon, 9 July 2019 
The arbitrator, 
(Mariana Vargas)