Judgment — ECLI:EU:C:2018:604
Date: 2018-07-25
Language of the case: Bulgarian
Court formation: Seventh Chamber
Subject matter: Right of establishment;Taxation;Free movement of capital;Approximation of laws
Procedure: Reference for a preliminary ruling;Reference for a preliminary ruling - decision unnecessary
Origin: Bulgaria

Summary — Judgment of the Court (Seventh Chamber) of 25 July 2018 1. Questions referred for a preliminary ruling — Jurisdiction of the Court — Limits –Request for interpretation of provisions of EU law manifestly inapplicable in the dispute in the main proceedings — Articles 5(4) and 12(b) TEU not applicable with regard to national legislation (Arts 5(4) and 12(b) TEU; Art. 267 TFEU) 2. Freedom to provide services — Restrictions — Tax legislation — Payment of income by a company resident in a Member State to a company established in another Member State — Payment subject to withholding tax unless stated otherwise in the double taxation convention — Convention exempting the non-resident company from paying any tax in the first Member State — Proof submitted late by the non-resident company that the requirements for the application of the exemption have been fulfilled –Obligation on the resident company not charging that withholding tax to pay irrecoverable default interest — Not permissible (Art. 56 TFEU) 1. See the text of the decision. (see paras 31-35) 2. Article 56 TFEU must be interpreted as precluding legislation of a Member State, such as that at issue in the main proceedings, whereby the payment of income by a resident company to a company established in another Member State is, in principle, subject to withholding tax, except where otherwise provided in the double taxation convention entered into between those two Member States, if that legislation requires the resident company, which neither deducts nor pays that sum to the tax authorities of the first Member State, to pay irrecoverable default interest for the period from the expiry of the time limit for payment of the income tax up to the date on which the non-resident company proves that the requirements for the application of the double taxation convention have been fulfilled, even though, in accordance with that convention, the non-resident company is not liable to pay any tax in the first Member State or the amount thereof is lower than that normally payable under the tax law of that Member State. As regards the reasons put forward in order to justify the restriction on the freedom to provide services, and as has been noted in paragraph 53 of this judgment, the Court has already held that the need to ensure the effective collection of tax and the need to ensure the effectiveness of fiscal supervision may constitute overriding reasons in the public interest capable of justifying a restriction on the freedom to provide services. The Court has also held that the imposition of penalties, including criminal penalties, may be considered to be necessary in order to ensure compliance with national rules, subject, however, to the condition that the nature and amount of the penalty imposed is in each individual case proportionate to the gravity of the infringement which it is designed to penalise (see, to that effect, judgment of 26 May 2016, NN (L) International, C‑48/15, EU:C:2016:356, paragraph 59 and the case-law cited). However, national legislation providing for a penalty in the form of irrecoverable interest, calculated on the basis of the sum of tax payable at source according to national legislation and which has accrued for the period from the date on which the tax becomes payable to the date on which the documents proving that the double taxation convention is applicable are submitted to the tax authorities, is not appropriate to ensure the attainment of the objectives referred to in the previous paragraph in the event that it is established that the tax is not payable under the relevant convention. In a situation such as that at issue in the main proceedings, there is no connection between the amount of interest payable, on the one hand, and the amount of tax payable, of which there is none, or the seriousness of the delay in providing those documents to the tax authorities, on the other. Furthermore, such a penalty goes beyond what is necessary to attain those objectives, given that the amount of interest accrued may prove to be excessive compared to the amount of tax payable and given that no possibility for that interest to be reimbursed is provided for. (see paras 57, 59, 60, 63, operative part)