Judgment;Summary — ECLI:EU:C:2025:239
Date: 2025-04-03
Language of the case: Lithuanian
Court formation: Sixth Chamber
Subject matter: Taxation;Approximation of laws
Procedure: Reference for a preliminary ruling
Origin: Lithuania

summary interpretation (commentary) of 
Article 32(6) of the Law on corporation tax, has stated: ‘in the event that, after 
taking into account all the relevant facts and circumstances, it is identified that one 
of the stages of an arrangement may not be genuine, that is to say, it has not been 
put into place for valid commercial reasons which reflect economic reality, but the 
existence of such an arrangement is not linked to the obtaining of a tax advantage 
that defeats the object or purpose [of Directive 2011/96] (that is to say, the tax 
liability and the amount of tax remain unchanged after the removal of the 
arrangement that is not genuine), the anti-abuse measure will not be applied.’ 
20 It is apparent from the circumstances of the proceedings that the Subsidiary in this 
case received the income that was the source of the dividends at issue from 
activities carried out in its own name and not in the form of dividends as an 
intermediate company. Accordingly, the Subsidiary in this case was not an 
intermediate company embedded in the group structure, but an income-generating 
company the profits of which were distributed in the form of dividends to the 
parent company. 
21 Having analysed the interpretative provisions relating to the involvement of an 
intermediate entity in the chain of payment of dividends, the Tax Disputes 
NORDCURRENT GROUP 
 
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Commission is uncertain whether, for the purposes of the anti-abuse rule in 
Directive 2011/96, the obtaining of a tax advantage from the receipt of tax-exempt 
dividends can be linked to a subsidiary which is not an intermediate company 
embedded in a group structure and which generates profits that are then 
distributed to the parent company, that is to say, where there would be no 
dividends (profit) to tax at all if the subsidiary were removed. 
22 In the main proceedings, the Inspectorate does not question either the 
establishment of the Subsidiary or the activities of the Subsidiary prior to the 
period under review; the assessment of the arrangement was carried out during the 
period under review (2018–2019), that is to say, the circumstances relating to the 
Inspectorate’s finding that there is an arrangement relate only to the moment of 
the payment (receipt) of tax-exempt dividends and, therefore, according to the 
Inspectorate, it is not required to assess the circumstances of the establishment of 
the Subsidiary or the circumstances of its activities prior to the period under 
review. The Inspectorate further notes that the information received from the 
United Kingdom tax authorities does not suggest that the Subsidiary’s human and 
material resources in 2015–2017 were different from those identified during the 
period under review. 
23 Nordcurrent submits that the tax authorities failed duly to take into account 
circumstances outside the period under review, that is to say, the circumstances 
relating to the establishment of the Subsidiary and the changes in its activities that 
led to a decrease in the volume of its activities. The Subsidiary was established in 
the United Kingdom for valid commercial reasons and carried out genuine 
commercial activities in the United Kingdom between 2009 and 2019. The valid 
commercial reasons are based, in essence, on the economic, business and personal 
reasons that led to the establishment of the Subsidiary in the United Kingdom (the 
United Kingdom was, and continues to be, one of the world’s leading video games 
markets; potential United Kingdom distributors required companies to be 
established and have accounts in the United Kingdom; the United Kingdom was 
the place of study, residence and contacts of the founders); market conditions 
limited Nordcurrent’s ability to distribute the games developed by it directly from 
Lithuania, since for a long time companies in Lithuania were unable to access 
Apple, Google or other larger sales platforms; the changes in its activity were due 
to objective factors that led to a decline in activity. After the need to distribute the 
games developed by Nordcurrent and to purchase game advertising through the 
Subsidiary ceased to exist, it was decided to wind up the Subsidiary in 2019. 
Furthermore, Nordcurrent submits that the activities of the Subsidiary prior to the 
period under review should have been reviewed also in view of the fact that the 
dividends at issue paid in 2018 arose out of the Subsidiary’s profits in 2016, that is 
to say, the period prior to the start of the period under review (the dividends paid 
in 2019 arose out of the profits for 2018). 
24 In the light of the provisions set out above relating to the putting into place of an 
arrangement, the Tax Disputes Commission is uncertain as to whether, for the 
purpose of recognising the Subsidiary established in another Member State as an 
REQUEST FOR A PRELIMINARY RULING OF 20. 2. 2024 – CASE C-228/24 
 
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arrangement as such, it may be found that such an arrangement has been put into 
place without assessing the circumstances relating to the establishment of the 
Subsidiary and its activities prior to the time of payment of the dividends, in 
which the establishment of the Subsidiary is justified by valid commercial 
reasons. 
25 The Inspectorate set out the provisions of Article 69(1) of Lietuvos Respublikos 
mokesčių administravimo įstatymas (Law of the Republic of Lithuania on tax 
administration) and noted that, according to the definition of tax advantage 
provided for in that article, a tax advantage arises where the aim is to avoid the 
payment of tax altogether. 
In its comments on the tax advantage aspects of the anti-abuse rule [in 
Directive 2011/96] (‘the arrangement has been put into place with the main 
purpose or one of the main purposes of obtaining a tax advantage’, ‘obtaining a 
tax advantage defeats the object or purpose of the Directive’), the Inspectorate 
took the position that benefiting from a tax advantage through the use of the 
arrangement (the Subsidiary, which had the characteristics of an arrangement that 
is not genuine) achieved a purpose that runs counter to Directive 2011/96. 
According to the Inspectorate, Nordcurrent obtained a tax advantage merely 
because it benefited from the exemption from taxation provided for in 
Article 35(2) of the Law on corporation tax (which results in the non-payment of 
corporation tax). The Inspectorate noted that the Court of Justice has held, in 
connection with questions concerning the payment of dividends, that to permit the 
setting up of financial arrangements whose sole aim is to benefit from the tax 
advantages resulting from the application of Directive 90/435 would not be 
consistent with such objectives and, on the contrary, would undermine the 
effective functioning of the internal market by distorting the conditions of 
competition ([judgment of 26 February 2019, T Danmark and Y Denmark,] Joined 
Cases C-116/16 and C-117/16[, EU:C:2019:135], paragraph 79). 
26 Nordcurrent disagrees with the Inspectorate’s position that benefiting from the 
exemption from taxation on dividends provided for in Article 35(2) of the Law on 
corporation tax constitutes in itself a tax advantage obtained by Nordcurrent, 
irrespective of how much and what kind of tax the taxpayer was (not) actually 
able to save. That position of the Inspectorate implies the use of a presumption 
that the taxpayer obtained a tax advantage by receiving the dividends from a 
foreign entity under Article 35(2) of the Law on corporation tax. Nordcurrent 
submits that the exemption from taxation on the dividends received, in the 
absence of actual tax avoidance or saving, does not defeat the object and purpose 
of Directive 2011/96. Nordcurrent also argues that there is no tax advantage 
because the Subsidiary was profitable in the United Kingdom and Lithuania 
charges a lower rate of corporation tax (15%) on taxable profits than the United 
Kingdom (24%). The United Kingdom Subsidiary made a total net profit of 
GBP 8 289 930 from its establishment through to its winding up, on which it paid 
GBP 2 112 598 (EUR 2 670 639) in corporation tax to the United Kingdom 
budget. According to Nordcurrent, more tax was paid in the United Kingdom 
NORDCURRENT GROUP 
 
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compared to the situation if Nordcurrent would have had to pay tax in Lithuania 
(according to the Inspectorate, in order to reach a conclusion as to where the 
higher amount of corporation tax would have been incurred, the company’s 
income and costs would first have to be assessed in accordance with the 
provisions of the Lithuanian Law on corporation tax, which has not been done). 
27 According to the Inspectorate, the mere fact of having paid taxes in the United 
Kingdom is not a reason to exclude a United Kingdom company from being 
regarded as an arrangement if the company was an arrangement that was not 
genuine and not put into place for valid commercial reasons. 
28 In the light of the provisions set out above relating to the difference in treatment 
of tax advantages, the Tax Disputes Commission is uncertain whether, in the event 
that the Subsidiary, which subjects the profits earned in its State of establishment 
to taxation and then pays out dividends on those profits that are not taxable in the 
State of the parent company, is recognised as an arrangement, it is sufficient to 
find that the main purpose or one of the main purposes of the arrangement is to 
obtain a tax advantage that defeats the object or purpose of Directive 2011/96. 
Furthermore, the question arises as to whether the circumstances relating to the 
fact that the profits earned under the Subsidiary’s name were subject to tax in the 
Member State of establishment are to be regarded as relevant for the purpose of 
challenging the finding that a tax advantage that defeats the object or purpose of 
Directive 2011/96 was obtained or that there was an arrangement. 
29 The different or contradictory positions on the interpretation of EU law and the 
case-law of the Court of Justice are clearly reflected in the pleadings of the parties 
and the opinions expressed at the sitting, and the Tax Disputes Commission 
therefore asks the Court of Justice to provide its interpretation with regard to the 
application of the anti-abuse rule in Directive 2011/96. 
30 The Tax Disputes Commission notes that the common minimum anti-abuse rule in 
Directive 2011/96 was introduced 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). The Court of Justice has not yet ruled on the 
implementation of the provisions of the anti-abuse rule in Directive 2011/96 in 
cases where it has to be decided whether an exemption from taxation may be 
applied at the level of the recipient of the dividends (the parent company) in 
respect of the dividends paid by a subsidiary registered in a Member State. 
31 […] [information unrelated to the questions referred]. 
32 The answers to these questions are essential and necessary in order to resolve the 
tax dispute between Nordcurrent and the Inspectorate that is being examined by 
the Tax Disputes Commission, since it is the interpretation of the legal provisions 
concerned that determines whether the taxation of Nordcurrent is well founded 
and the Inspectorate in entitled to calculate the amount of corporation tax payable 
by Nordcurrent. 
REQUEST FOR A PRELIMINARY RULING OF 20. 2. 2024 – CASE C-228/24 
 
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33 The Tax Disputes Commission also considers that a reference to the Court of 
Justice at the pre-litigation stage of examination of the tax dispute is expedient 
with a view to the expeditious examination of tax disputes. 
The Tax Disputes Commission […] [reference to provisions of procedural law] 
orders as follows: 
1. The following questions are referred to the Court of Justice of the European 
Union for a preliminary ruling: 
1. In circumstances such as those of the present case, is a national practice 
under which an exemption from taxation on dividends is not granted to a parent 
company in a Member State in respect of the dividends received from a subsidiary 
established in another Member State on the ground that such a subsidiary is 
recognised as an arrangement, where the subsidiary is not an intermediate 
company and the profits distributed by way of dividends were generated by 
activities carried out under the subsidiary’s name, so that removing the subsidiary 
would result in a situation where there are no profits at all or no payment of 
dividends, consistent with the objectives of the anti-abuse rule in 
Directive 2011/96? 
2. If the answer to the first question is in the affirmative, is a national practice 
under which, for the purpose of recognising a subsidiary established in another 
Member State as an arrangement as such, an assessment is made of the 
circumstances at the time of payment of the dividends, where the establishment of 
the subsidiary is justified by commercial reasons, consistent with the objectives of 
the anti-abuse rule in Directive 2011/96? 
3. May the anti-abuse rule in Directive 2011/96 be interpreted as meaning that, 
where a parent company has received dividends from a subsidiary that is 
established in another Member State and is recognised as an arrangement, that 
recognition alone is sufficient for it to be found that the parent company, through 
the application of the exemption from taxation on dividends, obtained a tax 
advantage that defeats the object or purpose [of Directive 2011/96]? Furthermore, 
are the circumstances relating to the fact that the profits earned by a subsidiary 
that has been recognised as an arrangement were subject to corporation tax in the 
Member State of establishment in accordance with the national rules in force in 
that Member State to be regarded as relevant for the purpose of challenging the 
finding that a tax advantage was obtained or that there was an arrangement? 
2. […] 
[standard procedural wording and composition of the Tax Disputes 
Commission]