Opinion of the Advocate General — ECLI:EU:C:2005:227
Date: 2005-04-14
Language of the case: German
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Right of establishment;Taxation
Procedure: Reference for a preliminary ruling
Origin: Germany

Summary of the Judgment Freedom of movement for persons – Freedom of establishment – Tax legislation (EC Treaty, Art. 52 (now, after amendment, Art. 43 EC) and Art. 58 (now Art. 48 EC)) Article 52 of the Treaty (now, after amendment, Article 43 EC) and Article 58 of the Treaty (now Article 48 EC) preclude a national law which, in the case of a branch of a company having its seat in another Member State, lays down a tax rate on the profits of that branch which is higher than that on the profits of a subsidiary of such a company where that subsidiary distributes its profits in full to its parent company. The second sentence of the first paragraph of Article 52 of the Treaty expressly leaves traders free to choose the appropriate legal form in which to pursue their activities in another Member State and that freedom of choice must not be limited by discriminatory tax provisions. The freedom to choose the appropriate legal form in which to pursue activities in another Member State thus primarily serves to allow companies having their seat in a Member State to open a branch in another Member State in order to pursue their activities under the same conditions as those which apply to subsidiaries. The refusal to apply the reduced tax rate to branches renders the possibility, for companies having their seat in another Member State, of exercising the right to freedom of establishment through a branch less attractive and thus restricts the freedom to choose the appropriate legal form in which to pursue activities in another Member State. It is for the national court to determine the tax rate which must be applied to the profits made by a branch by reference to the overall tax rate which would have been applicable if the profits of a subsidiary had been distributed to its parent company. (see paras 14-15, 17, 31, 37, operative part 1-2)