Summary;Judgment — ECLI:EU:C:2019:871
Date: 2019-10-17
Language of the case: Dutch
Court formation: Seventh Chamber
Subject matter: Right of establishment
Procedure: Reference for a preliminary ruling
Origin: Belgium

summary, that 
the system provided for by Article 205d of the Income Tax Code 1992 has similar 
or even identical consequences as a system that provides that the deduction for 
risk capital should be applied as a priority to the profits of a permanent 
establishment.  
23 In summary, the deduction for risk capital as calculated under Articles 205b and 
205c of the Income Tax Code 1992 is reduced by the part of the deduction for risk 
capital that is calculated with reference to the equity capital of permanent 
establishments (or immovable property and the rights in respect thereof) [Or. 9] 
located in an EEA Member State and exempt under a double taxation convention. 
That reduction is limited to the profits generated by those permanent 
establishments (or the income relating to immovable property and rights in respect 
thereof). The equity capital is defined as the net book value of the assets, reduced 
on the other hand by the total liabilities that do not form part of the company’s 
equity capital and that are attributable to the permanent establishments, to the 
immovable property and to the rights to immovable property (third paragraph of 
Article 205d of the Income Tax Code 1992).  
24 Unlike the situation for the 2008 year of assessment, there is no longer the 
possibility of a carry-over to subsequent years if there are no or insufficient profits 
to make the deduction for risk capital for a particular tax period. 1 
25 The applicant had one permanent establishment within the EEA, in the 
Netherlands, for the 2015 tax year to which the dispute relates, the income from 
which was exempt under a double taxation convention, and no exempt immovable 
property or rights thereto. In calculating the reduction of the deduction for risk 
capital pursuant to Article 205d(1) and (3) of the Income Tax Code 1992, only 
that permanent establishment was taken into account.  
 
1 The former Article 205d of the Income Tax Code 1992 which was applicable, inter alia, to the 
2008 year of assessment, was repealed by the Wet houdende fiscale en financiële bepalingen 
van 13 december 2012 (Law on various tax and financial provisions of 13 December 2012) (see 
Article 48 en 59, Belgisch Staatsblad of 20 December 2012, applicable from the 2013 year of 
assessment; see also paragraph 48 of the judgment of the Court of Justice of 4 July 2013, 
Argenta Spaarbank nv, C-350/11). 
REQUEST FOR A PRELIMINARY RULING OF 29. 6. 2018 — CASE C-459/18 
 
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26 In applying Article 205d, for the purposes of calculating the disputed assessment 
in corporation tax: 
- the amount was determined of the notional interest deduction relating 
to the applicant’s Netherlands permanent establishment, namely 
EUR 1 970 290.89 (Article 205d(3) of the Income Tax Code 1992);  
- the amount of the deduction for risk capital relating to the Netherlands 
permanent establishment, EUR 1 970 290.89, was compared with the 
profit of that permanent establishment, which was positive and 
amounted to EUR 149 185 743.91 (Article 205 d(1) of the Income Tax 
Code 1992);  
- the deduction for risk capital relating to the Netherlands permanent 
establishment, EUR 1 970 290.89, was deducted in full from the total 
deduction for [Or. 10] risk capital because the positive result of the 
Netherlands permanent establishment was higher than [...] the 
deduction for risk capital relating to that establishment.  
27 The Rechtbank finds that the reduction of the deduction for risk capital provided 
for in Article 205d of the Income Tax Code 1992 is not applicable to permanent 
establishments in Belgium, and that Belgian legislation also makes no provision 
for a similar reduction for Belgian establishments. 
28 Consequently, the scope of the deduction for risk capital is more limited if a 
company has a permanent establishment in another EEA Member State (and thus 
in another EU Member State), particularly if the profits of the establishment 
exceed the deduction for risk capital attributed to it, than if that permanent 
establishment were to be located in Belgium. The question therefore arises 
whether that national scheme is consistent with the freedom of establishment 
provided for in Article 49 TFEU. 
29 The case-law of the Court of Justice, in particular the judgment of 4 July 2013 
(Argenta Spaarbank, Case C-350/11), is, in fact, closely linked to the dispute 
before the Rechtbank. It relates to the same taxpayer and also to the compatibility 
of Article 49 TFEU with the determination of the deduction for risk capital in 
respect of the same Netherlands permanent establishment of that taxpayer.  
30 In the applicant’s situation for the 2015 year of assessment, where the profits of 
the permanent establishment in another Member State are higher than the 
deduction for risk capital calculated with reference to the equity capital attributed 
to that institution, the new scheme has a virtually identical effect to the scheme for 
the 2008 year of assessment that was found to be contrary to Article 49 TFEU. On 
the other hand, the assets of the permanent establishment located in another 
Member State are, as a first step at least, taken into account in calculating the 
deduction, and the limitation of the right to deduction for risk capital in relation to 
the equity capital of a permanent establishment in the EEA (the profits of which 
ARGENTA SPAARBANK 
 
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are exempt under a double taxation convention) remains limited to the amount of 
the profits of that establishment.  
31 Having regard to the amended national legal framework, the case-law of the Court 
of Justice is not sufficiently clear to assess the infringement of Article 49 TFEU 
alleged by the applicant. [Or. 11] 
32 The Rechtbank therefore considers it necessary to refer the question below on the 
interpretation of Article 49 TFEU to the Court of Justice for a preliminary ruling 
in order to be able to make a decision on the dispute submitted by the parties. 
33 The defendant considers the amendment to the national legislation to be a 
fundamental adjustment, resulting in the situation of a permanent establishment in 
another EEA Member State no longer being objectively comparable to that of a 
Belgian permanent establishment. The new scheme would work like that 
applicable to other deductible amounts relating to a permanent establishment, such 
as interest, which is first deducted from the profits of the establishment. At least 
the defendant is of the opinion that there is no question of adverse treatment of an 
establishment in another EEA Member State, or that there are at least grounds 
justifying such adverse treatment.  
34 The defendant also refers to a report of the European Commission of 
12 December 2016 stating that, in the light of the explanations provided by the 
Belgian authorities, the legislation which gives effect to the judgment in Argenta 
Spaarbank, C-350/11, appears to be in line with recent case-law. In the context of 
the EU Pilot project 2 the European Commission seemingly decided not to launch 
an infringement procedure. In any case, that report contains some provisos 
regarding the need to reconsider the position in the event of new developments or 
new factors coming to light.  
35 The applicant refers to the factors cited by the Raad van State. It also refers to, 
inter alia, the equal effect of the new scheme and the old scheme for the 
applicant’s situation in order to substantiate the objective comparability and 
disadvantages as already accepted in the judgment of the Court of Justice of 4 July 
2013. Regarding the absence of grounds of justification, it refers to, inter alia, the 
continuing absence of a direct link between the tax advantage and the 
compensation for that advantage by means of a particular tax levy under the 
scheme for the 2015 year of assessment. [Or. 12] 
ON THOSE GROUNDS 
THE RECHTBANK 
[...] Declares the applicant’s claim admissible. 
 
2 Explained in, for example, COM(2011)930 of 21 December 2011. 
REQUEST FOR A PRELIMINARY RULING OF 29. 6. 2018 — CASE C-459/18 
 
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Before considering the matter further, refers the following question to the Court of 
Justice of the European Union for a preliminary ruling: 
‘Does Article 49 of the Treaty on the Functioning of the European Union preclude 
national tax legislation pursuant to which, for the purpose of calculating the 
taxable profits of a company subject to full tax liability in Belgium which has a 
permanent establishment in another Member State, the profits of which are wholly 
exempt in Belgium by virtue of the application of a double taxation convention 
between Belgium and the other Member State,:  
- the deduction for risk capital is reduced by an amount in respect of 
deduction for risk capital calculated with reference to the positive 
difference between, on the one hand, the net book value of the assets 
of the permanent establishment, and, on the other hand, the total 
liabilities that do not form part of the company’s equity capital and that 
are attributable to the permanent establishment and 
- the aforementioned reduction is not applied in so far as the amount of 
the reduction is lower than the profits of that permanent establishment,  
whereas no reduction of the deduction for risk capital is applied if that positive 
difference can be attributed to a permanent establishment located in Belgium?’ 
[…] [Closing formula and signatures]