Opinion of the Advocate General — ECLI:EU:C:2008:513
Date: 2008-09-18
Language of the case: French
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Right of establishment;Free movement of capital
Procedure: Reference for a preliminary ruling
Origin: Belgium

summary, that a Member State which decides to apply a system for avoiding economic double taxation of dividends must apply that system in the same way to all recipients of dividends which it subjects to its taxation. Recipients of dividends within the country and those resident in another Member State were in a comparable situation as regards economic double taxation. (38) 62. The factual and legal context of the present case differs, however, from the situation in those judgments. The systems at issue in those cases for avoiding economic double taxation of dividends distributed to a recipient with liability to corporation tax exempted the dividends altogether from tax in the hands of the recipient, since the underlying income was already subject to corporation tax in the hands of the company paying the dividend. 63. That is not the aim pursued by the provisions on the withholding tax. Belgium likewise exempts payments of dividends to domestic recipients from withholding tax. But that is not intended to free income from interest definitively from tax. Nor is there any occasion to do so. Unlike dividends, the interest is not paid out of income of the paying company on which tax has already been paid. Rather, corporation tax becomes payable on the income from interest only in the hands of the recipient. 64. In the case of interest payments to recipients resident abroad, Belgium charges the proportion of tax on the income from interest that is due to it under the DTC at source because collecting the tax from recipients resident abroad is not automatically possible. Since taxing the income of domestic recipients does not produce those problems, there is no need to deduct tax at source in this case. Ultimately, the same tax is merely charged to different persons. 65. Consequently, only the taxation of the interest payments at source in Belgium on the one hand and the taxation of equivalent payments to taxable persons within the country on the other are to be included in the comparison. 66. It follows from the case-law on the taxation of providers of services with limited liability to tax that definitive taxation at a flat rate is permissible if in fact it is not higher than the tax on corresponding income of persons with unlimited liability to tax. (39) 67. In the tax years concerned, the withholding tax amounted to 13.39% or 15%, while corporation tax, according to the referring court, was from 28% to 39%, so that higher taxation of the cross-border interest payments is in general not to be expected. As against the taxation of natural persons that was at issue in Gerritse, (40) the comparison is made even easier by the fact that corporation tax is levied at a fixed, non-progressive rate, and that no basic allowance for subsistence is to be taken into account. 68. However, there is still an unknown factor in the comparison, as the Commission rightly points out. Unlike in the case of assessment of corporation tax, no operating expenses can be deducted from the flat-rate withholding tax. 69. In its decisions on limited liability to tax the Court has admittedly regarded it as an unjustified difference in treatment if non-residents are not allowed to deduct operating expenses which have a direct economic connection to the taxable activity, while residents can deduct operating expenses. (41) 70. But in those cases the income was fully and entirely subject to tax at the place where the services were provided and was presumably exempt from tax, or largely relieved by set-off of the foreign tax, at the seat of the provider of the services. It was thus in accordance with the principle of fiscal symmetry to include operating expenses in the basis of assessment in the State which essentially taxes the income connected to them. (42) By contrast, Belgium and Luxembourg have agreed in the present case that – apart from the Belgian withholding tax of 15% – Luxembourg is to have the right to levy tax on the income from interest of Belgian origin. It would accordingly appear natural also to take the operating expenses into account in the context of taxation in Luxembourg. 71. Regardless of that, there is no indication in the order for reference that the deduction of operating expenses is contested in the main proceedings. In addition, there are scarcely likely to be significant operating expenses in connection with loan transactions between associated undertakings. V – Conclusion 72. On the basis of the above considerations, I propose that the question referred by the Cour d’appel de Liège should be answered as follows: Articles 52 and 58 of the EC Treaty do not preclude a national withholding tax on the payment of loan interest to recipients resident in another Member State, where equivalent payments to domestic companies are exempt from the withholding tax but are subject to corporation tax of at least the same amount in the hands of the recipient. 1 – Original language: German. 2 – Paragraph 1 concerns certain financial services undertakings. 3 – See inter alia Case C‑124/99 Borawitz [2000] ECR I‑7293, paragraph 17; Case C‑60/05 WWF Italia and Others [2006] ECR I‑5083, paragraph 18; and Case C‑439/06 citiworks [2008] ECR I‑0000, paragraph 21. 4 – See inter alia Case C‑319/02 Manninen [2004] ECR I‑7477, paragraph 19; Case C‑196/04 Cadbury Schweppes and Cadbury Schweppes Overseas [2006] ECR I‑7995, paragraph 40; Case C‑374/04 Test Claimants in Class IV of the ACT Group Litigation [2006] ECR I‑11673, paragraph 36; and Case C‑379/05 Amurta [2007] ECR I‑9569, paragraph 16. 5 – See, to that effect, Case C‑336/96 Gilly [1998] ECR I‑2793, paragraphs 24 and 30; Case C‑307/97 Saint-Gobain [1999] ECR I‑6161, paragraph 57; Test Claimants in Class IV of the ACT Group Litigation, cited in footnote 4, paragraph 52; and Amurta, cited in footnote 4, paragraph 17. 6 – Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States, OJ 2003 L 157, p. 49. 7 – Taxable persons within the country include branches of companies whose main seat is in another Member State, as the Belgian Government explains. 8 – As summarised in Case C‑157/05 Holböck [2007] ECR I‑4051, paragraph 22, referring to Cadbury Schweppes and Cadbury Schweppes Overseas, cited in footnote 4, paragraphs 31 to 33; Test Claimants in Class IV of the ACT Group Litigation, cited in footnote 4, paragraphs 37 and 38; Case C‑446/04 Test Claimants in the FII Group Litigation [2006] ECR I‑11753, paragraph 36; and Case C‑524/04 Test Claimants in the Thin Cap Group Litigation [2007] ECR I‑2107, paragraphs 26 to 34. 9 – Case C‑251/98 Baars [2000] ECR I‑2787, paragraphs 21 and 22; Test Claimants in Class IV of the ACT Group Litigation, cited in footnote 4, paragraph 39; Case C‑231/05 OyAA [2007] ECR I‑6373, paragraph 20; and Case C‑284/06 Burda [2008] ECR I‑0000, paragraph 69. 10 – See, to that effect, Case C‑265/04 Bouanich [2006] ECR I‑923, paragraph 51. 11 – See in particular point I(3) (long-term loans with a view to establishing or maintaining lasting economic links, as direct investments) of the nomenclature of capital movements in Annex I to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty [article repealed by the Treaty of Amsterdam], OJ 1988 L 178, p. 5. 12– OyAA, cited in footnote 9, paragraph 24; Cadbury Schweppes and Cadbury Schweppes Overseas, cited in footnote 8, paragraph 33; and Test Claimants in the Thin Cap Group Litigation, cited in footnote 8, paragraph 34. 13 – The Court came to an equivalent conclusion on the relationship between freedom of establishment and the free movement of capital in, for example, Case C‑298/05 Columbus Container Services [2007] ECR I‑10451, paragraph 56. 14 – Case C‑324/00 Lankhorst-Hohorst [2002] ECR I‑11779, paragraph 26; Test Claimants in the Thin Cap Group Litigation, cited in footnote 8, paragraph 25; and Case C‑105/07 Lammers & Van Cleeff [2008] ECR I‑173, paragraphs 16 and 17. 15 – See, to that effect, Case C‑241/89 SARPP [1990] ECR I‑4695, paragraph 8; Case C‑387/01 Weigel [2004] ECR I‑4981, paragraph 44; Case C‑152/03 Ritter-Coulais [2006] ECR I‑1711, paragraph 29; and Case C‑506/06 Mayr [2008] ECR I‑0000, paragraph 43. 16 – See inter alia Saint-Gobain, cited in footnote 5, paragraph 35; Case C‑141/99 AMID [2000] ECR I‑11619, paragraph 20; Case C‑471/04 Keller Holding [2006] ECR I‑2107, paragraph 29; and Case C‑414/06 Lidl Belgium [2008] ECR I‑0000, paragraph 18. 17 – Test Claimants in Class IV of the ACT Group Litigation, cited in footnote 8, paragraph 43 with further references; Case C‑170/05 Denkavit Internationaal and Denkavit France [2006] ECR I‑11949, paragraph 22; and Burda, cited in footnote 9, paragraph 77. This finding is not affected in principle by the recent decisions on company law (compare in particular Case C‑212/97 Centros [1999] ECR I‑1459, Case C‑208/00 Überseering [2002] ECR I‑9919, and Case C‑167/01 Inspire Art [2003] ECR I‑10155). On this point see also the Opinion of Advocate General Poiares Maduro of 22 May 2008 in Case C‑210/06 Cartesio [2008] ECR I‑0000, point 22 et seq. In those cases the criterion for allocation was/is not called in question in principle; they concern rather the issue of what is to be regarded as the seat or how the seat can be transferred. 18 – See, to that effect, inter alia, Test Claimants in Class IV of the ACT Group Litigation, cited in footnote 8, paragraph 43 with further references; Denkavit Internationaal and Denkavit France, cited in footnote 17, paragraph 22; and Burda, cited in footnote 9, paragraph 77. 19 – Case C‑55/94 Gebhard [1995] ECR I‑4165, paragraph 37; Case C‑442/02 CaixaBank France [2004] ECR I‑8961, paragraph 11; Columbus Container Services, cited in footnote 13, paragraph 34; and Case C‑293/06 Deutsche Shell [2008] ECR I‑0000, paragraph 28. On the relationship between discrimination and restrictions, see also my Opinion of 4 September 2008 in Case C‑222/07 UTECA, not yet published in the ECR, point 77. 20 – See, to that effect, Case C‑279/93 Schumacker [1995] ECR I‑225; Test Claimants in Class IV of the ACT Group Litigation, cited in footnote 8, paragraph 46; and Denkavit Internationaal and Denkavit France, cited in footnote 17, paragraphs 24 and 25. 21 – Case C‑290/04 FKP Scorpio Konzertproduktionen [2006] ECR I‑9461, paragraphs 33 to 35. 22 – Opinion of 3 April 2008 in Case C‑524/06 Huber [2008] ECR I-0000, point 7. 23 – See, to that effect, Test Claimants in the Thin Cap Group Litigation, cited in footnote 8, paragraph 64; Cadbury Schweppes and Cadbury Schweppes Overseas, cited in footnote 4, paragraph 47; and Lidl Belgium, cited in footnote 16, paragraph 27. 24 – FKP Scorpio Konzertproduktionen, cited in footnote 21, paragraph 36. 25 – Council Directive 76/308/EEC of 15 March 1976 on mutual assistance for the recovery of claims resulting from operations forming part of the system of financing the European Agricultural Guidance and Guarantee Fund, and of the agricultural levies and customs duties, OJ 1976 L 73, p. 18. 26 – Council Directive 2001/44/EC of 15 June 2001 amending Directive 76/308/EEC on mutual assistance for the recovery of claims resulting from operations forming part of the system of financing the European Agricultural Guidance and Guarantee Fund, and of agricultural levies and customs duties and in respect of value added tax and certain excise duties, OJ 2001 L 175, p. 17. 27 – Moniteur belge, 6 July 1956 and 23 December 1956. 28 – See the case-law cited in footnote 4. 29 – On the legislature’s margin of discretion, see also my Opinions in UTECA, cited in footnote 19, point 60, and of 11 September 2008 in Case C‑317/07 Lahti Energia [2008] ECR I-0000, point 94, each with further references. 30 – Cited in footnote 16. 31 – Opinion in Lidl Belgium, cited in footnote 16, point 28 et seq. 32 – In footnote 24 to her Opinion in Lidl Belgium Advocate General Sharpston refers to Joined Cases C‑397/98 and C‑410/98 Metallgesellschaft and Others [2001] ECR I‑1727, paragraphs 44, 54 and 76; Case C‑436/00 X and Y [2002] ECR I‑10829, paragraphs 36 to 38; Case C‑268/03 De Baeck [2004] ECR I‑5961, paragraph 24; Test Claimants in the FII Group Litigation, cited in footnote 8, paragraphs 96 et seq. and 153 et seq.; and Case C‑347/04 Rewe Zentralfinanz [2007] ECR I‑2647, paragraph 29. 33 – Case C‑513/04 Kerckhaert and Morres [2006] ECR I‑10967, paragraph 20. See also Columbus Container Services, cited in footnote 13, paragraph 43. 34 – Kerckhaert and Morres, cited in footnote 33, paragraph 21, and Columbus Container Services, cited in footnote 13, paragraph 44. 35 – Kerckhaert and Morres, cited in footnote 33, paragraph 22, and Columbus Container Services, cited in footnote 13, paragraph 45. 36 – Cited in footnote 17. 37 – Cited in footnote 4. 38 – Denkavit Internationaal and Denkavit France, cited in footnote 17, paragraphs 35 to 37, and Amurta, cited in footnote 4, paragraphs 38 to 40. 39 – See, to that effect, Case C‑234/01 Gerritse [2003] ECR I‑5933, paragraph 55. 40 – Cited in footnote 39. 41 – Gerritse, cited in footnote 39, paragraph 27; FKP Scorpio Konzertproduktionen, cited in footnote 21, paragraphs 50 to 52; Case C‑346/04 Conijn [2006] ECR I‑6137, paragraph 26; and Case C‑345/04 Centro Equestre da Lezíria Grande [2007] ECR I‑1425, paragraph 24. 42 – On the principle of fiscal symmetry, see Lidl Belgium, cited in footnote 16, paragraph 33.