Judgment;Summary — ECLI:EU:C:2021:721
Date: 2021-09-09
Language of the case: Portuguese
Court formation: Seventh Chamber
Subject matter: Free movement of capital
Procedure: Reference for a preliminary ruling
Origin: Portugal

Translation C-449/20 – 1 
Case C-449/20 
Request for a preliminary ruling 
Date lodged: 
22 September 2020 
Referring court: 
Supremo Tribunal Administrativo (Secção de Contencioso 
Tributário) (Supreme Administrative Court (Tax Division)), 
Portugal 
Date of the decision to refer: 
1 July 2020 
Appellant: 
Real Vida Seguros, S. A. 
Respondent: 
AT – Autoridade Tributária e Aduaneira (Tax and Customs 
Authority) 
  
Supremo Tribunal Administrativo (Supreme Administrative Court) 
[…] 
The Secção de Contencioso Tributário (Tax Division) of the Supremo Tribunal 
Administrativo (Supreme Administrative Court) has issued the following decision: 
[…] 
I.1. Real [Vida] Seguros, S. A., […] Porto, lodged an appeal on a point of law against 
the judgment delivered [by the] Tribunal Administrativo e Fiscal do Porto 
(Administrative and Tax Court, Porto) on 29 June 2018, in so far as concerns that 
part of the judgment dismissing its appeal as unfounded – that is, the acceptance 
of dividends received on foreign shares as a tax cost for the purposes of a tax 
benefit, in the sum of EUR 10 196.54 (financial year 1999) and EUR 13 406.62 
(financial year 2000) – which part (partly) upheld the additional assessment of the 
[Imposto sobre o Rendimento das Pessoas Coletivas (Corporation Tax; ‘IRC’)] for 
the financial years 1999 and 2000. 
EN 
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I.2. The appellant put forward the following arguments and claims: 
i. […] 
ii. The purpose of this appeal on a point of law is to challenge the judgment of 
the referring court on grounds that it erred in law solely as regards its 
consideration of the question concerning the deduction of dividends received on 
foreign shares from net income for 1999 and 2000 pursuant to Article 31 of the 
[Estatuto dos Benefícios Fiscais (Statute governing Tax Benefits; ‘EBF’)] as it 
applied at the time of the facts, specifically because it held that the possibility of 
deduction provided for in the aforementioned provision applies only to dividends 
on shares admitted to trading on the Portuguese [OR. 2] stock exchange and does 
not apply to dividends on shares admitted to trading on foreign stock exchanges; 
iii. Tax rules must be interpreted in accordance with the general principles of 
legal interpretation, that is to say, by applying the criteria laid down in Article 9 of 
the Civil Code; 
iv. It therefore follows that the wording of the legislation must be the main 
criterion and the starting point for (all) interpretation, and that in interpreting laws 
the interpreter must seek to reconstruct their rationale; 
v. Interpretation may not go beyond the language and (formal and syntactic) 
linguistic construction in order to assert a meaning or particular characteristic that 
is not expressly included in the law itself; 
vi. In this regard, if there is no reference in either the law or its explanatory 
preamble to the origin of the dividends (domestic shares or foreign shares), the 
interpreter may not make such a distinction; 
vii. Moreover, any such distinction would be contrary to European Union law in 
the case of shares admitted to trading on [EU] stock exchanges; 
viii. Likewise, making the application of the tax benefit conditional on the 
share’s national origin is manifestly in breach of the principle of free movement of 
capital (Article 63 TFEU and following); 
ix. It would also give rise to a clear breach of the principle of capital export 
neutrality, since a tax benefit would be granted to tax residents who obtain income 
in the national territory, to the disadvantage of those who obtain income abroad[.] 
x. […] [Or. 3] [closing arguments] 
xi. […] [closing arguments] 
[…] [form of order sought by the appellant] 
1.3. […] [procedure] 
REAL VIDA SEGUROS 
 
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1.4. The Public Prosecutor stated that the appeal should be dismissed as unfounded, in 
view of the fact that the ‘… ratio legis of Article 31 of the EBF lies in the 
introduction of a measure intended to incentivise the capital market, on the 
Portuguese stock exchange’. 
1.5. […] [procedure] 
1.6. In view of the claims submitted in the appeal, it is necessary to determine whether, 
contrary to the ruling in the judgment under appeal, for the purposes of IRC it 
must be possible under Article 31 of the EBF to deduct dividends received on 
foreign shares from net income for 1999 and 2000. 
[Or. 4] 7. It is also necessary to ascertain whether, under Article 31 of the 
EBF, there has been a breach of the principle of free movement of capital 
(Article 63 et seq. of the Treaty on the Functioning of the European Union 
(TFEU)), as submitted in the appeal. 
Since breach of the principle of free movement of capital may give rise to an 
obligation to make a reference for a preliminary ruling pursuant to Article 267 
TFEU (unless it is considered that the Court of Justice of the European Union 
(CJEU) has already given a clear ruling on this point), the court must examine the 
issue of its own motion, […]. [procedural rules] 
With regard to breach of the principle of capital export neutrality, this must be 
examined in the light of the obligations on the State established in Article 81(f) of 
the Constituição da República Portuguesa (Constitution of the Portuguese 
Republic). 
[…] 
[…] [Background] facts 
The judgment under appeal found the following facts proven: 
1) The appellant was the subject of an inspection […] by the Serviços de Inspeção 
Tributária da Direção de Finanças do Porto (Tax Inspectorate of the Porto Finance 
Directorate) in respect of the financial years 1999 and 2000, which resulted in a 
correction of income for tax purposes for the years in question amounting to 
EUR 5 055.88 (1999) and EUR 15 816.85 (2000), making a total of 
EUR 20 872.73 […]; 
2) Amongst other things, the corrections consisted in disallowing provisions of 
EUR 1 253.35 and EUR 27 050.71 made for bad debts (for 1999 and 2000 
respectively) and in corrections to the taxable amount amounting to 
EUR 10 196.54 (for 1999) and EUR 13 406.62 (for 2000) […]; 
[Or. 5] 
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3) The grounds for the corrections are set out in the tax inspection report […] which, 
specifically, includes the following: 
[…] 
‘The inspection of accounting and tax aspects conducted in accordance with 
current procedures at a level of detail considered appropriate to the 
circumstances has given rise to the following corrections: 
III-1 – Financial year 1999 
III-1.1 – Corrections to the taxable amount – IRC 
III-1.1.1 – Tax benefits 
EUR 10 778.46 (PTE 2 160 888.15), amount of correction in favour of the Tax 
Authority, as set out below: […] 
• EUR 10 196.54 (PTE 2 044 222.75) – The examination of the taxable 
amount used as the basis for calculating income that benefits from the deduction 
for shares admitted to trading on stock exchanges pursuant to Article 31 of the 
EBF shows that the taxable person included the gross dividends received on both 
Portuguese and foreign shares. 
However, having regard to the concept of tax benefit, and given that the benefit in 
question was conceived in order to stimulate the national stock exchange, it 
should only have included dividends received on shares admitted to trading on the 
national stock exchange, and therefore the amount has been corrected in 
accordance with the aforementioned statutory provision[.] 
[…] [Or. 6] […] 
[…] [Or. 7] […] [facts that are not relevant to the request for a preliminary ruling] 
III-2 – Financial year 2000 
III-2.1 – Corrections to the taxable amount – IRC 
III-2.1.1 – Tax benefits 
The examination of the taxable amount used as the basis for calculating income 
that benefits from the deduction for shares admitted to trading on stock exchanges 
pursuant to Article 31 of the EBF shows that the taxable person included the gross 
dividends received on both Portuguese and foreign shares. 
However, having regard to the concept of tax benefit, and given that the benefit in 
question was conceived in order to stimulate the national stock exchange, it 
should only have included dividends received on shares admitted to trading on the 
national stock exchange, and therefore a correction has been made in the sum of 
REAL VIDA SEGUROS 
 
5 
EUR 13 406.62 […], in accordance with the aforementioned statutory provision.’ 
[…] 
[…] 
[Or. 8] […] 
[…] [Or. 9] […] [facts that are not relevant to the request for a preliminary ruling] 
[Or. 10] 
4) By decision […] [,] the appellant was informed of the tax inspection report […]; 
5) The Tax Authority then issued the IRC assessment[s] […] for financial years 1999 
and 2000, which showed that a sum of EUR 92 107.83 was payable in tax […]. 
6) On 25 September 2003 the appellant lodged an internal administrative appeal 
against the tax assessments referred to in paragraph 5 […]; 
7) The present appeal on a point of law was lodged on 21 June 2004 […]. 
[…] 
[…] Points of law: 
The judgment under appeal ruled that, with regard to points III-1.1.1 and III-2.1.1 
of the tax inspection report […], the tax benefit established in Article 31 of the 
EBF should be applied to dividends received on shares admitted to trading on 
national stock exchanges, but not on those admitted to trading on stock exchanges 
of other countries of the European Union. 
The aforementioned provision is worded as follows: 
‘For the purposes of IRS [personal income tax] or IRC, only 50% of the dividends 
received on shares admitted to trading on stock markets shall be taken into 
account.’ 
In support of the reasoning that was followed, it was argued that the objective of 
the provision in question was to stimulate or develop the stock exchange, that is to 
say, there was a significant public interest, specifically an economic interest, 
which was deemed to outweigh [Or. 11] the tax objective, and that public interest 
should be pursued under the enabling law and pursuant to Article 2(1) of the EBF. 
This latter provision provides as follows: 
– ‘Tax benefits are exceptional measures adopted in order to protect non-
fiscal public interests that outweigh the fiscal public interests which thus cannot 
be achieved.’ 
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The above reasoning was also based on a logical approach (Article 9(3) of the 
Civil Code) which reasoned that, since the objective of Article 31 of the EBF was 
to develop the national stock exchange, it makes no sense to apply the same 
measure to dividends on shares in companies listed on the market of other 
countries of the European Union. 
The appellant argues that the wording of the aforementioned Article 15 of the 
EBF makes no such distinction and, above all, that the distinction that has been 
made is contrary to EU law since, in its opinion, there is a clear breach of the 
principle of free movement of capital ― established in Article 63 TFEU et seq. ― 
and of the principle of capital export neutrality. 
The main conclusion to be drawn from the principles of interpretation that apply 
in the present case is that the guiding principle must be the unity of the legal 
system ― Article 11(1) of the Lei Geral Tributária (General Tax Law) and 
Article 9(1) of the Civil Code ― which makes the interpretation of the tax benefit 
in question subject to the outcome obtained by applying the principle and the rules 
relevant to the case. 
In that regard, the tax treatment of dividends on shares admitted to trading on 
national stock exchanges and those of other countries of the European Union 
could be considered to interfere with the free movement of capital referred to in 
Article 63 TFEU and following (formerly Article 56 and following of the Treaty 
establishing the European Community (TEC)), relied on in connection with this 
principle. 
[Or. 12] With regard to the free movement of capital, it is expressly stated that 
‘all restrictions shall be prohibited’ (Article 63 [TFEU]). 
There are exceptions to this provision, including those provided for in the 
‘relevant provisions of their tax law which distinguish between taxpayers who are 
not in the same situation with regard to their place of residence or with regard to 
the place where their capital is invested’ and also other exceptions that include 
‘measures which are justified on grounds of public policy’ – Article 65(1)(a) and 
(b) TFEU (formerly Article 58 TEC). 
The application of the exception is also conditional on there being no ‘arbitrary 
discrimination’ and no ‘disguised restriction on the free movement of capital’, 
requirements which apply to the situations provided for in Article 65(1)(a) and (b) 
by virtue of Article 65(3). 
[…] [reference to national case-law] 
As noted by [João Sérgio Ribeiro] on page 56 [of Direito Fiscal da União 
Europeia. Tributação Direta, 2nd ed. Almedina, 2019], ‘the Court of Justice has 
held that movements of capital within the meaning of Article 63 TFEU include in 
particular “direct” investments, namely investments in the form of participation in 
an undertaking through the holding of shares which confers the possibility of 
REAL VIDA SEGUROS 
 
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effectively participating in its management and control, and “portfolio” 
investments, namely investments in the form of the acquisition of shares on the 
capital market solely with the intention of making a financial investment without 
any intention to influence the management and control of the undertaking’, as 
established in the judgment of 8 July 2010, Commission v Portugal, C-171/08, 
paragraph 49 and the case-law cited. 
[Or. 13] Moreover, a search undertaken at www.curia.europa.eu/juris/ failed to 
uncover any previous ruling in the case-law of the Court of Justice of the 
European Union on breach of the principles of free movement of capital or capital 
export neutrality in the circumstances contemplated in Article 31 of the EBF and 
in accordance with the reasoning followed by the judgment under appeal now 
under consideration, that is to say, as a means of restricting the 50% deduction for 
IRC purposes solely to dividends received from shares quoted on national stock 
exchanges, thus excluding net dividends obtained on other stock exchanges in the 
countries of the European Union. 
Finally, having regard to the principles of the primacy of [EU] law and compatible 
interpretation, from which it can be seen that a reference for a preliminary ruling 
is an essential instrument for ensuring the uniform interpretation and application 
of EU law in all Member States, as well as the coherence of the European Union’s 
system of judicial protection and the principle of effective legal protection for the 
rights of individuals, it is considered helpful and necessary to ask the Court of 
Justice of the European Union to rule on the following question referred to it 
pursuant to Article 267 TFEU: 
Does the fact that, for the purposes of calculating the amount of the imposto 
sobre [o rendimento] [d]as pessoas coletivas (Corporation Tax; IRC) due 
from the appellant in respect of financial years 1999 and 2000, Articles 31 
and 2 of the Estatuto dos Benefícios Fiscais (Statute governing Tax Benefits) 
permit a 50% deduction in dividends obtained on national (Portuguese) stock 
exchanges but exclude dividends obtained on the stock exchanges of other 
countries of the European Union from benefiting from the deduction, 
constitute a breach of the free movement of capital under Article 63 TFEU 
and following? 
[…] [procedure] 
[…] Decision: 
The Judges of the Supremo Tribunal Administrativo (Secção de Contencioso 
Tributário) (Supreme Administrative Court (Tax Division)) decide to refer the 
above question to the Court of Justice of the [Or. 14] European Union for a 
preliminary ruling and therefore to stay the proceedings. 
[…] [subsequent procedure] 
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[…] [reference to an exemption from costs] 
1 July 2020 
[…] [signatures]