Judgment;Summary — ECLI:EU:C:2023:890
Date: 2023-11-16
Language of the case: Hungarian
Court formation: Ninth Chamber
Subject matter: Approximation of laws
Procedure: Reference for a preliminary ruling
Origin: Hungary

Summary C-318/22 – 1 
Case C-318/22 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
12 May 2022 
Referring court: 
Fővárosi Törvényszék (Hungary) 
Date of the decision to refer: 
27 April 2022 
Applicant: 
GE Infrastructure Hungary Holding Kft. 
Defendant: 
Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (Appeals 
Directorate of the National Tax and Customs Administration, 
Hungary) 
  
Subject matter of the main proceedings 
Action for judicial review of a decision by the Nemzeti Adó- és Vámhivatal 
Fellebbviteli Igazgatósága (Appeals Directorate of the National Tax and Customs 
Administration, Hungary; ‘the defendant’) confirming a decision of the first-tier 
tax authority refusing to grant the reduction of the basis of assessment to 
corporation tax requested by the limited liability company GE Infrastructure 
Hungary Holding Kft. (‘the applicant’) in connection with income recognised in 
the accounts following a business conversion. 
Subject matter and legal basis of the request 
Subject matter: Interpretation of national legislation which applies to purely 
domestic situations provisions identical to those contained in an EU directive 
governing cross-border scenarios. Whether Article 8(2) of Directive 2009/133 is 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-318/22 
 
2  
applicable to the conversion of a single-member company and, if so, whether the 
application of that provision is subject to certain conditions. 
Legal basis: Article 267 TFEU 
Questions referred for a preliminary ruling 
a) Must Council Directive 2009/133/EC of 19 October 2009 on the common 
system of taxation applicable to mergers, divisions, partial divisions, 
transfers of assets and exchanges of shares concerning companies of 
different Member States and to the transfer of the registered office of an SE 
or SCE between Member States (‘the Directive’) be interpreted as meaning 
that compatibility with recital 2 and Article 1(a) thereof is maintained by 
national legislation (or a provision of national law), or the interpretation and 
application in practice of such national legislation (or such a provision of 
national law), pursuant to which the Directive is held not to apply to intra-
State business conversions but only to international and cross-border 
business conversions, in circumstances in which the provisions of the 
Directive were transposed by the a társasági adóról és osztalékadóról szóló 
1996. évi LXXXI. törvény (Law LXXXI of 1996 on corporation tax and tax 
on dividends; ‘the Law on corporation tax’) in such a way that, although 
[EU] law does not directly govern that matter, the national legislature 
provided in Article 31(1)(a) of that Law that the purpose of the latter was to 
align the legislation so enacted with acts of EU law, including the Directive? 
b) Must Article 8(2) of the Directive be interpreted as meaning that 
compatibility with that provision is maintained by national legislation (or a 
provision of national law), or the interpretation and application in practice of 
such legislation (or such a provision), whereby, in the context of a partial 
division of undertakings resident in a single Member State, the shareholder 
of the transferring company is obliged to reduce the nominal value of his 
holding in the transferring company (the subscribed capital of the 
transferring company) in order to reduce the book value of his holding (his 
shares) in the transferring company, the tax administration requiring that 
reduction as a precondition of eligibility for the tax treatment provided for in 
Article 8(2) of the Directive, even in the case where the partial division 
entails losses for the shareholder of the transferring company? 
c) Must Article 8(2) of the Directive be interpreted as meaning that 
compatibility with the rule set out therein is maintained by national 
legislation (or a provision of national law), or the interpretation and 
application in practice of such legislation (or such a provision of national 
law), whereby the treatment for corporation tax purposes envisaged in that 
rule is not applicable to a partial division if the transferring company 
concerned is a single-member commercial company, that is to say if, as a 
result of the partial division, the founder of the transferring company retains 
GE INFRASTRUCTURE HUNGARY HOLDING 
 
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his 100% holding in that company unchanged, or there is no change to the 
subscribed capital of the transferring commercial company? 
Provisions of European Union law relied on 
Council Directive 2009/133/EC of 19 October 2009 on the common system of 
taxation applicable to mergers, divisions, partial divisions, transfers of assets and 
exchanges of shares concerning companies of different Member States and to the 
transfer of the registered office of an SE or SCE between Member States: 
recital 2; Article 1(a); Article 2(c); Article 8(2) and (5). 
Provisions of national law relied on 
A társasági adóról és az osztalékadóról szóló 1996. évi LXXXI. törvény (Law 
LXXXI of 1996 on corporation tax and tax on dividends; ‘the Law on corporation 
tax’): Article 1(5); Articl4, point 23/a; Article 7(1)(gy), point 1; Article 8(1)(m), 
point mb; Article 31(1)(a). 
A számvitelről szóló 2000. évi C. törvény (Law C of 2000 on accounting; ‘the La 
won accounting’): Article 85(1)(d). 
Succinct presentation of the facts and procedure in the main proceedings 
1 The applicant owned a 100% holding in the limited liability company GE 
Hungary Kft. (‘GE Hungary’), which in turn owned a 100% holding in the limited 
liability company GE Aviation Hungary Kft. (‘GE Aviation’). In 2017, those three 
companies signed an agreement for a so-called ‘partial division with merger by 
acquisition’.  
2 As part of that transformation, two of GE Hungary’s business lines were spun off 
and merged by acquisition into GE Aviation. The spin-off of those lines of 
business was recognised in GE Hungary’s accounts by means of a reduction of 
that company’s reserves, no change having been made to its subscribed capital. 
3 At the same time, the applicant acquired a direct 99.6% holding in GE Aviation. 
For that purpose, the latter company’s subscribed capital was increased by means 
of a charge against reserves. In addition, the value of GE Hungary’s holding in GE 
Aviation was reduced, that reduction having also been recognised in the accounts 
by means of a reduction of the reserves. 
4 The applicant retained its 100% holding in GE Hungary. 
5 Following a tax inspection carried out in 2019, the applicant applied to have its 
basis of assessment to corporation tax reduced by 83 331 000 000 HUF as a result 
of the aforementioned spin-off of certain lines of GE Hungary’s business. The 
first-tier tax authority turned down that application, on the ground that the amount 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-318/22 
 
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of the reduction applied for did not correspond to a reduction of the holding, that 
is to say that the business conversion had not led to any change either to the 
applicant’s holding in GE Hungary or to the latter company’s subscribed capital. 
6 That decision was confirmed by the defendant, acting as second-tier authority, 
which took the view that, for the reasons given, Article 7(1)(gy), point 1, of the 
Law on corporation tax was not applicable. It further held that the applicant could 
not rely on the Directive, given that, according to Article 1([a]) thereof, this is 
applicable only to mergers involving companies from two or more Member States. 
The defendant concluded that, for the reasons given, there were no grounds for 
reducing the basis of assessment to corporation tax payable by the applicant for 
the 2017 financial year on the legal basis cited. 
7 The applicant brought before the referring court an action for judicial review of 
the defendant’s decision. 
The essential arguments of the parties in the main proceedings 
8 The applicant submits that the transaction at issue constitutes a partial division 
within the meaning of Article 2(c) of the Directive. According to the settled case-
law of the Court of Justice, the Directive is to be applied to and governs all cases 
in which, in order to resolve a purely domestic situation, domestic law adheres to 
the solutions adopted by EU law. So far as concerns the transaction at issue here, 
the respondent should have taken into consideration the joint interpretation, based 
on the Directive, of the Law on accounting and the Law on corporation tax, 
according to which a business conversion of this kind will not give rise to any 
corporation tax liability on the part of the company. 
9 The applicant submits that the provisions of the Directive on non-liability to tax 
were transposed by Article 7(1)(gy) of the Law on corporation tax, concerning 
cases of a reduction of the holding, which is based on the concept [of a holding 
reduction] contained in Article 85(1)(d) of the Law on accounting. However, the 
concept of partial division defined in Article 2(d) of the Directive does not support 
the inference that the transferring company must reduce its subscribed capital. 
Neither does this necessarily happen in practice, and the provisions of national 
law are also amenable to a reading that is consistent with the EU legislation. 
10 The applicant argues that, since the Directive does not afford Member States any 
discretion in the transposition of the Directive, those States cannot subject to any 
further conditions the fiscal neutrality established for the benefit of the 
shareholders of the controlled company. The advantages granted by the Directive 
may be refused only if the main purpose of the transaction in question is tax 
evasion or avoidance, a situation which the applicant has not claimed to be present 
and is not at issue in this case. 
11 The applicant also relies on the fundamental principle of the primacy of economic 
reality: the fact that the defendant makes eligibility for the advantages of the 
GE INFRASTRUCTURE HUNGARY HOLDING 
 
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Directive contingent upon a reduction of subscribed capital is a formal condition 
which cannot in any way be inferred from the Directive and cannot be inferred 
from the Law on accounting or the Law on corporation tax either. After all, the 
value of shares [in a limited liability company] does not depend exclusively on the 
company’s subscribed capital but is influenced by other elements of its capital. 
12 The defendant argues that there is an obligation to apply the Directive only if a 
transaction is concluded between companies established in two or more Member 
States, whereas, in this case, the transaction was concluded between commercial 
companies operating in a single Member State. 
13 The defendant further considers that the tax base could have been reduced only if 
GE Hungary’s subscribed capital had been reduced, that is to say if the transaction 
had not been recognised in the accounts as a charge against reserves. It takes the 
view that the case-law cited by the applicant is not applicable, since the facts of 
that case were different from those of the present case. Furthermore, that case-law 
does not support the inference that Article 7(1)(gy), point 1, of the Law on 
corporation tax is contrary to the Directive. 
Succinct presentation of the reasoning in the request for a preliminary ruling 
14 The referring court has to rule on whether, in the case of a business conversion 
(partial division) included within Article 2(c) of the Directive, compatibility with 
Article 8(2) and (5) of the Directive is maintained by an interpretation of 
Article 7(1)(gy), point 1, of the Law on corporation tax according to which the 
condition making a reduction of the basis of assessment to corporation tax 
contingent upon a ‘reduction of the holding’ is fulfilled only if the subscribed 
capital is changed, a change to the reserves being insufficient. 
15 The Directive was incorporated into the Law on corporation tax by 
Article 31(1)(a) of that Law. In the view of the referring court, the national 
legislation contains provisions identical to those of the Directive in the case of 
both cross-border business conversions and purely domestic business conversions. 
The principles of equal treatment and fiscal neutrality require that that national 
legislation be interpreted in accordance with the Directive. In this regard, the 
referring court mentions the judgments in Leur-Bloem (C-28/95, EU:C:1997:369), 
Andersen og Jensen (C-43/00, EU:C:2002:15) and Dzodzi (C-297/88, 
EU:C:1990:360). 
16 The referring court considers that Article 2(c) of the Directive does not constitute 
an acte clair or an acte éclairé in this regard.