Opinion of the Advocate General — ECLI:EU:C:2002:545
Date: 2002-09-26
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Right of establishment
Procedure: Reference for a preliminary ruling
Origin: Germany

Summary of the Judgment 
Freedom of movement for persons — Freedom of establishment — Tax legislation — 
Tax on company profits — Taxation as disguised dividends of interest paid by a company 
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SUMMARY — CASE C-324/00 
in return for capital loaned to a major shareholder not in receipt of a tax credit — 
Provision affecting mainly company shareholders that are foreign parent companies — 
Not permissible — Whether justifiable — No justification 
(Art. 43 EC) 
Article 43 EC is to be interpreted as 
precluding tax legislation of a Member 
State, which provides that repayments in 
respect of loan capital which a company 
has obtained from a shareholder, such as its 
parent company, with a substantial holding 
in its capital must, in certain cases, be 
regarded as a covert distribution of profits, 
and which applies only to repayments in 
respect of capital obtained from a share­
holder not entitled to tax credit, where, in 
the large majority of cases, resident parent 
companies received a tax credit, whereas, 
as a general rule, non-resident parent com­
panies do not. 
Such a difference in treatment between 
resident subsidiary companies according to 
the seat of their parent company makes it 
less attractive for companies established in 
other Member States to exercise freedom of 
establishment and they may, in con­
sequence, refrain from acquiring, creating 
or maintaining a subsidiary in the State 
which adopts that measure and constitutes 
an obstacle to freedom of establishment 
which is, in principle, prohibited by 
Article 43 EC. 
That legislation cannot be justified by 
reasons linked to the risk of tax evasion, 
where it does not have the specific purpose 
of preventing wholly artificial arrange­
ments, designed to circumvent national 
tax legislation, but applies generally to 
any situation in which the parent company 
has its seat, for whatever reason, outside 
the Member State, since such a situation 
does not, of itself, entail a risk of tax 
evasion; nor can it be justified by the need 
to ensure the coherence of a tax system, 
there being no direct link between the less 
favourable tax treatment suffered by the 
subsidiary of a non-resident parent com­
pany and any tax advantage to offset such 
treatment. 
(see paras 27-28, 32, 36-37, 40, 42, 45, 
operative part) 
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