Judgment;Summary — ECLI:EU:C:2023:880
Date: 2023-11-16
Language of the case: Portuguese
Court formation: Sixth Chamber
Subject matter: Right of establishment;Free movement of capital
Procedure: Reference for a preliminary ruling
Origin: Portugal

Summary C-472/22 – 1 
Case C-472/22 
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: 
14 July 2022 
Referring court: 
Tribunal Arbitral Tributário (Centro de Arbitragem 
Administrativa – CAAD) (Portugal) 
Date of the decision to refer: 
9 July 2022 
Applicant: 
NO 
Defendant: 
Autoridade Tributária e Aduaneira  
  
Subject matter of the main proceedings 
Declaration of illegality and subsequent annulment of the assessment for the 
Imposto sobre o Rendimento das Pessoas Singulares (Personal Income Tax, 
‘IRSʼ) issued to the applicant for the year 2019, in so far as it does not take into 
account the tax advantage provided for in Article 43(3) of the Código do Imposto 
sobre o Rendimento das Pessoas Singulares (Personal Income Tax Code, ‘CIRSʼ), 
for infringement of Article 43(3) of the CIRS, of Articles 49 (right of 
establishment) and 63 (free movement of capital) of the Treaty on the Functioning 
of the European Union and of Article 8 of the Constitution of the Portuguese 
Republic. 
Subject matter and legal basis of the request 
Subject matter: interpretation of Article 49 TFEU (right of establishment), of 
Articles 63 TFEU and 65 TFEU (free movement of capital) and of the principle of 
prohibition of abusive practices as a general principle of European Union law. 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-472/22 
 
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Legal basis: Article 267 TFEU. 
Questions referred for a preliminary ruling  
1. Are Article 49 TFEU (right of establishment) and/or Article 63 TFEU (free 
movement of capital) to be interpreted as precluding a legal provision or a fiscal 
practice of a Member State whereby, for the purposes of personal income tax in 
that Member State, a tax advantage, consisting in taxation of 50% of the gain 
resulting from the transfer of company shares, is applied to transfers of shares in 
companies incorporated under national law, but not to transfers of shares in 
companies incorporated in another Member State?  
2. Are Article 49 TFEU (right of establishment) and/or Article 63 TFEU (free 
movement of capital) to be interpreted as precluding a legal provision or a fiscal 
practice of a Member State whereby, for the purposes of personal income tax in 
that Member State, a tax advantage, consisting in taxation of 50% of the gain 
resulting from the transfer of company shares, is applied to transfers of shares in 
companies which have their actual domicile in the national territory, but not to 
transfers of shares in companies which have their actual domicile in the territory 
of another Member State? 
3. Are Article 49 TFEU (right of establishment) and/or Article 63 TFEU (free 
movement of capital) to be interpreted as precluding a legal provision or a fiscal 
practice of a Member State whereby, for the purposes of personal income tax in 
that Member State, a tax advantage, consisting in taxation of 50% of the gain 
resulting from the transfer of company shares, is applied to transfers of shares in 
companies with tax residence in the national territory, but not to transfers of 
shares in companies with tax residence in the territory of another Member State?  
4. Are Article 49 TFEU (right of establishment) and/or Article 63 TFEU (free 
movement of capital) to be interpreted as precluding a legal provision or a fiscal 
practice of a Member State whereby, for the purposes of personal income tax in 
that Member State, a tax advantage, consisting in taxation of 50% of the gain 
resulting from the transfer of company shares, is applied to transfers of shares in 
companies which conduct their business in the national territory, but not to 
transfers of shares in companies which conduct their business in the territory of 
another Member State? 
5. Is the principle of prohibition of abusive practices to be interpreted as 
applying to a transfer of company shares such as that in the present case, which, in 
essence, has a result equivalent to a dividend payment, and the legal form of 
which was chosen by the taxpayer with the fundamental aim of obtaining a tax 
advantage deriving from national law and strictly applicable to capital gains on 
securities, in circumstances such as those of the present case, in which the grant to 
the taxpayer of the tax advantage concerned depends on whether that taxpayer is 
able to rely on and exercise the right of establishment under Article 49 TFEU 
and/or free movement of capital under Article 63 TFEU?  
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6. Is the principle of prohibition of abusive practices to be interpreted as 
precluding a taxpayer from relying on and exercising the right of establishment 
(under Article 49 TFEU) or the free movement of capital (under Article 63 TFEU) 
in order to benefit from the tax advantage provided for in national law for capital 
gains arising from the transfer of company shares, when, with the main objective 
of benefiting from that tax advantage, that taxpayer has carried out a transaction, 
which, in essence, has a result equivalent to a dividend payment, such as a transfer 
of shares? 
7. If the answer to the previous question is in the affirmative, can a taxpayer 
invoke legal certainty or legitimate expectations in order to challenge a refusal to 
recognise the right of establishment and/or free movement of capital in line with 
the principle of prohibition of abusive practices and, thus, legitimise that abusive 
practice?  
8. Is the principle of prohibition of abusive practices to be interpreted as 
meaning that its application depends on verification of the conditions for the 
application of the general anti-abuse regulations under national law? 
9. Is the principle of prohibition of abusive practices to be interpreted as 
meaning that its application depends on it being invoked by the national 
authorities? 
10. Is the principle of prohibition of abusive practices to be interpreted as 
meaning that its application depends on compliance by the national tax authorities 
with the procedure laid down for the application of the general anti-abuse 
regulations under national law?  
11. Given that the jurisdiction of the national court is limited to assessing the 
legality of tax measures and deciding whether to annul or to uphold them in the 
legal order, without replacing the Tax Authority, is the principle of prohibition of 
abusive practices to be interpreted as meaning that the Arbitration Tribunal has 
jurisdiction to reclassify/redefine/requalify the abusive transaction and apply the 
relevant national legislation to the transaction which would exist in its place? 
Provisions of European Union law and case-law relied on  
Articles 49, 63 and 65 of the Treaty on the Functioning of the European Union. 
Principle of prohibition of abusive practices. 
Judgment of the Court of Justice of 29 February 2019, N Luxemburgo (C-115/16, 
C-118/16, C-119/16 and C-299/16, EU:C:2019:134, paragraphs 79 and 80). 
Judgment of 22 November 2019, Cussens (C-251/16, EU:C:2017:881, 
paragraph 80). 
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Judgment of 12 June 2014, Ascendi (C-377/13, EU:C:2014:1754, paragraph 35). 
Judgment of 21 February 2006 Halifax (C-255/02, EU:C:2006:121, paragraph 79). 
Provisions of national law relied on 
Article 8 of the Constitution of the Portuguese Republic. 
Article 43(3) and (4) of the CIRS. 
Decree-law No 372/2007 of 6 November, Article 2 of the annex.  
Lei Geral Tributária (General Tax Law), Article 38(2) as amended by Law No 30-
G/2000 of 29 December. 
Succinct presentation of the facts and procedure in the main proceedings  
1 The applicant is a French citizen who was resident for 
tax purposes in Portugal in 2019. 
2 On 23 April 2019, the applicant sold to the French 
company SAS Prince Vert, for EUR 850 000, 29 222 shares in the French 
company Château de La Bourdaisiere (CLB) SaRL (‘CLB SaRLʼ), with a total 
nominal value of EUR 155 057.78 and a total book value of EUR 164 024,63. 
3 In 2019, CLB SaRL was a small firm within the meaning 
of Article 2 of the Annex to Decree-law No 372/2007 of 6 November, with a 
workforce of 15 people and an annual turnover or an annual balance sheet total of 
not more than EUR 10 million.  
4 The applicant submitted his IRS return for 2019 and 
entered therein the sale of company shares, purchased in 2011-2012 for a total 
value of EUR 279 129.00 and transferred in 2019 for a value of EUR 850 000. 
5 Following the submission of that return, the Autoridade Tributária (‘Tax 
Authorityʼ) notified the applicant of the IRS assessment for the financial year 
2019, which calculated the tax payable on the full amount of the capital gains 
arising from the transfer or the company shares in question (EUR 141 460.02), 
without taking into account, therefore, the 50% reduction which would be the 
result of applying the provisions of Article 43(3) of the CIRS, which would have 
been EUR 70 730.01. 
6 The applicant lodged an appeal in which he sought a 
declaration of illegality and subsequent annulment of the IRS assessment for 
2019, in the amount of EUR 141 460.02 euros, in so far as it does not take into 
account the tax advantage provided for in Article 43(3) of the CIRS, which would 
have been EUR 70 730.01. 
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The essential arguments of the parties in the main proceedings  
7 According to the Tax Authority, the tax advantage provided for in Article 43(3) of 
the CIRS refers to companies which have their actual domicile in Portuguese 
territory, since classification as a micro-enterprise or small enterprise is decided 
by the Portuguese State, specifically the Ministry of Economy and Innovation. 
8 The scope of that tax advantage is limited ‘to the 
Portuguese territoryʼ, as is apparent from the teleological interpretation of 
Article 43(3) of the CIRS, the aim of which is to support national companies and 
stimulate economic activity in Portugal. 
9 In its opinion, it is apparent from the wording of 
Article 43(3) of the CIRS that that article applies only to companies which carry 
on their activities in a sphere subject to the control of the Ministry of Economy, 
which is not the case of the French company whose shares were transferred by the 
applicant. 
10 According to the Tax Authority, its interpretation of Article 43(3) of the CIRS 
does not infringe European Union law, in particular the free movement of capital 
provided for in Article 63 TFEU, since Article 65(1)(a) TFEU allows Member 
States to distinguish between taxpayers who are not in the same situation with 
regard to the place where their capital is invested. 
11 For that purpose, the comparability of the cross-border 
situation with an internal situation is examined taking into account the objective of 
the national provisions concerned, and the question of whether the difference in 
treatment arising from the national legislation reflects an objective difference of 
situation is determined in the light of the distinguishing criteria laid down in the 
national legislation. 
12 Since the purpose of Article 43(3) and (4) of the CIRS is 
to support Portuguese enterprises and stimulate economic activity in Portugal, 
transfers of shares in ‘companies established in Portugalʼ are not comparable with 
transfers of shares in ‘companies situated outside the national territoryʼ in so far as 
the former stimulate economic activity in Portugal and the latter do not have that 
effect.  
13 The difference in treatment between ‘companies 
established in Portugalʼ and ‘companies situated outside the national territoryʼ 
reflects that objective difference of situation, so that the tax relief in Article 43(3) 
and (4) of the CIRS, which is limited to the former, does not infringe European 
Union law.  
14 Conversely, the applicant maintains that the tax 
advantage provided for in Article 43(3) of the CIRS applies both to gains arising 
from the transfer of shares in ‘enterprises resident in the national territoryʼ and to 
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gains arising from the transfer of shares in undertakings resident in other Member 
States.  
15 The applicant claims that the fact that he is not granted 
that tax advantage constitutes discrimination between ‘resident companiesʼ and 
‘non-resident companiesʼ, which infringes (1) the freedom of establishment 
provided for in Article 49 TFEU, since this, by referring to the elimination of legal 
obstacles to cross-border economic activity and to ‘economic and social 
interpenetration within the Community in respect of activities of self-employed 
personsʼ, prohibits different (tax) treatment according to the State in which it is 
sought to invest, and (2) the free movement of capital, provided for in Article 63 
TFEU, since a transaction to dispose of investment, like the one which is the 
subject of the present case, constitutes a movement of capital which falls within 
the scope of Article 63 TFEU.  
16 That is because the situation of taxpayers resident in 
Portugal who receive capital gains arising from the transfer of shares in companies 
established in another Member State is objectively comparable to the situation of 
taxpayers resident in Portugal who receive capital gains arising from the transfer 
of shares in companies established in Portugal, the only differentiating factor 
between the two situations being the State of origin of the return on investment.  
17 Therefore, the differential treatment of capital gains 
makes it less attractive to exercise the right of establishment and the right of free 
movement of capital, and constitutes an unacceptable restriction of those rights.  
18 The applicant finds no justification for the restriction in 
question, namely, the limitation of the scope of Article 43(3) of the CIRS to 
capital gains arising from the transfer of shares in companies established in 
Portugal. 
19 Since, in the present case, it is not a situation which may 
be regarded as adequate and proportionate to the pursuit of the objectives 
recognised by the TFEU, or necessary in the absence of further tax harmonisation, 
and since there is no overriding reason relating to the public interest which may 
prevail in this case, this restriction is incompatible with the aforementioned right 
and freedom. 
Succinct presentation of the reasoning in the request for a preliminary ruling  
20 In these proceedings, the parties disagree as to whether 
Article 49 TFEU, relating to the right of establishment, and/or Article 63 TFEU, 
relating to the free movement of capital, preclude the Tax Authorityʼs 
interpretation of Article 43(3) and (4) of the CIRS. 
21 Article 43 of the CIRS, in its relevant part, is worded as follows: 
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Article 43 – Capital Gains  
1 – The amount of income classified as capital gains is represented by the balance 
of the difference between capital gains and capital losses occurring in the same 
year, determined in accordance with the following articles. 
… 
3 – The balance to which paragraph 1 refers, concerning the transactions 
provided for in Article 10(1)(b), relating to micro-enterprises and small 
enterprises which are not quoted on the regulated or unregulated stock markets, 
when it is positive, is also taken at 50% of its value. 
4 – For the purposes of the previous paragraph, micro-enterprises and small 
enterprises are understood to be the entities as defined in the Annex to Decree-
law No 372/2007 of 6 November. . 
22 In view of the claims made by the Tax Authority, the referring court has doubts as 
to whether the tax advantage established in Article 43(3) of the CIRS was refused 
to the applicant on the grounds that the company whose shares were transferred 
(a) was a ‘French companyʼ, that is to say, a company incorporated under French 
law (as opposed to a ‘Portuguese companyʼ), (b) had its ‘actual domicileʼ in 
France (as opposed to a company with its ‘actual domicileʼ in Portugal) or (c) 
exercises its economic activity in that Member State (as opposed to a company 
which exercises its economic activity in Portugal). 
23 The applicant assumes that the distinguishing criterion adopted by the Tax 
Authority was tax residence, although he also refers to the companyʼs domicile.  
24 For the purposes of corporation tax, a company is resident in Portugal when it has 
its ‘registered officeʼ or ‘effective centre of managementʼ in Portugal (see 
Article 2(3) of the Código do Imposto sobre o Rendimento das Pessoas Coletivas 
(Corporation Tax Code)). 
25 The concept of ‘actual domicileʼ appears in Portuguese commercial law as the 
‘effective centre of management of the companyʼ (that is to say, the place where 
the companyʼs management bodies meet to take decisions regarding the company, 
and the place where the general meetings of shareholders are held) as opposed to 
the ‘statutory domicile ʼ, that is to say, the place which appears in the companyʼs 
statutes (see Articles 3 and 4 of the Código das Sociedades Comerciais 
(Commercial Companies Code)). 
26 Given the lack of clarity of the Tax Authorityʼs position 
in this regard, the referring court considers that it is necessary to make several 
assumptions: that the Tax Authority considers that the tax advantage established 
in Article 43(3) of the CIRS is not applicable to the applicant because the 
company whose shares were transferred (a) is not a Portuguese company, (b) does 
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not have its actual domicile in Portuguese territory, (c) does not have tax residence 
in Portugal or (d) does not exercise an economic activity in Portugal.  
27 On the basis of the Tax Authorityʼs arguments, the 
referring court is not clear as to which criterion it adopted in order to refuse the 
applicant the tax advantage established in Article 43(3) of the CIRS, so it is also 
relevant to consider the criteria of the location of the ‘actual domicileʼ, of the tax 
residence and of the territory in which the company exercises its economic 
activity.  
28 It is clear from a combined reading of Articles 63 TFEU 
and 65 TFEU that a distinction must be drawn between, on the one hand, the 
differences in treatment authorised by Article 65(1)(a) TFEU, and, on the other, 
the discriminations prohibited by Article 65(3) TFEU, so it is necessary to 
ascertain whether the difference in treatment relates to situations which are 
objectively comparable or whether it is justified for an overriding reason in the 
public interest. 
29 The Tax Authority argues that the situations are not 
comparable, in view of the objective pursued by Article 43(3) of the CIRS (‘to 
stimulate economic activity in Portugalʼ), which therefore does not infringe 
European Union law.  
30 Although the issue has not been raised by the parties in 
the main proceedings, the referring court considers that, for the resolution of the 
dispute before it, the principle of prohibition of abusive practices as a general 
principle of European Union law is also relevant, and it has therefore given the 
parties the opportunity to submit their comments in that regard during the 
proceedings.  
31 The referring court considers that the interpretation of 
the principle of prohibition of abusive practices in the light of Articles 49 TFEU, 
63 TFEU and 65 TFEU is an unprecedented legal framework and there is 
reasonable doubt regarding the interpretation thereof in the main proceedings.  
32 The referring court has doubts concerning (i) the concept 
of ‘abusive practiceʼ as a precondition for the application of the principle of 
prohibition of abusive practices, (ii) the relevance of that principle in the sphere of 
the right of establishment provided for in Article 49 TFEU and of free movement 
of capital provided for in Article 63 TFEU, (iii) the conditions for the application 
of the principle of prohibition of abusive practices and (iv) their respective 
practical effects on the ruling which must be given in the dispute before it, in 
which it may be considered that the taxpayer has made an artificial transfer of 
company shares, with the fundamental aim of obtaining a tax advantage under 
national law and, in order to obtain that tax advantage, invokes the right of 
establishment provided for in Article 49 TFEU and the free movement of capital 
established in Article 63 TFEU.  
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33 The referring court wonders whether an artificial 
transaction carried out with the essential aim of obtaining a tax advantage under 
national law may constitute an ‘abusive practiceʼ, for the purposes of the principle 
of prohibition of abusive practices, when, in order to obtain that tax advantage, the 
taxpayer invokes the right of establishment laid down in Article 49 TFEU and the 
free movement of capital established in Article 63 TFEU. 
34 Taking into account all the relevant facts and 
circumstances, in particular the legal and economic relationships between the 
parties to the transaction in question, the referring court concludes that there are 
serious and objective indications that the transfer by the applicant of the shares in 
CLB SaRL to Prince Vert may constitute an artificial transaction, or a ‘non-
genuineʼ transaction (that is to say, a transaction the form of which does not 
reflect the economic reality or the result actually produced), and may have been 
structured with the fundamental aim of obtaining a tax advantage.  
35 Firstly, the transfer of 29 222 shares in CLB SaRL, with 
a nominal value of EUR 155 057.78 and a book value of EUR 164 024,63, was 
made for the sum of EUR 850 000. 
36 In the present case, the fact that the applicant has sold, 
for EUR 850 000, shares with a book value of EUR 164 024,63 to a company 
under his control (Prince Vert) indicates that (i) the shares were transferred for a 
value significantly higher than that which would have been paid if the transaction 
had been carried out between parties which were not linked or had no special 
relationship and (ii) the value of the transaction was set artificially (and not on 
terms which were basically the same as those which would normally be agreed 
between independent entities in comparable transactions).  
37 Secondly, the transfer of 29 222 shares in CLB SaRL 
(corresponding to 47.5% of its share capital) by the defendant did not significantly 
alter his position as majority shareholder and entity which effectively controls 
CLB SaRL (before the operation, the applicant held 97.95% directly and 1,76% 
indirectly of the shares in CLB SaRL, that is to say, 99,71% in total; after the 
operation, the applicant came to hold 50.45% directly and 42.61% indirectly of 
the shares in CLB SaRL, that is to say, 93.06% in total), which indicates that the 
operation in question is artificial.  
38 The referring court considers that the fact that the 
transfer of shares concerned has not significantly altered the position of the 
applicant as majority shareholder and entity which effectively controls CLB SaRL 
means that the result of the transaction was, in substantive terms, that the 
applicantʼs equity increased and that of Prince Vert decreased, which represents a 
real removal of assets (capital) from Prince Vert. 
39 It is clear from the established facts that this is not an 
‘exchange of sharesʼ as part of a corporate reorganisation plan (by which Prince 
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Vert would acquire shares in CLB SaRL with the aim of acquiring the majority of 
the votes in that company and the applicant would receive, in exchange, shares in 
Prince Vert), that is to say, an operation which might benefit from a possible 
deferment of capital gains tax until it was actually implemented. 
40 In view of the effects produced with regard to the 
applicant and to the companies, the question which arises is whether the operation 
at issue consists in (a) the return of the capital invested by the applicant in CLB 
SaRL, which should benefit from the more advantageous capital gains tax rules or 
(b) a distribution of capital which does not significantly alter the applicantʼs 
shareholder position in CLB SaRL, which is a payment with a result equivalent to 
dividend payments, which should not be able to benefit from the more 
advantageous capital gains tax rules.  
41 In that regard, the following comments should be made: 
first, the companies concerned did not distribute dividends between 2013 and 
2019 and, second, the validity and effect of the transfer of the shares in question 
are not disputed in the light of commercial and company law, but only its tax 
consequences.  
42 The question arises because the application of capital 
gains tax rules to the payment of EUR 850 000 results, in fact, in a tax liability 
significantly lower than that which would correspond if the dividend tax rules 
were applied.  
43 Looking objectively at the relevant facts and 
circumstances, the referring court considers that the transfer of shares analysed 
has had the essential aim of taxing the amount received by the applicant 
(EUR 850 000) in accordance with the capital gains tax rules, on the basis of the 
tax advantage established in Article 43(3) of the CIRS, which is considerably 
more favourable than the tax rules applicable to dividends/profit distributions. 
44 In view of the established facts and the content and true 
significance of the operation at issue, namely, (i) that the amount of EUR 850 000 
received by the applicant represents a payment with a result equivalent to a 
dividend payment (instead of a return on the capital invested in CLB SRL), and 
(ii) that the operation has had the fundamental or predominant aim of obtaining a 
tax advantage, the referring court wonders where the constituent elements of an 
‘abusive practiceʼ are present for the purposes of applying the principle of 
prohibition of abusive practices.  
45 The referring court wonders whether the taxpayer may 
rely on the right of establishment provided for in Article 49 TFEU or the free 
movement of capital provided for in Article 63 TFUE in order to qualify for a tax 
advantage provided for in national law for capital gains arising from the transfer 
of company shares, when, with the main objective of qualifying for that tax 
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advantage, he carried out the operation as a transfer of shares whereas, in essence, 
he received a payment with a result equivalent to a dividend payment.  
46 The judicial nature of arbitration tribunals dealing with 
taxation which act as part of the Centre for Administrative Arbitration in the light 
of European Union law has been recognised by the Court of Justice in its 
judgment of 12 June 2014, Ascendi (C-377/13, EU:C:2014:1754), and it is 
therefore indisputable that those tribunals have jurisdiction to make a reference for 
a preliminary ruling under Article 267 TFEU. 
47 The referring court considers that, in order to rule on the 
dispute in the main proceedings, it is relevant and necessary to have the 
interpretation of Articles 49 TFEU (right of establishment) and 63 TFEU and 65 
TFEU (free movement of capital), and also of the principle of prohibition of 
abusive practices as a general principle of European Union law. 
48 The referring court is not aware of any judgment of the 
Court of Justice relating to the interpretation of Articles 49 TFEU, 63 TFEU and 
65 TFEU in relation to the principle of prohibition of abusive practices.