Opinion of the Advocate General — ECLI:EU:C:2007:323
Date: 2007-06-07
Language of the case: Dutch
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Free movement of capital
Procedure: Reference for a preliminary ruling
Origin: Netherlands

Summary of the Judgment 1. Free movement of capital – Restrictions – Tax legislation – Corporation tax (Arts 56 EC and 58 EC; Council Directive 90/435, Art. 5(1)) 2. Preliminary rulings – Admissibility – Limits (Art. 234 EC) 3. Free movement of capital – Restrictions – Tax legislation – Corporation tax (Art. 56 EC) 1. Articles 56 EC and 58 EC preclude legislation of a Member State which, where the minimum threshold for the parent company’s shareholdings in the share capital of the subsidiary set out in Article 5(1) of Directive 90/435 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States is not reached, provides for a withholding tax on dividends distributed by a company established in that Member State to a company established in another Member State, while exempting from that tax the dividends paid to a company liable to corporation tax in the first Member State or which has a permanent establishment in the first Member State which owns shares in the company paying the dividends. Thus to treat dividends paid to companies established in another Member State less favourably than dividends paid to companies established in the Member State concerned is liable to deter companies established in another Member State from investing in the Member State concerned and thus constitutes a restriction on the free movement of capital prohibited, in principle, by Article 56 EC. It is true that, in the context of measures laid down by a Member State in order to prevent or mitigate the imposition of a series of charges to tax on, or the economic double taxation of, profits distributed by a resident company, resident shareholders receiving dividends are not necessarily in a situation which is comparable to that of shareholders receiving dividends who are resident in another Member State. However, as soon as a Member State, either unilaterally or by way of a convention, imposes a charge to income tax not only on resident shareholders but also on non-resident shareholders in respect of dividends which they receive from a resident company, the position of those non-resident shareholders becomes comparable to that of resident shareholders. It is solely because of the exercise by that State of its taxing powers that, irrespective of any taxation in another Member State, a risk of a series of charges to tax or economic double taxation may arise. In such a case, in order for non‑resident companies receiving dividends not to be subject to a restriction on the free movement of capital, the State in which the company making the distribution is resident is obliged to ensure that, under the procedures laid down by its national law in order to prevent or mitigate a series of liabilities to tax, non-resident shareholder companies are subject to the same treatment as resident shareholder companies. That is not the case where economic double taxation, to which dividends distributed to companies not established in the State of residence of the distributing company are subject, stems solely from the exercise by that Member State of its taxing powers, which subject those dividends to dividend tax, whereas that Member State elected to prevent such economic double taxation in respect of recipient companies with their seat in that same Member State or having a permanent establishment there which owns the shares in the company making the distribution. Such legislation cannot be justified either by the need to safeguard the cohesion of the national taxation system or by the need to safeguard the allocation between the Member States of the power to tax. Where a Member State has chosen not to tax recipient companies established in its territory in respect of this type of income, it cannot rely on the argument that there is a need to safeguard the balanced allocation between the Member States of the power to tax in order to justify the taxation of recipient companies established in another Member State. (see paras 28, 37-40, 59-61, operative part 1) 2. Questions on the interpretation of Community law referred by a national court in the factual and legislative context which that court is responsible for defining, and the accuracy of which is not a matter for the Court to determine, enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it. That presumption of relevance cannot be rebutted by the simple fact that one of the parties to the main proceedings contests certain facts, the accuracy of which is not a matter for the Court to determine and on which the delimitation of the subject-matter of those proceedings depends. (see paras 64-65) 3. A Member State may not rely on the existence of a full tax credit granted unilaterally by another Member State to a recipient company established in the latter Member State in order to escape the obligation to prevent economic double taxation of dividends resulting from the exercise of its power to tax in a situation where the first Member State prevents economic double taxation of dividends distributed to companies established in its territory. Where a Member State relies on a convention for the avoidance of double taxation concluded with another Member State, it is for the national court to establish whether account should be taken, in the main proceedings, of that convention, and, if so, to determine whether it enables the effects of the restriction on the free movement of capital to be neutralised. (see para. 84, operative part 2)