Opinion of the Advocate General — ECLI:EU:C:2003:48
Date: 2003-01-23
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Taxation;Approximation of laws
Procedure: Reference for a preliminary ruling
Origin: United Kingdom

Summary of the Judgment 
1. Approximation of laws — Common system of taxation applicable in the case of 
parent companies and subsidiaries of different Member States — Directive 90/435 — 
Exemption, in the Member State of the subsidiary, from withholding tax on profits 
distributed to the parent company — Concept of withholding tax — Charge envis­
aged by a double taxation convention 
(Council Directive 90/435, Art. 5(1)) 
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SUMMARY — CASE C-58/01 
2. Approximation of laws — Common system of taxation applicable in the case of 
parent companies and subsidiaries of different Member States — Directive 90/435 — 
Exemption, in the Member State of the subsidiary, from withholding tax on profits 
distributed to the parent company — Exception for domestic or agreement-based 
provisions designed to eliminate or lessen economic double taxation of dividends — 
Charge envisaged by a double taxation convention 
(Council Directive 90/435, Arts 5(1) and 7(2)) 
3. Approximation of laws — Common system of taxation applicable in the case of 
parent companies and subsidiaries of different Member States — Directive 90/435 — 
Domestic or agreement-based provisions designed to eliminate or lessen economic 
double taxation of dividends — Compliance with the obligations to state reasons and 
to consult the Parliament and the Economic and Social Committee 
(Arts 94 EC and 253 EC; Council Directive 90/435, Art. 7(2)) 
1. Taxation such as the charge envisaged 
by a double taxation convention 
imposed on dividends that are paid by 
a resident subsidiary to its non-resident 
parent company amounts to a with­
holding tax on profits which a sub­
sidiary distributes to its parent com­
pany within the meaning of Article 5(1) 
of Directive 90/435 on the common 
system of taxation applicable in the 
case of parent companies and subsidi­
aries of different Member States, which 
exempts those profits from withhold­
ing tax. On the other hand, such 
taxation does not amount to a with­
holding tax prohibited by Article 5(1) 
of the directive in so far as it is imposed 
on the tax credit to which that dis­
tribution of dividends confers entitle­
ment in the Member State of the 
subsidiary. 
(see paras 51, 54, 56-57, 
59-60, operative part 1) 
2. Article 7(2) of Directive 90/435 on the 
common system of taxation applicable 
in the case of parent companies and 
subsidiaries of different Member 
States, which provides that the direc­
tive is not to affect the application of 
domestic or agreement-based provi­
sions designed to eliminate or lessen 
economic double taxation of dividends, 
in particular provisions relating to the 
payment of tax credits to the recipients 
of dividends, is to be interpreted as 
allowing taxation such as a 5% charge, 
envisaged by a double taxation con­
vention, on dividends paid by a resi­
dent subsidiary to its non-resident 
parent company, even though that 
charge amounts to a withholding tax 
within the meaning of Article 5(1) of 
the directive, which exempts profits 
distributed by a subsidiary to its parent 
company from withholding tax. 
(see para. 89, operative part 2) 
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OCÉ VAN DER GRINTEN 
3. Directive 90/435 on the common sys­
tem of taxation applicable in the case 
of parent companies and subsidiaries of 
different Member States clearly indi­
cates in its statement of reasons, in 
accordance with Article 253 EC, the 
general objective it pursues, that is to 
say, fiscal neutrality of cross-border 
distribution of profits, and that state­
ment of reasons is sufficient to cover 
also the clause preserving domestic or 
agreement-based provisions which pur­
sue the same objective, namely 
Article 7(2) of the directive. 
Furthermore, the insertion of that 
provision into the text of the directive 
after the Commission's initial proposal 
was submitted to the Parliament and 
the Economic and Social Committee, in 
accordance with Article 94 EC, must 
be regarded as a technical adjustment 
and does not constitute a substantial 
change requiring consultation for a 
second time. 
(sec paras 99, 101-102) 
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