Joined Cases C‑327/16 and C‑421/16

Marc Jacob v Ministre des Finances et des Comptes publics

and

Ministre des Finances et des Comptes publics v Marc Lassus

(Requests for a preliminary ruling from the Conseil d’État (France))

(Reference for a preliminary ruling — Direct taxation — Freedom of establishment — Mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States — Directive 90/434/EEC — Article 8 — Exchange of securities — Capital gains relating to that transaction — Deferred taxation — Capital losses upon the subsequent transfer of securities received — Tax competence of the State of residence — Difference in treatment — Justification — Preservation of the allocation of fiscal competence between Member States)

Summary — Judgment of the Court (First Chamber), 22 March 2018

Freedom of movement for persons—Freedom of establishment—Restrictions—Tax legislation—Common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States—Directive 90/434—Exchange of securities—Capital gains relating to that exchange—National legislation providing for the establishment of capital gains on that exchange and deferring their taxation until the transfer of the securities received in exchange—Taking into account of any capital loss resulting from the transfer by a resident taxpayer holding securities—Transfer not falling within the fiscal competence of the Member State of the exchange—No taking into account of such capital loss—Unlawful

Freedom of movement for persons—Freedom of establishment—Restrictions—Tax legislation—Common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States—Directive 90/434—Exchange of securities—Capital gains relating to that exchange—National legislation providing for the establishment of capital gains on that exchange and deferring their taxation until the transfer of the securities received in exchange—Taking into account of any capital loss resulting from the transfer by a resident or non-resident taxpayer holding securities—Objectively comparable situations—Difference in treatment—No justification

Approximation of laws—Common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States—Directive 90/434—Exchange of securities—Capital gains relating to that exchange—National legislation providing for the establishment of capital gains on that exchange and deferring their taxation until the transfer of the securities received in exchange—Transfer not falling within the fiscal competence of the Member State of the exchange—Lawfulness

Approximation of laws—Common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States—Directive 90/434—Exchange of securities—Capital gains relating to that exchange—National legislation providing for the establishment of capital gains on that exchange and deferring their taxation until the transfer of the securities received in exchange—Lawfulness

See the text of the decision. (see paras 33, 34, 37)

Article 8 of Council Directive 90/434/EEC of 23 July 1990 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States, as amended by the Act concerning the conditions of accession of the Kingdom of Norway, the Republic of Austria, the Republic of Finland and the Kingdom of Sweden, as adjusted by Decision 95/1/EC, Euratom, ECSC of the Council of the European Union of 1 January 1995, must be interpreted as meaning not precluding legislation of a Member State pursuant to which the capital gain resulting from an exchange of securities falling within the scope of that directive is established when the transaction occurs, but is taxed in the year in which the event putting an end to the deferred taxation occurs: in this case, the transfer of the securities received in exchange. In that regard, it must be pointed out that such establishment is merely a technique allowing the Member State with fiscal competence in respect of the securities existing before the exchange, but which, under Article 8(1) of the Merger Directive, has been prevented from exercising that competence at that time, to preserve its fiscal competence and exercise it at a later date, namely on the date of the transfer of the securities received in exchange in accordance with the second subparagraph of Article 8(2) of that directive. (see paras 55, 56, operative part 1)

Article 8 of the Directive 90/434, as amended by the Act concerning the conditions of accession of the Kingdom of Norway, the Republic of Austria, the Republic of Finland and the Kingdom of Sweden, as adjusted by Decision 95/1, must be interpreted as not precluding legislation of a Member State that provides for the taxation of the capital gain relating to an exchange of securities, in a case where taxation of the gain has been deferred, upon a subsequent transfer of the securities received in exchange, even though that transfer does not fall within the fiscal competence of that Member State. In the absence of harmonisation at Union level, Member States retain the power to define, by treaty or unilaterally, in compliance with EU law, the criteria for allocating their powers of taxation, with a view to eliminating double taxation (see, by analogy, judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraphs 45 and 46 and the case-law cited). In the present case, the referring court takes the view that, under national and treaty law, capital gains resulting from the exchanges of securities concerned fall within the fiscal competence of the French Republic. In those circumstances, and since the Merger Directive, as follows from paragraph 56 of this judgment, does not preclude the taxation of the capital gain resulting from the exchange of securities from being deferred until the subsequent transfer of the securities received in exchange, that directive does not prevent the Member State concerned from taxing that gain upon that transfer. As follows from points 69 to 71 of the Advocate General’s Opinion, the mere fact that the transfer of the securities received in exchange falls within the fiscal competence of a Member State other than the one with fiscal competence for the capital gain resulting from the exchange of securities cannot deprive the latter of these two Member States of its right to exercise fiscal competence in respect of a capital gain arising within the ambit of its fiscal competence. That finding is also consistent with the principle of fiscal territoriality linked to a temporal component, as recognised by the Court, which seeks to preserve the allocation of powers of taxation between the Member States and pursuant to which a Member State has the right to tax the capital gain arising within the ambit of its fiscal competence (see, to that effect, judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraphs 45 and 46 and the case-law cited). (see paras 61-66, operative part 2)

See the text of the decision. (see paras 78-83)