Case C‑176/15

Guy Riskin

and

Geneviève Timmermans

v

État belge

(Request for a preliminary ruling

from the tribunal de première instance de Liège)

‛Reference for a preliminary ruling — Free movement of capital — Articles 63 and 65 TFEU — Article 4 TEU — Direct taxation — Taxation of dividends — Bilateral convention for the avoidance of double taxation — Third State — Scope’

Summary — Judgment of the Court (Sixth Chamber), 30 June 2016

Free movement of capital and liberalisation of payments — Restrictions — Tax legislation — Taxation of dividends — Bilateral conventions for the avoidance of double taxation concluded, on the one hand, between two Member States and, on the other, between one of those States and a third State — Conditional set-off against domestic tax, by the shareholder’s Member State of residence, of a dividend tax paid in the other Member State in accordance with the convention between those Member States — Unconditional set-off provided for in the convention concluded between that Member State of residence and the third State — Lawfulness

(Art. 4 TEU; Arts 63 TFEU and 65 TFEU)

Articles 63 TFEU and 65 TFEU, read in conjunction with Article 4 TEU, must be interpreted as not precluding a Member State from not extending the benefit of the advantageous treatment accorded to a resident shareholder as a result of a bilateral double taxation convention concluded between that Member State and a third State — by which tax deducted at source by the third State is allowed unconditionally as a credit against tax payable in the shareholder’s Member State of residence — to a resident shareholder in receipt of dividends from a Member State with which that Member State of residence has concluded a bilateral double taxation convention under which the granting of such a set-off is subject to compliance with additional conditions provided for by national law.

Such disadvantageous treatment constitutes a restriction on the free movement of capital that is prohibited, in principle, by Article 63(1) TFEU. However, Article 65(1)(a) and (3) TFEU distinguishes between the unequal treatment that is permitted and the discrimination that is prohibited. In that respect, in the absence of any unifying or harmonising EU measures, Member States retain the power to define, by treaty or unilaterally, the criteria for allocating their powers of taxation. Consequently, a Member State may find it necessary, by treaty or unilaterally, to treat dividends from the various States differently so as to take account of the resulting disparities between the tax laws of the various Member States.

In the context of bilateral tax conventions, the benefits granted by such conventions are an integral part of all the convention rules and contribute to the overall balance of mutual relations between the two contracting States, regardless of whether the conventions concerned are double taxation conventions concluded with Member States or with third States.

As regards the benefit of an unconditional set-off granted under a bilateral convention for the avoidance of double taxation concluded between a Member State and a third State which consists in enabling residents of the Member State to have the tax deducted at source by the third State allowed as a credit against tax payable in the Member State, the scope of such a convention is limited to residents of that Member State receiving dividends from that third State and having had tax deducted at source by that third State. The fact that the benefit in question is granted only to those residents falling within the scope of that convention cannot be classified as a benefit that is separable from that convention, given that that benefit is an integral part of the convention rules and contributes to the overall balance of mutual relations between the two contracting States to that convention.

In those circumstances, residents of that Member State who receive dividends from other Member States and do not fall within the scope of such a bilateral convention for the avoidance of double taxation, and who, in order to benefit from such a set-off, must satisfy the condition laid down by national law — that the capital and property from which the dividends concerned are derived be applied in the conduct of professional activity in their Member State of residence — are not in a situation that is objectively comparable to that of residents of that Member State who receive dividends from a third State with which the Member State concerned has concluded a bilateral double taxation convention providing for an unconditional right to such a set-off. Such disadvantageous treatment does not, therefore, constitute a restriction prohibited by the Treaty provisions on the free movement of capital.

(see paras 25, 28-35, 37, operative part)