10.

Let me now turn to the fifth argument. The French Government observes that the principle of equality does not prohibit treating similar situations differently if the difference is objectively justified (judgment of 8 October 1980 in Case 810/79 Uberschär v Bundesversicherungsanstalt für Angestellte [1980] ECR 2747; judgment of 16 October 1980 in Case 147/79 Hochstrass v Court of Justice [1980] ECR 3005). That is exactly the situation in this case. The different rules applied to subsidiaries, on the one hand, and agencies and branches, on the other, have nothing to do with the nationality of those bodies. They are in fact based on an objective distinction, to be found in the legal systems of practically all the Member States, between ‘residents’ and ‘nonresidents’. The Commission takes a different view. It contends that like citizenship for natural persons, the location of the registered office serves in France as a criterion for deciding whether companies are subject to the national rules. It follows that to treat them differently by reason of the location of their registered office (in France or another Member State) amounts to discrimination on the basis of their nationality. The discrimination is admittedly not explicit; in point of fact it is well hidden. However, as was stated in the judgment of 12 February 1974 in Case 152/73 (Sotgiu v Deutsche Bundespost [1974] ECR 153) that does not prevent it being incompatible with the Treaty. I agree with the Commission as to the discriminatory nature of the rules at issue. However, the argument that I have just referred to leaves me puzzled, just as I doubt, to return to the subject of the preceding paragraph, whether it is really useful to weigh up the advantages and disadvantages from which companies incorporated under French law and the agencies and branches of foreign companies benefit or suffer. There is a much more direct way of arriving at the Commission's objective taking as the point of departure the arrangements for determining the amount of corporation tax owed in France. Let me remind the Court that account is taken for that purpose ‘solely of profits made in the undertakings operating in France’ (Article 209 of the General Tax Code). Thus, the nationality of the undertaking, the location of its registered office, the nature of its profits and the country in which they are invested are relevant. Liability to corporation tax is governed by a sole criterion: the principle of territoriality. It applies, moreover, in a perfectly symmetrical way in the sense that foreign companies are taxed in respect of their activities in France and French companies are not taxed in respect of activities carried out abroad. With regard to the basis on which tax is levied therefore, French companies and secondary establishments of foreign undertakings are treated in the same way. That is not so with regard to the calculation of the amount of tax due. As the Court will be aware, the shareholders' tax credit, which from practical point of view corresponds to a partial refund, is granted to companies having ‘their registered office in France’ (Article 158 ter of the General Tax Code) but not to nonresidents. What are the reasons for that exclusion? They were set out by Mr Valéry Giscard d'Estaing when, as Minister for Finance and Economic Affairs, he presented the bill implementing the reform of 12 July 1965 to the National Assembly in the following terms: ‘We wanted this concession under the budget of the French State to be reserved either to the French themselves or to persons resident in France. We obviously do not exclude the possibility of extending the concession by way of suitable agreements which may be negotiated to nationals of other countries which adopt an approach corresponding to our own ... ’. Later in the same speech, he also said: ‘Before extending the concessions which we are introducing to nationals of other countries, we must therefore ensure that French residents of those countries are able to benefit from the same advantages on a reciprocal basis’ (Journal Officiel de la République Française, Débats Assemblée Nationale, 11 May 1965, p. 1233). All is thus clear: the basis of the rules under consideration is the conviction, which I have already shown to be without foundation in the Community context (supra, point 7), that the shareholders' tax credit should be applied to companies incorporated in other Member States only in so far as those States grant the same concession to French companies. Moreover, since both types of company are subject to the same criterion in regard to determining the amount of tax due, it is clear that the said rules affect ‘the management of undertakings’ inasmuch as they impose a greater burden on the management of foreign companies operating through secondary establishments. There is thus no doubt that at least from that point of view, they infringe the principle that there must be equal conditions of establishment laid down in the second paragraph of Article 52 of the Treaty.