Keywords

Summary



Keywords

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 envisaged by a double taxation convention — (Council Directive 90/435, Art. 5(1))

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))

Summary

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 withholding tax on profits which a subsidiary distributes to its parent company 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 subsidiaries of different Member States, which exempts those profits from withholding tax. On the other hand, such taxation does not amount to a withholding tax prohibited by Article 5(1) of the directive in so far as it is imposed on the tax credit to which that distribution of dividends confers entitlement 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 directive is not to affect the application of domestic or agreement-based provisions 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 convention, on dividends paid by a resident 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

3. Directive 90/435 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States clearly indicates 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 statement of reasons is sufficient to cover also the clause preserving domestic or agreement-based provisions which pursue 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.

see paras 99, 101-102