Case C-446/04: Judgment of the Court (Grand Chamber) of 12 December 2006 (reference for a preliminary ruling from the High Court of Justice of England and Wales, Chancery Division, United Kingdom) — Test Claimants in the FII Group Litigation v Commissioners of Inland Revenue (Freedom of establishment — Free movement of capital — Directive 90/435/EEC — Corporation tax — Payment of dividends — Prevention or mitigation of a series of charges to tax — Exemption — Dividends received from companies resident in another Member State or a non member country — Tax credit — Advance corporation tax — Equal treatment — Claim for repayment or claim for damages)
Date: 2006-12-30
Institutions: Court of Justice
Subjects: corporation tax, interpretation of the law, redemption, tax exemption, tax on profits of self-employment

30.12.2006

EN

Official Journal of the European Union

C 331/5

Intervener in support of the applicant: Commission of the European
Communities (represented by: A. Lopes Sabino and M. Bishop,
Agents)

Interveners in support of the defendant: Republic of Estonia, (repre-
sented by L. Uibo, Agent) Republic of Poland, represented by M.
Węglarz, T. Nowakowski and T. Krawczyk, Agents

Parties to the main proceedings

Applicants: Test Claimants in the FII Group Litigation

Defendant: Commissioners of Inland Revenue

Re:

Re:

Annulment of Council Regulation (EC) No 1223/2004 of 28
June 2004 amending Regulation (EC) No 1228/2003 of the
European Parliament and of the Council as regards the date of
application of certain provisions to Slovenia (OJ 2004 L 233, p.
3) — Legal basis

Operative part of the judgment

The Court:

1) Annuls Council Regulation (EC) No 1223/2004 of 28 June
2004 amending Regulation (EC) No 1228/2003 of the European
Parliament and of the Council as regards the date of application of
certain provisions to Slovenia;

2) Maintains the effects of Regulation No 1223/2004 until

the
adoption, within a reasonable period, of a new regulation founded
on an appropriate legal basis, without however prolonging those
effects beyond 1 July 2007;

3) Orders the Council of the European Union to pay the costs;

4) Orders the Republic of Poland, the Republic of Estonia and the
Commission of the European Communities to bear their own costs.

(1) OJ C 273, 6.11.2004.

Judgment of the Court (Grand Chamber) of 12 December
2006 (reference for a preliminary ruling from the High
Court of Justice of England and Wales, Chancery Division,
United Kingdom) — Test Claimants in the FII Group Litiga-
tion v Commissioners of Inland Revenue

(Case C-446/04) (1)

(Freedom of establishment — Free movement of capital —
Directive 90/435/EEC — Corporation tax — Payment of divi-
dends — Prevention or mitigation of a series of charges to tax
— Exemption — Dividends received from companies resident
in another Member State or a non member country — Tax
credit — Advance corporation tax — Equal treatment —
Claim for repayment or claim for damages)

(2006/C 331/08)

Language of the case: English

Referring court

High Court of Justice of England and Wales, Chancery Division

Reference for a preliminary ruling — High Court of Justice of
England and Wales, Chancery Division — Interpretation of Arti-
cles 43 and 56 EC and Articles 4(1) and 6 of Council Directive
90/435/EEC of 23 July 1990 on the common system of taxa-
tion applicable in the case of parent companies and subsidiaries
of different Member States (OJ 1990 L 225, p. 6) — Tax exemp-
tion granted in a Member State to a company established in its
territory which received dividends paid by companies also estab-
lished in its territory — Exemption not granted for dividends
paid to that company by companies established in the territory
of another Member State

Operative part of the judgment

1) Articles 43 EC and 56 EC must be interpreted as meaning that,
where a Member State has a system for preventing or mitigating
the imposition of a series of charges to tax or economic double
taxation as regards dividends paid to residents by resident compa-
nies,
treat dividends paid to residents by non-resident
companies in the same way.

it must

Articles 43 EC and 56 EC do not preclude legislation of a
Member State which exempts from corporation tax dividends which
a resident company receives from another resident company, when
that State imposes corporation tax on dividends which a resident
company receives from a non resident company in which the resi-
dent company holds at least 10 % of the voting rights, while at
the same time granting a tax credit in the latter case for the tax
actually paid by the company making the distribution in the
Member State in which it is resident, provided that the rate of tax
applied to foreign-sourced dividends is no higher than the rate of
tax applied to nationally-sourced dividends and that the tax credit
is at least equal to the amount paid in the Member State of the
company making the distribution, up to the limit of the amount of
the tax charged in the Member State of the company receiving the
distribution.

Article 56 EC precludes legislation of a Member State which
exempts from corporation tax dividends which a resident company
receives from another resident company, where that State levies
corporation tax on dividends which a resident company receives
from a non-resident company in which it holds less than 10 % of
the voting rights, without granting the company receiving the divi-
dends a tax credit for the tax actually paid by the company making
the distribution in the State in which the latter is resident.

2) Articles 43 EC and 56 EC preclude legislation of a Member State
which allows a resident company receiving dividends from another
resident company to deduct from the amount which the former
company is liable to pay by way of advance corporation tax the
amount of that tax paid by the latter company, whereas no such
deduction is permitted in the case of a resident company receiving
dividends from a non resident company as regards the corre-
sponding tax on distributed profits paid by the latter company in
the State in which it is resident.

C 331/6

EN

Official Journal of the European Union

30.12.2006

3) Articles 43 EC and 56 EC do not preclude legislation of a
Member State which provides that any relief for tax paid abroad
made available to a resident company which has received foreign-
sourced dividends is to reduce the amount of corporation tax
against which that company may offset advance corporation tax.

set out in paragraph 51 of the judgment in Joined Cases C-46/93
and C-48/93 Brasserie du Pêcheur and Factortame [1996] ECR
I-1029, but that does not preclude the State from being liable
under less restrictive conditions, where national law so provides.

Article 43 EC precludes legislation of a Member State which
allows a resident company to surrender to resident subsidiaries the
amount of advance corporation tax paid which cannot be offset
against the liability of that company to corporation tax for the
current accounting period or previous or subsequent accounting
periods, so that those subsidiaries may offset it against their liabi-
lity to corporation tax, but does not allow a resident company to
surrender such an amount to non-resident subsidiaries where the
latter are taxable in that Member State on the profits which they
made there.

4) Articles 43 EC and 56 EC preclude legislation of a Member State
which, while exempting from advance corporation tax resident
companies paying dividends to their shareholders which have their
origin in nationally-sourced dividends received by them, allows resi-
dent companies distributing dividends to their shareholders which
have their origin in foreign-sourced dividends received by them to
elect to be taxed under a regime which permits them to recover the
advance corporation tax paid but, first, obliges those companies to
pay that advance corporation tax and subsequently to claim repay-
ment and, secondly, does not provide a tax credit for their share-
holders, whereas those shareholders would have received such a tax
credit in the case of a distribution made by a resident company
which had its origin in nationally-sourced dividends.

5) Article 57(1) EC is to be interpreted as meaning that where, before
31 December 1993, a Member State has adopted legislation
which contains restrictions on capital movements to or from non-
member countries which are prohibited by Article 56 EC and, after
that date, adopts measures which, while also constituting a restric-
tion on such movements, are essentially identical to the previous
legislation or do no more than restrict or abolish an obstacle to the
exercise of the Community rights and freedoms arising under that
previous legislation, Article 56 EC does not preclude the applica-
tion of those measures to non-member countries when they apply
to capital movements involving direct investment, including invest-
ment in real estate, establishment, the provision of financial services
or the admission of securities to capital markets. Holdings in a
company which are not acquired with a view to the establishment
lasting and direct economic links between the
or maintenance of
shareholder and that company and do not allow the shareholder to
participate effectively in the management of that company or in its
control cannot,
in this connection, be regarded as direct invest-
ments.

6) In the absence of Community legislation, it is for the domestic legal
system of each Member State to designate the courts and tribunals
having jurisdiction and to lay down the detailed procedural rules
governing actions for safeguarding rights which individuals derive
from Community law, including the classification of claims brought
by injured parties before the national courts and tribunals. Those
courts and tribunals are, however, obliged to ensure that individuals
should have an effective legal remedy enabling them to obtain reim-
bursement of the tax unlawfully levied on them and the amounts
paid to that Member State or withheld by it directly against that
tax. As regards other loss or damage which a person may have
sustained by reason of a breach of Community law for which a
Member State is liable, the latter is under a duty to make repara-
tion for the loss or damage caused to individuals in the conditions

(1) OJ C 6, 8.1.2005.

Judgment of the Court (Second Chamber) of 23 November
the European Communities v
2006 — Commission of

Italian Republic.

(Case C-486/04) (1)

(Failure of a Member State to fulfil obligations — Assessment
of the effects of certain projects on the environment — Waste
recovery — Installation for the production of electricity by the
incineration of combustible materials derived from waste and
biomass in Massafra (Taranto) — Directives 75/442/EEC and
85/337/EEC)

(2006/C 331/09)

Language of the case: Italian

Parties

Applicant: Commission of the European Communities (repre-
sented by: M. van Beek, Agent, A. Capobianco and F. Louis,
lawyers)

Defendant: Italian Republic (represented by: I.M. Braguglia, agent,
M. Fiorilli and G. Fiengo, lawyers)

Re:

Failure of a Member State to fulfil obligations — Article 2(1)
and Article 4(1), (2) and (3) of Council Directive 85/337/EEC of
27 June 1985 on the assessment of the effects of certain public
and private projects on the environment (OJ 1985 L 175, p.
40), as amended by Council Directive 97/11/EC of 3 March
1997 (OJ 1997 L 73, p. 5) — Installation for the production of
electricity by the incineration of combustible material derived
from waste and biomass at Massafra (Taranto)

Operative part of the judgment

The Court:

1. Declares that

— by exempting from the environmental impact assessment proce-
dure the Massafra installation for the incineration of combus-
tible materials derived from waste and biomass, with a capacity
exceeding 100 tonnes per day, covered by point 10 of Annex I
to Council Directive 85/337/EEC of 27 June 1985 on the
assessment of the effects of certain public and private projects
environment, as amended by Council Directive
on the
97/11/EC of 3 March 1997,