Case C-406/07: Action brought on 4 September 2007 — Commission of the European Communities v Hellenic Republic
Date: 2007-11-10
Institutions: Court of Justice
Subjects: action for failure to fulfil an obligation, free movement of capital, organisation, tax, tax exemption

C 269/34

EN

Official Journal of the European Union

10.11.2007

By its second plea, the appellant submits that the Court of First
Instance applied incorrect legal criteria when it ruled,
in the
context of the examination into whether there was a specific
problem within the terms of Article 95(5) EC, that:

(i) the existence of a specific problem with regard to air
quality must be examined solely on the basis of
the
criteria in Directive 1999/30/EC (2), without the impossi-
bility for a Member State to adopt measures designed to
prevent cross-border pollution and criteria such as high
demographic density, vehicle traffic intensity in many areas
and the location of residential areas along traffic routes
being capable of having relevance in that regard; and

(ii) there can be no question of a specific problem in the afore-
mentioned sense if a very small number of Member States
also are experiencing a problem in connection with air
quality.

(1) Commission Decision 2006/372/EC of 3 May 2006 concerning
draft national provisions notified by the Kingdom of the Netherlands
under Article 95(5) of the EC Treaty laying down limits on the emis-
sions of particulate matter by diesel-powered vehicles (OJ 2006
L 142, p. 16).

(2) Council Directive of 22 April 1999 relating to limit values for
sulphur dioxide, nitrogen dioxide and oxides of nitrogen, particulate
matter and lead in ambient air (OJ 1999 L 163, p. 41).

Action brought on 4 September 2007 — Commission of
the European Communities v Hellenic Republic

(Case C-406/07)

(2007/C 269/58)

Language of the case: Greek

(a) its obligations under Articles 56 and 43 of the Treaty
establishing the European Community and Articles 40
and 31 of the EEA Agreement, in applying a tax regime
for dividends from abroad that is less favourable than
the regime for domestic dividends;

(b) its obligations under Article 43 of the Treaty establishing
the European Community and Article 31 of the EEA
Agreement in maintaining in force the provisions of the
Kodika Forologias Eisodimatos (Income Tax Code) (Law
2238/1994, as last amended by Law 3296/2004), by
which foreign partnerships in Greece are taxed more
heavily than domestic partnerships;

— order the Hellenic Republic to pay the costs.

Pleas in law and main arguments

The Commission considers that the Member States may not tax
dividends from abroad at a higher rate than that applicable to
domestic dividends.

The tax exemption provided for by Greek tax legislation is
aimed at avoiding the double taxation of company profits
distributed to shareholders, but is applied only to domestic divi-
dends.

The Greek tax legislation accordingly results in discouraging
persons subject to full tax obligations in Greece from investing
their capital in companies established in another Member State.

The provisions of the Greek legislation also have a restrictive
effect in relation to companies established in another Member
State, since it constitutes an obstacle to the centralising of
capital in Greece by such companies.

Since income from capital of non-Greek origin receives less
favourable tax treatment than dividends distributed by compa-
nies established in Greece, the shares of companies established
in other Member States are less attractive to investors resident in
Greece than the shares of companies whose seat is in Greece.

Parties

Applicant: Commission of the European Communities (repre-
sented by: D. Triandafillou, acting as Agent)

It follows from the above that legislative provisions such as that
under scrutiny constitute a restriction on the free movement of
capital which, in principle, is prohibited by Article 56 EC.

Defendant: Hellenic Republic

Form of order sought

The Court is asked to

— declare that the Hellenic Republic is in breach of

In the case of persons who are subject to full tax obligations in
Greece and who hold foreign shares which afford them the
possibility of exercising a manifest influence on the decisions of
the undertaking and determining its activities, it is similarly a
restriction on freedom of establishment which is prohibited by
Article 43 EC.