Case C-38/10: Action brought on 22 January 2010 — European Commission v Portuguese Republic
Date: 2010-01-22
Institutions: Court of Justice
Subjects: European Commission, Portugal, action for failure to fulfil an obligation, cessation of trading, company law, corporation tax, right of establishment, tax law, transfer of businesses








C_2010080EN.01001801.xml










27.3.2010   


EN


Official Journal of the European Union


C 80/18





Action brought on 22 January 2010 — European Commission v Portuguese Republic
(Case C-38/10)
2010/C 80/33
Language of the case: Portuguese

Parties


Applicant: European Commission (represented by: R. Lyal and G. Braga, Agents)

Defendant: Portuguese Republic

Form of order sought







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A declaration that, by adopting and maintaining in force the legislative provisions contained in Articles 76A, 76B and 76C of the Portuguese Corporation Tax Code, by virtue of which, in the case of the transfer of the registered office and effective centre of management of a Portuguese undertaking to another Member State or of the cessation of activities in Portugal of a permanent establishment or of the transfer of its assets in Portugal to another Member State:






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the basis of assessment for the year in which that event takes place includes all unrealised capital gains relating to the assets in question, whereas unrealised capital gains relating to exclusively national transactions are not included in the basis of assessment;










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the members of a company transferring its registered office and effective centre of management out of Portugal are subject to taxation based on the difference between the value of the company’s liquid assets (calculated at the date of the transfer and at market prices) and the cost price of the respective shareholdings,




the Portuguese Republic has failed to fulfil its obligations under Article 49 of the Treaty on the functioning of the European Union and Article 31 of the Agreement on the European Economic Area;










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an order that the Portuguese Republic should pay the costs.





Pleas in law and main arguments

The Commission takes the view that those articles of the Corporation Tax Code may constitute an impediment to the freedom of establishment enshrined in Article 49 TFEU.
In accordance with that Portuguese legislation, unrealised capital gains are taxed only when a company transfers its registered office and effective centre of management out of Portuguese territory or when it transfers individual assets to a permanent establishment in another Member State, whereas similar transfers of the registered office within Portuguese territory or of assets from the principal place of business to a branch in the same Member State do not entail any immediate tax consequences.
The Commission does not challenge the Member States’ rights to tax capital gains made by a person who, as a resident taxpayer, has been subject to taxation on his worldwide income. None the less, the Commission considers that the Portuguese legislation must apply the same rule and that the chargeable events giving rise to tax obligations must be the same, in particular, the realisation of the asset or any factor necessitating an adjustment of depreciation, whether the registered office, effective centre of management or assets are transferred out of Portuguese territory or whether they remain there.
The Commission considers that companies must have the right to transfer their registered office or individual assets to another Member State without being subject to excessively complex and burdensome procedures, there being, in its view, no justification for the immediate charging of taxes on unrealised capital gains when a Portuguese company transfers its registered office or effective centre of management to another Member State or when a permanent establishment ceases activity in Portuguese territory or transfers its assets from Portugal to another Member State, if that kind of taxation is not found in comparable national situations.
The need to ensure that the rights of certain interested persons, in particular, the rights of creditors, minority shareholders and the tax authorities, receive special protection has to be guaranteed, but in accordance with the principle of proportionality, as interpreted by the Court of Justice.
In that regard, the Portuguese Republic could, for example, determine the value of the unrealised capital gains which it seeks to keep within its fiscal sovereignty, if that did not mean that the tax was immediately payable and if it did not involve other conditions attaching to the deferment of payment.
The objective of ensuring effective fiscal supervision and combating tax avoidance, while legitimate, could also be attained by less restrictive means, using the mechanisms provided by Council Directive 77/799/EC (1) of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation, or by Council Directive 2008/55/EC (2) of 26 May 2008 on mutual assistance for the recovery of claims relating to certain levies, duties, taxes and other measures.
In the Commission’s view, the Portuguese legislation goes beyond what is necessary in order to attain the objectives pursued, that is to say, to ensure the effectiveness of the tax system. In consequence, the Commission considers that the Portuguese legislation must apply the same rule whether the registered office, effective centre of management or assets are transferred out of Portuguese territory or whether they remain there: the tax must be charged only after the increase in the value of the assets has been realised.


(1)  OJ 1977 L 336, p. 15


(2)  OJ 2008 L 150, p. 28