Case C-135/17: Judgment of the Court (Grand Chamber) of 26 February 2019 (request for a preliminary ruling from the Bundesfinanzhof — Germany) — X GmbH v Finanzamt Stuttgart — Körperschaften (Reference for a preliminary ruling — Free movement of capital — Movement of capital between Member States and third countries — Standstill clause — National legislation of a Member State regarding controlled companies established in third countries — Amendment of that legislation, followed by the reintroduction of the earlier legislation — Income of a company established in a third country derived from the holding of debts owed by a company established in a Member State — Incorporation of that income into the tax base of a taxable person resident for tax purposes in a Member State — Restriction on the free movement of capital — Justification)
Date: 2019-02-26
Institutions: Court of Justice
Subjects: EU Member State, basis of tax assessment, capital increase, debt, direct investment, establishment, free movement of capital, national law, shareholding, third country








C_2019139EN.01001001.xml










15.4.2019   


EN


Official Journal of the European Union


C 139/10






Judgment of the Court (Grand Chamber) of 26 February 2019 (request for a preliminary ruling from the Bundesfinanzhof — Germany) — X GmbH v Finanzamt Stuttgart — Körperschaften
(Case C-135/17) (1)

(Reference for a preliminary ruling - Free movement of capital - Movement of capital between Member States and third countries - Standstill clause - National legislation of a Member State regarding controlled companies established in third countries - Amendment of that legislation, followed by the reintroduction of the earlier legislation - Income of a company established in a third country derived from the holding of debts owed by a company established in a Member State - Incorporation of that income into the tax base of a taxable person resident for tax purposes in a Member State - Restriction on the free movement of capital - Justification)
(2019/C 139/07)
Language of the case: German

Referring court

Bundesfinanzhof

Parties to the main proceedings


Applicant: X GmbH

Defendant: Finanzamt Stuttgart — Körperschaften

Operative part of the judgment







1.


The standstill clause in Article 64(1) TFEU must be interpreted as meaning that Article 63(1) TFEU does not prejudice the application of a restriction on movements of capital to or from third countries involving direct investment which existed, in its essence, on 31 December 1993 in the legislation of a Member State, although the scope of the restriction was extended, after that date, to include shareholdings which do not involve direct investment.










2.


The standstill clause in Article 64(1) TFEU must be interpreted as meaning that the prohibition in Article 63(1) TFEU is applicable to a restriction on movements of capital to or from third countries involving direct investment where the national tax legislation laying down that restriction was substantially amended, after 31 December 1993, by means of the adoption of a law which entered into force, but which was replaced, before ever being applied in practice, by legislation essentially identical to that applicable on 31 December 1993, unless the applicability of that law was deferred in accordance with national law, so that, despite its entry into force, it was not applicable to cross-border movements of capital that are covered by Article 64(1) TFEU, which it is for the referring court to determine.










3.


Article 63(1) TFEU must be interpreted as not precluding legislation of a Member State under which income obtained by a company established in a third country that does not come from an activity of that company pursued on its own account, such as income classified as ‘controlled-company income from invested capital’ within the meaning of that legislation, is incorporated, pro rata to the amount of the shareholding, into the tax base of a taxable person residing in that Member State where that taxable person holds at least 1 % of the shares in that company and that income is taxed, in that third country, at a lower rate than the rate prevailing in the Member State concerned, unless there is a legal framework providing, in particular, treaty obligations that empower the national tax authorities of that Member State to verify, if necessary, the accuracy of information provided in respect of that company with a view to demonstrating that that taxable person’s shareholding in that company is not the result of an artificial scheme.






(1)  OJ C 221, 10.7.2017.