CELEX: 62011CC0350
Language: en
Date: 2012-09-19 00:00:00
Title: Opinion of Advocate General Mengozzi delivered on 19 September 2012.#Argenta Spaarbank NV v Belgische Staat.#Request for a preliminary ruling from the rechtbank van eerste aanleg te Antwerpen.#Tax legislation — Corporation tax — Deduction for risk capital — Notional interest — Reduction of the amount deductible by companies with establishments abroad the income from which is exempt under double taxation conventions.#Case C‑350/11.

OPINION OF ADVOCATE GENERAL
      MENGOZZI
      delivered on 19 September 2012 (
            1
         )
      
         Case C-350/11
      
      
         Argenta Spaarbank NV
      
      
         v
      
      
         Belgische Staat
      
      
         (Reference for a preliminary ruling from the rechtbank van eerste aanleg te Antwerpen (Belgium))
      
      ‛Freedom of establishment — Tax legislation — Corporation tax — Deduction for risk capital — Notional interest — Reduction of the amount deductible by a company with a permanent establishment in another Member State the income from which is exempt from tax in Belgium pursuant to a double taxation convention — Restriction — Justification — Coherence of the tax system — Balanced allocation between the Member States of the power to tax’
      
         I – Introduction
      
      
               1.
            
            
               By this reference for a preliminary ruling, the rechtbank van eerste aanleg te Antwerpen (Court of First Instance, Antwerp) (Belgium) asks the Court for clarification as to whether the freedom of establishment laid down in Article 43 EC precludes a tax measure prohibiting a company subject to full tax liability in Belgium that wishes to benefit from a deduction for risk capital from taking into account the assets related to its permanent establishment in another Member State the income from which is exempt from tax in Belgium pursuant to a double taxation convention, when the assets attributed to a permanent establishment located in Belgium can be taken into account for that purpose.
            
         
               2.
            
            
               The reference has been made in proceedings between Argenta Spaarbank NV (‘Argenta’) and the Belgian tax authorities in connection with the taking into account, in respect of corporation tax for the 2008 tax year, of the net value of the assets of the permanent establishment which Argenta has in the Netherlands for the purposes of determining the risk capital used as a basis for the deduction of the same name.
            
         
               3.
            
            
               This measure was adopted by the Law of 22 June 2005 introducing a tax deduction for risk capital (
                     2
                  ) which, inter alia, inserted Articles 205a to 205h and 236 into the Income Tax Code 1992.
            
         
               4.
            
            
               According to the explanatory memorandum to that law, its aim was to reduce the difference in tax treatment between the financing of companies with loan capital (the return on which is entirely tax deductible) and financing with equity capital (risk capital), the return on which was fully taxed, to increase the solvency ratio of companies, the introduction of the deduction for risk capital falling within the general aim of improving the competitiveness of the Belgian economy, and to establish a valid alternative to the coordination centre tax regime, which was to be abolished. (
                     3
                  )
            
         
               5.
            
            
               The deduction for risk capital (also known in tax circles as deduction of notional interest) (
                     4
                  ) consists in notionally removing the interest deemed to have been earned by the company’s equity capital from the basis of assessment to corporation tax. That deduction is equal to the risk capital determined in accordance with Article 205b of the Income Tax Code 1992 multiplied by a rate laid down in the following paragraphs of Article 205c of the Income Tax Code 1992. (
                     5
                  )
            
         
               6.
            
            
               The first subparagraph of Article 205b(1) of the Income Tax Code 1992 provides for account to be taken, subject to the provisions of Article 205b(2) to (7), of the risk capital corresponding to the amount of the company’s equity capital at the end of the previous tax period, (
                     6
                  ) determined in accordance with accounting legislation and the annual accounts as shown on the balance sheet. Article 205b(2) to (7) list the cases in which equity capital must be adjusted before the amount of the deduction for risk capital is calculated.
            
         
               7.
            
            
               In particular, under Article 205b(2) of the Income Tax Code 1992, the risk capital is reduced by the net value of the assets of permanent establishments the income from which is exempt in Belgium under a double taxation convention.
            
         
               8.
            
            
               According to Article 7(1) of the double taxation convention of 5 June 2001 concluded between the Kingdom of Belgium and the Kingdom of the Netherlands (
                     7
                  ) (‘the Belgium-Netherlands Convention’), the profits of an enterprise from a Contracting State are taxable only in that State unless the enterprise carries on business in the other Contracting State through a permanent establishment located there. If the enterprise carries on business in that way, the profits of the enterprise may be taxed in the other State, but only so much of them as is attributable to that permanent establishment.
            
         
               9.
            
            
               Under Article 23(1)(a) of the Belgium-Netherlands Convention, double taxation, so far as concerns the Kingdom of Belgium, is avoided to the effect that, where a Belgian resident receives income – other than dividends, interest, or royalties covered by Article 12(5) of that convention – or possesses assets which are taxed in the Netherlands pursuant to that convention, the Kingdom of Belgium exempts that income or those assets from tax but it may, in order to calculate the amount of tax on the remainder of that resident’s income or assets, apply the same rate as if the income or assets in question were not exempted.
            
         
               10.
            
            
               On the basis of Article 205b(2) of the Income Tax Code 1992, the Belgian tax authorities refused to allow Argenta, a company established in Belgium which is fully subject to corporation tax there, to take into account the net value of the assets of its permanent establishment in the Netherlands for the purposes of calculating the deduction for risk capital.
            
         
               11.
            
            
               As it considered that Article 205b(2) of the Income Tax Code 1992 constituted an obstacle to the freedom of establishment laid down in Article 43 EC, Argenta lodged an appeal against that refusal with the rechtbank van eerste aanleg te Antwerpen, which decided to stay the proceedings and refer the following question to the Court of Justice for a preliminary ruling:
               ‘Does Article 43 EC preclude national tax legislation pursuant to which, for the purposes of the calculation of its taxable profit, a company subject to full tax liability in Belgium cannot apply a deduction in respect of risk capital in the amount of the positive difference between (i) the net book value of the assets of the establishments that that company runs in another Member State of the European Union and (ii) the total liabilities that are attributable to those establishments, whereas it can apply a deduction in respect of risk capital if that positive difference can be attributed to a permanent establishment located in Belgium?’
            
         
               12.
            
            
               Written observations were lodged by Argenta, the Belgian Government and the European Commission. Those interested parties also replied within the prescribed time-limit to a written question sent by the Court and were heard at the hearing on 12 July 2012.
            
         
         II – Analysis
      
      
               13.
            
            
               As is clear from my introductory statement, the deduction for risk capital which is at issue in the present case enables companies subject to Belgian corporation tax to deduct from their taxable income notional interest determined by national legislation and calculated on the basis of their equity capital (net assets).
            
         
               14.
            
            
               In practice, the deduction for risk capital enables Belgian companies and non-resident companies with a permanent establishment in Belgium to reduce, often dramatically, the corporation tax to be paid when those companies are financed by equity capital.
            
         
               15.
            
            
               The following example, taken from a brochure issued by the Belgian tax authorities (
                     8
                  ) and adapted to the year of assessment at issue in this case, helps to illustrate my point. Take, for instance, a company established in Belgium whose balance sheet consists of EUR 100 000 of equity capital used to finance a group of companies. If that Belgian company receives an intra-group interest rate of 4%, its profit before tax is EUR 4 000. Following the deduction for risk capital, the rate for which was 3.871% in 2008, the taxable amount is EUR 129 [4000 - (100000 x 3.871%)]. As the rate of corporation tax was 33.99%, the company will pay EUR 43.85 in tax, which amounts to an effective tax rate of 1.10% as opposed to 33.99% if the deduction for risk capital did not exist. This example is summarised in the following table:
               
                           
                              Equity capital = 100 000
                           
                        
                     
                           
                              Accounts
                           
                        
                        
                           
                              Without the deduction for risk capital
                           
                        
                        
                           
                              With the deduction for risk capital
                           
                        
                     
                           Profit before tax (intra-group interest rate of 4%)
                        
                        
                           4 000
                        
                        
                           4 000
                        
                     
                           Deduction for risk capital (3.871%)
                        
                        
                           0
                        
                        
                           - 3 871
                        
                     
                           Taxable amount
                        
                        
                           4 000
                        
                        
                           129
                        
                     
                           Corporation tax (33.99%)
                        
                        
                           1 360
                        
                        
                           43.85
                        
                     
                           Effective tax rate
                        
                        
                           33.99%
                        
                        
                           1.10%
                        
                     
         
               16.
            
            
               This example supports the finding that the amount of the deduction for risk capital is calculated not on the basis of the paid-up capital on which interest is to be earned but, subject to certain adjustments, on the basis of all the equity capital of the company concerned. (
                     9
                  )
            
         
               17.
            
            
               The referring court is asking the Court not about the legality of the risk-capital deduction mechanism as such but only about one of the means of implementing it, that is to say, one of the adjustments to be made when determining the equity capital to be taken into account for the purposes of calculating that deduction, pursuant to Article 205b(2) of the Income Tax Code 1992.
            
         
               18.
            
            
               Indeed, it is merely asking whether the freedom of establishment precludes the exclusion from the basis for calculation of that deduction of the assets attributed to a foreign permanent establishment of a company subject to full tax liability in Belgium, an establishment whose income is not taxable in that Member State by virtue of a double taxation convention concluded with the Member State where the establishment is located, whereas assets attributed to a Belgian permanent establishment of such a company are taken into account in the taxable amount for calculating the deduction.
            
         
               19.
            
            
               Having regard to the information provided by the Belgian Government in answer to the Court’s question, the exclusion of the assets of foreign permanent establishments of Belgian companies concerns, within the European Economic Area, all the Member States, the Republic of Iceland and the Kingdom of Norway, but not the Principality of Liechtenstein – the only country with which the Kingdom of Belgium has not concluded a double taxation convention.
            
         
               20.
            
            
               Argenta and the Commission propose that the referring court’s question should be answered in the affirmative.
            
         
               21.
            
            
               The Belgian Government is of the opposite view.
            
         
               22.
            
            
               Firstly, it disputes the assertion that the rule laid down in Article 205b(2) of the Income Tax Code 1992 causes disadvantage. That rule has, in its view, no effect on the Belgian company in so far as the deduction for risk capital is to be applied not to the profits of that company but to the profits of the permanent establishment which are exempt in Belgium under, in this instance, the Belgium-Netherlands Convention.
            
         
               23.
            
            
               The Belgian Government then argues that to uphold Argenta’s application would be contrary to international tax rules and, in particular, to the Model Convention of the Organisation for Economic Cooperation and Development (OECD), which views the permanent establishment as an autonomous fiscal entity and recognises the exclusive jurisdiction of the Member State in which that establishment is located to tax its profits and act in relation to its expenditure. The expenses incurred in acquiring the income which is taxable in the Member State in which the permanent establishment is located and exempt in the Member State of residence of a company must be deductible in that other Member State and not in the Member State of residence, in the same way as the interest incurred in respect of debts contracted in order to acquire the assets of a permanent establishment must be deductible from the profits attributable to that permanent establishment.
            
         
               24.
            
            
               Moreover, in that government’s view, even assuming that the Kingdom of Belgium’s refusal to take into account the assets of foreign permanent establishments results in a less favourable situation for a given taxpayer than if the same taxpayer had created an establishment in Belgium, that circumstance would not constitute an infringement of the freedom of establishment, as it would be the consequence of the exercise in parallel of fiscal sovereignty by two or more Member States and of the fact that an advantage similar to the deduction for risk capital does not exist in most of the other Member States. The Belgian risk-capital deduction scheme does not, in itself, deter Belgian companies from creating permanent establishments in other Member States.
            
         
               25.
            
            
               Finally and in any event, the Belgian Government argues that any restriction on freedom of establishment would be justified by the combined need to ensure the coherence of the Belgian tax system and to ensure the balanced allocation between the Member States of the power to tax.
            
         
               26.
            
            
               As Argenta rightly states in its written observations, those arguments constitute, in essence, variations on the same theme. The Kingdom of Belgium, after forgoing, under a double taxation convention, taxation of the profits of a permanent establishment located in another Member State, refuses to grant the deduction for risk capital to a Belgian company which is subject to full corporation tax liability in Belgium and owns that establishment, to the extent of the equity capital allocated to that establishment.
            
         
               27.
            
            
               Grant of the deduction for risk capital is therefore, to that extent, subject to the satisfaction of a territorial condition, namely that the Belgian company’s equity capital should be attributed to an entity taxable in Belgium.
            
         
               28.
            
            
               From the point of view of European Union law, such a criterion does not, in my opinion, bear scrutiny.
            
         
               29.
            
            
               Firstly, there is no doubt that the difference in tax treatment, depending on whether Belgian companies have a permanent establishment in Belgium or in another Member State, constitutes a restriction on freedom of establishment.
            
         
               30.
            
            
               In this regard, it will be recalled that the Court has repeatedly held that freedom of establishment entails for companies formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Community the right to pursue their activities in other Member States through a subsidiary, branch or agency. (
                     10
                  )
            
         
               31.
            
            
               It is also settled case-law that the provisions of the EC Treaty on freedom of establishment preclude a Member State from hindering the establishment in another Member State of one of its nationals or of a company incorporated under its legislation. (
                     11
                  )
            
         
               32.
            
            
               These considerations also apply where a company established in a Member State carries on business in another Member State through a permanent establishment. (
                     12
                  )
            
         
               33.
            
            
               As to the tax scheme at issue in the main proceedings, the taking into account of the equity capital assigned to a permanent establishment in order to calculate the deduction for risk capital of a Belgian company subject to corporation tax in Belgium undeniably constitutes a tax advantage, since taking it into account helps to reduce the effective rate of the corporation tax that such a company must pay in that Member State.
            
         
               34.
            
            
               However, a Belgian company subject to corporation tax in Belgium is refused such a tax advantage under that tax scheme if it has a permanent establishment located in another Member State the income from which is exempt pursuant to a double taxation convention concluded between that Member State and the Kingdom of Belgium.
            
         
               35.
            
            
               The tax position of that company is therefore less favourable than the position that it would have if it had a permanent establishment in Belgium.
            
         
               36.
            
            
               This assessment is not invalidated by the Belgian Government’s claim that the refusal to take into account the equity capital assigned to a permanent establishment located in another Member State has no effect on the tax treatment of the Belgian company, as the deduction for risk capital is applied not to the profits of that company but to the profits of the permanent establishment.
            
         
               37.
            
            
               Firstly, if that were the case, it is hard to understand why the Kingdom of Belgium would have been prompted to specifically exclude the equity capital of permanent establishments located abroad which belong to Belgian companies subject to corporation tax in Belgium from the calculation of the deduction for risk capital.
            
         
               38.
            
            
               Secondly, it is clear from the Belgian tax legislation, in particular Articles 205a and 205b of the Income Tax Code 1992, that the deduction for risk capital indeed has a bearing on the tax treatment of the company established in Belgium and that, as the Commission highlighted in response to the Court’s written question, under Article 185 of the Income Tax Code 1992, Belgian companies subject to full corporation tax liability in Belgium are taxable in that country on the total amount of their income.
            
         
               39.
            
            
               According to the explanatory memorandum to the draft law introducing a tax deduction for risk capital, even where a company has a permanent establishment the income of which is exempt from tax in Belgium under a double taxation convention, Belgian accounting law does not require a distinction to be made on the company’s balance sheet between the equity capital assigned to the foreign permanent establishment and the other equity capital specific to that company. (
                     13
                  )
            
         
               40.
            
            
               As Argenta highlighted in its response to the Court’s written question without being contradicted by the Belgian Government, it follows from these considerations that a Belgian company financed with equity capital may benefit from the deduction for risk capital even if its foreign permanent establishment – which does not itself have any equity capital – alone makes profits, which will ultimately be attributed to that company, under Belgian legislation, for the purposes of calculating the deduction.
            
         
               41.
            
            
               It follows that the deduction for risk capital is applied to the overall situation of the Belgian company subject to full tax liability in Belgium.
            
         
               42.
            
            
               Nor do I share the Belgian Government’s view that the difference in tax treatment at issue in this case is the consequence of the exercise in parallel of fiscal sovereignty by the Member State in which the company has its seat and the Member State in which the permanent establishment is located, in that that difference results from the fact that an advantage similar to the deduction for risk capital does not exist, or at least not yet, in the other Member States or that the corporation tax rate varies between the Member States.
            
         
               43.
            
            
               It is true that the Court has already ruled that the disadvantages which may arise from the exercise in parallel of fiscal sovereignty by different Member States, to the extent that such exercise is not discriminatory, do not constitute restrictions on the freedoms of movement. (
                     14
                  )
            
         
               44.
            
            
               According to that line of reasoning, disadvantages or differences in treatment resulting solely from the application of disparities between the tax legislation of the Member States, as opposed to those resulting from the application of one and the same tax system of a Member State, fall outside the scope of those freedoms. (
                     15
                  )
            
         
               45.
            
            
               However, in this case, the difference in treatment between companies established in Belgium subject to full corporation tax liability in that Member State, on the basis, ultimately, of whether they have a permanent establishment in Belgium, arises from the Belgian tax system alone. This difference in no way depends on the impossibility for a Belgian company, such as Argenta, of benefiting from a similar advantage, which does not exist in the Netherlands, or on the corporation tax rate, which may be different from that which is, in principle, applicable in Belgium. Moreover, the pertinence of the latter ground may legitimately be questioned. Indeed, it should be noted that the equity capital assigned to permanent establishments which are located in third States not bound to the Kingdom of Belgium by a double taxation convention and which are owned by Belgian companies subject to full corporation tax liability in Belgium are included in the calculation of the deduction for risk capital irrespective of the tax rate applicable in those third States.
            
         
               46.
            
            
               I therefore consider that the exclusion from the calculation of the deduction for risk capital, as provided for in Article 205b(2) of the Income Tax Code 1992, of the equity capital assigned to a permanent establishment the income from which is exempt from taxation in Belgium and which is owned by a Belgian company subject to full corporation tax liability in that State constitutes, in principle, a restriction on the freedom of establishment.
            
         
               47.
            
            
               It must therefore be verified at this point whether that restriction may nevertheless be justified by, at the very least, one of the two reasons of public interest advanced by the Belgian Government, that is to say, firstly, ensuring the coherence of its tax system and, secondly, preserving the balanced allocation between the Member States of the power to tax.
            
         
               48.
            
            
               It is common ground that each of these two requirements of public interest has been regarded as capable of validly justifying restrictions on the exercise of the freedom of establishment. (
                     16
                  )
            
         
               49.
            
            
               The restrictive measures at issue must, however, be appropriate for attaining the public-interest objectives pursued and not go beyond what is necessary to attain those objectives. (
                     17
                  )
            
         
               50.
            
            
               I consider that, in the present case, neither of the aforementioned objectives can succeed.
            
         
               51.
            
            
               According to the case-law, the objective of preserving the coherence of the tax system cannot be upheld unless a direct link is established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy. (
                     18
                  )
            
         
               52.
            
            
               Relying on that case-law, the Belgian Government contends that the risk-capital deduction scheme maintains a perfect symmetry between the conferral of the tax advantage, calculated in relation to assets, and the right to tax the profits generated by those assets.
            
         
               53.
            
            
               That argument is, in my view, insufficient to establish the existence of a direct link within the meaning of the case-law. As the tax advantage is calculated on the basis of the equity capital of the companies concerned, it need merely be stated that that advantage is not in fact offset by any subsequent taxation of the profits generated by that equity capital, since the objective of that deduction is to generally reduce the effective rate of corporation tax paid by the entities covered by the Income Tax Code 1992. (
                     19
                  ) The grant of the deduction for risk capital is not, in fact, linked to the generation of profits in Belgium, since, if the Belgian company did not make any profit in a given year, the surplus of the deduction granted for that year could, under Article 205d of the Income Tax Code 1992, be carried forward for the following seven years.
            
         
               54.
            
            
               The Belgian Government’s argument based on the judgment in Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt is not capable of invalidating that assessment.
            
         
               55.
            
            
               I note that, in that case, the Court held that the reintegration provided for by the German tax system of losses incurred by a permanent establishment of a German company located in another Member State was justified by the need to preserve the coherence of that tax system on the ground that the reintegration constituted the ‘logical complement of the deduction previously granted’, (
                     20
                  ) since only previously deducted losses were reintegrated. (
                     21
                  ) There was thus ‘a direct, personal and material link between the two elements of the tax mechanism’, (
                     22
                  ) that is to say, the grant, firstly, of a tax advantage – namely the taking into account of losses – to the resident company that owned the permanent establishment located in the other Member State (which was, moreover, treated as if that permanent establishment was located in Germany) (
                     23
                  ) and, secondly, the reintegration of those losses.
            
         
               56.
            
            
               However, in the present case, from whatever angle one views the deduction for risk capital, there is no levy in the Belgian system that would offset that tax advantage such that those two elements are directly linked in the manner described in Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt.
            
         
               57.
            
            
               In any event, as Argenta and the Commission argue, the fiscal coherence relied on by the Kingdom of Belgium seems to have been shifted to the level of the reciprocity of the applicable rules of the Belgium-Netherlands Convention.
            
         
               58.
            
            
               In fact, by stipulating, in essence, in Article 7(1) of that convention, that the profits of an enterprise located in a Contracting State are taxable in the other Contracting State when those profits are attributable to its permanent establishment in the territory of that other Contracting State, that convention creates a fiscal reciprocity in respect of the rules applicable in the Contracting States which is specifically intended to ensure fiscal coherence. Therefore, the fact that the Kingdom of Belgium has refrained from taxing the profits of Belgian companies attributed to permanent establishments located in the Netherlands does not justify its unilateral refusal of the tax advantage at issue. To accept otherwise would amount, ultimately, to accepting that the Belgium-Netherlands Convention creates an inconsistency which must be remedied by the unilateral refusal of the tax advantage at issue. However, such a line of reasoning has already been rejected by the Court. (
                     24
                  )
            
         
               59.
            
            
               It also seems to me that by refusing to grant the tax advantage at issue on the pretext that only the Kingdom of the Netherlands taxes the profits attributed to the permanent establishments located in its territory which are owned by Belgian companies, although the Kingdom of the Netherlands does not accord a tax advantage similar to that introduced in Belgium, the Belgian Government is attempting to avoid its obligations under European Union law by asking another Member State to adapt its own tax system to that in force in Belgium. However, the Court has already ruled that the Member States are not obliged under the EC Treaty to make such adaptations. (
                     25
                  )
            
         
               60.
            
            
               The second objective in the public interest put forward by the Belgian Government, namely, preserving the balanced allocation between the Member States of the power to tax, is, at least in part, indissociable from the objective that has just been examined.
            
         
               61.
            
            
               In my view, it should meet with the same outcome.
            
         
               62.
            
            
               I note that, according to the case-law, the need to safeguard the balanced allocation between the Member States of the power to tax may be accepted, in particular, where the system in question is designed to prevent conduct capable of jeopardising the right of a Member State to exercise its tax jurisdiction in relation to activities carried out in its territory. (
                     26
                  )
            
         
               63.
            
            
               However, subjecting Belgian companies with a permanent establishment in a Member State with which the Kingdom of Belgium has concluded a double taxation convention and Belgian companies with such an establishment in Belgian territory or in a third State with which the Kingdom of Belgium has not entered into such a convention to the same tax treatment (that is to say, granting them the tax advantage of the deduction for risk capital) would not jeopardise at all, in this case, either the Kingdom of Belgium’s right to tax the overall profits of those companies established in its territory or the right of the Kingdom of the Netherlands under the Belgium-Netherlands Convention to tax the profits attributable to permanent establishments in its territory which are owned by Belgian companies.
            
         
               64.
            
            
               This assessment is not altered by the Belgian Government’s argument that the balanced allocation between the Member States of the power to tax would none the less be jeopardised if the Kingdom of Belgium were required to grant the deduction for risk capital in a situation such as that in the main proceedings even though the deduction from tax of interest on loans used to acquire assets of foreign permanent establishments could be granted only by the Member State in which those establishments are located.
            
         
               65.
            
            
               In fact, the deduction for risk capital is a tax advantage granted at a standard rate on the basis of a notional cost, namely the theoretical cost of using equity capital, borne, as the Commission has stated without being contradicted by the Belgian Government, not by the Belgian company but by its shareholders. Although this was contested by the Belgian Government at the hearing, it is, in the words of the explanatory memorandum to the draft law introducing a tax deduction for risk capital, a sui generis deduction (
                     27
                  ) unilaterally granted by the Kingdom of Belgium. The balanced allocation between the Member States of the power to tax does not, therefore, raise any obstacle to the Kingdom of Belgium ensuring the equal tax treatment of Belgian companies with a permanent establishment, irrespective of the Member State in which that establishment is located.
            
         
               66.
            
            
               So far as is relevant, the a contrario and, by definition, hypothetical interpretation inferred by the Belgian Government from the judgments in Jobra (
                     28
                  ) and Tankreederei I (
                     29
                  ) – on the basis that the Court would not have rejected the reliance on the need to ensure the balanced allocation between the Member States of the power to tax if the assets, in respect of which the investment-related deductions concerned in those two cases had been refused because the investments were not made in national territory, had generated only profits that were entirely exempt from tax in the Member States in question – cannot succeed either.
            
         
               67.
            
            
               Accordingly, the restriction on freedom of establishment resulting from the application of Article 205b(2) of the Income Tax Code 1992 cannot be justified by the two reasons of public interest set out by the Belgian Government.
            
         
               68.
            
            
               I therefore propose that the Court rule that Article 43 EC must be interpreted as precluding a national tax provision, such as that at issue in the main proceedings, pursuant to which, for the purpose of the calculation of its taxable profits, a company subject to full corporation tax liability in a Member State cannot apply a deduction in respect of risk capital in the amount of the positive difference between the net book value of the assets and the total liabilities that are attributed to a permanent establishment which the company runs in another Member State and the income of which is exempt in the first Member State under a double taxation convention concluded between those Member States, whereas such a company can apply such a deduction if that positive difference can be attributed to a permanent establishment located in the first Member State or in a third State with which that Member State has not concluded a double taxation convention.
            
         
         III – Conclusion
      
      
               69.
            
            
               In view of the foregoing I propose that the Court give the following answer to the question submitted by the rechtbank van eerste aanleg te Antwerpen:
               Article 43 EC must be interpreted as precluding a national tax provision, such as that at issue in the main proceedings, pursuant to which, for the purpose of the calculation of its taxable profits, a company subject to full corporation tax liability in a Member State cannot apply a deduction in respect of risk capital in the amount of the positive difference between the net book value of the assets and the total liabilities that are attributed to a permanent establishment which the company runs in another Member State and the income of which is exempt in the first Member State under a double taxation convention concluded between those Member States, whereas such a company can apply such a deduction if that positive difference can be attributed to a permanent establishment located in the first Member State or in a third State with which that Member State has not concluded a double taxation convention.
            
         (
            1
         )	Original language: French.
      (
            2
         )	Belgisch Staatsblad of 30 June 2005, p. 30077.
      (
            3
         )	Coordination centres were governed by Royal Decree No 187 of 30 December 1982 (Belgisch Staatsblad of 13 January 1983) and initially benefited from a tax exemption, for a period of ten years, applicable to tax on the profits of coordination centres which carried out, for undertakings of the group to which they belonged, some administrative, preparatory or auxiliary tasks and some financial centralisation activities. In 1984, the Commission of the European Communities considered the regime to be free of elements of State aid. However, a report of the Council of the European Union of 29 February 2000 classed the Belgian provisions relating to coordination centres as harmful tax measures which had to be abolished, initially by 31 December 2005 and subsequently by 31 December 2010. On 17 February 2003, the Commission adopted Decision 2003/757/EC on the aid scheme implemented by Belgium for coordination centres established in Belgium (OJ 2003 L 282, p. 25), providing for the existing aid scheme to be progressively abolished by 31 December 2010 at the latest. The coordination centre scheme, which was amended several times but always derogated from the ordinary Belgian tax regime, resulted in a number of cases before the Court, including those which gave rise to the judgment in Case C-399/03 Commission v Council [2006] ECR I-5629, concerning the legality of the authorisation given, in July 2003, by the Council to the Kingdom of Belgium to grant the aid scheme to certain coordination centres whose authorisation expired by 31 December 2005 at the latest, and to the judgment in Joined Cases C-182/03 and C-217/03 Belgium and Forum 187 v Commission [2006] ECR I-5479, concerning the legality of the aforementioned Commission decision. The coordination centre scheme was abandoned at the end of 2010. Following the partial annulment of Decision 2003/757 by the Court, the Commission adopted a new decision on 13 November 2007 (Decision 2008/283/EC on the aid scheme implemented by Belgium for coordination centres established in Belgium and amending Decision 2003/757/EC (OJ 2008 L 90, p. 7)), which was the subject of two actions for annulment before the Court of First Instance (now ‘the General Court’) of the European Union, registered as Case T-94/08 and Case T-189/08. In its judgments in Case T-94/08 Centre de coordination Carrefour v Commission [2010] ECR II-1015 and Case T-189/08 Forum 187 v Commission [2010] ECR II-1039, the General Court dismissed the actions as inadmissible. The Court of Justice dismissed the appeal by order of 3 March 2011 in Case C-254/10 P Carrefour v Commission.
      (
            4
         )	See in this regard, inter alia, Parent, X., ‘La déduction pour capital à risque. Les intérêts notionnels’, Revue de la faculté de droit de l’Université de Liège, 2006, No 1-2, p. 289; Colmant, B., and others, Les intérêts notionnels. Aspects juridiques, fiscaux et financiers de la déduction pour capital à risque, Larcier, Brussels, 2006, p. 3; Traversa, E., and Lecocq, A., ‘La déduction des intérêts notionnels en Belgique: premier bilan’, Droit fiscal, No 9, 2009, p. 9; and Dassesse, M., ‘Les intérêts notionnels à l’épreuve du droit communautaire. Le législateur belge à la mémoire bien courte’, Liber Amicorum Jacques Autenne, Bruylant, Brussels, 2010, p. 231.
      (
            5
         )	In the 2008 tax year, the rate was 3.871%. In the 2012 tax year, it is 3.425%. The rate is calculated annually on the basis of the average of the monthly interest rates for 10-year linear bonds (OLOs). The rate may deviate by a maximum of one percentage point from the previous year’s rate. The maximum rate is 6.5%.
      (
            6
         )	Article 205d of the Income Tax Code 1992 states that if there are no, or insufficient, profits from which the deduction for risk capital may be made, it can be carried forward successively to the profits of the next seven years.
      (
            7
         )	Belgisch Staatsblad of 20 December 2002, p. 57533.
      (
            8
         )	See ‘La déduction d’intérêt notionnel: un incitant fiscal belge novateur – Exercice d’imposition 2013 – Revenus 2012’, Service Public Fédéral Finances, p. 6 (http://minfin.fgov.be/portail2/belinvest/downloads/fr/publications/bro_notional_interest.pdf).
      (
            9
         )	See in particular, to this effect, Parent, X., op. cit. p. 298.
      (
            10
         )	See Case C-307/97 Saint-Gobain ZN [1999] ECR I-6161, paragraph 35; Case C-141/99 AMID [2000] ECR I-11619, paragraph 20; Case C-471/04 Keller Holding [2006] ECR I-2107, paragraph 29; Case C-347/04 Rewe Zentralfinanz [2007] ECR I-2647, paragraph 25; and Case C-414/06 Lidl Belgium [2008] ECR I-3601, paragraph 18.
      (
            11
         )	See, inter alia, Case C-264/96 ICI [1998] ECR I-4695, paragraph 21; Rewe Zentralfinanz, paragraph 26; and Lidl Belgium, paragraph 19.
      (
            12
         )	See Lidl Belgium, paragraph 20, and Case C-157/07 Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt [2008] ECR I-8061, paragraph 31. See also Case C-293/06 Deutsche Shell [2008] ECR I-1129, paragraph 29.
      (
            13
         )	See the draft law introducing a tax deduction for risk capital, Belgian Chamber of Representatives, 11 May 2005, doc. 51 1778/001, p. 12, annexed to Argenta’s written observations.
      (
            14
         )	See in particular Case C-157/10 Banco Bilbao Vizcaya Argentaria [2011] ECR I-13023, paragraph 38 and the case-law cited.
      (
            15
         )	See to this effect Case C-240/10 Schulz-Delzers and Schulz [2011] ECR I-8531, paragraphs 40 to 42.
      (
            16
         )	See in particular, on ensuring the coherence of the tax system, Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt, paragraph 43, and, on the preservation of the balanced allocation between the Member States of the power to tax, Case C-371/10 National Grid Indus [2011] ECR I-12273, paragraph 45 and the case-law cited.
      (
            17
         )	See in particular, to this effect, Case C-269/09 Commission v Spain [2012] ECR, paragraph 62 and the case-law cited.
      (
            18
         )	See in particular Case C-319/02 Manninen [2004] ECR I-7477, paragraph 42; Case C-524/04 Test Claimants in the Thin Cap Group Litigation [2007] ECR I-2107, paragraph 68; and Commission v Spain, paragraph 85.
      (
            19
         )	It should be noted that, in their aforementioned work, Colmant, B., and others point out, in the chapter devoted to the ‘principles of the deduction for risk capital’, that the deduction is ‘not entered in the accounts, is made in the company’s tax return and is not offset by any corresponding taxable income’ (p. 19).
      (
            20
         )	Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt, paragraph 42.
      (
            21
         )	Ibid., paragraph 44.
      (
            22
         )	Ibid., paragraph 42.
      (
            23
         )	Ibid., paragraph 35.
      (
            24
         )	See, in particular, Case C-242/03 Weidert and Paulus [2004] ECR I-7379, paragraphs 24 to 26 and the case-law cited.
      (
            25
         )	See, in particular, Case C-96/08 CIBA [2010] ECR I-2911, paragraph 28, and Banco Bilbao Vizcaya Argentaria, paragraph 39.
      (
            26
         )	See Case C-231/05 Oy AA [2007] ECR I-6373, paragraph 54; Case C-379/05 Amurta [2007] ECR I-9659, paragraph 58; Case C-303/07 Aberdeen Property Fininvest Alpha [2009] ECR I-5145, paragraph 66; Case C-284/09 Commission v Germany [2011] ECR I-9879, paragraph 77; and Joined Cases C-338/11 to C-347/11 Santander Asset Management SGIIC and Others [2012] ECR, paragraph 47.
      (
            27
         )	According to the commentary on Article 4 of the draft law (p. 10 of the explanatory memorandum), ‘the deduction for risk capital is a sui generis deduction, all the conditions for which are laid down in the draft provisions’.
      (
            28
         )	Case C-330/07 [2008] ECR I-9099.
      (
            29
         )	Case C-287/10 [2010] ECR I-14233.