CELEX: 62002CJ0315
Language: en
Date: 2004-07-15
Title: Judgment of the Court (First Chamber) of 15 July 2004. # Anneliese Lenz v Finanzlandesdirektion für Tirol. # Reference for a preliminary ruling: Verwaltungsgerichtshof - Austria. # Free movement of capital - Tax on revenue from capital - Revenue from capital of Austrian origin: tax rate of 25 % in discharge or rate equal to half of the average tax rate on aggregate income - Income from capital originating in another Member State: normal tax rate. # Case C-315/02.

Case C-315/02
      Anneliese Lenz
      v
      Finanzlandesdirektion für Tirol
      (Reference for a preliminary ruling from the Verwaltungsgerichtshof (Austria))
      (Free movement of capital – Tax on revenue from capital – Revenue from capital of Austrian origin: tax rate of 25% with discharging effect or tax at half the rate applicable to the
         whole of the revenue – Revenue from capital originating in another Member State: normal rate of tax)
      
      Summary of the Judgment
      Free movement of capital – Restrictions – Taxes on revenue from capital – Tax rate of 25% with discharging effect or ordinary
            tax rate reduced by half – Limitation to revenue from capital of national origin – Revenue from capital of foreign origin
            subject to ordinary tax without reduction – Not permissible – Justification – None
      (EC Treaty, Arts 73b and 73d(1) and (3) (now Arts 56 EC and 58(1) and (3) EC))
      Articles 73b and 73d(1) and (3) of the Treaty (now, respectively, Articles 56 EC and 58(1) and (3) EC) preclude legislation
         of a Member State which allows only the recipients of revenue from capital of national origin to choose between a tax with
         discharging effect at the rate of 25% and ordinary income tax with the application of a rate reduced by half, while providing
         that revenue from capital originating in another Member State must be subject to ordinary income tax without any reduction
         in the rate.
      
      Such tax legislation constitutes a prohibited restriction on the free movement of capital in that it has the effect of deterring
         taxpayers living in the Member State concerned from investing their capital in companies established in another Member State;
         it also produces a restrictive effect in relation to companies established in other Member States in that it constitutes an
         obstacle to their raising capital in the Member State concerned.
      
      That legislation cannot be justified by an objective difference in situation of such a kind as to justify a difference in
         tax treatment, in accordance with Article 73d(1)(a) of the Treaty. In relation to a tax rule designed to attenuate the effects
         of double taxation – corporation tax and then a tax on income – of the profits distributed by the company in which the investment
         is made, shareholders who are fully taxable in the Member State concerned and receive revenue from capital from a company
         established in another Member State are in a situation comparable with that of shareholders who are likewise fully taxable
         in that Member State but receive revenue from capital from a company established in that same Member State.
      
      Moreover, in the absence of a direct link between the obtaining of the tax advantages at issue enjoyed by taxpayers resident
         in the Member State concerned on their domestic revenue from capital and the taxation of the companies’ profits by way of
         corporation tax, tax on the income of physical persons and corporation tax being in any case two distinct taxes which affect
         different taxpayers, and having regard to the fact that the aim pursued, namely the attenuation of an instance of double taxation,
         would not be affected in any way if one were also to give the benefit of that legislation to persons deriving revenue from
         capital originating in another Member State, it cannot be justified by the need to ensure the coherence of the tax system
         in question.
      
      Furthermore, in the absence of such a link, refusal to grant those tax advantages to the recipients of revenue from capital
         originating in another Member State cannot be justified by the fact that revenue from companies established in another Member
         State is subject to low taxation in that State. Nor can unfavourable tax treatment contrary to a fundamental freedom be justified
         by the existence of other tax advantages, even supposing that such advantages exist.
      
      A reduction in tax receipts cannot be regarded as an overriding reason in the public interest which may be relied on to justify
         a measure which is in principle contrary to a fundamental freedom.
      
      (see paras 20-22, 28, 31-32, 34-36, 38, 40, 42-43, 49, operative part 1-2)

      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
            
            JUDGMENT OF THE COURT (First Chamber)15 July 2004(1)
         
         
               (Free movement of capital  –  Tax on revenue from capital  –  Revenue from capital of Austrian origin: tax rate of 25 % in discharge or rate equal to half of the average tax rate on aggregate
                  income  –  Income from capital originating in another Member State: normal tax rate)
               
               
             In Case C-315/02,
             REFERENCE to the Court under Article 234 EC by the Verwaltungsgerichtshof (Austria) for a preliminary ruling in the proceedings
            pending before that court between
            
            
            
            Anneliese Lenz
            
            and
            
            Finanzlandesdirektion für Tirol,
            
             on the interpretation of Articles 73b et 73d of the EC Treaty (now Articles 56 EC and 58 EC),
            
            THE COURT (First Chamber),,
            
             composed of: P. Jann, President of the Chamber, A. Rosas, S. von Bahr, R. Silva de Lapuerta and K. Lenaerts (Rapporteur),
            Judges, 
            
             Advocate General: A. Tizzano, Registrar:  M.-F. Contet, Principal Administrator,
            
            
            after considering the observations submitted on behalf of:
               
               –
                A. Lenz, by C. Huber and R. Leitner, accountants and tax advisers,
               
               –
                the Austrian Government, by H. Dossi, acting as Agent,
               
               –
                the Danish Government, by J. Molde, acting as Agent,
               
               –
                the French Government, by G. de Bergues and P. Boussaroque, acting as Agents,
               
               –
                the United Kingdom Government, by K. Manji, acting as Agent, and M. Hoskins, barrister,
               
               –
                the Commission of the European Communities, by K. Gross and R. Lyal, acting as Agents,
               
               
            
            
            
            
            after hearing the oral observations of A. Lenz, represented by R. Leitner and G. Toifl, tax advisers, of the Austrian Government,
               represented by J. Bauer, acting as Agent, of the United Kingdom Government, represented by M. Hoskins, and of the Commission,
               represented by K. Gross and R. Lyal, at the hearing on 29 January 2004,
            
            
            after hearing the Opinion of the Advocate General at the sitting on 25 March 2004,
         gives the following
         
         
         Judgment
         1
            
          By order of 27 August 2002, received at the Court on 6 September 2002, the Verwaltungsgerichtshof (Supreme Administrative
         Court) referred to the Court for a preliminary ruling under Article 234 EC three questions on the interpretation of Articles
         73b and 73d of the EC Treaty (now Articles 56 EC and 58 EC).
         
         
         
         2
            
          Those questions were raised in proceedings brought before that court by Ms Lenz, questioning the compatibility of Austrian
         tax legislation on the taxation of revenue derived from capital with Community law.
         
         
            
               Austrian legal background
            
         
         3
            
          Under the Austrian tax system, the earnings of companies established in Austria are taxed at two levels: at company level
         on the profits which it makes at the fixed rate of 34%, and at shareholder level on revenue received from companies, that
         is to say on dividends and other benefits distributed by the company.
         
         
         
         4
            
          As regards the taxation of shareholders, the system applicable varies according to whether the revenue is of Austrian or of
         foreign origin.
         
         The taxation of revenue from capital of Austrian origin
         
         5
            
          According to Paragraph 93(2) of the Einkommensteuergesetz 1988 (the 1988 Law on Income Tax, BGBl. 1988/400; ‘the EStG’): ‘domestic
         revenue from capital assets exists where the person liable to pay revenue from capital assets has its residence, head office
         or seat in Austria or is the branch office in Austria of a credit institution …’ (version published in BGBl. 1996/201).
         
         
         
         6
            
          Paragraph 93(1) of the EStG (version published in BGBl. 1996/201) provides that ‘in the case of domestic revenue from capital
         assets ... income tax shall be levied by deduction from revenue from capital assets (‘Kapitalertragsteuer’) which, in accordance
         with Paragraph 95(1) of the EStG, amounts to 25%.
         
         
         
         7
            
          Paragraph 97(1) of the EStG (version published in BGBl. 1996/797) provides that liability to tax on revenue from capital ‘is
         regarded as having been discharged by virtue of the deduction of the tax’. Revenue from capital is therefore not subject to
         any further income tax.
         
         
         
         8
            
          In cases where payment in discharge of tax liability (‘definitive taxation’) cannot be levied by means of deduction at source
         (i.e. with the companies), Paragraph 97(2) of the EStG provides that the tax is to be levied by ‘voluntary payment, at the
         payment counter, of an amount corresponding to the tax on revenue from capital’ (version published in BGBl. 1996/797).
         
         
         
         9
            
          If the taxpayer decides not to opt for the definitive taxation of 25% of his domestic revenue from capital, he benefits, in
         accordance with Paragraph 37(1) and (4) of the EStG (version published in BGBl. 1996/797), from the ‘half rate’ system (‘Halbsatzverfahren’).
         
         
         
         10
            
          In that case, the revenue from capital contributes towards determining aggregate taxable income, possibly leading to an increase
         in the rate to be applied. However, in compensation for that increase, such revenue from capital is subject to a tax rate
         reduced to half the average rate applicable to aggregate income.
         
         Taxation of foreign revenue from capital
         
         11
            
          Foreign revenue from capital paid to a taxpayer living in Austria is subject to ordinary income tax. It therefore contributes
         to determining the total taxable income and is subject in the ordinary way to income tax, the maximum rate of which is 50%.
         
         
         
         12
            
          The Austrian legal position has been changed by a law which came into force on 1 April 2002. That law is subsequent to the
         dispute in the main proceedings, and the latter is therefore not affected by it.
         
         The dispute in the main proceedings and the questions referred
         
         13
            
          Ms Lenz, a German national fully liable to tax in Austria, declared in her income tax return for 1996 revenue from capital
         in the form of dividends received from limited liability companies established in Germany. The Austrian tax authorities charged
         that revenue to ordinary income tax. The half-rate taxation provided for under Paragraph 37 of the EStG and the definitive
         taxation under Paragraph 97 in combination with Paragraph 93 of the EStG (‘the tax advantages at issue) apply only to revenue
         from capital of Austrian origin.
         
         
         
         14
            
          Taking the view that application of the ordinary progressive rate of income tax to her revenue from capital of German origin
         was contrary to the freedom of movement of capital laid down by Article 73b(1) of the Treaty, Ms Lenz lodged a complaint with
         the Finanzlandesdirektion für Tirol (Regional Tax Directorate, Tirol). That complaint was rejected by a decision of 16 April
         1999, against which Ms Lenz brought an action before the Verwaltungsgerichtshof.
         
         
         
         15
            
          It was in those circumstances that the Verwaltungsgerichtshof decided to stay the proceedings and refer the following questions
         to the Court of Justice for a preliminary ruling:
         ‘1.     Does Article 73b(1) in conjunction with Article 73d(1)(a) and (b) and (3) of the EC Treaty (now Article 56(1) in conjunction
         with Article 58(1)(a) and (b) and (3) EC) preclude a provision such as that in Paragraph 97(1) and (4) of the Einkommenssteuergesetz
         1988 (1988 Law on Income Tax) in conjunction with Paragraph 37(1) and (4) of the Einkommenssteuergesetz 1988, under which
         a taxpayer in receipt of dividends from domestic shares may choose whether they should be subject to tax (at a flat rate of
         25%) in discharge of liability or whether they should be taxed at a rate equivalent to half of the average tax rate applicable
         to the aggregate income, whereas dividends from foreign shares are always taxed at the normal rate of income tax?
          2.       Is the level of taxation of the revenue of a limited company which has its seat and head office in another EU Member State
         or a non-Member State in which shares are held of relevance to the answer to the first question?
          3.       If the answer to the first question is in the affirmative, can the situation described in Article 73b(1) of the EC Treaty
         (now Article 56(1) EC) arise as a result of the corporation tax paid in the countries in which they are established by companies
         limited by shares with seats and head offices in other EU Member States or non-Member States being credited pro rata against
         the Austrian income tax payable by the recipient of the dividends?’
         
         The first two questions
         
         16
            
          By its first two questions, which it will be convenient to examine together, the referring court asks in essence whether Articles
         73b(1) and 73d(1) and (3) of the Treaty preclude legislation of a Member State which reserves the application of definitive
         taxation at a flat rate of 25 %, or of a tax rate reduced by half, for revenue from capital paid by a company established
         in that Member State, to the exclusion of such revenue paid by a company established in another Member State, and, if so,
         whether assessment of the compatibility of such legislation with those provisions of the Treaty depends on the level of corporation
         tax on the profits of companies in the State where they are established.
         
         
         
         17
            
          Since the dispute in the main proceedings concerns the refusal by the tax authorities of a Member State to grant the tax advantages
         at issue to a person fully taxable in that Member State and who received dividends from a company established in another Member
         State, the questions raised call for a reply only in so far as they concern the free movement of capital between Member States.
         
         
         
         18
            
          It first needs to be examined whether, as Ms Lenz and the Commission of the European Communities maintain, tax legislation
         such as that at issue in the main proceedings restricts the free movement of capital within the meaning of Article 73b(1)
         of the Treaty.
         
         
         
         19
            
          According to consistent case-law, although direct taxation falls within the competence of Member States, the latter must none
         the less exercise that competence consistently with Community law (Case C-80/94 Wielockx [1995] ECR I-2493, paragraph 16; Case C-35/98 Verkooijen [2000] ECR I-4071, paragraph 32; and Case C-334/02 Commission v France [2004] ECR I-0000, paragraph 21).
         
         
         
         20
            
          In this case, the tax legislation at issue has the effect of deterring taxpayers living in Austria from investing their capital
         in companies established in another Member State. The legislation allows such a taxpayer, in respect of the taxation of his
         domestic revenue from capital, to choose between definitive taxation at the fixed rate of 25% and ordinary income tax at a
         rate reduced by half, whereas his revenue from capital originating in another Member State is subject to the application of
         ordinary income tax, the rate of which may be as much as 50%.
         
         
         
         21
            
          That legislation also produces a restrictive effect in relation to companies established in other Member States, inasmuch
         as it constitutes an obstacle to their raising capital in Austria. To the extent that revenue from capital originating in
         another Member State receives less favourable tax treatment than revenue from capital of Austrian origin, the shares of companies
         established in other Member States are, for investors living in Austria, less attractive than the shares of companies established
         in that Member State (see, to that effect, Verkooijen, paragraph 35, and Commission v France, paragraph 24).
         
         
         
         22
            
          It follows from the above that legislation such as that at issue in the main proceedings constitutes a restriction on the
         free movement of capital which is, in principle, prohibited by Article 73b(1) of the Treaty.
         
         
         
         23
            
          It remains to be examined, however, whether that restriction on the free movement of capital is capable of being justified
         having regard to the provisions of the Treaty.
         
         
         
         24
            
          It should be noted in that respect that, in accordance with Article 73d(1) of the Treaty, ‘… Article 73b shall be without
         prejudice to the right of Member States … to apply the relevant provisions of their tax law which distinguish between taxpayers
         who are not in the same situation with regard to … the place where their capital is invested’ or their right ‘to take all
         requisite measures to prevent infringements of national law and regulations’.
         
         
         
         25
            
          According to the Austrian, Danish, French and United Kingdom Governments, it is clear from that provision that Member States
         are entitled to reserve the tax advantages at issue for revenue from capital paid by companies established in their territory.
         
         
         
         26
            
          In that respect, it should be noted that Article 73d(1) of the Treaty, which, as a derogation from the fundamental principle
         of the free movement of capital, must be interpreted strictly, cannot be interpreted as meaning that any tax legislation making
         a distinction between taxpayers by reference to the place where they invest their capital is automatically compatible with
         the Treaty. The derogation in Article 73d(1) of the Treaty is itself limited by Article 73d(3) of the Treaty, which provides
         that the national provisions referred to in Article 73d(1) ‘shall not constitute a means of arbitrary discrimination or a
         disguised restriction on the free movement of capital and payments as defined in Article 73b’. 
         
         
         
         27
            
          A distinction must therefore be made between unequal treatment which is permitted under Article 73d(1) of the Treaty and arbitrary
         discrimination which is prohibited by Article 73(d)(3). In that respect, the case-law shows that, for national tax legislation
         like that at issue, which makes a distinction between revenue from capital paid by companies established in the territory
         of the Member State concerned and that originating in another Member State, to be capable of being regarded as compatible
         with the Treaty provisions on the free movement of capital, the difference in treatment must concern situations which are
         not objectively comparable or be justified by overriding reasons in the general interest, such as the need to safeguard the
         cohesion of the tax system, the fight against tax avoidance and the effectiveness of fiscal supervision (Verkooijen, paragraph 43; Case C-436/00 X and Y [2002] ECR I-10829, paragraphs 49 and 72; Commission  v France, paragraph 27). In order to be justified, moreover, the difference in treatment between different categories of revenue from
         capital must not go beyond what is necessary in order to attain the objective of the legislation.
         
         
         
         28
            
          The governments which have submitted observations in this case argue, first, that the Austrian authorities collect the tax
         on the profits which companies established in Austria distribute to their shareholders partly from the companies and partly
         from the shareholders. In relation to companies established outside their territory, the Austrian authorities are not in a
         position to levy the tax on revenue from companies in the same way. The tax legislation at issue is therefore justified by
         an objective difference in situation of such a kind as to justify a difference in tax treatment, in accordance with Article
         73d(1)(a) of the Treaty (Case C-279/93 Schumacker [1995] ECR I-225, paragraphs 30 to 34 and 37; Verkooijen, paragraph 43).
         
         
         
         29
            
          It therefore needs to be examined whether, in accordance with Article 73d(1)(a) of the Treaty, the difference in treatment
         of a person fully taxable in Austria, according to whether such person receives revenue from capital from companies established
         in that Member State or revenue from capital from companies established in other Member States, relates to situations which
         are not objectively comparable.
         
         
         
         30
            
          The documents before the Court show that the Austrian tax legislation is designed to attenuate the economic effects of double
         taxation of company profits arising from the taxation of company profits by way of corporation tax and the taxation of a shareholder
         who is a taxpayer, by way of income tax, on the same profits distributed in the form of dividends. 
         
         
         
         31
            
          However, both revenue from capital of Austrian origin and such revenue originating in another Member State are capable of
         being the subject of double taxation. In both cases, the revenue is, in principle, subject first to corporation tax and then,
         to the extent to which it is distributed in the form of dividends, to income tax.
         
         
         
         32
            
          In relation to a tax rule designed to attenuate the effects of double taxation of the profits distributed by the company in
         which the investment is made, shareholders who are fully taxable in Austria and receive revenue from capital from a company
         established in another Member State are therefore in a situation comparable with that of shareholders who are likewise fully
         taxable in Austria but receive revenue from capital from a company established in Austria.
         
         
         
         33
            
          It follows that the Austrian tax legislation which makes application of the definitive tax rate of 25%, or of the tax rate
         reduced by half, to revenue from capital subject to the condition that such revenue must be of Austrian origin does not relate
         to a difference in situation within the meaning of Article 73d(1)(a) of the Treaty between revenue from capital of Austrian
         origin and revenue from capital originating in another Member State (see, to that effect, Case C-107/94 Asscher [1996] ECR I-3089, paragraphs 41 to 49, and Case C-234/01 Gerritse [2003] ECR I-5933, paragraphs 47 to 54).
         
         
         
         34
            
          Secondly, the governments which have submitted observations to the Court argue that the Austrian tax legislation is objectively
         justified by the need to ensure the coherence of the national tax system (Case C-204/90 Bachmann [1992] ECR I‑249; Case C-300/90 Commission v Belgium [1992] ECR I-305). They argue in that respect that the tax advantages at issue are designed to attenuate the effects of double
         taxation of company profits. They argue that there is a direct economic link between the taxation of the profits of the company
         and those taxation advantages. Therefore, since only companies established in Austria are subject to corporation tax in that
         Member State, it is justified to reserve those tax advantages for the recipients of revenue from capital of Austrian origin.
         
         
         
         35
            
          In paragraph 28 of the judgment in Bachmann and paragraph 21 of the judgment in Commission  v Belgium, in which the Court acknowledged that the need to preserve the coherence of a tax system might justify a restriction on the
         exercise of fundamental freedoms guaranteed by the Treaty, it is important to note that there was a direct link between the
         deductibility of contributions and the taxation of sums payable by insurers under pension and life assurance contracts, and
         that link had to be maintained to preserve the cohesion of the tax system in question (see, in particular, Case C-55/98 Vestergaard [1999] ECR I-7641, paragraph 24; X and Y, paragraph 52).
         
         
         
         36
            
          In this case, apart from the fact that tax on the income of physical persons and corporation tax are two distinct taxes which
         affect different taxpayers (Case C‑251/98 Baars [2000] ECR I-2787, paragraph 40; Verkooijen, paragraphs 57 and 58; Case C-168/01 Bosal [2003] ECR I-0000, paragraph 30), it should be noted that the Austrian tax legislation does not make the obtaining of the
         tax advantages at issue enjoyed by Austrian residents on their domestic revenue from capital dependent upon the taxation of
         the companies’ profits by way of corporation tax.
         
         
         
         37
            
          It should also be recalled that the argument based on the need to preserve the coherence of a tax system must be verified
         having regard to the aim pursued by the tax legislation in question (Case C-9/02 De Lasteyrie du Saillant [2004] ECR I-0000, paragraph 67).
         
         
         
         38
            
          In this case, the aim pursued by the Austrian tax legislation, namely the attenuation of an instance of double taxation, would
         not be affected in any way if one were also to give the benefit of the Austrian tax legislation to persons deriving revenue
         from capital originating in another Member State. On the contrary, the fact of reserving the definitive tax rate of 25% and
         tax rate reduced by half solely for persons deriving revenue from capital of Austrian origin has the effect of increasing
         the disparity between the overall tax burden on the profits of Austrian companies and that on the profits of companies established
         in another Member State.
         
         
         
         39
            
          An argument based on the need to preserve the coherence of the Austrian tax system cannot therefore be accepted.
         
         
         
         40
            
          Admittedly, granting the tax advantage at issue also to persons receiving revenue from capital originating in another Member
         State would involve a reduction in tax receipts for the Member State concerned. However, it is settled case-law that a reduction
         in tax receipts cannot be regarded as an overriding reason in the public interest which may be relied on to justify a measure
         which is in principle contrary to a fundamental freedom (Verkooijen, paragraph 59; Case C-136/00 Danner [2002] ECR I-8147, paragraph 56; X and Y, paragraph 50).
         
         
         
         41
            
          Moreover, contrary to what the Austrian and Danish Governments argue, the level of taxation on companies established in another
         Member State is not relevant in relation to Austrian tax legislation when assessing the compatibility of national legislation
         with Articles 73b and 73d(1) and (3) of the Treaty.
         
         
         
         42
            
          It should be noted in that regard that, in respect of capital from revenue of Austrian origin, the tax legislation at issue
         establishes no direct link between the taxation of company profits by means of corporation tax and the tax advantages enjoyed,
         in relation to income tax, by taxpayers living in Austria. In those circumstances, the level of the taxation of companies
         established outside Austrian territory cannot justify a refusal to grant those same financial advantages to persons receiving
         revenue from capital paid by those latter companies.
         
         
         
         43
            
          Whilst one cannot exclude the possibility that extension of the tax legislation in question to revenue from capital originating
         in another Member State might make it advantageous for investors living in Austria to buy shares of companies established
         in other Member States, where corporation tax is lower than in Austria, that possibility is in no way capable of justifying
         legislation such as that at issue in the main proceedings. As regards an argument based on a possible tax advantage for taxpayers
         receiving in their country of residence dividends from companies established in another Member State, it is clear from settled
         case-law that unfavourable tax treatment contrary to a fundamental freedom cannot be justified by the existence of other tax
         advantages, even supposing that such advantages exist (Verkooijen, paragraph 61, and case-law there cited).
         
         
         
         44
            
          The French Government further argues that the Austrian tax legislation is justified by the need to ensure the effectiveness
         of fiscal supervision.
         
         
         
         45
            
          In that respect, the Court notes that Article 73d(1)(b) of the Treaty, amongst other provisions, shows that the effectiveness
         of financial supervision may be relied upon in order to justify restrictions on the exercise of fundamental freedoms guaranteed
         by the Treaty (Case C-254/97 Baxterand Others [1999] ECR I-4809, paragraph 18; Case C-478/98 Commission v Belgium [2000] ECR I-7587, paragraph 39).
         
         
         
         46
            
          Concerning, first, the tax advantage arising from the taxation of revenue from capital of Austrian origin at a reduced rate,
         it has not in any way been demonstrated that the application of different rates of tax by reference to the origin of the revenue
         from capital is capable of making financial supervision more effective.
         
         
         
         47
            
          Concerning, secondly, the definitive tax at the rate of 25%, it should be noted that this is deducted directly at source by
         companies established in Austria. However, as the Advocate General points out in paragraphs 33 and 34 of his Opinion, tax
         that is definitive in nature does not necessarily presuppose a tax at source. Thus, Article 97(2) of the EStG provides that,
         in cases where deduction at source is not possible, the definitive tax may be paid by ‘voluntary payment, at the payment counter,
         of an amount corresponding to the tax on revenue from capital’. In respect of revenue from companies established in other
         Member States, therefore, a procedure similar to ‘voluntary payment’ to the tax administration could be instituted.
         
         
         
         48
            
          Admittedly, deduction at source, carried out directly by companies established in Austria, is an easier operation for the
         tax administration than a ‘voluntary payment’. However, mere administrative inconvenience is not capable of justifying an
         obstacle to a fundamental freedom of the Treaty, such as the free movement of capital (Commission v France, paragraphs 29 and 30).
         
         
         
         49
            
          Having regard to all of the foregoing, the answer to the first two questions must be that Articles 73b and 73d(1) and (3)
         of the Treaty preclude legislation which allows only the recipients of revenue from capital of Austrian origin to choose between
         definitive taxation at the rate of 25% and ordinary income tax with the application of a rate reduced by half, while providing
         that revenue from capital originating in another Member State must be subject to ordinary income tax without any reduction
         in the rate. Refusal to grant the recipients of revenue from capital originating in another Member State the tax advantages
         granted to recipients of revenue from capital of Austrian origin cannot be justified by the fact that revenue from companies
         established in another Member State is subject to low taxation in that State.
         
         The third question
         
         50
            
          By its third question, the national court asks whether Article 73b(1) of the Treaty precludes tax legislation which allows
         a taxpayer who lives in Austria, and receives revenue from capital originating in another Member State, to deduct pro rata
         from his income tax the corporation tax paid by the company in which he has a holding.
         
         
         
         51
            
          The applicant in the main proceedings and the Commission have doubts as to the admissibility of this question. They maintain
         that it is of no relevance in resolving the dispute in the main proceedings, since it concerns a tax system that is not in
         force in Austria.
         
         
         
         52
            
          In that respect, it has been consistently held that the Court of Justice may not rule on a question referred for a preliminary
         ruling by a national court where it is quite obvious that the interpretation of Community law that is sought bears no relation
         to the actual facts of the main action or its purpose, or where the problem is hypothetical (Case C-83/91 Meilicke [1992] ECR I-4871, paragraph 25; Case C‑36/99 Idéal Tourisme [2000] ECR I-6049, paragraph 20; Case C-380/01 Schneider [2004] ECR I-0000, paragraph 22). 
         
         
         
         53
            
          In this case, the provisions referred to in the order for reference do not provide for the possibility of deducting in Austria
         corporation tax which has been paid in another Member State. When asked by the Court to give further detail on that point,
         the Austrian Government confirmed that the tax legislation in force at the date of the facts in the main proceedings did not
         allow the identification of a deduction such as that indicated by the referring court, even on a broad interpretation of the
         law.
         
         
         
         54
            
          In those circumstances, there is no need to reply to the third question.
         
         
         Costs
         55
            
          The costs incurred by the Austrian, Danish, French and United Kingdom Governments, and by the Commission, which have submitted
         observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step
         in the proceedings pending before the national court, the decision on costs is a matter for that court.
         
         
         On those grounds,
         
         
         
            
            THE COURT (First Chamber),
         
         
          in answer to the questions referred to it by the Verwaltungsgerichtshof by order of 27 August 2002, hereby rules:
         
            
            
             
               1.
                  Articles 73b and 73d(1) and (3) of the EC Treaty (now, respectively, Articles 56 EC and 58(1) and (3) EC) preclude legislation
                     which allows only the recipients of revenue from capital of Austrian origin to choose between a tax with discharging effect
                     and ordinary income tax with the application of a rate reduced by half, while providing that revenue from capital originating
                     in another Member State must be subject to ordinary income tax without any reduction in the rate.
                  
               
            
            
            
             
               2.
                  Refusal to grant the recipients of revenue from capital originating in another Member State the tax advantages granted to
                     recipients of revenue from capital of Austrian origin cannot be justified by the fact that revenue from companies established
                     in another Member State is subject to low taxation in that State.
                  
               
            
            
                  Jann
               
               
                  Rosas
               
               
                  von Bahr
               
            
                  Silva de Lapuerta
               
               
                  
               
               
                  Lenaerts
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
            
            
            
            
            
            
            
         
         
          Delivered in open court in Luxembourg on 15 July 2004.
         
         
         
         
                  R. Grass
               
               
                  P. Jann
               
            
         
         
         
                  Registrar
               
               
                  President of the First Chamber
               
            
      
      
          1 –
            
            Language of the case: German.