Finanzamt Hamburg-Am Tierpark v Burda GmbH.
Date: 2008-06-26
37. It is clear from the case-law that the Court may of its own motion, or on a proposal from the Advocate General, or at the request of the parties, order the reopening of the oral procedure in accordance with Article 61 of the Rules of Procedure if it considers that it lacks sufficient information, or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see Case C‑210/03 Swedish Match  [2004] ECR I‑11893, paragraph 25; Case C‑306/05 SGAE  [2006] ECR I‑11519, paragraph 27; and Case C‑466/03 Albert Reiss Beteiligungsgesellschaft  [2007] ECR I‑5357, paragraph 29).
39. It should be pointed out that in proceedings brought under Article 234 EC, it is not for the Court to specify the relevant provisions of national law applicable to the main proceedings. That is the prerogative of the court making the reference which, while drawing up the internal legal framework, leaves it open to the Court to provide all the criteria of interpretation of Community law so as to permit the court making the reference to assess the compatibility of national legislation with the Community rules.
42. However, it is clear from the case-law that neither the Statute of the Court of Justice nor the Rules of Procedure make provision for the parties to submit observations in response to the Advocate General’s Opinion (see, in particular, SGAE , paragraph 26 and the case-law cited therein).
44. In making those claims, Burda is essentially arguing that certain factual premises on which the Advocate General’s analysis is based are incorrect or incomplete.
51. According to settled case-law, the aim of that directive – which, as can be seen from paragraphs 5 and 24 of the present judgment, is applicable in the main proceedings – is to eliminate, through the introduction of a common system of taxation, any disadvantage to cooperation between companies of different Member States as compared with cooperation between companies of the same Member State, and thereby to facilitate cross-border cooperation. Thus, with a view to preventing double taxation, Article 5(1) of Directive 90/435 provides for exemption, in the State of the subsidiary, from withholding tax upon distribution of profits (see Joined Cases C‑283/94, C-291/94 and C-292/94 Denkavit and Others  [1996] ECR I‑5063, paragraph 22; Case C‑375/98 Epson Europe  [2000] ECR I‑4243, paragraph 20; Case C-294/99 Athinaïki Zithopoiïa  [2001] ECR I‑6797, paragraph 25; Case C‑58/01 Océ Van der Grinten  [2003] ECR I‑9809, paragraph 45; and Case C‑446/04 Test Claimants in the FII Group Litigation  [2006] ECR I‑11753, paragraph 103).
52. As regards, in particular, the prohibition laid down in Article 5 of Directive 90/435 on Member States levying a withholding tax on profits distributed by a resident subsidiary to its parent company, where that parent company is resident in another Member State, the Court has already held that any tax on income received in the State in which dividends are distributed is a withholding tax on distributed profits where the chargeable event for the tax is the payment of dividends or of any other income from shares, the taxable amount is the income from those shares and the taxable person is the holder of the shares ( Epson Europe , paragraph 23; Athinaïki Zithopoiïa , paragraphs 28 and 29; Océ Van der Grinten , paragraph 47; and Test Claimants in the FII Group Litigation , paragraph 108).
55. It must be stated that Burda is liable to corporation tax when it distributes profits, but the holders of the shares are Burda International and RCS.
56. Thus, the third condition for the existence of a withholding tax within the meaning of Article 5(1) of Directive 90/435 is lacking in the case before the referring court.
58. In particular, in the Commission’s view, the interpretation of the conditions for the application of Article 5(1) of Directive 90/435 must take account of the specific economic function of the withholding tax mechanism which the directive puts in place. If that is not done, the provision will be compromised in the most frequent cases, that is to say, every time a subsidiary distributes dividends to its parent companies where the latter are resident in a Member State other than the one in which the subsidiary is resident.
59. In that regard, the Commission adds that the economic effect of taxing the subsidiary corresponds to taxing the parent company inasmuch as the tax is withheld by the company distributing the profits and paid directly to the tax authorities.
60. The preceding arguments cannot be accepted.
61. It should be noted at once that, as is clear from the case-law subsequent to Athinaïki Zithopoiïa , the Court maintains, as a condition for the existence of a withholding tax within the meaning of Article 5(1) of Directive 90/435, that the taxable person must be the holder of the shares (see Océ Van der Grinten , paragraph 47, and Test Claimants in the FII Group Litigation , paragraph 108).
62. Moreover, that finding cannot be set aside on the basis of supposed economic considerations inherent in the withholding tax mechanism, such as those invoked by the Commission. Such considerations, even if they were relevant, form a basis for the application of Article 5(1) of Directive 90/435 only if the conditions laid down in the case-law cited in paragraph 52 of the present judgment are all fulfilled.
66. First of all, it should be borne in mind that, according to settled case-law, although direct taxation falls within their competence, Member States must none the less exercise that competence consistently with Community law (see, inter alia, Case C‑196/04 Cadbury Schweppes and Cadbury Schweppes Overseas  [2006] ECR I‑7995, paragraph 40; Case C‑374/04 Test Claimants in Class IV of the ACT Group Litigation  [2006] ECR I‑11673, paragraph 36; and Case C‑231/05 Oy AA  [2007] ECR I‑6373, paragraph 20).
68. It follows from settled case-law that, in so far as any given national rules concern only relationships within a group of companies, they primarily affect the freedom of establishment (see, inter alia, to that effect Test Claimants in the FII Group Litigation , paragraph 118; Test Claimants in Class IV of the ACT Group Litigation , paragraph 33; and Oy AA , paragraph 23).
69. Moreover, according to consistent case-law, where a company has a shareholding in another company which gives it definite influence over that company’s decisions and allows it to determine that company’s activities, it is the provisions of the Treaty on the freedom of establishment that are to be applied (see, inter alia, Cadbury Schweppes and Cadbury Schweppes Overseas , paragraph 31; Test Claimants in Class IV of the ACT Group Litigation , paragraph 39; Case C‑524/04 Test Claimants in the Thin Cap Group Litigation  [2007] ECR I‑2107, paragraph 27; Oy AA , paragraph 20; Case C‑112/05 Commission  v Germany  [2007] ECR I‑8995, paragraph 13; and Case C‑298/05 Columbus Container Services  [2007] ECR I‑0000, paragraph 29).
71. In that regard, it should also be pointed out that national legislation such as that at issue in the main proceedings, the application of which does not depend on the extent of the holding which the company receiving the dividend has in the company paying it, may fall within the purview both of Article 43 EC on freedom of establishment and of Article 56 EC on the free movement of capital (see, to that effect, Test Claimants in the FII Group Litigation , paragraph 36).
72. The fact remains that the dispute before the referring court relates exclusively to the effect of the national legislation at issue in the main proceedings on the situation of a resident company which has distributed dividends to shareholders whose holding gives them definite influence over the decisions of that company and enables them to determine its activities (see, to that effect, Test Claimants in the FII Group Litigation , paragraph 38).
74. In any event, should the provisions of the KStG 1996 have restrictive effects on the free movement of capital, it follows from the case-law that those effects would be the unavoidable consequence of such an obstacle to freedom of establishment as there might be, and do not therefore justify an independent examination of that legislation from the point of view of Article 73b of the Treaty ( Oy AA , paragraph 24 and the case-law cited therein).
76. Freedom of establishment, which Article 52 of the Treaty grants to Community nationals and which includes the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, under the conditions laid down for its own nationals by the law of the Member State of residence, entails, in accordance with Article 58 of the EC Treaty (now Article 48 EC), for companies or firms 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 exercise their activity in the Member State concerned through a subsidiary, branch or agency (see, inter alia, Cadbury Schweppes and Cadbury Schweppes Overseas , paragraph 41, and Test Claimants in Class IV of the ACT Group Litigation , paragraph 42).
77. In the case of companies, it should be borne in mind that their registered office for the purposes of Article 58 of the Treaty serves, in the same way as nationality in the case of individuals, as the connecting factor with the legal system of a Member State. Acceptance of the proposition that the Member State of residence may freely apply different treatment merely by reason of the fact that the registered office of a company is situated in another Member State would deprive Article 52 of the Treaty of all meaning. Freedom of establishment thus aims to guarantee the benefit of national treatment in the host Member State, by prohibiting any discrimination based on the place in which companies have their seat (see, inter alia, to that effect, Test Claimants in Class IV of the ACT Group Litigation , paragraph 43 and the case-law cited therein).
86. It should be pointed out that, according to the case-law, it is for each Member State to organise, in compliance with Community law, its system of taxation of distributed profits and, in that context, to define the tax base as well as the tax rates which apply to the company making the distribution and/or to the shareholder to whom the dividends are paid, in so far as they are liable to tax in that State ( Test Claimants in Class IV of the ACT Group Litigation , paragraph 50).
87. According to the same line of authority, in the absence of any unifying or harmonising Community measures, Member States retain the power to define, by treaty or unilaterally, the criteria for allocating their powers of taxation, particularly with a view to eliminating double taxation ( Test Claimants in Class IV of the ACT Group Litigation , paragraph 52).
96. It follows from the foregoing that the answer to the second question must therefore be that Article 52 of the Treaty (now, after amendment, Article 43 EC) must be interpreted as not precluding the application of a national measure, such as Paragraph 28(4) of the KStG 1996, under which the taxation of profits distributed by a subsidiary resident in a Member State to its parent company is subject to the same corrective mechanism regardless of whether the parent company is resident in the same Member State or in another Member State even though – unlike a resident parent company – a non-resident parent company is not granted a tax credit by the Member State in which the subsidiary is resident.
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