Mark Kerckhaert and Bernadette Morres v Belgische Staat.
Date: 2006-11-14
15. At the outset it must be pointed out that, according to settled case‑law, although direct taxation falls within the competence of the Member States, the latter must none the less exercise that competence in a manner consistent with Community law (see Case C‑80/94 Wielockx [1995] ECR I‑2493, paragraph 16; Case C‑35/98 Verkooijen  [2000] ECR I‑4071, paragraph 32; Case C‑334/02 Commission  v France  [2004] ECR I‑2229, paragraph 21; Case C‑315/02 Lenz [2004] ECR I‑7063, paragraph 19; and Case C‑319/02 Manninen  [2004] ECR I‑7477, paragraph 19).
17. Contrary to the arguments submitted by Mr and Mrs Kerckhaert-Morres, the case in the main proceedings differs from those which gave rise to the judgments cited above inasmuch as the Belgian tax legislation does not make any distinction between dividends from companies established in Belgium and dividends from companies established in another Member State. Under Belgian law both are taxed at an identical rate of 25% by way of income tax.
19. It is true that discrimination may consist not only in the application of different rules to comparable situations but also in the application of the same rule to different situations (see Case C‑279/93 Schumacker  [1995] ECR I‑225, paragraph 30, and Case C‑311/97 Royal Bank of Scotland  [1999] ECR I‑2651, paragraph 26). However, in respect of the tax legislation of his State of residence, the position of a shareholder receiving dividends is not necessarily altered, in terms of that case-law, merely by the fact that he receives those dividends from a company established in another Member State, which, in exercising its fiscal sovereignty, makes those dividends subject to a deduction at source by way of income tax.
20. In circumstances such as those of the present case, the adverse consequences which might arise from the application of an income tax system such as the Belgian system at issue in the main proceedings result from the exercise in parallel by two Member States of their fiscal sovereignty.
21. It must be recalled, in that regard, that conventions preventing double taxation such as those envisaged in Article 293 EC are designed to eliminate or mitigate the negative effects on the functioning of the internal market resulting from the coexistence of national tax systems referred to in the preceding paragraph.
22. Community law, in its current state and in a situation such as that in the main proceedings, does not lay down any general criteria for the attribution of areas of competence between the Member States in relation to the elimination of double taxation within the Community. Apart from Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 225, p. 6), the Convention of 23 July 1990 on the elimination of double taxation in connection with the adjustment of profits of associated enterprises (OJ 1990 L 225, p. 10) and Council Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments (OJ 2003 L 157, p. 38), no uniform or harmonisation measure designed to eliminate double taxation has as yet been adopted at Community law level.
23. Consequently, it is for the Member States to take the measures necessary to prevent situations such as that at issue in the main proceedings by applying, in particular, the apportionment criteria followed in international tax practice. The purpose of the France-Belgium Convention is essentially to apportion fiscal sovereignty between the French Republic and the Kingdom of Belgium in those situations. However, that convention is not at issue in the preliminary reference at hand.
24. In the light of all those considerations, the answer to the question referred must be that Article 73b(1) of the Treaty does not preclude legislation of a Member State, such as Belgian tax legislation, which, in the context of tax on income, makes dividends from shares in companies established in the territory of that State and dividends from shares in companies established in another Member State subject to the same uniform rate of taxation, without providing for the possibility of setting off tax levied by deduction at source in that other Member State.
Costs