Masco Denmark ApS and Damixa ApS v Skatteministeriet.
Date: 2016-12-21
23


It should be noted that freedom of establishment, conferred on European Union nationals by Article 49 TFEU, entails, according to Article 54 TFEU, for companies or firms formed pursuant to the law of a Member State and having their registered office, central administration or principal place of business within the European Union, the right to exercise their activity in another Member State through a subsidiary, a branch or an agency (see, to that effect, judgment of 21 February 2013, A, C‑123/11, EU:C:2013:84, paragraph 30 and the case-law cited).
24


Whilst the provisions of the FEU Treaty concerning freedom of establishment are directed to ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that State, they also prohibit the Member State of origin from hindering the establishment in another Member State of a company incorporated under its legislation, in particular through a subsidiary (see, to that effect, judgment of 17 December 2015, Timac Agro Deutschland, C‑388/14, EU:C:2015:829, paragraph 21 and the case-law cited).
25


Freedom of establishment is hindered if, under a Member State’s tax regime, a resident company having a subsidiary in another Member State suffers a disadvantageous difference in treatment for tax purposes compared with a resident company having a subsidiary in the first Member State (see, to that effect, judgment of 17 December 2015, Timac Agro Deutschland, C‑388/14, EU:C:2015:829, paragraph 22 and the case-law cited).
28


Such a difference in treatment, which in the main proceedings in the present case results solely from the Danish rules, is permissible only if it relates to situations which are not objectively comparable or if it is justified by an overriding reason in the public interest (judgment of 6 October 2015, Finanzamt Linz, C‑66/14, EU:C:2015:661, paragraph 30 and the case-law cited).
29


First, it must be ascertained whether the situations at issue are objectively comparable. For that purpose, it must be recalled that the comparability of a cross-border situation with an internal situation must be examined having regard to the aim pursued by the national provisions at issue (judgment of 6 October 2015, Finanzamt Linz, C‑66/14, EU:C:2015:661, paragraph 31 and the case-law cited).
33


In order to be so justified, such a difference must be appropriate for ensuring attainment of the objective pursued and must not go beyond what is necessary to achieve that objective (judgment of 25 February 2010, X Holding, C‑337/08, EU:C:2010:89, paragraph 26 and the case-law cited).
35


As regards the need to safeguard the balanced allocation of taxation powers between the Member States, this may be capable of justifying a difference in treatment where the system in question is designed to prevent conduct liable to jeopardise the right of a Member State to exercise its powers of taxation in relation to activities carried on in its territory (judgment of 21 February 2013, A, C‑123/11, EU:C:2013:84, paragraph 41 and the case-law cited).
36


Thus, the preservation of the allocation of the power to impose taxes between Member States might make it necessary to apply to the economic activities of companies established in one of those States only the tax rules of that State in respect of both profits and losses (judgment of 21 February 2013, A, C‑123/11, EU:C:2013:84, paragraph 42 and the case-law cited).
37


To give companies the right to elect to have their losses taken into account in the Member State in which they are established or in another Member State would seriously undermine a balanced allocation of the power to impose taxes between the Member States in that the taxable bases would be altered in both States to the extent of the losses transferred (judgment of 21 February 2013, A, C‑123/11, EU:C:2013:84, paragraph 43).
40


It is true that freedom of establishment cannot be understood as meaning that a Member State is required to draw up its tax rules on the basis of those in another Member State in order to ensure, in all circumstances, taxation which removes any disparities arising from national tax rules, given that the decisions taken by a company as to the establishment of commercial structures abroad may be to the company’s advantage or not, depending on the circumstances (judgment of 23 October 2008, Krankenheim Ruhesitz am Wannsee-Seniorenheimstatt, C‑157/07, EU:C:2008:588, paragraph 50 and the case-law cited).
41


Thus, in a context such as that in the case in the main proceedings, Article 49 TFEU, read in conjunction with Article 54 TFEU, cannot have the effect of requiring the Member State of residence of a parent company which has granted a loan to a subsidiary resident in another Member State, to go beyond according a tax exemption to that parent company for the amount of interest expenditure which could not be deducted by the subsidiary if the thin capitalisation rules of the first Member State were to be applied. Accordingly, those articles cannot have the effect of requiring the Member State of residence of that parent company to grant that company a tax exemption for a higher amount originating from the tax system of another Member State, if the first Member State is not to see its fiscal autonomy limited by the exercise of fiscal power of the other Member State (see, by analogy, judgment of 30 June 2011, Meilicke and Others, C‑262/09, EU:C:2011:438, paragraph 33 and the case-law cited).
42


Nevertheless, it should be stressed that, where a Member State has a system for preventing or mitigating a series of charges to tax or economic double taxation for dividends paid to residents by resident companies, it must treat dividends paid to residents by non-resident companies in the same way (judgment of 30 June 2011, Meilicke and Others, C‑262/09, EU:C:2011:438, paragraph 29 and the case-law cited).
43


In a context such as that of the case in the main proceedings, concerning a parent company in one Member State whose subsidiary is resident in another Member State which has more stringent rules on thin capitalisation, the granting, by the Member State in which the parent company is resident, of a tax exemption to that parent company for interest paid by that subsidiary up to the amount that the subsidiary was not entitled to deduct under the thin capitalisation rules of the latter Member State would not call into question the balanced allocation of the power to impose taxes and would constitute a measure less restrictive of freedom of establishment than that provided for in the legislation at issue in the main proceedings (see, by analogy, judgments of 12 December 2006, Test Claimants in the FII Group Litigation, C‑446/04, EU:C:2006:774, paragraph 52, and of 30 June 2011, Meilicke and Others, C‑262/09, EU:C:2011:438, paragraph 32).
44


As regards the objective of preventing tax avoidance, it should be noted that, in order for an argument based on that justification to succeed, the specific objective of that measure must be to prevent wholly artificial arrangements which do not bear any relation to economic reality and which are designed to avoid payment of the tax normally due on the profits generated by activities carried out on national territory (see, to that effect, judgment of 17 December 2015, Timac Agro Deutschland, C‑388/14, EU:C:2015:829, paragraph 42 and the case-law cited).
45


In that regard, it should be noted that the legislation at issue in the main proceedings does not have the specific purpose of preventing wholly artificial arrangements, set up to circumvent Danish tax legislation, from attracting tax benefits; rather, it generally excludes all resident companies which have granted, for whatever reason, a loan to a thinly capitalised subsidiary resident in another Member State from attracting the relevant tax benefits (see, by analogy, judgment of 12 December 2002, Lankhorst-Hohorst, C‑324/00, EU:C:2002:749, paragraph 37 and the case-law cited).