Laboratoires Fournier SA v Direction des vérifications nationales et internationales.
Date: 2005-03-10
14. Although direct taxation falls within the competence of the Member States, the latter must none the less exercise that competence consistently with Community law (see, inter alia, Case C-80/94 Wielockx  [1995] ECR I‑2493, paragraph 16, and Case C-242/03 Weidert and Paulus  [2004] ECR I-0000, paragraph 12).
15. Moreover, the legislation of a Member State, such as that at issue in the main proceedings, by restricting the benefit of a tax credit for research only to research carried out in that Member State, makes the provision of services constituted by the research activity subject to different tax arrangements depending on whether it is carried out in other Member States or in the Member State concerned (see, to that effect, Case C-55/98 Vestergaard  [1999] ECR I-7641, paragraph 21).
17. The French Government submits, however, that that difference of treatment flows directly from the principle of fiscal territoriality, which the Court expressly recognised in Case C-250/95 Futura Participations and Singer  [1997] ECR I‑2471, paragraph 22, and hence cannot be regarded as giving rise to overt or covert discrimination prohibited by the EC Treaty.
20. Although it is true that It is true that in Bachmann  (paragraph 28) and Case C-300/90 Commission  v Belgium  [1992] ECR I‑305, paragraph 21, the Court accepted that the need to safeguard the coherence of the tax system could justify a restriction on the exercise of the fundamental freedoms guaranteed by the Treaty. Subsequently, however, it has stated that, in Bachmann  and Commission  v Belgium , there was a direct link, with respect to the taxpayer subject to income tax, between the deductibility of the insurance contributions from taxable income and the later taxation of the sums paid by the insurers under pension and life assurance contracts, and that link had to be maintained in order to preserve the coherence of the tax system concerned (see, inter alia, Case C-484/93 Svensson and Gustavsson  [1995] ECR I‑3955, paragraph 18, and Case C-319/02 Manninen  [2004] ECR I-0000, paragraph 42). Where there is no such direct link, the argument based on the need to safeguard the coherence of the tax system cannot be relied upon (see, inter alia, Weidert and Paulus , paragraphs 20 and 21).
21. In a situation such as that in the main proceedings, there is no such direct link between general corporation tax, on the one hand, and a tax credit for part of the research expenditure incurred by a company, on the other.
23. Although the promotion of research and development may, as argued by the French Government, be an overriding reason relating to public interest, the fact remains that it cannot justify a national measure such as that at issue in the main proceedings, which refuses the benefit of a tax credit for research for any research not carried out in the Member State concerned. Such legislation is directly contrary to the objective of the Community policy on research and technological development which, according to Article 163(1) EC is, inter alia, ‘strengthening the scientific and technological bases of Community industry and encouraging it to become more competitive at international level’. Article 163(2) EC provides in particular that, for this purpose, the Community is to ‘support [undertakings’] efforts to cooperate with one another, aiming, notably, at enabling [them] to exploit the internal market potential to the full, in particular through … the removal of legal and fiscal obstacles to that cooperation.’
24. Effectiveness of fiscal supervision constitutes an overriding requirement of general interest capable of justifying a restriction on the exercise of the fundamental freedoms guaranteed by the Treaty (see, inter alia, Futura Participations and Singer , paragraph 31). A Member State may therefore apply measures which enable the amount of costs deductible in that State as research expenditure to be ascertained clearly and precisely (Case C-254/97 Baxter and Others  [1999] ECR I-4809, paragraph 18).
25. However, national legislation which absolutely prevents the taxpayer from submitting evidence that expenditure relating to research carried out in other Member States has actually been incurred and satisfies the prescribed requirements cannot be justified in the name of effectiveness of fiscal supervision. The possibility cannot be excluded a priori that the taxpayer is able to provide relevant documentary evidence enabling the tax authorities of the Member State of taxation to ascertain, clearly and precisely, the nature and genuineness of the research expenditure incurred in other Member States (see Baxter and Others , paragraphs 19 and 20).