Kronos International Inc. v Finanzamt Leverkusen.
Date: 2014-09-11
29. It is apparent from the Court’s settled case-law that the tax treatment of dividends may fall within Article 49 TFEU on freedom of establishment and Article 63 TFEU on the free movement of capital (judgments in Haribo Lakritzen Hans Riegel and Österreichische Salinen , C‑436/08 and C‑437/08, EU:C:2011:61, paragraph 33; Accor , C‑310/09, EU:C:2011:581, paragraph 30; and Test Claimants in the FII Group Litigation , C‑35/11, EU:C:2012:707, paragraph 89).
30. As regards the question whether national legislation falls within the scope of one or other of the freedoms of movement, it is clear from well-established case-law that the purpose of the legislation concerned must be taken into consideration (judgment in Test Claimants in the FII Group Litigation , EU:C:2012:707, paragraph 90 and the case-law cited).
31. National legislation intended to apply only to those shareholdings which enable the holder to exert a definite influence on a company’s decisions and to determine its activities falls within the scope of Article 49 TFEU on freedom of establishment (see judgments in Test Claimants in the FII Group Litigation , C‑446/04, EU:C:2006:774, paragraph 37; Idryma Typou , C‑81/09, EU:C:2010:622, paragraph 47; Accor , EU:C:2011:581, paragraph 32; Scheunemann , C‑31/11, EU:C:2012:481, paragraph 23; and Test Claimants in the FII Group Litigation , EU:C:2012:707, paragraph 91).
32. On the other hand, national provisions which apply to shareholdings acquired solely with the intention of making a financial investment without any intention to influence the management and control of the undertaking must be examined exclusively in light of the free movement of capital (judgments in Haribo Lakritzen Hans Riegel and Österreichische Salinen , EU:C:2011:61, paragraph 35; Accor , EU:C:2011:581, paragraph 32; Scheunemann , EU:C:2012:481, paragraph 23; and Test Claimants in the FII Group Litigation , EU:C:2012:707, paragraph 92).
34. Such a threshold admittedly serves to exclude from the scope of the exemption shareholdings acquired solely with the intention of making a financial investment without any intention to influence the management and control of the undertaking.
35. However, contrary to the German Government’s submissions, such a threshold does not in itself make the exemption applicable only to those shareholdings which enable the holder to exert a definite influence on a company’s decisions and to determine its activities. The Court has already held that a holding of such a size does not necessarily mean that the holder exerts a definite influence on the decisions of the company of which it is a shareholder (see, to this effect, judgment in ITELCAR and Fazenda Pública , C‑282/12, EU:C:2013:629, paragraph 22).
37. In the case of legislation from whose purpose it cannot be determined whether it falls predominantly within the scope of Article 49 TFEU or Article 63 TFEU, the Court has already held that, in so far as the national legislation relates to dividends which originate in a Member State, account should be taken of the facts of the case in point in order to determine whether the situation to which the dispute in the main proceedings relates falls within the scope of Article 49 TFEU or of Article 63 TFEU (see, to this effect, judgments in Test Claimants in the FII Group Litigation , EU:C:2012:707, paragraphs 93 and 94 and the case-law cited; Beker , C‑168/11, EU:C:2013:117, paragraphs 27 and 28; and Bouanich , C‑375/12, EU:C:2014:138, paragraph 30).
38. As regards, on the other hand, the tax treatment of dividends originating in a third country, the Court has held that it is sufficient to examine the purpose of national legislation in order to determine whether the tax treatment of such dividends falls within the scope of the provisions of the FEU Treaty on the free movement of capital, as national legislation relating to the tax treatment of dividends originating in third countries is not capable of falling within the scope of Article 49 TFEU (see, to this effect, judgment in Test Claimants in the FII Group Litigation , EU:C:2012:707, paragraphs 96 and 97).
39. The Court has thus held that a company that is resident in a Member State and has a shareholding in a company resident in a third country giving it definite influence over the decisions of the latter company and enabling it to determine its activities may rely upon Article 63 TFEU in order to call into question the consistency with that provision of legislation of that Member State which relates to the tax treatment of dividends originating in the third country and does not apply exclusively to situations in which the parent company exercises decisive influence over the company distributing the dividends (see judgment in Test Claimants in the FII Group Litigation , EU:C:2012:707, paragraph 104).
41. In so far as, in view of the fact that the company distributing the dividends is located in a third State, only the free movement of capital may be relied upon against the national legislation relating to the treatment of the dividends distributed by it, account does not have to be taken of the size of the shareholdings in the company making the distribution. A company resident in a Member State may rely on Article 63 TFEU in order to call into question the legality of such rules irrespective of the extent of its shareholding in the company distributing dividends established in a third country (see, to this effect, judgment in Test Claimants in the FII Group Litigation , EU:C:2012:707, paragraphs 99 and 104).
44. The Treaty rules concerning freedom of establishment apply only to nationals of a Member State of the European Union (see, to this effect, judgment in Ferrer Laderer , C‑147/91, EU:C:1992:278, paragraph 9).
45. In accordance with Article 54 TFEU, 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 Union are to be treated, for the purposes of the provisions of the Treaty on freedom of establishment, in the same way as natural persons who are nationals of Member States (judgment in National Grid Indus , C‑371/10, EU:C:2011:785, paragraph 25).
48. In the absence of a uniform definition in EU law of the companies which may enjoy the right of establishment on the basis of a single connecting factor determining the national law applicable to a company, the question whether Article 49 TFEU applies to a company which seeks to rely on the fundamental freedom enshrined in that article is a preliminary matter which, as EU law now stands, can only be resolved by the applicable national law (see Cartesio , C‑210/06, EU:C:2008:723, paragraph 109, and National Grid Indus , EU:C:2011:75, paragraph 26).
49. A Member State thus has the power to define the connecting factor required of a company if it is to be regarded as incorporated under its national law and as such capable of enjoying the right of establishment (see, to this effect, judgments in Cartesio , EU:C:2008:723, paragraph 110, and National Grid Indus , EU:C:2011:785, paragraph 27).
53. It should also be noted that the Court has held that, since the Treaty does not extend freedom of establishment to third countries, it is important to ensure that the interpretation of Article 63(1) TFEU as regards relations with third countries does not enable economic operators who do not fall within the limits of the territorial scope of freedom of establishment to profit from that freedom (judgment in Test Claimants in the FII Group Litigation , EU:C:2012:707, paragraph 100).
60. In this context, it should be recalled first of all that the referring court alone can determine the subject-matter of the questions which it proposes to refer to the Court (judgment in Kersbergen-Lap and Dams-Schipper , C‑154/05, EU:C:2006:449, paragraph 21).
63. Furthermore, the Court has already held that the tax situation of an investment vehicle’s shareholders is irrelevant for the purpose of determining whether or not national legislation is discriminatory when the distinguishing criterion for determining the tax treatment applicable, established by the national legislation at issue, is not the tax situation of the shareholder but solely the status of the investment vehicle, namely whether or not it is resident (see, to this effect, judgment in Santander Asset Management SGIIC and Others , C‑338/11 to C‑347/11, EU:C:2012:286, paragraphs 28 and 41).
66. The Court has also held that a Member State is, in principle, free to prevent the imposition of a series of charges to tax on dividends received by a resident company by opting for the exemption method when the dividends are paid by a resident company and for the imputation method when they are paid by a non-resident company. Those two methods are in fact equivalent provided, however, that the tax rate applied to foreign-sourced dividends is not higher than the rate applied to nationally-sourced dividends and that the tax credit is at least equal to the amount paid in the State of the company making the distribution, up to the limit of the tax charged in the Member State of the company receiving the dividends (judgment in Test Claimants in the FII Group Litigation , EU:C:2012:707, paragraph 39 and the case-law cited).
69. Whatever the mechanism adopted for preventing or mitigating the imposition of a series of charges to tax or economic double taxation, the freedoms of movement guaranteed by the Treaty preclude a Member State from treating foreign-sourced dividends less favourably than nationally-sourced dividends, unless such a difference in treatment concerns situations which are not objectively comparable or is justified by overriding reasons in the public interest (see, to this effect, judgments in Lenz , C‑315/02, EU:C:2004:446, paragraphs 20 to 49; Manninen , C‑319/02, EU:C:2004:484, paragraphs 20 to 55; and Test Claimants in the FII Group Litigation , EU:C:2006:774, paragraph 46).
83. The Court has already held that the free movement of capital, enshrined in Article 63(1) TFEU, cannot have the effect of requiring Member States to go beyond the cancelling of national income tax payable by a shareholder in respect of foreign-sourced dividends received and to reimburse a sum whose origin is in the tax system of another Member State (see, by analogy, judgment in Test Claimants in the FII Group Litigation , EU:C:2006:774, paragraph 52), if the first Member State is not to see its fiscal autonomy limited by the exercise of the fiscal power of the other Member State (see, in particular, judgment in Meilicke and Others , C‑262/09, EU:C:2011:438, paragraph 33 and the case-law cited).
84. Furthermore, the Court has ruled that the status of Member State of residence of the company receiving dividends cannot entail the obligation for that Member State to offset a fiscal disadvantage arising where a series of charges to tax is imposed entirely by the Member State in which the company distributing those dividends is established, in so far as the dividends received are neither taxed nor taken into account in a different way by the first Member State as regards investment enterprises established in that State (judgment in Orange European Smallcap Fund , C‑194/06, EU:C:2008:289, paragraph 41).
86. It follows that the obligations of the Member State of residence of the company receiving dividends when it does not exercise its own powers of taxation over those dividends differ, as regards treatment of the taxation carried out by another Member State, from the obligations owed by it when it elects to tax those dividends and must consequently take into account, within the limits of its own taxation, the tax burden resulting from the exercise of the tax powers of the other Member State.