Winfried L. Holböck v Finanzamt Salzburg-Land.
Date: 2007-05-24
21. As a preliminary point, it should be observed that, according to settled case-law, although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with Community law (Case C‑35/98 Verkooijen  [2000] ECR I‑4071, paragraph 32; Lenz , paragraph 19; and Case C‑319/02 Manninen [2004] ECR I‑7477, paragraph 19).
22. As regards the question whether national legislation falls within the scope of one or other of the freedoms of movement, it is clear from what is now well established case-law that the purpose of the legislation concerned must be taken into consideration (see, to that effect, Case C‑196/04 Cadbury Schweppes and Cadbury Schweppes Overseas  [2006] ECR I‑7995, paragraphs 31 to 33; Case C‑452/04 Fidium Finanz  [2006] ECR I‑9521, paragraphs 34 and 44 to 49; Case C‑374/04 Test Claimants in Class IV of the ACT Group Litigation  [2006] ECR I‑0000, paragraphs 37 and 38; Case C‑446/04 Test Claimants in the FII Group Litigation  [2006] ECR I‑0000, paragraph 36; and Case C‑524/04 Test Claimants in the Thin Cap Group Litigation  [2007 ] ECR I‑0000, paragraphs 26 to 34).
23. Unlike the situations in Cadbury Schweppes and Cadbury Schweppes Overseas  (paragraphs 31 and 32) and Test Claimants in the Thin Cap Group Litigation  (paragraphs 28 to 33), the Austrian legislation in the present case is not intended to apply only to those shareholdings which enable the holder to have a definite influence on a company’s decisions and to determine its activities.
24. National legislation which makes the receipt of dividends liable to tax, where the rate depends on whether the source of those dividends is national or otherwise, irrespective of the extent of the holding which the shareholder has in the company making the distribution, may fall within the scope of both Article 43 EC on freedom of establishment and Article 56 EC on free movement of capital (see, to that effect, Test Claimants in Class IV of the ACT Group Litigation , paragraphs 37 and 38, and Test Claimants in the FII Group Litigation , paragraphs 36, 80 and 142).
25. However, in the present case, neither of those freedoms precludes the application of the Austrian legislation.
26. First, as regards the provisions of the Treaty concerning freedom of establishment, it should be noted that Article 43 EC secures freedom of establishment for nationals of a Member State on the territory of another Member State, 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 State of establishment (see Case C‑251/98 Baars  [2000] ECR I‑2787, paragraph 27, and Case C‑9/02 De Lasteyrie du Saillant [2004] ECR I‑2409, paragraph 40).
27. According to equally well established case-law of the Court, even though, according to their wording, the provisions of the 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 one of its nationals or of a company incorporated under its legislation (see Case C‑446/03 Marks & Spencer  [2005] ECR I‑10837, paragraph 31, and Cadbury Schweppes and Cadbury Schweppes Overseas , paragraph 42).
28. However, the chapter of the Treaty concerning the right of establishment does not include any provision extending its application to situations which involve the establishment in a non-member country of a Member State national or of a company incorporated under the legislation of a Member State (see, to that effect, the order of 10 May 2007 in Case C‑102/05 A and B  [2007] ECR I‑0000, paragraph 29).
30. Second, as regards the provisions of the Treaty concerning the free movement of capital, it is true that the Court has, in paragraphs 20 to 22 of its judgment in Lenz , held that, in so far as the taxation of income from capital at a definitive tax rate of 25% or at a rate reduced by half is subject, under the national legislation, to a condition that the source of that income is in Austria, the legislation not only has the effect of deterring taxpayers living in Austria from investing their capital in companies established outside that Member State, but also produces a restrictive effect in relation to those companies, inasmuch as it constitutes an obstacle to their raising capital within Austria. According to the Court, such legislation constitutes a restriction on the free movement of capital which is, in principle, prohibited by Article 56(1) EC.
33. Although the concept of ‘direct investment’ is not defined by the Treaty, it has nevertheless been defined in the nomenclature of the capital movements set out in Annex I to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty [article repealed by the Treaty of Amsterdam] (OJ 1988 L 178, p. 5) ( Test Claimants in the FII Group Litigation , paragraphs 177 and 178).
34. As the list of ‘direct investments’ in the first section of that nomenclature and the relative explanatory notes show, the concept of direct investments concerns investments of any kind undertaken by natural or legal persons and which serve to establish or maintain lasting and direct links between the persons providing the capital and the undertakings to which that capital is made available in order to carry out an economic activity (see, to that effect, Test Claimants in the FII Group Litigation , paragraphs 180 and 181).
35. As regards shareholdings in new or existing undertakings, as the explanatory notes confirm, the objective of establishing or maintaining lasting economic links presupposes that the shares held by the shareholder enable him, either pursuant to the provisions of the national laws relating to companies limited by shares or in some other way, to participate effectively in the management of that company or in its control ( Test Claimants in the FII Group Litigation , paragraph 182).
36. Contrary to Mr Holböck’s contention, the restrictions on capital movements involving direct investment or establishment within the meaning of Article 57(1) EC extend not only to national measures which, in their application to capital movements to or from non-member countries, restrict investment or establishment, but also to those measures which restrict payments of dividends deriving from them (see Test Claimants in the FII Group Litigation , paragraph 183).
37. It follows that a restriction on capital movements, such as a less favourable tax treatment of foreign-sourced dividends, comes within the scope of Article 57(1) EC, inasmuch as it relates to holdings acquired with a view to establishing or maintaining lasting and direct economic links between the shareholder and the company concerned and which allow the shareholder to participate effectively in the management of the company or in its control ( Test Claimants in the FII Group Litigation , paragraph 185).
38. As the French and Netherlands Governments and the Commission have noted, that is true of the less favourable tax treatment of foreign-sourced dividends associated with a shareholding of two thirds of the shares of the company making the distribution.
39. However, it is clear from Article 57(1) EC that a Member State may, in its relations with non-member countries, apply restrictions on capital movements which come within the substantive scope of that provision, even though they contravene the principle of the free movement of capital laid down under Article 56 EC, provided that those restrictions already existed on 31 December 1993 ( Test Claimants in the FII Group Litigation , paragraph 187).
40. While it is, in principle, for the national court to determine the content of the legislation which existed on a date laid down by a Community measure, the Court can provide guidance on interpreting the Community concept which constitutes the basis of a derogation from Community rules for national legislation ‘existing’ on a particular date (see, to that effect, Case C‑302/97 Konle [1999] ECR I‑3099, paragraph 27, and Test Claimants in the FII Group Litigation , paragraph 191).
41. In that context, the Court has held that any national measure adopted after a date thus fixed is not, by that fact alone, automatically excluded from the derogation laid down in the Community measure in question. A provision which is, in substance, identical to the previous legislation, or limited to reducing or eliminating an obstacle to the exercise of Community rights and freedoms in the earlier legislation, will be covered by the derogation. By contrast, legislation based on an approach which differs from that of the previous law and establishes new procedures cannot be treated as legislation existing at the date fixed in the Community measure in question (see Konle , paragraphs 52 and 53, and Test Claimants in the FII Group Litigation , paragraph 192).
42. In the present case, the national court has stated in its order for reference that the taxation system applicable in Austria at the time of the facts in the main proceedings to dividends distributed by companies established in non-member countries was based on the EStG 1988, as amended by the 1993 Tax Reform Law and the 1996 Structural Adjustment Law. It is apparent also from the order for reference that, in relation to the taxation of general profit distributions, unlike the provisions introduced by the EStG 1988 before 31 December 1993, the amendments to the legislation made after 31 December 1993 did not change the legal framework applicable to the facts in the main proceedings, including in respect of the period after that date.
43. Accordingly, the Austrian legislation must be regarded as having existed on 31 December 1993 for the purposes of Article 57(1) EC.
44. It follows that, even if a taxpayer in Mr Holböck’s position is justified in invoking Article 56 EC, that does not preclude the application of the Austrian legislation in circumstances such as those of the main proceedings.
45. In the light of the foregoing, the answer to the question referred must be that Article 57(1) EC must be interpreted as meaning that Article 56 EC is without prejudice to the application by a Member State of legislation which existed on 31 December 1993 under which a shareholder in receipt of dividends from a company established in a non-member country, who holds two thirds of the share capital in that company, is taxed at the ordinary rate of income tax, whereas a shareholder in receipt of dividends from a resident company is taxed at a rate of half the average tax rate.
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