X Holding BV v Staatssecretaris van Financiën.
Date: 2010-02-25
11. It is clear from its case-law that the Court may of its own motion, or on a proposal from the Advocate General, or at the request of the parties, order the reopening of the oral procedure in accordance with Article 61 of the Rules of Procedure if it considers that it lacks sufficient information or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see, inter alia, Case C‑210/06 Cartesio [2008] ECR I‑9641, paragraph 46).
16. It must be borne in mind that, according to settled case-law, although direct taxation is a matter within the competence of the Member States, they must none the less exercise that competence in a manner consistent with Community law (see, inter alia, Marks & Spencer , paragraph 29; Case C‑374/04 Test Claimants in Class IV of the ACT Group Litigation [2006] ECR I‑11673, paragraph 36; and Case C‑182/08 Glaxo Wellcome  [2009] ECR I‑0000, paragraph 34).
17. Freedom of establishment, which Article 43 EC grants to Community nationals and which includes the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, under the same conditions as those laid down for its own nationals by the law of the Member State in which such establishment is effected, entails, in accordance with Article 48 EC, for companies formed pursuant to the law of a Member State and having their registered office, central administration or principal place of business within the European Community, the right to exercise their activity in the Member State concerned through a subsidiary, a branch or an agency (see, inter alia, Case C‑307/97 Saint‑Gobain ZN  [1999] ECR I‑6161, paragraph 35, and Marks & Spencer , paragraph 30).
18. In that regard, the possibility granted by Netherlands law to resident parent companies and their resident subsidiaries to be taxed as if they formed a single tax entity, that is to say, to be subject to a tax integration scheme, constitutes an advantage for the companies concerned. That scheme allows, in particular, for the profits and losses of the companies constituting the tax entity to be consolidated at the level of the parent company and for the transactions carried out within the group to remain neutral for tax purposes.
20. In order for such a difference in treatment to be compatible with the provisions of the EC Treaty on the freedom of establishment, it must relate to situations which are not objectively comparable or be justified by an overriding reason in the general interest (see, to that effect, Case C‑446/04 Test Claimants in the FII Group Litigation  [2006] ECR I‑11753, paragraph 167).
21. The Netherlands, German and Portuguese Governments submit that those two situations are not objectively comparable, as resident subsidiaries and non-resident subsidiaries are not in comparable tax situations with regard to a tax scheme such as that at issue in the main proceedings. They argue in particular that a subsidiary which is established in another Member State is not subject to the fiscal jurisdiction of the State in which the parent company is established, with the result that it cannot be integrated into a tax entity subject to tax in the latter State.
22. In that context, it is settled case-law of the Court that the comparability of a Community situation with an internal situation must be examined having regard to the aim pursued by the national provisions at issue (see, to that effect, Case C‑231/05 Oy AA  [2007] ECR I‑6373, paragraph 38).
23. In tax law, the taxpayers’ residence may constitute a factor that might justify national rules involving different treatment for resident and non-resident taxpayers. However, that is not always the case. To accept that the Member State of establishment may in all cases apply different treatment solely because the registered office of a company is situated in another Member State would deprive Article 43 EC of its substance (see, to that effect, Case 270/83 Commission  v France [1986] ECR 273, paragraph 18, and Marks & Spencer , paragraph 37).
24. However, the situation of a resident parent company wishing to form a single tax entity with a resident subsidiary and the situation of a resident parent company wishing to form a single tax entity with a non-resident subsidiary are objectively comparable with regard to the objective of a tax scheme such as that at issue in the main proceedings in so far as each seeks to benefit from the advantages of that scheme, which, in particular, allows the profits and losses of the companies constituting the single tax entity to be consolidated at the level of the parent company and the transactions carried out within the group to remain neutral for tax purposes.
26. 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 (see, to that effect, Case C‑250/95 Futura Participations and Singer  [1997] ECR I‑2471, paragraph 26, Case C‑9/02 de Lasteyrie du Saillant  [2004] ECR I‑2409, paragraph 49, and Marks & Spencer , paragraph 35).
28. In that regard, it should be noted that the preservation of the allocation of the power to impose taxes between Member States may 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 (see Marks & Spencer , paragraph 45, and Case C‑414/06 Lidl Belgium [2008] ECR I‑3601, paragraph 31).
29. To give companies the option of having 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, since the tax base would be increased in the first Member State, and reduced in the second, by the amount of the losses transferred (see Marks & Spencer , paragraph 46, Oy AA , paragraph 55, and Lidl Belgium , paragraph 32).
30. The same applies with regard to a tax integration scheme such as that at issue in the main proceedings.
31. Since the parent company is at liberty to decide to form a tax entity with its subsidiary and, with equal liberty, to dissolve such an entity from one year to the next, the possibility of including a non-resident subsidiary in the single tax entity would be tantamount to granting the parent company the freedom to choose the tax scheme applicable to the losses of that subsidiary and the place where those losses are taken into account.
32. Since the dimensions of the tax entity can therefore be altered, acceptance of the possibility of including a non-resident subsidiary in such an entity would have the consequence of allowing the parent company to choose freely the Member State in which the losses of that subsidiary are to be taken into account (see, to that effect, Oy AA,  paragraph 56, and Lidl Belgium , paragraph 34).
33. A tax scheme such as that at issue in the main proceedings is, for that reason, justified in view of the need to safeguard the allocation of the power to impose taxes between the Member States.
34. Since such a scheme is appropriate for achieving that objective, it still remains to establish whether or not that scheme goes beyond what is necessary to attain that objective (see, to that effect, inter alia, Marks & Spencer , paragraph 53).
39. It is, admittedly, true that the Court has held in other cases that the second sentence of the first paragraph of Article 43 EC leaves traders free to choose the appropriate legal form in which to pursue their activities in another Member State and that freedom of choice must not be limited by discriminatory tax provisions (see, to that effect, Commission v France , paragraph 22; Oy AA , paragraph 40; and Case C‑253/03 CLT-UFA [2006] ECR I‑1831, paragraph 14).
40. However, the Member State of origin remains at liberty to determine the conditions and level of taxation for different types of establishments chosen by national companies operating abroad, on condition that those companies are not treated in a manner that is discriminatory in comparison with comparable national establishments (Case C‑298/05 Columbus Container Services  [2007] ECR I‑10451, paragraphs 51 and 53). As permanent establishments situated in another Member State and non-resident subsidiaries are not, as has been stated in paragraph 38 of the present judgment, in a comparable situation with regard to the allocation of the power of taxation, the Member State of origin is not obliged to apply the same tax scheme to non-resident subsidiaries as that which it applies to foreign permanent establishments.
41. Accordingly, in a situation such as that at issue in the main proceedings, in which the tax advantage concerned lies in the possibility granted to resident parent companies and their resident subsidiaries to be taxed as if they formed a single tax entity, any extension of that advantage to cross-border situations would, as has been indicated in paragraph 32 of this judgment, have the effect of allowing parent companies to choose freely the Member State in which the losses of their non-resident subsidiary are to be taken into account (see, by way of analogy, Oy AA , paragraph 64).
43. Consequently, the answer to the question referred is that Articles 43 EC and 48 EC do not preclude legislation of a Member State which makes it possible for a parent company to form a single tax entity with its resident subsidiary, but which prevents the formation of such a single tax entity with a non-resident subsidiary, in that the profits of that non-resident subsidiary are not subject to the fiscal legislation of that Member State.
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