Denkavit Internationaal BV and Denkavit France SARL v Ministre de l'Économie, des Finances et de l'Industrie.
Date: 2006-12-14
19. First of all, it should be noted 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-279/93 Schumacker  [1995] ECR I‑225, paragraph 21; Case C-264/96 ICI  [1998] ECR I‑4695, paragraph 19; and Case C-471/04  Keller Holding [2006] ECR I-2107, paragraph 28)  and avoid any discrimination on grounds of nationality (Case C-80/94 Wielockx  [1995] ECR I‑2493, paragraph 16; Case C-311/97 Royal Bank of Scotland [1999] ECR I-2651, paragraph 19; and Joined Cases C‑397/98 and C-410/98 Metallgesellschaft and Others [2001] ECR I‑1727, paragraph 37).
20. 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 conditions laid down for its own nationals by the law of the Member State where such establishment is effected, entails, in accordance with Article 48 EC, for 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 Community, the right to exercise their activity in the Member State concerned through a subsidiary, branch or agency (Case C-307/97  Saint-Gobain ZN  [1999] ECR I-6161, paragraph 35, and Keller Holding , paragraph 29).
21. The abolition of restrictions on freedom of establishment also applies to restrictions on the setting up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of another Member State (Case 270/83  Commission   v  France   [1986] ECR 273, paragraph 13, and Royal Bank of Scotland , paragraph 22)
22. In the case of companies, it should be borne in mind that their registered office for the purposes of Article 48 EC serves, in the same way as nationality in the case of individuals, as the connecting factor with the legal system of a Member State (see Metallgesellschaft and Others , paragraph 42, and the case-law cited). Acceptance of the proposition that the Member State in which a resident subsidiary is established may freely apply different treatment merely by reason of the fact that the registered office of the parent company is situated in another Member State would deprive Article 43 EC of all meaning (see, to that effect, Commission v France , paragraph 18; Case C-330/91 Commerzbank [1993] ECR I‑4017, paragraph 13; Metalgesellschaft and Others , paragraph 42; and Case C-446/03 Marks & Spencer  [2005] ECR I‑10837, paragraph 37). Freedom of establishment thus seeks to guarantee the benefit of national treatment in the host Member State, by prohibiting any discrimination, even minimal, based on the place in which companies have their seat (see, to that effect, Commission v France , paragraph 14, and Saint-Gobain ZN , paragraph 35).
23. It is true that the Court has already held that, in tax law, the taxpayers’ residence may constitute a factor that might justify national rules involving different treatment for resident and non-resident taxpayers. ( Marks & Spencer , paragraph 37).
24. Different treatment of resident and non-resident taxpayers cannot therefore in itself be categorised as discrimination within the meaning of the EC Treaty (see, to that effect, Wielockx , paragraph 19).
25. However, a difference in treatment between those two categories of taxpayer must be categorised as discrimination within the meaning of the Treaty where there is no objective difference such as to justify that difference in treatment (see, to that effect, Schumacker , paragraphs 36 to 38, and Royal Bank of Scotland , paragraph 27).
29. Such a difference in the tax treatment of dividends between parent companies, based on the location of their registered office, constitutes a restriction on freedom of establishment, which is, in principle, prohibited by Article 43 EC and Article 48 EC.
30. The tax measure at issue in the main proceedings makes it less attractive for companies established in other Member States to exercise freedom of establishment and they may, in consequence, refrain from acquiring, creating or maintaining a subsidiary in the State which adopts that measure (see, to that effect, Case C-324/00 Lankhorst-Hohorst  [2002] ECR I‑11779, paragraph 32, and Keller Holding , paragraph 35).
34. It is true that, in the context of measures laid down by a Member State in order to prevent or mitigate the imposition of a series of charges to tax on, or the double taxation of, profits distributed by a resident company, resident shareholders receiving dividends are not necessarily in a situation which is comparable to that of shareholders receiving dividends who are resident in another Member State (see, to that effect, Case C-374/04 Test Claimants in Class IV of the ACT Group Litigation  [2006] ECR I-0000, paragraphs 57 to 65).
35. However, as soon as a Member State, either unilaterally or by way of a convention, imposes a charge to tax on the income, not only of resident shareholders, but also of non-resident shareholders, from dividends which they receive from a resident company, the situation of those non‑resident shareholders becomes comparable to that of resident shareholders ( Test Claimants in Class IV of the ACT Group Litigation , paragraph 68).
36. In the present case, parent companies receiving dividends paid by resident subsidiaries, are, as regards the taxation in France of those dividends, in a comparable situation, whether they receive those dividends as resident parent companies or as non-resident parent companies which have a fixed place of business in France, or as non‑resident parent companies which do not have a fixed place of business in France. In each of those cases, the French Republic imposes a liability to tax on dividends received from a resident company.
37. It must be held in that regard that the exemption in respect of dividends received by resident parent companies is designed to avoid the imposition of a series of charges to tax on the profits of subsidiaries which are distributed by way of dividend to the parent companies of those subsidiaries. As the Advocate General stated at point 22 of his Opinion, since the French Republic has chosen to relieve its residents of such a liability to tax, it must extend that relief to non-residents to the extent to which an imposition of that kind on those non-residents results from the exercise of its tax jurisdiction over them (see, to that effect, Test Claimants in Class IV of the ACT Group Litigation , paragraph 70).
43. In that regard, it should first of all be noted that, in the absence of harmonising measures at Community level and of conventions concluded between all the Member States for the purposes of the second indent of Article 293 EC, the Member States retain competence for determining the criteria for taxation on income with a view to eliminating double taxation by means, inter alia, of international conventions. In those circumstances, the Member States remain at liberty to determine the connecting factors for the allocation of fiscal jurisdiction by means of bilateral agreements (see, to that effect, Saint‑Gobain ZN , paragraph 57, and Case C-265/04 Bouanich [2006] ECR I-923, paragraph 49).
44. The fact remains that, as far as the exercise of the power of taxation so allocated is concerned, the Member States may not, having regard to the principle referred to in paragraph 19 of this judgment, disregard Community rules ( Saint-Gobain ZN , paragraph 58). In particular, such an allocation of fiscal jurisdiction does not permit Member States to introduce discriminatory measures which are contrary to the Community rules ( Bouanich , paragraph 50).
45. In the present case, since the tax regime arising under the Franco‑Netherlands Convention forms part of the legal framework applying to the main proceedings and has been presented as such by the national court, the Court of Justice must take it into account in order to provide an interpretation of Community law that is relevant to the national court (see, to that effect, Case C-319/02 Manninen  [2004] ECR I‑7477, paragraph 21; Bouanich , paragraph 51; and Test Claimants in Class IV of the ACT Group Litigation , paragraph 71).
50. A restriction on freedom of establishment is prohibited by Article 43 EC, even if it is of limited scope or minor importance (see, to that effect, Case 270/83 Commission v France , paragraph 21; Case C-34/98 Commission v France [2000] ECR I-995, paragraph 49; and Case C‑9/02 De Lasteyrie du Saillant [2004] ECR I-2409, paragraph 43).
53. The French Republic cannot rely on the Franco-Netherlands Convention in order to avoid the obligations imposed on it by the Treaty (see, to that effect, Case 270/83 Commission  v France , paragraph 26).