Lammers & Van Cleeff NV v Belgische Staat.
Date: 2008-01-17
12. As a preliminary point, it must be remembered that, according to settled case-law, although direct taxation falls within their competence, Member States must none the less exercise that competence consistently with Community law and avoid any discrimination on grounds of nationality (see, inter alia, Joined Cases C-397/98 and C-410/98 Metallgesellschaft and Others  [2001] ECR I-1727, paragraph 37; Case C‑324/00 Lankhorst-Hohorst  [2002] ECR I‑11779, paragraph 26; and Case C‑524/04 Test Claimants in the Thin Cap Group Litigation  [2007] ECR I‑2107, paragraph 25).
14. In this respect, it must be stated that it follows from the case‑law that the general prohibition of all discrimination on grounds of nationality laid down by Article 12 EC applies independently only to situations governed by Community law for which the EC Treaty lays down no specific rules of non-discrimination. The Treaty lays down in Articles 43 EC and 56 EC, in particular, such specific rules in relation to freedom of establishment and the free movement of capital (see, inter alia, Metallgesellschaft and Others , paragraphs 38 and 39, and Case C‑443/06 Hollmann  [2007] ECR I‑0000, paragraphs 28 and 29).
18. Freedom of establishment, which Article 43 EC grants to Community nationals and which includes the right for them 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 (see, inter alia, Case C‑307/97 Saint‑Gobain ZN  [1999] ECR I-6161, paragraph 35; Case C‑196/04 Cadbury Schweppes and Cadbury Schweppes Overseas  [2006] ECR I‑7995, paragraph 41; and Test Claimants in the Thin Cap Group Litigation , paragraph 36).
19. In the case of companies, 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 State. Acceptance of the proposition that the Member State in which a subsidiary seeks to establish itself may freely apply different treatment merely by reason of the fact that the registered office of its parent company is situated in another Member State would deprive Article 43 EC of all meaning (see, to that effect, Case C‑330/91 Commerzbank  [1993] ECR I‑4017, paragraph 13; Metallgesellschaft and Others , paragraph 42; and Test Claimants in the Thin Cap Group Litigation , paragraph 37). Freedom of establishment thus aims to guarantee the benefit of national treatment in the host Member State, by prohibiting any discrimination based on the place in which companies have their seat (see, to that effect, Saint‑Gobain ZN , paragraph 35, and Test Claimants in the Thin Cap Group Litigation , paragraph 37).
23. A difference in treatment between resident companies according to the place of establishment of the company which, as director, has granted them a loan constitutes an obstacle to the freedom of establishment if it makes it less attractive for companies established in other Member States to exercise that freedom and they may, in consequence, refrain from managing a company in the Member State which enacts that measure, or even refrain from acquiring, creating or maintaining a subsidiary in that Member State (see, to that effect, Lankhorst-Hohorst , paragraph 32; Test Claimants in the Thin Cap Group Litigation , paragraph 61; and Case C‑231/05 Oy AA  [2007] ECR I‑0000, paragraph 39).
25. Such a restriction is permissible only if it pursues a legitimate objective which is compatible with the Treaty and is justified by overriding reasons of public interest. It is further necessary, in such a case, that its application be appropriate to ensuring the attainment of the objective thus pursued and not go beyond what is necessary to attain it (see, inter alia, Case C‑446/03 Marks & Spencer  [2005] ECR I‑10837, paragraph 35, and Cadbury Schweppes and Cadbury Schweppes Overseas , paragraph 47).
26. In this respect, it must be pointed out that, according to established case-law, a national measure restricting freedom of establishment may be justified where it specifically targets wholly artificial arrangements designed to circumvent the legislation of the Member State concerned ( Test Claimants in the Thin Cap Group Litigation , paragraph 72 and the case‑law cited).
27. The mere fact that a resident company is granted a loan by a related company which is established in another Member State cannot be the basis of a general presumption of abusive practices and justify a measure which compromises the exercise of a fundamental freedom guaranteed by the Treaty ( Test Claimants in the Thin Cap Group Litigation , paragraph 73 and the case‑law cited).
28. In order for a restriction on the freedom of establishment to be justified on the ground of prevention of abusive practices, the specific objective of such a restriction must be to prevent conduct involving the creation of wholly artificial arrangements which do not reflect economic reality, with a view to escaping the tax normally due on the profits generated by activities carried out on national territory ( Test Claimants in the Thin Cap Group Litigation , paragraph 74 and the case‑law cited).
29. At paragraph 80 of its judgment in Test Claimants in the Thin Cap Group Litigation , the Court held that legislation of a Member State may be justified by the need to combat abusive practices where it provides that interest paid by a resident subsidiary to a non-resident parent company is to be treated as a distribution only if, and in so far as, it ex ceeds what those companies would have agreed upon on an arm’s-length basis, that is to say, the commercial terms which those parties would have accepted if they had not formed part of the same group of companies.
30. The fact that a resident company has been granted a loan by a non‑resident company on terms which do not correspond to those which would have been agreed upon at arm’s length constitutes, for the Member State in which the borrowing company is resident, an objective element which can be independently verified in order to determine whether the transaction in question represents, in whole or in part, a purely artificial arrangement, the essential purpose of which is to circumvent the tax legislation of that Member State. In that regard, the question is whether, had there been an arm’s-length relationship between the companies concerned, the loan would not have been granted or would have been granted for a different amount or at a different rate of interest ( Test Claimants in the Thin Cap Group Litigation , paragraph 81).