C. Baars v Inspecteur der Belastingen Particulieren/Ondernemingen Gorinchem.
Date: 2000-04-13
17 It must be remembered from the outset that, although direct taxation falls within their competence, the Member States must none the less exercise that competence consistently with Community law 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).
20 Under Netherlands laws, a substantial holding, which is essentially a holding for the last five years of at least one third of the shares in a company and more than seven percent of paid-up nominal capital, does not necessarily imply control or management of the company, which are factors connected with the exercise of the right of establishment. Consequently, the fact that a Member State does not allow its taxpayers the undertaking exemption for a substantial holding, within the meaning of its domestic legislation, in companies established in other Member States does not necessarily affect freedom of establishment.
21 However, the situation from which the main proceedings have arisen concerns a national of a Member State who resides in that Member State and who holds all the shares in a company established in another Member State. A 100% holding in the capital of a company having its seat in another Member State undoubtedly brings such a taxpayer within the scope of application of the Treaty provisions on the right of establishment.
22 It is clear from the second paragraph of Article 52 of the Treaty that freedom of establishment includes the right to set up and manage undertakings, in particular companies or firms, in a Member State by a national of another Member State. So, a national of a Member State who has a holding in the capital of a company established in another Member State which gives him definite influence over the company's decisions and allows him to determine its activities is exercising his right of establishment.
23 As to Article 6 of the Treaty, it follows from the case-law of the Court of Justice that that article, which lays down a general prohibition of all discrimination on grounds of nationality, applies independently only to situations governed by Community law for which the Treaty lays down no specific non-discrimination rules (Case 305/87 Commission v Greece [1989] ECR 1461, paragraphs 12 and 13; Case C-1/93 Halliburton Services [1994] ECR I-1137, paragraph 12, and Royal Bank of Scotland, cited above, paragraph 20).
24 It is common ground that the principle of non-discrimination has been given effect, in the field of the right of establishment, by Article 52 of the Treaty (Halliburton Services, cited above, paragraph 12, and Case C-193/94 Skanavi and Chryssanthakopoulos [1996] ECR I-929, paragraph 21).
26 It is therefore necessary to determine, as in essence the national court essentially asks by its first question, whether Article 52 of the Treaty precludes a Member State's tax legislation, such as that at issue in the main proceedings, which, in circumstances where a holding in the capital of a company confers on the shareholder a definite influence over the company's decisions and allows him to determine its activities - which is self-evidently always the case wherever there is a 100% holding,
- allows nationals of Member States resident on its territory an exemption, in whole or in part, from wealth tax in respect of the assets invested in shares in the company,
- but makes that exemption subject to the condition that the holding be held in a company established in the Member State concerned, thus denying it to holders of shares in companies established in other Member States.
27 Article 52 of the Treaty constitutes one of the fundamental provisions of Community law and has been directly applicable in the Member States since the end of the transitional period. Under that provision, freedom of establishment for nationals of a Member State on the territory of another Member State 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 country where such establishment is effected (Case 270/83 Commission v France [1986] ECR 273, paragraph 13, and Royal Bank of Scotland, cited above, paragraph 22).
28 Even though Article 52 of the Treaty, like the other provisions concerning freedom of establishment, is, according to its terms, aimed particularly at ensuring that foreign nationals are treated in the host Member State in the same way as nationals of that State, it also prohibits the Member State of origin from hindering the establishment in another Member State of one of its own nationals (see, to that effect, Case 81/87 Daily Mail and General Trust [1988] ECR 5483, paragraph 16; Case C-264/96 ICI [1998] ECR I-4695, paragraph 21, and Case C-200/98 X and Y [1999] ECR I-0000, paragraph 26).
29 Article 52 of the Treaty likewise prohibits a Member State from hindering the establishment in another Member State of nationals of Member States residing on its territory.
30 By refusing to grant the tax advantage conferred by the undertaking exemption to nationals of Member States residing in the Netherlands who, in exercise of their right of free establishment, manage a company having its seat in a Member State other than the Netherlands, while granting that advantage to nationals of Member States residing in the Netherlands who hold a substantial holding in a company having its seat in the Netherlands, the national legislation at issue in the main proceedings provides for a difference in treatment between taxpayers by adopting as its criterion the seat of the companies of which those taxpayers are shareholders.
31 That difference in the treatment of taxpayers is in principle contrary to Article 52 of the Treaty.
40 Second, in Bachmann and Commission v Belgium, cited above, there was a direct link between the deductibility of pension and life assurance contributions and the taxation of the sums received under those insurance contracts, and it was necessary to preserve that link in order to safeguard the cohesion of the tax system in question. There is, however, no such link in the present case, which concerns two separate taxes levied on different taxpayers. It is therefore irrelevant, for the purposes of granting shareholders a tax allowance in respect of the wealth tax, that companies established in the Netherlands are subject to corporation tax in the Netherlands and that companies established in another Member State are not.