Hornbach-Baumarkt-AG v Finanzamt Landau.
Date: 2018-05-31
28


According to the settled case-law of the Court, national legislation intended to apply only to those shareholdings which enable the holder to exert a definite influence on a company’s decisions and to determine its activities fall within the scope of freedom of establishment (judgments of 13 November 2012, Test Claimants in the FII Group Litigation, C‑35/11, EU:C:2012:707, paragraph 91; of 5 February 2014, Hervis Sport- és Divatkereskedelmi, C‑385/12, EU:C:2014:47, paragraph 22; and of 10 June 2015, X, C‑686/13, EU:C:2015:375, paragraph 18).
32


According to settled case-law, the provisions of the Treaty concerning freedom of establishment prohibit the Member State of origin from hindering the establishment in another Member State of a company incorporated under its legislation, in particular through a subsidiary. Freedom of establishment is hindered if, under a Member State’s tax system, a resident company having a subsidiary in another Member State suffers a disadvantageous difference in treatment for tax purposes compared with a resident company having a subsidiary in the first Member State (judgment of 21 December 2016, Masco Denmark and Damixa, C‑593/14, EU:C:2016:984, paragraphs 24 and 25).
35


According to the case-law of the Court, such a difference in the tax treatment of taxpayers based on the place where the companies with which an agreement on non-arm’s-length terms have been made have their registered office is liable to constitute a restriction of freedom of establishment, within the meaning of Article 43 EC. The taxpayer might thereby be deterred from acquiring, creating or maintaining a subsidiary in a Member State other than its Member State of residence or from acquiring or maintaining a substantial holding in a company established in that other Member State because of the tax burden imposed, in a cross-border situation, on the agreement entered into on non-arm’s-length terms (see, to that effect, judgment of 21 January 2010, SGI, C‑311/08, EU:C:2010:26, paragraph 44).
36


According to the Court’s settled case-law, a tax measure which is liable to hinder the freedom of establishment enshrined in Article 43 EC is permissible only if it relates to situations which are not objectively comparable or if it can be justified by overriding reasons in the public interest recognised by EU law. It is further necessary, in such a case, that it is appropriate for ensuring the attainment of the objective in question and does not go beyond what is necessary to attain that objective (see, to that effect, judgments of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 42; of 17 December 2015, Timac Agro Deutschland, C‑388/14, EU:C:2015:829, paragraphs 26 and 29; of 21 December 2016, Masco Denmark and Damixa, C‑593/14, EU:C:2016:984, paragraph 28; and of 23 November 2017, A, C‑292/16, EU:C:2017:888, paragraph 28).
40


It should be noted that those arguments do not relate to the comparability of the situations but rather to the justification derived from the principle of territoriality, whereby Member States are entitled to tax income generated on their territory, or connected with the need to preserve the allocation of powers of taxation between Member States, which is a legitimate objective recognised by the Court (see, to that effect, judgments of 17 July 2014, Nordea Bank Danmark, C‑48/13, EU:C:2014:2087, paragraph 27, and of 23 November 2017, A, C‑292/16, EU:C:2017:888, paragraph 30).
41


In that regard, it should be noted that both the German Government and the Swedish Government argue that legislation such as that at issue in the main proceedings is justified by the overriding reason in the public interest of the preservation of the balanced allocation of the power to tax between the Member States and they rely, in this connection, on the judgment of 21 January 2010, SGI, (C‑311/08, EU:C:2010:26, paragraph 69).
43


According to settled case-law, the need to maintain the balanced allocation of the power to tax between the Member States may be capable of justifying a difference in treatment where the system in question is designed to prevent conduct liable to jeopardise the right of a Member State to exercise its power to tax in relation to activities carried out in its territory (judgments of 29 March 2007, Rewe Zentralfinanz, C‑347/04, EU:C:2007:194, paragraph 42; of 18 July 2007, Oy AA, C‑231/05, EU:C:2007:439, paragraph 54, of 21 February 2013, A, C‑123/11, EU:C:2013:84, paragraph 41; and of 21 December 2016, Masco Denmark and Damixa, C‑593/14, EU:C:2016:984, paragraph 35).
44


The Court has held that allowing companies resident in a Member State to transfer their profits, in the form of unusual or gratuitous advantages, to companies with which they have a relationship of interdependence and which are established in other Member States may well undermine the balanced allocation of the power to tax between the Member States and that legislation of a Member State providing that the resident company is to be taxed in respect of such advantages which it has granted to a company established in another Member State allows the former Member State to exercise its tax jurisdiction in relation to activities carried out in its territory. The Court has further held that such national legislation pursues legitimate objectives which are compatible with the Treaty and constitute overriding reasons in the public interest and that such legislation must be regarded as appropriate to ensure the attainment of those objectives (see, to that effect, judgment of 21 January 2010, SGI, C‑311/08, EU:C:2010:26, paragraphs 63, 64 and 69).
49


In that regard, the Court has held that national legislation which provides for a consideration of objective and verifiable elements in order to determine whether a transaction represents an artificial arrangement, entered into for tax reasons, is to be regarded as not going beyond what is necessary to attain the objectives relating to the need to maintain the balanced allocation of the power to tax between the Member States and to prevent tax avoidance where, first, on each occasion on which there is a suspicion that a transaction goes beyond what the companies concerned would have agreed under market conditions, the taxpayer is given an opportunity, without being subject to undue administrative constraints, to provide evidence of any commercial justification that there may have been for that transaction. Second, the corrective tax measure must, where required, be confined to the part which exceeds what would have been agreed between the companies in question under market conditions (judgment of 21 January 2010, SGI, C‑311/08, EU:C:2010:26, paragraphs 71 and 72).