Itelcar — Automóveis de Aluguer Lda v Fazenda Pública.
Date: 2013-10-03
14. As regards the applicability of Article 56 EC to the facts of the case before the referring court, it should be noted at the outset that financial loans and credits granted by non-residents to residents constitute movements of capital for the purposes of that provision, as has been stated, moreover, under heading VIII of the nomenclature set out in Annex I to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty [Article repealed by the Treaty of Amsterdam] (OJ 1988 L 178, p. 5) and in the explanatory notes set out therein (see, to that effect, Case C‑452/04 Fidium Finanz [2006] ECR I‑9521, paragraphs 41 and 42).
16. In that connection, the Court has held, in relation to national legislation on the tax treatment of dividends originating in a non-member country, that it is sufficient to examine the purpose of that legislation in order to determine whether the tax treatment falls within the scope of the EC Treaty provisions on the free movement of capital. Since the Treaty chapter on freedom of establishment does not contain any provision which extends the application of its provisions to situations concerning the establishment of a company of a Member State in a non-member country or the establishment of a company of a non-member country in a Member State, such legislation cannot fall within the scope of Article 43 EC (see Case C‑35/11 Test Claimants in the FII Group Litigation  [2012] ECR I‑0000, paragraphs 96 and 97 and the case-law cited).
17. The Court has also held that, where it is apparent from the purpose of such national legislation that it can apply only to those shareholdings which enable the holder to exert a definite influence on the decisions of the company concerned and to determine its activities, neither Article 43 EC nor Article 56 EC may be relied upon (C‑35/11 Test Claimants in the FII Group Litigation , paragraph 98).
18. On the other hand, national rules relating to the tax treatment of dividends coming from a non-member country which do not apply exclusively to situations in which the parent company exerts decisive influence over the company paying the dividends must be assessed in the light of A rticle 56 EC. A company resident in a Member State may therefore rely on that provision in order to call into question the legality of such rules, irrespective of the size of its shareholding in the company paying dividends established in a non-member country ( Test Claimants in the FII Group Litigation , paragraph 99, and Case C‑168/11 Beker [2013] ECR I‑0000, paragraph 30).
22. Nevertheless, even if the application of the rules at issue in the main proceedings is confined to situations concerning dealings between a borrowing company and a lending company holding at least 10% of the shares or voting rights in the borrowing company, or between companies in which the same shareholders have such a holding, as contemplated in Article 58(4)(a) and (b) of the CIRC, it is clear that a holding of such a size does not necessarily imply that the holder exerts a definite influence over the decisions of the company of which it is a shareholder (see, to that effect, Case C‑251/98 Baars  [2000] ECR I‑2787, paragraph 20, and Case C‑446/04 Test Claimants in the FII Group Litigation  [2006] ECR I‑11753, paragraph 58).
23. It follows that a resident company may, irrespective of whether the lending company of the non-member country has a shareholding in it, or of the size of any such shareholding, rely upon the Treaty provisions on the free movement of capital in order to call into question the legality of such national rules (see, by analogy, Case C‑35/11 Test Claimants in the FII Group Litigation , paragraph 104).
24. Moreover, in the circumstances of this case there is no risk, from the interpretation of those Treaty provisions in the light of relations with non-member countries, that lending companies established in those countries, which do not fall within the limits of the territorial scope of freedom of establishment, can profit from that freedom. Contrary to the assertions made by the Portuguese Government at the hearing, national rules such as those at issue in the main proceedings do not relate to the conditions for the access of such companies to the market in the Member State concerned, but relate only to the tax treatment of interest on overall debts regarded as excessive that are entered into by a resident company with a company of a non-member country, with which it has special relations within the meaning of Article 58(4) of the CIRC (see, by analogy, Case C‑35/11 Test Claimants in the FII Group Litigation , paragraph 100).
26. It should be borne in mind that, according to settled case-law, although direct taxation falls within the competence of the Member States, they must nonetheless exercise that competence in accordance with European Union law (Joined Cases C‑338/11 to C‑347/11 Santander Asset Management SGIIC and Others  [2012] ECR I‑0000, paragraph 14 and the case-law cited).
27. It also follows from settled case-law that the measures prohibited by Article 56(1) EC, as restrictions on the movement of capital, include those that are of such a kind as to discourage non-residents from making investments in a Member State or to discourage that Member State’s residents from doing so in other States (Case C‑370/05 Festersen [2007] ECR I‑1129, paragraph 24, and Santander Asset Management SGIIC and Others , paragraph 15).
32. According to settled case-law, such a restriction may be permissible if it is justified by an overriding reason in the public interest. It is also necessary, in such a case, that the restriction be appropriate for ensuring the attainment of the objective in question and not go beyond what is necessary to attain that objective (see Case C‑35/11 Test Claimants in the FII Group Litigation , paragraph 55 and the case-law cited).
34. In that connection, it should be recalled that, according to settled case-law, a national measure restricting the free movement of capital may be justified where it specifically targets wholly artificial arrangements which do not reflect economic reality and the sole purpose of which is to avoid the tax normally payable on the profits generated by activities carried out on the national territory (see, to that effect, Case C‑524/04 Test Claimants in the Thin Cap Group Litigation  [2007] ECR I‑2107, paragraphs 72 and 74, and Case C‑182/08 Glaxo Wellcome  [2009] ECR I‑8591, paragraph 89).
35. By providing that certain interest paid by a resident company to a company established in a non-member country, with which it has special relations, is not to be deductible for the purposes of determining the taxable profit of that resident company, rules such as those at issue in the main proceedings are capable of preventing practices the sole purpose of which is to avoid the tax that would normally be payable on profits generated by activities undertaken in the national territory. It follows that such rules are an appropriate means of attaining the objective of combatting tax evasion and avoidance (see, by analogy, Case C‑524/04 Test Claimants in the Thin Cap Group Litigation , paragraph 77).
37. In that connection, it is apparent from the case-law of the Court that, where rules are predicated on an assessment of objective and verifiable elements for the purposes of determining whether a transaction represents a wholly artificial arrangement entered into for tax reasons alone, they may be regarded as not going beyond what is necessary to prevent tax evasion and avoidance, if, on each occasion on which the existence of such an arrangement cannot be ruled out, those rules give the taxpayer an opportunity, without subjecting him to undue administrative constraints, to provide evidence of any commercial justification that there may have been for that transaction (see, to that effect, Case C‑524/04 Test Claimants in the Thin Cap Group Litigation , paragraph 82, and Case C‑318/10 SIAT  [2012] ECR I‑0000, paragraph 50).
38. Similarly, the Court has held that, where the transaction in question goes beyond what the companies concerned would have agreed on an arm’s length basis, the corrective tax measure must, in order not to be considered disproportionate, be confined to the part which exceeds that which would have been agreed on that basis (see, to that effect, Case C‑524/04 Test Claimants in the Thin Cap Group Litigation , paragraph 83, and SIAT , paragraph 52).
44. That being so, the rules in question do not make it possible, at the outset, to determine their scope with sufficient precision. Accordingly, they do not meet the requirements of legal certainty, in accordance with which rules of law must be clear, precise and predictable as regards their effects, especially where they may have unfavourable consequences for individuals and companies. As it is, rules which do not meet the requirements of the principle of legal certainty cannot be considered to be proportionate to the objectives pursued (see SIAT , paragraphs 58 and 59).