Bosal Holding BV v Staatssecretaris van Financiën.
Date: 2003-09-18
22. Concerning that latter point, the Court notes as a preliminary observation that, as appears particularly from the third recital in its preamble, the directive seeks to eliminate any disadvantage resulting from the fact that tax provisions governing relations between parent companies and subsidiaries of different Member States are, in general, less favourable than those applicable to relations between parent and subsidiary companies of the same Member State, and thereby to facilitate the grouping together of companies at Community level (Case C-294/99  Athinaïki Zythopoiïa  [2001] ECR I-6797, paragraph 25).
26. However, that possibility may be exercised only in compliance with the fundamental provisions of the Treaty, in this case Article 52 thereof.  It is therefore in relation to that provision that it is necessary to examine the question whether the directive authorises a Member State only partially to allow, as does Article 13(1) of the 1969 Law, the deductibility of costs in relation to holdings.
27. As the referring court has pointed out, the limitation laid down in Article 13(1) of the 1969 Law of the deductibility of costs incurred by the parent company established in the Netherlands in connection with the capital of subsidiaries established in other Member States to cases where the latter generate, even if only indirectly, profits which are taxable in the Netherlands constitutes a hindrance to the establishment of subsidiaries in other Member States.  In the light of that limitation, a parent company might be dissuaded from carrying on its activities through the intermediary of a subsidiary established in another Member State since, normally, such subsidiaries do not generate profits that are taxable in the Netherlands.
29. As regards the argument concerning the need to preserve the coherence of the tax system, the Court of Justice pointed out in its judgment in Case C-35/98  Verkooijen  [2000] ECR I-4071, paragraph 57, that, in  Bachmann  and  Commission  v  Belgium , a direct link existed, in the case of one and the same taxpayer, between the grant of a tax advantage and the offsetting of that advantage by a fiscal levy, both of which related to the same tax.
30. Where there is no such direct link, because, for example, one is dealing with different taxes or the tax treatment of different taxpayers, the argument based on the coherence of the tax system cannot be relied upon (see, to that effect, Case C-251/98  Baars  [2000] ECR I-2787, paragraph 40).
37. An argument based on the principle of territoriality, as recognised by the Court of Justice in Case C-250/95  Futura Participations and Singer  [1997] ECR I-2471, paragraph 22, has also been relied upon by the Netherlands Government in order to justify the difference in tax treatment under the 1969 Law.  According to the government, the costs in connection with activities abroad, including financing costs and costs in relation to holdings, should be set off against the profits generated by those activities and the deduction of those costs is linked solely to the making or non-making of profits outside the Netherlands.  According to the Netherlands Government, there is therefore no discrimination, the subsidiaries which do make profits taxable in the Netherlands and those which do not being in a situation which is not comparable.
40. Moreover, in a case concerning the tax treatment of a subsidiary which varied in relation to the seat of the parent company, the Court has held that the difference in the tax treatment of parent companies depending on whether or not they are resident cannot justify denial of a tax advantage to subsidiaries, resident in the United Kingdom, of parent companies having their seat in another Member State where that advantage is available to subsidiaries, resident in the United Kingdom, of parent companies also resident in the United Kingdom, since all those subsidiaries are liable to mainstream corporation tax on their profits irrespective of the place of residence of their parent companies (Joined Cases C-397/98 and C-410/98  Metallgesellschaft and Others  [2001] ECR I-1727, paragraph 60).
42. As for the argument of the Netherlands Government and the Commission that the limitation on deductibility is justified by the aim of avoiding an erosion of the tax base going beyond mere diminution of tax revenue, this cannot be accepted.  Such a justification does not differ in substance from that concerning the risk of a diminution in tax revenue.  In that respect, the case-law of the Court of Justice shows that such a justification does not appear amongst the grounds listed in Article 56(1) of the EC Treaty (now, after amendment, Article 46(1) EC) and does not constitute a matter of overriding general interest which may be relied upon in order to justify a restriction on the freedom of establishment (see, to that effect, Case C-264/96  ICI  v  Colmer  [1998] ECR I-4695, paragraph 28).