Argenta Spaarbank NV v Belgische Staat.
Date: 2013-07-04
19. As is clear from settled case-law, the freedom of establishment conferred by Article 49 TFEU on European Union nationals, which entails for them access to, and pursuit of, activities as self-employed persons and the forming and management of undertakings, under the same conditions as those laid down for its own nationals by the laws of the Member State of establishment, includes, pursuant to Article 54 TFEU, the right of 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 Union to pursue their activities in the Member State concerned through a subsidiary, a branch or an agency (see Case C-310/09 Accor  [2011] ECR I-0000, paragraph 39 and the case-law cited).
20. Even though, according to their wording, the provisions of the FEU Treaty concerning freedom of establishment are aimed at ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that State, they also prohibit the Member State of origin from hindering the establishment in another Member State of one of its nationals or of a company incorporated under its legislation ( Accor , paragraph 40 and the case-law cited).
21. Those considerations also apply where a company established in a Member State carries on business in another Member State through a permanent establishment (Case C-414/06 Lidl Belgium  [2008] ECR I‑3601, paragraph 20).
22. In the main proceedings, it is common ground that, for the purposes of calculating the deduction for risk capital, the legislation at issue establishes a difference in treatment between the assets of permanent establishments situated in a Member State other than the Kingdom of Belgium the income from which is not taxable in Belgium and the assets of permanent establishments situated in the Kingdom of Belgium.
23. Assets attributed to permanent establishments which are situated in a Member State other than the Kingdom of Belgium and the income from which is not taxable in Belgium are not taken into account when calculating the risk capital serving as a basis for calculation of the deduction at issue in the main proceedings, whereas assets attributed to permanent establishments situated in Belgium are taken into account for that purpose.
24. As the Advocate General has noted in point 33 of his Opinion, the taking into account of the assets of a permanent establishment in order to calculate the deduction for risk capital of a company subject to corporation tax in Belgium constitutes a tax advantage, since taking them into account helps to reduce the effective rate of the corporation tax that such a company must pay in that Member State.
25. Such a tax advantage is denied when the permanent establishment of the company resident in Belgium is situated in another Member State and enjoys an exemption for its income, under a double taxation convention concluded between the Kingdom of Belgium and that other Member State.
26. The Belgian Government submits, in this regard, that the difference in treatment arising from the national legislation at issue in the main proceedings is not, however, a restriction on freedom of establishment since, first, that difference in treatment does not result in adverse consequences for the company with a permanent establishment in a Member State other than the Kingdom of Belgium and, second, if such adverse consequences were to be established, they would be due to the exercise in parallel by a number of Member States of their fiscal sovereignty.
27. Thus, the Belgian Government contends that, even if the assets of the permanent establishment situated in a Member State other than the Kingdom of Belgium were taken into account, the profits for tax purposes of the resident principal company could not be reduced. In its submission, in the case of foreign permanent establishments not exempt under a double taxation convention, the deduction for risk capital is calculated separately, by reference to the assets attributed to the permanent establishment, and is applied first to the profits made by that establishment. The Belgian Government draws the conclusion, by analogy, that if it were necessary to take account of the assets of the permanent establishment which is situated in a Member State other than the Kingdom of Belgium and the income from which is exempt under a convention, the deduction for risk capital should be ascribed to the profits attributed to that establishment. However, those profits are not taxed in Belgium.
28. Argenta and the Commission have contested that interpretation of Belgian law, submitting that in the case of foreign permanent establishments the income from which is not exempt from tax in Belgium the deduction for risk capital is calculated on the basis of overall income and that it applies to all the taxable income of the company concerned.
29. It should be recalled that, as follows from settled case-law, when the Court replies to a question submitted for a preliminary ruling by a court of a Member State in accordance with Article 267 TFEU, it does not have jurisdiction to interpret the domestic law of that Member State, as this task falls to the national courts (see, inter alia, Case C-37/92 Vanacker and Lesage  [1993] ECR I-4947, paragraph 7;  Case C-449/06 Gysen  [2008] ECR I-553, paragraph 17; and Case C-23/12 Zakaria  [2013] ECR I-0000, paragraph 29).
30. However, it must be noted that the Belgian Government conceded at the hearing that – even if the deduction for risk capital were calculated separately, by reference to the assets of the permanent establishment, and were to be applied first to the profits of that establishment – any surplus would be deducted from the profits made by the principal company. Thus, it does not follow from the line of argument put forward by the Belgian Government that it would be impossible for the resident principal company to benefit, for the purpose of reducing its basis of assessment, from the deduction for risk capital calculated by taking account of the assets of the permanent establishment situated in a Member State other than the Kingdom of Belgium.
31. Furthermore, as the Advocate General has observed in point 40 of his Opinion, the Belgian Government has not contested Argenta’s submission that a Belgian company financed with equity capital may benefit from the deduction for risk capital even if its foreign permanent establishment – which does not itself have any equity capital – alone makes profits, which will ultimately be attributed to that company, under Belgian legislation, for the purposes of calculating the deduction.
32. Consequently, the inability of a company with a permanent establishment in a Member State other than the Kingdom of Belgium to benefit, for the purpose of reducing its basis of assessment, from the deduction for risk capital calculated by taking account of the assets of that establishment is disadvantageous for that company.
33. Contrary to the Belgian Government’s assertions, this disadvantageous treatment stems not from the fact that the Member State in which the permanent establishment is situated does not provide for any deduction for risk capital, but solely from the choice made in the Belgian legislation not to permit assets of the aforesaid permanent establishments to be taken into account. The disadvantageous treatment cannot therefore be the consequence of the exercise in parallel by a number of Member States of their fiscal sovereignty.
34. Disadvantageous treatment of that kind is liable to deter a Belgian company from carrying on its business through a permanent establishment situated in a Member State other than the Kingdom of Belgium and therefore constitutes a restriction prohibited in principle by the Treaty provisions relating to freedom of establishment.
35. It is clear from the Court’s case-law that a restriction on freedom of establishment is permissible only if it is justified by overriding reasons in the public interest. It is further necessary, in such a case, that the restriction be appropriate to ensuring the attainment of the objective in question and not go beyond what is necessary to attain it (see Lidl Belgium , paragraph 27 and case-law cited).
41. So far as concerns the first ground of justification relied on by the Belgian Government, it should be recalled that the Court has already acknowledged that the need to maintain the coherence of a tax system can justify a restriction on the exercise of the freedoms of movement guaranteed by the Treaty (Case C-204/90 Bachmann  [1992] ECR I-249, paragraph 28; Case C-319/02 Manninen  [2004] ECR I-7477, paragraph 42; Case C-471/04 Keller Holding  [2006] ECR I-2107, paragraph 40; and Case C-418/07 Papillon  [2008] ECR I-8947, paragraph 43).
42. However, in order for an argument founded on such a justification to succeed, it is necessary, in accordance with settled case-law, that the existence of a direct link be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy ( Manninen , paragraph 42, and Keller Holding , paragraph 40), the direct nature of that link falling to be examined in the light of the objective pursued by the rules in question ( Manninen , paragraph 43; Case C‑293/06 Deutsche Shell  [2008] ECR I-1129, paragraph 39; and Papillon , paragraph 44).
50. So far as concerns the second ground of justification relied on by the Belgian Government, it should be recalled that preservation of the allocation between Member States of the power to tax is a legitimate objective recognised by the Court  (see, to this effect, Case C-446/03 Marks & Spencer  [2005] ECR I-10837, paragraph 45; Case C-470/04 N  [2006] ECR I-7409, paragraph 42; Case C-231/05 Oy AA  [2007] ECR I‑6373, paragraph 51; and Lidl Belgium , paragraph 31). It is also settled case-law that, in the absence of any unifying or harmonising measures of the European Union, the Member States retain the power to define, by treaty or unilaterally, the criteria for allocating their powers of taxation, particularly with a view to eliminating double taxation (Case C-540/07 Commission  v Italy [2009] ECR I-10983, paragraph 29, and Case C-371/10 National Grid Indus  [2011] ECR I-0000, paragraph 45).
51. However, the fact that a Member State has agreed, in a double taxation convention concluded with another Member State, that the profits attributable to a permanent establishment situated in that other Member State are taxable only in the latter and that, consequently, the first Member State cannot exercise its power to tax in relation to the profits attributable to that permanent establishment cannot systematically justify any refusal to grant an advantage to the company established in the territory of the first Member State to which the permanent establishment belongs.
52. Such a refusal would be tantamount to justifying a difference in treatment solely on the ground that a company established in a Member State has developed a cross-border economic activity which is not liable to generate tax revenue for that Member State (see, to this effect, Marks & Spencer , paragraph 40, and Case C‑347/04 Rewe Zentralfinanz  [2007] ECR I-2647, paragraph 43).
53. On the other hand, it is apparent from the case-law that the need to safeguard the balanced allocation between the Member States of the power to tax may be accepted, in particular, where the system in question is designed to prevent conduct capable of jeopardising the right of a Member State to exercise its powers of taxation in relation to activities carried out in its territory (see Oy AA , paragraph 54; Case C-379/05 Amurta  [2007] ECR I-9569, paragraph 58; Case C-303/07 Aberdeen Property Fininvest Alpha [2009] ECR I-5145, paragraph 66; Case C‑284/09 Commission  v Germany [2011] ECR I-0000, paragraph 77; and Joined Cases C-338/11 to C-347/11 Santander Asset Management SGIIC and Others  [2012] ECR I-0000, paragraph 47).
54. Thus, the Court has held that this objective is designed inter alia to safeguard symmetry between the right to tax profits and the entitlement to deduct losses of a permanent establishment, inasmuch as acceptance that the losses of a non-resident permanent establishment might be deducted from the income of the principal company would result in allowing that company to choose freely the Member State in which it claims such losses (see, to this effect, Oy AA , paragraph 56, and Lidl Belgium , paragraph 34).