Trustees of the P Panayi Accumulation & Maintenance Settlements v Commissioners for Her Majesty's Revenue and Customs.
Date: 2017-09-14
26


In that regard, it is clear that freedom of establishment, which is one of the fundamental provisions of EU law (judgment of 24 May 2011, Commission v Belgium, C‑47/08, EU:C:2011:334, paragraph 77 and the case-law cited), which contributes to the objective of completing the internal market (see, to that effect, judgment of 13 December 2005, SEVIC Systems, C‑411/03, EU:C:2005:762, paragraph 19), is a very broad concept.
27


It accordingly follows from the Court’s case-law that, first, exceptions to that freedom must be interpreted strictly (see, to that effect, judgments of 21 June 1974, Reyners, 2/74, EU:C:1974:68, paragraphs 43 to 55, and of 1 February 2017, Commission v Hungary, C‑392/15, EU:C:2017:73, paragraph 106 and the case-law cited), second, while the provisions of the Treaty relating to that freedom are aimed at ensuring the benefit of national treatment in the host Member 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 in accordance with its legislation (judgments of 27 September 1988, Daily Mail and General Trust, 81/87, EU:C:1988:456, paragraph 16, and of 21 May 2015, Verder LabTec, C‑657/13, EU:C:2015:331, paragraph 33 and the case-law cited) and, third, the concept of establishment within the meaning of the Treaty is a very broad one, allowing an EU national to participate, on a stable and continuous basis, in the economic life of a Member State other than his State of origin and to profit therefrom, so contributing to economic and social interpenetration within the European Union (see, to that effect, judgment of 30 November 1995, Gebhard, C‑55/94, EU:C:1995:411, paragraph 25).
36


The Court has previously held that a company incorporated under the law of a Member State which transfers its place of effective management to another Member State, without that transfer affecting its status as a company of the former Member State, may rely on freedom of establishment for the purpose of challenging the lawfulness of a tax imposed on it by the former Member State on the occasion of that transfer of the place of effective management (judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 33).
41


Under settled case-law, Article 49 TFEU requires the elimination of restrictions on freedom of establishment. That freedom includes, for companies established in accordance with the legislation of a Member State and having their registered office, central administration or principal place of business within the European Union, the right to exercise their activity in other Member States through a subsidiary, branch or agency (judgment of 21 May 2015, Verder LabTec, C‑657/13, EU:C:2015:331, paragraph 32 and the case-law cited).
43


All measures which prohibit, impede or render less attractive the exercise of the freedom must be considered to be restrictions on freedom of establishment (judgment of 21 May 2015, Verder LabTec, C‑657/13, EU:C:2015:331, paragraph 34 and the case-law cited).
48


That restriction is permissible only if it relates to situations which are not objectively comparable or if it is justified by overriding reasons in the public interest that are recognised by EU law. It is further necessary, in such a case, that the restriction is appropriate for ensuring the attainment of the objective that it pursues and that it does not go beyond what is necessary to attain it (judgment of 17 December 2015, Timac Agro Deutschland, C‑388/14, EU:C:2015:829, paragraphs 26 and 29 and the case-law cited).
49


As regards, first, the issue of whether the situations concerned are comparable, suffice it to state that, with respect to the legislation of a Member State that is designed to tax capital gains accruing within its territory, the situation of a trust which transfers its place of management to another Member State is, in relation to the taxation of gains in the value of trust assets which accrued in the former Member State prior to that transfer, comparable to that of a trust which retains its place of management in the former Member State (see, to that effect, judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 38).
51


In that context, it should be borne in mind that preservation of a balanced allocation of powers of taxation between Member States is a legitimate objective recognised by the Court. Further, 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, with a view to eliminating double taxation (judgment of 21 May 2015, Verder LabTec, C‑657/13, EU:C:2015:331, paragraph 42 and the case-law cited).
52


In this case, it follows from the Court’s case-law that the transfer of the place of management of a trust from one Member State to another Member State cannot mean that the Member State of origin has to abandon its right to tax a capital gain which arose within the ambit of its powers of taxation before that transfer. In that regard, the Court has held that, in accordance with the principle of fiscal territoriality linked to a temporal consideration, namely the taxpayer’s residence for tax purposes within national territory during the period in which the capital gains arise, a Member State is entitled to charge tax on those gains at the time when that taxpayer leaves the country. Such a measure is intended to prevent situations capable of jeopardising the right of the Member State of origin to exercise its powers of taxation in relation to activities carried on within its territory, and can therefore be justified on grounds connected with the preservation of the allocation of powers of taxation between the Member States (judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 46 and the case-law cited).
53


However, the Court has made it clear that the objective of preserving the allocation of powers of taxation between the Member States can justify a national measure only where the Member State in whose territory income was generated is actually prevented from exercising its power of taxation in respect of such income (judgment of 23 January 2014, DMC, C‑164/12, EU:C:2014:20, paragraph 56).
57


As regards, last, the proportionality of the measure at issue, it follows from the Court’s case-law that the fact that the Member State of origin, for the purpose of safeguarding the exercise of its powers of taxation, determines the amount of tax due on the unrealised capital gains that have arisen in its territory at the time when its power of taxation in respect of those capital gains ceases to exist, in this case at the time when the place of management of the trust is transferred to another Member State, is compatible with the principle of proportionality (judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 52). Further, legislation of a Member State which provides that a trust which transfers its place of management to another Member State may choose between immediate payment of the tax due on those capital gains or deferred payment of that tax, together with, if appropriate, interest in accordance with the applicable national legislation, would constitute a measure less harmful to freedom of establishment than the immediate payment of the tax due (see, to that effect, judgment of 21 May 2015, Verder LabTec, C‑657/13, EU:C:2015:331, paragraph 49 and the case-law cited).
58


Further, in that context, it must be made clear that deferred payment cannot result in the Member state of origin being obliged to take into account losses that occur after the transfer of the place of management of a trust to another Member State (see, to that effect, judgment of 29 November 2011, National Grid Indus, C‑371/10, EU:C:2011:785, paragraph 61).
60


That finding cannot be called into question by the fact that, in the circumstances of the main proceedings, the gains were made after the establishment of the amount of the tax, but before that tax became payable, given that the disproportionality of the legislation at issue in the main proceedings is due to the fact that that legislation makes no provision for the taxpayer being able to defer the time when the tax payable is paid.