Floridienne SA and Berginvest SA v Belgian State.
Date: 2000-11-14
17 In that regard, it should be observed that the Court has consistently held that a holding company whose sole purpose is to acquire holdings in other undertakings, without involving itself directly or indirectly in the management of those undertakings, without prejudice to its rights as a shareholder, does not have the status of taxable person and has no right to deduct tax under Article 17 of the Sixth Directive. That conclusion is based, inter alia, on the fact that the mere acquisition of financial holdings in other companies does not constitute an economic activity within the meaning of the Sixth Directive (see Case C-60/90 Polysar Investments Netherlands v Inspecteur der Invoerrechten [1991] ECR I-3111, paragraph 17; and Case C-333/91 Sofitam [1993] ECR I-3513, paragraph 12).
18 However, the Court has held that it is otherwise where the holding is accompanied by direct or indirect involvement in the management of the companies in which the holding has been acquired, without prejudice to the rights held by the holding company as shareholder (Polysar, paragraph 14).
19 It follows that involvement of that kind in the management of subsidiaries must be regarded as an economic activity within the meaning of Article 4(2) of the Sixth Directive, in so far as it entails carrying out transactions which are subject to VAT by virtue of Article 2 of that directive, such as the supply by Floridienne and Berginvest of administrative, accounting and information technology services to their subsidiaries.
20 Nevertheless, if the receipt of dividends paid by those subsidiaries to the holding company thus involving itself in their management is to fall within the scope of VAT, a further requirement is that the dividends are capable of being regarded as consideration for the economic activity in question, which presupposes that there is a direct link between the activity carried out and the consideration received (see, inter alia, Case 154/80 Staatssecretaris van Financiën v Coöperatieve Aardappelenbewaarplaats [1981] ECR 445, paragraph 12; and Case C-288/94 Argos Distributors v Commissioners of Customs and Excise [1996] ECR I-5311, paragraph 16).
21 In that regard, the Court has held that, since the receipt of dividends is not the consideration for any economic activity, it does not fall within the scope of VAT. Consequently, dividends resulting from shareholding fall outside the deduction entitlement (Sofitam, paragraph 13).
22 Certain features of dividends account, in particular, for their exclusion from VAT. First, it is not in dispute that the existence of distributable profits is generally a prerequisite of paying a dividend and that payment is thus dependent on the company's year-end results. Second, the proportions in which the dividend is distributed are determined by reference to the type of shares held, in particular by reference to classes of shares, and not by reference to the identity of the owner of a particular shareholding. Lastly, dividends represent, by their very nature, the return on investment in a company and are merely the result of ownership of that property (Polysar, paragraph 13).
23 In view, specifically, of the fact that the amount of the dividend thus depends partly on unknown factors and that entitlement to dividends is merely a function of shareholding, the direct link between the dividend and a supply of services (even where the services are supplied by a shareholder who is paid dividends), which is necessary if the dividends are to constitute consideration for the services, does not exist.
26 In that regard, it must be observed that the Court has held that interest received by a property management company on investments, made for its own account, of sums paid by co-owners or lessees cannot be excluded from the scope of VAT, since the interest does not arise simply from ownership of the asset but is the consideration for placing capital at the disposition of a third party (Case C-306/94 Régie Dauphinoise - Cabinet A. Forest v Ministre du Budget [1996] ECR I-3695, paragraph 17).
27 Since Article 2(1) of the Sixth Directive excludes from the scope of VAT transactions in which the taxable person is not acting as such, loan transactions, such as those in point in the main proceedings, are subject to VAT only if they constitute either an economic activity of the operator within the meaning of Article 4(2) of the Sixth Directive or the direct, permanent and necessary extension of a taxable activity, without, however, being incidental to that activity within the meaning of Article 19(2) of the directive (see, to that effect, Régie Dauphinoise, paragraph 18).
28 Where a holding company makes capital available to its subsidiaries, that activity may of itself be considered an economic activity, consisting in exploiting that capital with a view to obtaining income by way of interest therefrom on a continuing basis, provided that it is not carried out merely on an occasional basis and is not confined to managing an investment portfolio in the same way as a private investor (see, to that effect, Case C-155/94 Wellcome Trust v Commissioners for Customs and Excise [1996] ECR I-3013, at paragraph 36; and Case C-230/94 Enkler v Finanzamt Homburg [1996] ECR I-4517, paragraph 20) and provided that it is carried out with a business or commercial purpose characterised by, in particular, a concern to maximise returns on capital investment.
29 Moreover, the making by a holding company of loans to subsidiaries to which it supplies administrative, accounting, information technology and general management services cannot be subject to VAT on the ground that it is the direct, permanent and necessary extension of the supply of services within the meaning of the judgment in Régie Dauphinoise. Such loans are neither necessarily nor directly linked to services thus supplied.
32 Therefore, the answer to the question referred to the Court for a preliminary ruling must be that Article 19 of the Sixth Directive is to be interpreted as meaning that the following must be excluded from the denominator of the fraction used to calculate the deductible proportions:
- share dividends paid by its subsidiaries to a holding company which is a taxable person in respect of other activities and which supplies management services to those subsidiaries, and
- interest paid by the subsidiaries to the holding company on loans it has made to them, where the loan transactions do not constitute, for the purposes of Article 4(2) of the Sixth Directive, an economic activity of the holding company.