Haribo Lakritzen Hans Riegel BetriebsgmbH (C-436/08) and Österreichische Salinen AG (C-437/08) v Finanzamt Linz.
Date: 2011-02-10
32. According to settled case-law, it is for the Court alone, where questions are formulated imprecisely, to extract from all the information provided by the national court or tribunal and from the documents in the main proceedings the points of European Union law which require interpretation, having regard to the subject-matter of those proceedings (Case C‑107/98 Teckal  [1999] ECR I‑8121, paragraph 34, and Case C‑57/01 Makedoniko Metro and Michaniki  [2003] ECR I‑1091, paragraph 56).
33. In this connection, it is to be noted that the tax treatment of dividends may fall within Article 49 TFEU on freedom of establishment and Article 63 TFEU on the free movement of capital (see, to this effect, Case C‑446/04 Test Claimants in the FII Group Litigation  [2006] ECR I‑11753, paragraph 36).
34. As regards the question whether national legislation falls within the scope of one or other of the freedoms of movement, it is clear from what is now well established case-law that the purpose of the legislation concerned must be taken into consideration (see, to this effect, Case C‑196/04 Cadbury Schweppes and Cadbury Schweppes Overseas [2006] ECR I‑7995, paragraphs 31 to 33; Case C‑452/04 Fidium Finanz  [2006] ECR I‑9521, paragraphs 34 and 44 to 49; Case C‑374/04 Test Claimants in Class IV of the ACT Group Litigation  [2006] ECR I‑11673, paragraphs 37 and 38; Test Claimants in the FII Group Litigation , paragraph 36; and Case C‑524/04 Test Claimants in the Thin Cap Group Litigation  [2007] ECR I‑2107, paragraphs 26 to 34).
35. It has already been held that national legislation intended to apply only to those shareholdings which enable the holder to exert a definite influence on a company’s decisions and to determine its activities falls within the provisions of the Treaty on freedom of establishment (see Test Claimants in the FII Group Litigation , paragraph 37, and Case C‑81/09 Idrima Tipou  [2010] ECR I‑0000, paragraph 47). On the other hand, national provisions which apply to shareholdings acquired solely with the intention of making a financial investment without any intention to influence the management and control of the undertaking must be examined exclusively in light of the free movement of capital (see, to this effect, Test Claimants in the FII Group Litigation , paragraph 38, and Case C‑182/08 Glaxo Wellcome  [2009] ECR I‑8591, paragraphs 40 and 45 to 52).
41. In that regard, it should be recalled that, in proceedings under Article 267 TFEU, which are based on a clear separation of functions between the national courts and tribunals and the Court of Justice, any assessment of the facts in the case is a matter for the national court or tribunal. Similarly, it is solely for the national court or tribunal, before which the dispute has been brought and which must assume responsibility for the forthcoming judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted concern the interpretation of European Union law, the Court is in principle bound to give a ruling (see, inter alia, Joined Cases C‑261/08 and C‑348/08 Zurita García and Choque Cabrera  [2009] ECR I‑10143, paragraph 34 and the case‑law cited).
42. The Court may refuse to rule on a question referred for a preliminary ruling by a national court or tribunal only where it is quite obvious that the interpretation of European Union law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, inter alia, Case C‑379/98 PreussenElektra  [2001] ECR I‑2099, paragraph 39; Case C‑390/99 Canal Satélite Digital  [2002] ECR I‑607, paragraph 19; and Zurita García and Choque Cabrera , paragraph 35).
46. Article 63(1) TFEU gives effect to the liberalisation of capital between Member States and between Member States and non-member States. To that end, it provides, in the chapter of the FEU Treaty entitled ‘Capital and payments’, that all restrictions on the movement of capital between Member States and between Member States and non-member States are to be prohibited.
50. It follows from settled case-law that the measures prohibited by Article 63(1) TFEU, as restrictions on the movement of capital, include those which are such 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 Case C‑101/05 A  [2007] ECR I‑11531, paragraph 40).
51. As regards whether national legislation such as that at issue in the main proceedings constitutes a restriction on the movement of capital, in order to qualify for the exemption from corporation tax, resident companies receiving portfolio dividends from a company established in a non-member State party to the EEA Agreement are, unlike resident companies receiving portfolio dividends from resident companies, subject to an additional condition, namely the condition concerning the existence of a comprehensive agreement for mutual assistance with regard to administrative matters and enforcement between the Republic of Austria and the non-member State concerned. Given that only the States concerned can decide whether to bind themselves by means of conventions, the condition concerning the existence of a comprehensive agreement for mutual assistance with regard to administrative matters and enforcement may, de facto, entail a permanent regime of non-exemption from corporation tax for portfolio dividends from a company established in a non-member State party to the EEA Agreement (see, by analogy, Case C‑72/09 Établissements Rimbaud  [2010] ECR I‑0000, paragraph 25).
56. In so far as Article 65(1)(a) TFEU is a derogation from the fundamental principle of the free movement of capital, it must be interpreted strictly. It cannot therefore be interpreted as meaning that all tax legislation which draws a distinction between taxpayers on the basis of their place of residence or the State in which they invest their capital is automatically compatible with the Treaty (see Case C‑11/07 Eckelkamp and Others  [2008] ECR I‑6845, paragraph 57, and Case C‑510/08 Mattner  [2010] ECR I-0000, paragraph 32).
57. The derogation in that provision is itself limited by Article 65(3) TFEU, which provides that the national provisions referred to in Article 65(1) ‘shall not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments as defined in Article 63’.
58. The differences in treatment authorised by Article 65(1)(a) TFEU must thus be distinguished from discrimination prohibited by Article 65(3). The case-law shows that, for national tax legislation such as that at issue in the main proceedings to be capable of being regarded as compatible with the provisions of the Treaty on the free movement of capital, the difference in treatment which it prescribes, between portfolio dividends from resident companies and those from companies established in a non-member State party to the EEA Agreement, must concern situations which are not objectively comparable or be justified by an overriding reason in the public interest (see Case C‑35/98 Verkooijen  [2000] ECR I‑4071, paragraph 43; Case C‑319/02 Manninen  [2004] ECR I‑7477, paragraph 29; Case C‑512/03 Blanckaert  [2005] ECR I‑7685, paragraph 42; and Case C‑540/07 Commission  v Italy  [2009] ECR I‑10983, paragraph 49).
59. In the context of a tax rule, such as that at issue in the main proceedings, which seeks to prevent the economic double taxation of distributed profits, the situation of a corporate shareholder receiving foreign-sourced dividends is comparable to that of a corporate shareholder receiving nationally‑sourced dividends in so far as, in each case, the profits made are, in principle, liable to be subject to a series of charges to tax (see Test Claimants in the FII Group Litigation , paragraph 62).
60. In those circumstances, Article 63 TFEU requires a Member State which has a system for preventing economic double taxation as regards dividends paid to resident companies by other resident companies to accord equivalent treatment to dividends paid to resident companies by companies established in non‑member States party to the EEA Agreement (see, to this effect, Test Claimants in the FII Group Litigation , paragraph 72).
63. It must also be examined whether the restriction resulting from national legislation such as that at issue in the main proceedings is justified by overriding reasons in the public interest (see Case C‑451/05 ELISA  [2007] ECR I‑8251, paragraph 79).
65. It should be borne in mind that the case‑law concerning restrictions on the exercise of the freedoms of movement within the European Union cannot be transposed in its entirety to movements of capital between Member States and non-member States, since such movements take place in a different legal context (see A , paragraph 60, and Commission  v Italy , paragraph 69).
66. In that regard, it should be observed that the framework established by Directive 77/799 for cooperation between the competent authorities of the Member States does not exist between those authorities and the competent authorities of a non-member State where that State has not entered into any undertaking of mutual assistance ( Commission  v Italy , paragraph 70, and Établissements Rimbaud , paragraph 41).
67. It follows that, where the legislation of a Member State makes the grant of a tax advantage dependent on satisfying conditions compliance with which can be verified only by obtaining information from the competent authorities of a non-member State party to the EEA Agreement, it is in principle legitimate for the Member State to refuse to grant that advantage if ‑ in particular, because that non-member State is not bound under an agreement to provide information ‑ it proves impossible to obtain the requisite information from it ( Établissements Rimbaud , paragraph 44).
70. However, even if the restriction on a freedom of movement is appropriate to the objective pursued, it cannot go beyond what is necessary to attain that objective (see ELISA , paragraph 82 and the case‑law cited). It must therefore be examined whether the restriction resulting from legislation such as that at issue in the main proceedings complies with the principle of proportionality.
80. The difference in treatment to which portfolio dividends are subject has the effect of discouraging companies resident in Austria from investing capital in companies established in other Member States and in non‑member States party to the EEA Agreement. Since, in Austria, dividends received from companies established in other Member States and in non‑member States party to the EEA Agreement receive less favourable tax treatment than dividends received from a company established in Austria, the shares of the former companies are less attractive to investors resident in Austria than shares in companies established in Austria.
84. It should be remembered, first of all, that in the context of a tax rule, such as that at issue in the main proceedings, which seeks to prevent the economic double taxation of distributed profits, the situation of a corporate shareholder receiving foreign-sourced dividends is comparable to that of a corporate shareholder receiving nationally-sourced dividends in so far as, in each case, the profits made are, in principle, liable to be subject to a series of charges to tax (see Test Claimants in the FII Group Litigation , paragraph 62).
85. In those circumstances, Article 63 TFEU requires a Member State which has a system for preventing economic double taxation as regards dividends paid to residents by resident companies to accord equivalent treatment to dividends paid to residents by non-resident companies (see, to this effect, Test Claimants in the FII Group Litigation , paragraph 72).
86. It has been held that European Union law does not prohibit a Member State from preventing the imposition of a series of charges to tax on dividends received by a resident company by applying rules which exempt those dividends from tax when they are paid by a resident company, while preventing those dividends from being liable to a series of charges to tax through an imputation method when they are paid by a non-resident company, provided, however, that the tax rate applied to foreign-sourced dividends is not higher than the rate applied to nationally-sourced dividends and that the tax credit is at least equal to the amount paid in the State of the company making the distribution, up to the limit of the tax charged in the Member State of the company receiving the dividends (see Test Claimants in the FII Group Litigation , paragraphs 48 and 57, and the order in Case C‑201/05 Test Claimants in the CFC and Dividend Group Litigation  [2008] ECR I‑2875, paragraph 39).
87. Thus, when the profits underlying foreign-sourced dividends are subject in the State of the company making the distribution to a lower level of tax than the tax levied in the Member State of the recipient company, that Member State must grant an overall tax credit corresponding to the tax paid by the company making the distribution in the State in which it is resident ( Test Claimants in the FII Group Litigation , paragraph 51).
88. Where, conversely, those profits are subject in the State of the company making the distribution to a higher level of tax than the tax levied by the Member State of the company receiving them, that Member State is obliged to grant a tax credit only up to the limit of the amount of corporation tax for which the company receiving the dividends is liable. It is not required to repay the difference, that is to say, the amount paid in the State of the company making the distribution which is greater than the amount of tax payable in the Member State of the company receiving it (see Test Claimants in the FII Group Litigation , paragraph 52).
89. In those circumstances the imputation method enables dividends from non‑resident companies to be accorded treatment equivalent to that accorded, by the exemption method, to dividends paid by resident companies. Application of the imputation method to dividends from non‑resident companies makes it possible to ensure that foreign-sourced and nationally-sourced portfolio dividends bear the same tax burden, in particular where the State from which the dividends come applies, in the context of corporation tax, a lower tax rate than that applicable in the Member State where the company receiving the dividends is established. In such a case, exempting dividends from non‑resident companies would give taxpayers that have invested in foreign holdings an advantage compared with those having invested in domestic holdings.
91. As to the administrative burden imposed on the taxpayer in order to qualify for the imputation method, it has already been held that the mere fact that, compared with an exemption system, an imputation system imposes additional administrative burdens on taxpayers cannot be regarded as a difference in treatment which is contrary to the free movement of capital (see, to this effect, Test Claimants in the FII Group Litigation , paragraph 53).
95. It must be borne in mind that the tax authorities of a Member State are entitled to require the taxpayer to provide such proof as they may consider necessary in order to determine whether the conditions for a tax advantage provided for in the legislation at issue have been met and, consequently, whether to grant that advantage (see, to this effect, Case C‑136/00 Danner  [2002] ECR I‑8147, paragraph 50; Case C‑422/01 Skandia and Ramstedt  [2003] ECR I‑6817, paragraph 43; and Case C‑318/07 Persche  [2009] ECR I‑359, paragraph 54).
97. However, inasmuch as a Member State is, in principle, free, to avoid the imposition of a series of charges to tax on portfolio dividends received by a resident company by opting for the exemption method when the dividends are paid by a resident company and for the imputation method when they are paid by a non-resident company established in another Member State or in a non-member State party to the EEA Agreement, additional administrative burdens which are imposed on the resident company, in particular the fact that the national tax authority demands information relating to the tax that has actually been charged on the profits of the company distributing dividends in the State in which the latter is resident, are an intrinsic part of the very operation of the imputation method and cannot be regarded as excessive (see, to this effect, Test Claimants in the FII Group Litigation , paragraphs 48 and 53). In the absence of such information, the tax authorities of the Member State where the company receiving foreign-sourced dividends is established are not, in principle, in a position to determine the amount of corporation tax paid in the State of the company making the distribution that must be credited against the amount of tax payable by the recipient company.
98. Whilst the company receiving dividends does not itself have all the information relating to the corporation tax that has been charged on the dividends distributed by a company established in another Member State or in a non-member State party to the EEA Agreement, such information is known, in any event, to the latter company. Accordingly, any difficulty that the recipient company may have in providing the information required relating to the tax paid by the company distributing dividends is connected not to the inherent complexity of the information but to a possible lack of cooperation on the part of the company that has the information. As the Advocate General states in point 58 of her Opinion, the inadequate flow of information to the investor is not a problem for which the Member State concerned should have to answer.
99. Furthermore, as the Austrian Government observes, the notice of 13 June 2008 has simplified the evidence necessary in order to receive a credit for the foreign tax in that, when calculating the tax paid abroad, account is taken of the following formula. The profit of the company distributing dividends must be multiplied by the nominal rate of corporation tax applicable in the State where that company is established and by the holding of the recipient company in the capital of the company distributing dividends. Such a calculation requires only limited cooperation on the part of the company distributing dividends or of the investment fund when the holding concerned is possessed through such a fund.
100. Finally, as the Austrian, German, Netherlands and United Kingdom Governments and the Commission point out, the fact that, for dividends distributed by companies established in Member States other than the Republic of Austria, the latter’s tax authorities can have recourse to the mechanism of mutual assistance under Directive 77/799 does not mean that they would be required to spare the company receiving dividends the necessity of providing them with proof of the tax paid in another Member State by the company making the distribution.
101. Since Directive 77/799 provides for the possibility for national tax authorities to request information which they cannot obtain themselves, the Court has stated that the use, in Article 2(1) of Directive 77/799, of the word ‘may’ indicates that, whilst those authorities have the possibility of requesting information from the competent authority of another Member State, such a request does not in any way constitute an obligation. It is for each Member State to assess the specific cases in which information concerning transactions by taxable persons established in its territory is lacking and to decide whether those cases justify submitting a request for information to another Member State (Case C‑184/05 Twoh International  [2007] ECR I‑7897, paragraph 32, and Persche , paragraph 65).
102. Consequently, Directive 77/799 does not require the Member State where the company receiving dividends is established to have recourse to the mechanism of mutual assistance for which the directive provides as soon as the information provided by that company is not sufficient to establish whether it fulfils the conditions laid down by the national legislation for application of the imputation method.
109. National legislation such as that at issue in the main proceedings has the effect of discouraging companies established in Austria from investing their capital in companies established in non-member States other than States party to the EEA Agreement. Since dividends that the latter companies pay to companies established in Austria receive less favourable tax treatment than dividends distributed by a company established in Austria, the shares of companies established in non‑member States are less attractive to investors resident in Austria than shares in companies established in Austria (see, to this effect, Test Claimants in the FII Group Litigation , paragraph 166, and A , paragraph 42).
113. In the context of a tax rule, such as that at issue in the main proceedings, which seeks to prevent the economic double taxation of distributed profits, the situation of a corporate shareholder receiving dividends from non‑member States is comparable to that of a corporate shareholder receiving nationally‑sourced dividends in so far as, in each case, the profits made are, in principle, liable to be subject to a series of charges to tax ( Test Claimants in the FII Group Litigation , paragraph 62).
114. In those circumstances, Article 63 TFEU requires a Member State which has a system for preventing economic double taxation as regards dividends paid to resident companies by other resident companies to accord equivalent treatment to dividends paid to resident companies by companies established in a non-member State other than a State party to the EEA Agreement (see, to this effect, Test Claimants in the FII Group Litigation , paragraph 72).
117. It must also be examined whether the restriction resulting from legislation such as that at issue in the main proceedings is justified by overriding reasons in the public interest (see ELISA , paragraph 79).
118. According to the Austrian, German, Italian, Finnish and Netherlands Governments, while a restriction on the movement of capital from non‑member States may be justified, the same does not apply when that restriction concerns capital movements between Member States (see Test Claimants in the FII Group Litigation , paragraph 171, and A , paragraph 37). Those governments take the view that the need to ensure a balanced allocation of the power to tax in relations between Member States and non‑member States other than States party to the EEA Agreement can constitute an overriding reason in the public interest that relieves Member States of the need to give dividends sourced from such non-member States the same tax treatment as dividends from resident companies. They explain that, whilst the Member States are obliged to accord a company established in another Member State the same tax advantages as those that they accord to companies established in their territory, no such obligation exists between the Member States of the European Union and non‑member States in respect of companies established in their respective territories. If Article 63 TFEU were to be considered to oblige a Member State to treat dividends from non‑member States other than States party to the EEA Agreement in the same way as dividends paid by resident companies, the Member States’ freedom of action for negotiating tax conventions and thereby ensuring themselves a balanced allocation of the power to tax in their relationships with the non‑member States would in practice become non‑existent.
119. It is to be recalled that the case-law concerning restrictions on the exercise of the freedoms of movement within the European Union cannot be transposed in its entirety to movements of capital between Member States and non-member States, since such movements take place in a different legal context ( Établissements Rimbaud , paragraph 40 and the case‑law cited).
121. It has already been recognised that a restriction on the exercise of a freedom of movement within the European Union can be justified in order to safeguard the allocation of the power to impose taxes between the Member States (see, to this effect, Case C‑446/03 Marks & Spencer  [2005] ECR I‑10837, paragraph 45; Case C‑231/05 Oy AA  [2007] ECR I‑6373, paragraph 51; and Case C‑414/06 Lidl Belgium  [2008] ECR I‑3601, paragraph 42). Such a justification, which constitutes an overriding reason in the public interest, can therefore, a fortiori , be recognised in the Member States’ relations with non‑member States.
122. However, in order for the difference in treatment between nationally-sourced dividends and dividends from a non‑member State other than a State party to the EEA Agreement to be justified by an overriding reason in the public interest of this kind, the difference must be appropriate for attaining the objective invoked and must not go beyond what is necessary to attain it (see Case C‑250/95 Futura Participations and Singer  [1997] ECR I‑2471, paragraph 26; Case C‑9/02 de Lasteyrie du Saillant  [2004] ECR I‑2409, paragraph 49; and Marks & Spencer , paragraph 35).
123. Treatment of portfolio dividends received by a resident company in the same way whether they come from another resident company or from a company established in a non-member State other than a State party to the EEA Agreement would not result in income normally taxable in the Member State where the recipient company is resident being transferred to the non‑member State concerned (see, to this effect, Glaxo Wellcome , paragraph 87). As the Advocate General states in point 120 of her Opinion, the main proceedings concern not the power to impose taxes in respect of economic activities carried on in national territory, but taxation of foreign income.
126. However, it has been consistently held that a reduction in tax revenue cannot be regarded as an overriding reason in the public interest which may be relied on to justify a measure which is, in principle, contrary to a fundamental freedom (see, inter alia, Manninen , paragraph 49, and Case C‑386/04 Centro di Musicologia Walter Stauffer [2006] ECR I‑8203, paragraph 59).
128. That being so, a lack of reciprocity in relations between Member States and non-member States other than States party to the EEA Agreement cannot justify a restriction on the movement of capital between Member States and those non-member States.
130. It is to be remembered that the framework established by Directive 77/799 for cooperation between the competent authorities of the Member States does not exist between those authorities and the competent authorities of a non‑member State where that State has not entered into any undertaking of mutual assistance (see Commission  v Italy , paragraph 70, and Établissements Rimbaud , paragraph 41).
131. It follows that, where legislation of a Member State makes the grant of a tax advantage dependent on satisfying conditions compliance with which can be verified only by obtaining information from the competent authorities of a non-member State other than a State party to the EEA Agreement, it is in principle legitimate for the Member State to refuse to grant that advantage if ‑ in particular, because that non-member State is not bound under an agreement to provide information ‑ it proves impossible to obtain the requisite information from it (see, by analogy, Établissements Rimbaud , paragraph 44).
136. It follows that where, before 31 December 1993, a Member State has adopted legislation which contains restrictions on capital movements to or from non‑member States which are prohibited by Article 63 TFEU and, after that date, adopts measures which, while also constituting a restriction on such movements, are essentially identical to the previous legislation or do no more than restrict or abolish an obstacle to the exercise of the European Union rights and freedoms arising under that previous legislation, Article 63 TFEU does not preclude the application of those measures to non‑member States when they apply to capital movements involving direct investment ( Test Claimants in the FII Group Litigation , paragraph 196).
137. It has already been held that holdings in a company which are not acquired with a view to the establishment or maintenance of lasting and direct economic links between the shareholder and that company and do not allow the shareholder to participate effectively in the management of that company or in its control cannot be regarded as direct investments ( Test Claimants in the FII Group Litigation , paragraph 196). Since the legislation under examination in the context of the present question concerns only holdings of less than 10% of the share capital of the company making the distribution, it must be held not to fall within the scope ratione materiae of Article 64(1) TFEU.
142. Also, when introducing mechanisms designed to prevent or mitigate distributed profits being liable to a series of charges to tax, it is in principle for Member States to determine the category of taxpayers entitled to benefit from those mechanisms and, for that purpose, to set thresholds based on the shareholdings which taxpayers have in the companies making the distributions ( Test Claimants in the FII Group Litigation , paragraph 67).
146. However, such a question is purely hypothetical and therefore inadmissible (see Joined Cases C‑188/10 and C‑189/10 Melki and Abdeli  [2010] ECR I‑0000, paragraph 27 and the case‑law cited).
155. The Austrian Government submits that Article 63 TFEU does not require it to provide for such carrying-forward. It states that, where profits are subject in the State in which the company making the distribution is resident to a higher level of tax than the tax levied by the State of the company receiving them, the latter State is obliged to grant a tax credit only up to the limit of the amount of corporation tax for which the company receiving the dividends is liable ( Test Claimants in the FII Group Litigation , paragraph 52); likewise, where no domestic tax is paid on the dividends received because the company receiving them suffers a loss in the year of the distribution, the State of the recipient company is not obliged to grant a tax credit, either for the tax year corresponding to that year or, a fortiori , for subsequent tax years.
156. In that regard, it is to be remembered that Article 63 TFEU requires a Member State which has a system for preventing economic double taxation as regards dividends paid to resident companies by other resident companies to accord equivalent treatment to dividends paid to resident companies by non-resident companies ( Test Claimants in the FII Group Litigation , paragraph 72).
158. It follows that, even if dividends distributed by a non‑resident company and received by a resident company do not have corporation tax charged on them in the Member State where the latter company is established in respect of the tax year in which those dividends have been received, the reduction of the losses of the company receiving the dividends is liable to result for that company, if the credit for the tax paid by the company making the distribution is not carried forward, in economic double taxation on the dividends in subsequent tax years when its results are positive (see, to this effect, Case C‑138/07 Cobelfret  [2009] ECR I‑731, paragraphs 39 and 40, and the order in KBC-Bank and Beleggen, Risicokapitaal, Beheer , paragraphs 39 and 40). By contrast, there is no risk of economic double taxation for nationally‑sourced dividends, because the exemption method is applied to them.
161. Contrary to the Austrian Government’s assertions, legislation such as that at issue in the main proceedings cannot be justified by the fact that, when applying the imputation method, a Member State is required to grant a tax credit only up to the limit of the amount of corporation tax for which the companies receiving the dividends are liable (see Test Claimants in the FII Group Litigation , paragraphs 50 and 52).
162. It is true that, according to the case-law, equivalence between the exemption method and the imputation method does not require that, under the latter method, a tax credit be granted for dividends from non-resident companies that exceeds the level of national taxation ( Test Claimants in the FII Group Litigation , paragraphs 50 and 52). Grant of a tax credit up to the limit of the amount of corporation tax for which the companies receiving the dividends are liable is sufficient to eliminate economic double taxation of the dividends distributed.
164. Since, in the context of a tax rule which seeks to prevent or to mitigate the double taxation of distributed profits, the situation of a company receiving foreign‑sourced dividends is comparable to that of a company receiving nationally‑sourced dividends in so far as, in each case, the profits made are, in principle, liable to be subject to a series of charges to tax (see Test Claimants in the FII Group Litigation , paragraph 62), a difference in treatment, such as that at issue in the main proceedings, between nationally‑sourced dividends, on the one hand, and foreign-sourced dividends, on the other, cannot be justified by a difference in situation connected with the place where the capital is invested.
165. Finally, and contrary to the Italian Government’s assertions, the difference in treatment at issue in the main proceedings cannot be justified by the need to prevent artificial arrangements from being set up, within a group of companies to which the company receiving the dividends and the non‑resident company distributing them belong, to alter the source of the dividends with the sole purpose of obtaining tax advantages. Suffice it to state that the national measure at issue in the main proceedings, which restricts the free movement of capital, does not specifically target wholly artificial arrangements which do not reflect economic reality and whose only purpose would be to obtain a tax advantage (see, to this effect, Glaxo Wellcome , paragraph 89 and the case-law cited). Furthermore, as the Advocate General observes in point 160 of her Opinion, the existence of wholly artificial arrangements within a group of companies appears to be ruled out in an instance such as that in the main proceedings, since Salinen received dividends from holdings that constituted less than 10% of the capital of the company making the distribution and were held collectively with other investors through a domestic investment fund.
167. It must be remembered that it is for each Member State to organise, in compliance with European Union law, its system for taxing distributed profits and, in that context, to define the tax base and the tax rate which apply to the shareholder receiving them (see, in particular, Test Claimants in Class IV of the ACT Group Litigation , paragraph 50; Test Claimants in the FII Group Litigation , paragraph 47; and Case C‑194/06 Orange European Smallcap Fund  [2008] ECR I‑3747, paragraph 30).
168. It follows that dividends distributed by a company established in one Member State to a shareholder resident in another Member State are liable to be subject to juridical double taxation where the two Member States choose to exercise their fiscal competence and to subject those dividends to taxation in the hands of the shareholder (Case C‑128/08 Damseaux  [2009] ECR I‑6823, paragraph 26).
169. However, the Court has already ruled that the disadvantages which may arise from the parallel exercise of powers of taxation by different Member States, in so far as such an exercise is not discriminatory, do not constitute restrictions prohibited by the Treaty (Case C‑487/08 Commission  v Spain  [2010] ECR I‑0000, paragraph 56 and the case‑law cited).
170. Since European Union law, as it currently stands, does not lay down any general criteria for the attribution of areas of competence between the Member States in relation to the elimination of double taxation within the European Union, the fact that both the Member State in which the dividends are paid and the Member State in which the shareholder is resident are liable to tax those dividends does not mean that the Member State of residence is obliged, under European Union law, to prevent the disadvantages which could arise from the exercise of competence thus attributed by the two Member States (see Damseaux , paragraphs 30 and 34, and Case C‑96/08 CIBA  [2010] ECR I‑0000, paragraphs 27 and 28).
171. Accordingly, Article 63 cannot be interpreted as obliging a Member State to provide, in its tax legislation, that a credit is to be granted for the withholding tax levied on dividends in another Member State in order to prevent the juridical double taxation – resulting from the parallel exercise by the Member States concerned of their respective powers of taxation – of the dividends received by a company established in the first Member State (see, to this effect, Case C‑513/04 Kerckhaert and Morres  [2006] ECR I‑10967, paragraphs 22 to 24).