Emerging Markets Series of DFA Investment Trust Company v Dyrektor Izby Skarbowej w Bydgoszczy.
Date: 2014-04-10
20. In that regard, it must be recalled that, under Article 83 of the Court’s Rules of Procedure, the Court may at any time, after hearing the Advocate General, order the reopening of the oral part of the procedure, in particular if it considers that it lacks sufficient information or where a party has, after the close of that part of the procedure, submitted a new fact which is of such a nature as to be a decisive factor for the decision of the Court (see Joined Cases C‑228/12 to C‑232/12 and C‑254/12 to C‑258/12 Vodafone Omnitel and Others [2013] ECR, paragraph 26).
25. In that regard, it follows from the Court’s case-law that the tax treatment of dividends may fall within the scope of Article 49 TFEU on freedom of establishment and Article 63 TFEU on the free movement of capital and, as regards the question whether national legislation falls within the scope of one or other of the freedoms of movement, the purpose of the legislation concerned must be taken into consideration (see, to that effect, Case C‑35/11 Test Claimants in the FII Group Litigation [2012] ECR, paragraphs 89 and 90 and case-law cited).
26. In particular, 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 scope of freedom of establishment (see Test Claimants in the FII Group Litigation , paragraph 91 and case-law cited).
27. It follows that, as regards dividends originating in a third country, where it is apparent from the purpose of such national legislation that it is 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, neither Article 49 TFEU nor Article 63 TFEU may be relied upon (see Test Claimants in the FII Group Litigation , paragraph 98).
28. 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 Test Claimants in the FII Group Litigation , paragraph 92).
29. In a context which relates to the tax treatment of dividends originating in a third country, it is clear that it is sufficient to examine the purpose of national legislation in order to assess whether the tax treatment of dividends originating in a third country falls within the scope of the FEU Treaty provisions on the free movement of capital (see, to that effect, Test Claimants in the FII Group Litigation , paragraph 96).
30. In that regard, the Court has stated that national rules relating to the tax treatment of dividends from a third country which do not apply exclusively to situations in which the parent company exercises decisive influence over the company paying the dividends must be assessed in the light of Article 63 TFEU. A company established in a Member State may therefore rely on that provision in order to call into question the legality of such rules, irrespective of the size of its investment in the company paying dividends established in a third country (see, to that effect, Test Claimants in the FII Group Litigation , paragraph 99).
31. It is important however to ensure that the interpretation of Article 63(1) TFEU as regards relations with third countries does not enable economic operators who do not fall within the limits of the territorial scope of freedom of establishment to profit from that freedom (see, to that effect, Test Claimants in the FII Group Litigation , paragraph 100).
38. It must be recalled at the outset that while direct taxation falls within their competence, Member States must none the less exercise that competence in accordance with European Union law (Joined Cases C‑338/11 to C‑347/11 Santander Asset Management SGIIC and Others [2012] ECR, paragraph 14 and case-law cited).
39. In that regard, it follows from the Court’s 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‑101/05 A [2007] ECR I‑11531, paragraph 40; Joined Cases C‑436/08 and C‑437/08 Haribo Lakritzen Hans Riegel and Österreichische Salinen [2011] ECR I‑305, paragraph 50, and Santander Asset Management SGIIC and Others , paragraph 15).
42. That difference in the tax treatment of dividends as between resident and non‑resident investment funds may discourage, on the one hand, investment funds established in a non-Member country from investing in companies established in Poland, and, on the other hand, investors resident in Poland from acquiring shares in non-resident investment funds (see, to that effect, Santander Asset Management SGIIC and Others , paragraph 17).
47. As regards the temporal criterion laid down by Article 64(1) TFEU, it is apparent from the Court’s settled case-law that while it is, in principle, for the national court to determine the content of the legislation which existed on a date laid down by a European Union measure, it is for the Court of Justice to provide guidance on interpreting the concept of European Union law which constitutes the basis of a derogation under European Union law for national legislation ‘existing’ on a particular date (see, to that effect, Case C‑446/04 Test Claimants in the FII Group Litigation [2006] ECR I‑11753, paragraph 191).
48. In that context, the Court has held that any national measure adopted after a date thus fixed is not, by that fact alone, automatically excluded from the derogation laid down in the European Union measure in question. A provision which is, in essence, identical to the previous legislation, or limited to reducing or eliminating an obstacle to the exercise of rights and freedoms established by European Union law in the earlier legislation, will be covered by the derogation. By contrast, legislation based on an approach which differs from that of the previous law and establishes new procedures cannot be treated as legislation existing at the date fixed in the European Union measure in question (see Case C‑446/04 Test Claimants in the FII Group Litigation , paragraph 192, and Case C‑157/05 Holböck [2007] ECR I‑4051, paragraph 41).
50. Accordingly, as stated by the Advocate General in Point 57 of his Opinion, a restriction, within the meaning of the Treaty provisions relating to free movement of capital, which was maintained after 31 December 1993 did not exist before that date.
51. On 31 December 1993 the dividends paid by Polish companies to non-resident entities were subject to the same deduction of tax at source as those paid to entities established in Poland, namely tax at a reduced rate, pursuant to a double taxation convention entered into by the Republic of Poland and the State concerned. The Law of 28 August 1997, referred to in paragraph 49 of this judgment, first introduced a restriction, since that law created a difference of treatment between resident and non-resident investment funds, by exempting the former from liability to deduction of tax at source and the administrative procedures associated with a flat-rate levy of the tax on dividends distributed to them.
52. Consequently, the national legislation at issue in the main proceedings cannot be regarded as an existing restriction on 31 December 1993, since what constitutes a restriction on the free movement of capital, namely the tax exemption provided for in Article 6(1)(10) of the law on corporation tax, was introduced subsequently, is based on an approach which differs from that of the previous law, and establishes a new procedure, within the meaning of the case-law cited in paragraph 48 of this judgment.
55. 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 based on 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; Case C‑510/08 Mattner [2010] ECR I‑3553, paragraph 32; and Haribo Lakritzen Hans Riegel and Österreichische Salinen , paragraph 56).
56. The derogation provided for in Article 65(1)(a) TFEU is itself limited by Article 65(3) TFEU, which provides that the national provisions referred to in Article 65(1) TFEU ‘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’ (see Haribo Lakritzen Hans Riegel and Österreichische Salinen , paragraph 57).
57. The differences in treatment authorised by Article 65(1)(a) TFEU must thus be distinguished from discrimination prohibited by Article 65(3) TFEU. It is clear from the Court’s case-law that, if national tax legislation such as that at issue in the main proceedings is to be regarded as compatible with the provisions of the Treaty on the free movement of capital, the difference in treatment which it prescribes must concern situations which are not objectively comparable or be justified by an overriding reason in the public interest (see Haribo Lakritzen Hans Riegel and Österreichische Salinen , paragraph 58 and case-law cited).
Whether the situations are objectively comparable
58. As regards the question of comparability, it must first be stated that in the context of a tax rule, such as that at issue in the main proceedings, which seeks to exempt from tax profits distributed by resident companies, the situation of a resident investment fund receiving profits is comparable to that of a non-resident investment fund receiving profits in so far as, in each case, the profits made are, in principle, liable to be subject to economic double taxation or a series of charges to tax (see, to that effect, Case C‑446/04 Test Claimants in the FII Group Litigation , paragraph 62; Harib o Lakritzen Hans Riegel and Österreichische Salinen , paragraph 113; Case C‑284/09 Commission  v Germany [2011] ECR I‑9879, paragraph 56; and Santander Asset Management SGIIC and Others , paragraph 42 and case-law cited).
59. Yet, since it is solely because of the exercise by the Republic of Poland of its power to tax that, irrespective of any taxation in another non-Member State, a risk of a series of charges to tax or economic double taxation may arise, Article 63 TFEU obliges that Member State, which establishes a tax exemption, with regard to dividends paid to resident traders by companies which are also resident, to accord equivalent treatment to dividends paid to traders established in non‑Member States (see, to that effect, Case C‑446/04 Test Claimants in the FII Group Litigation , paragraph 72; Haribo Lakritzen Hans Riegel and Österreichische Salinen , paragraph 60; and Commission  v Germany , paragraph 57).
61. Secondly, it must be borne in mind that only the distinguishing criteria for taxing distributed profits established by the national tax legislation at issue in the main proceedings are to be taken into account in determining whether situations subject to differential treatment are objectively comparable (see, to that effect, Santander Asset Management SGIIC and Others , paragraph 28).
63. In the light of that distinguishing criterion, the assessment of whether the situations are comparable must be carried out only at the level of the investment vehicle, since the rules at issue do not take into account the tax situation of their unit-holders (see, to that effect, Santander Asset Management SGIIC and Others , paragraphs 32, 39 and 41).
70. That being established, it remains to be examined whether the restriction resulting from national rules, such as that at issue in the main proceedings, is justified by overriding reasons in the public interest (see Haribo Lakritzen Hans Riegel and Österreichische Salinen , paragraph 63 and case-law cited).
Whether there is an overriding reason in the public interest
– The need to guarantee the effectiveness of fiscal supervision
71. It is settled case-law that the need to guarantee the effectiveness of fiscal supervision constitutes an overriding reason in the public interest capable of justifying a restriction on the exercise of fundamental freedoms guaranteed by the Treaty (Case C‑493/09 Commission  v Portugal [2011] ECR I‑9247, paragraph 42 and case-law cited).
81. Admittedly, according to the Court’s case-law, in relations between Member States of the European Union, it cannot be excluded, a priori , that a taxpayer may be able to provide relevant documentary evidence enabling the tax authorities of the Member State of taxation to ascertain, clearly and precisely, that he meets equivalent requirements to those laid down by the national law at issue in his State of residence (see, to that effect, A , paragraph 59, and Commission  v Portugal , paragraph 46).
82. However, that case-law 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 ( A , paragraph 60; Case C‑540/07 Commission  v Italy  [2009] ECR I‑10983, paragraph 69; Case C‑72/09 Établissements Rimbaud  [2010] ECR I‑10659, paragraph 40; and Haribo Lakritzen Hans Riegel and Österreichische Salinen , paragraph 65).
83. It must 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; Établissements Rimbaud , paragraph 41; and Haribo Lakritzen Hans Riegel and Österreichische Salinen , paragraph 66).
84. It follows from the foregoing that the justification based on the need to maintain the effectiveness of fiscal supervision can only be accepted where the legislation of a Member State makes entitlement to a tax advantage dependent on the satisfaction of conditions compliance with which can be verified only by obtaining information from the competent authorities of a non-Member State and where, because that non-Member State is not bound under an agreement to provide information, it proves impossible to obtain that information from it (see Haribo Lakritzen Hans Riegel and Österreichische Salinen , paragraph 67 and case-law cited).
85. However, unlike the cases which gave rise to the judgments cited in paragraph 82 of this judgment, where there was no obligation under an agreement on the non-Member State concerned to provide information, with the result that the Court ruled out the possibility that the taxpayer himself could provide the evidence required for the correct determination of the taxes concerned, in so far as concerns the main proceedings, there does exist a regulatory framework of mutual administrative assistance established between the Republic of Poland and the United States of America which permits the exchange of information which may be required for the application of the tax legislation.
91. It must be recalled that the Court has previously held that the need to safeguard such coherence may justify rules that are liable to restrict fundamental freedoms ( Santander Asset Management SGIIC and Others , paragraph 50 and case-law cited).
92. However, for an argument based on such a justification to succeed, a direct link must be established, according to settled case‑law, between the tax advantage concerned and the compensating of that advantage by a particular tax levy, with the direct nature of that link falling to be examined in the light of the objective pursued by the rules in question ( Santander Asset Management SGIIC and Others , paragraph 51 and case-law cited).
98. According to the Court’s settled case-law, it must be recalled 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 ( Santander Asset Management SGIIC and Others , paragraph 47 and case-law cited).
99. However, where a Member State has chosen not to tax resident investment funds in receipt of nationally-sourced dividends, it cannot rely on the argument that there is a need to ensure a balanced allocation between the Member States of the power to tax in order to justify the taxation of non-resident investment funds in receipt of such income (see, to that effect, Santander Asset Management SGIIC and Others , paragraph 48 and case-law cited).
100. In that regard, it cannot validly be maintained that that case-law is not applicable to relations between Member States and non-Member States, since a lack of reciprocity in such relations, as relied on by the German Government, cannot justify a restriction on movements of capital between Member States and those non-Member States (see, to that effect, Haribo Lakritzen Hans Riegel and Österreichische Salinen , paragraph 128).
102. In that respect, suffice it to recall that, in accordance with the Court’s settled case-law, diminution of tax revenue cannot be regarded as an overriding reason in the public interest which may be relied upon in order to justify a measure which is, in principle, contrary to a fundamental freedom ( Haribo Lakritzen Hans Riegel and Österreichische Salinen , paragraph 126).
108. In that connection, regard must be had to the Court’s settled case-law to the effect that the interpretation which, in the exercise of the jurisdiction conferred on it by Article 267 TFEU, the Court gives to a rule of European Union law clarifies and defines the meaning and scope of that rule as it must be or ought to have been understood and applied from the time of its entry into force. It follows that the rule as so interpreted may, and must, be applied by the courts to legal relationships arising and established before the judgment ruling on the request for interpretation, provided that in other respects the conditions enabling an action relating to the application of that rule to be brought before the courts having jurisdiction are satisfied ( Santander Asset Management SGIIC and Others , paragraph 58 and case-law cited).
109. It is only quite exceptionally that the Court may, in application of the general principle of legal certainty inherent in the legal order of the European Union, be moved to restrict for any person concerned the opportunity of relying on a provision which it has interpreted with a view to calling into question legal relationships established in good faith. Two essential criteria must be fulfilled before such a limitation can be imposed: those concerned must have acted in good faith and there must be a risk of serious difficulties ( Santander Asset Management SGIIC and Others , paragraph 59 and case-law cited).
110. More specifically, the Court has taken that step only in quite specific circumstances, where there was a risk of serious economic repercussions owing in particular to the large number of legal relationships entered into in good faith on the basis of rules considered to be validly in force and where it appeared that individuals and national authorities had been led to adopt practices which did not comply with European Union law by reason of objective, significant uncertainty regarding the implications of European Union provisions, to which the conduct of other Member States or the Commission may even have contributed ( Santander Asset Management SGIIC and Others , paragraph 60 and case-law cited).
111. As regards the Polish Government’s argument concerning the far‑reaching consequences which the judgment to be delivered by the Court might have for the Polish budget, it is settled case‑law that the financial consequences which might ensue for a Member State from a preliminary ruling do not in themselves justify limiting the temporal effects of the ruling ( Santander Asset Management SGIIC and Others , paragraph 62 and case-law cited).