Océ Van der Grinten NV v Commissioners of Inland Revenue.
Date: 2003-09-25
45. As appears particularly from the third recital in its preamble, the Directive seeks, by the introduction of a common system of taxation, to eliminate any disadvantage to cooperation between companies of different Member States as compared with cooperation between companies of the same Member State and thereby to facilitate the grouping together of companies at Community level. Thus, with a view to avoiding double taxation, Article 5(1) of the Directive provides for exemption in the State of the subsidiary from withholding tax upon distribution of profits (Joined Cases C-283/94, C-291/94 and C-292/94  Denkavit and Others  [1996] ECR I-5063, paragraph 22;  Epson Europe , cited above, paragraph 20; and  Athinaiki Zithopiia , cited above, paragraph 25).
46. In order to determine whether the taxation of distributed profits pursuant to the United Kingdom legislation at issue in the main proceedings falls within the scope of Article 5(1) of the Directive, it is necessary, first, to refer to the wording of that provision. The term   " withholding tax"  contained in it is not limited to certain specific types of national taxation (see  Epson Europe , paragraph 22, and  Athinaiki Zithopiia , paragraph 26). Second, it is settled case-law that the nature of a tax, duty or charge must be determined by the Court, under Community law, according to the objective characteristics by which it is levied, irrespective of its classification under national law (see  Athinaiki Zithopiia , paragraph 27, and the case-law cited).
47. The Court has already held that any tax on income received in the State in which dividends are distributed is a withholding tax on distributed profits for the purposes of Article 5(1) of the Directive where the chargeable event for the tax is the payment of dividends or of any other income from shares, the taxable amount is the income from those shares and the taxable person is the holder of the shares (to this effect, see  Epson Europe , paragraph 23, and  Athinaiki Zithopiia , paragraphs 28 and 29).
55. The part of the 5% charge applying to the tax credit to which distribution of the dividend confers entitlement does not possess the characteristics of a withholding tax on distributed profits, in principle prohibited by Article 5(1) of the Directive, because it is not imposed on the profits distributed by the subsidiary.
56. The tax credit is a fiscal instrument designed to avoid double taxation, in economic terms, first in the hands of the subsidiary and then in the hands of the parent company in receipt of the dividends, of the profits distributed as dividends. Thus it does not constitute income from shares.
83. On that basis, Article 5(1) of the Directive establishes the principle that withholding taxes on profits distributed by a subsidiary established in one Member State to its parent company established in another Member State are prohibited. The temporary derogations for the German, Greek and Portuguese tax systems, announced in the fifth recital, are laid down in express terms in Article 5(2), (3) and (4) of the Directive. There is no similar provision establishing an express derogation for the United Kingdom tax system.
86. It is to be remembered that derogations from a general principle are to be interpreted strictly. As regards, in particular, the principle of exemption from withholding tax laid down in Article 5(1) of the Directive, the Court thus held at paragraph 27 of its judgment in  Denkavit and Others , cited above, in relation to Article 3(2) of the Directive that since Article 3(2) constitutes a derogation from that principle it is to be interpreted strictly and that the option which it allows the Member States cannot be given an interpretation going beyond its actual words.
87. In the context of the convention at issue in the main proceedings, the 5% charge was established directly in conjunction with payment of a tax credit which was introduced in order to mitigate the economic double taxation of dividends paid by a subsidiary established in the United Kingdom to its parent company established in the Netherlands. That charge, which amounts to a withholding tax within the meaning of Article 5(1) of the Directive in so far as it is imposed on the dividends, was not, as the Italian Government has pointed out, set at a rate such as to cancel out the effects of that lessening of the economic double taxation of dividends. In any event, any tax paid in the United Kingdom in respect of the dividends remains deductible from the tax due in the Netherlands, pursuant to Article 22(2)(c) of the convention at issue in the main proceedings.
97. As regards the alleged lack of reasoning as to Article 7(2) of the Directive, it is settled case-law that the scope of the obligation to state reasons depends on the nature of the measure in question and, where a measure of general application is involved, the statement of reasons may be confined to indicating the general situation which led to its adoption, on the one hand, and the general objectives which it is intended to achieve, on the other (see, to this effect, Case C-150/94  United Kingdom  v  Council  [1998] ECR I-7235, paragraph 25; Case C-284/94  Spain  v  Council  [1998] ECR I-7309, paragraph 28; and Case C-168/98  Luxembourg  v  Parliament and Council  [2000] ECR I-9131, paragraph 62).
98. Furthermore, the Court has repeatedly held that, if the contested measure clearly discloses the essential objective pursued by the institution, it would be excessive to require a specific statement of reasons for the various technical choices made ( United Kingdom  v  Council , paragraph 26,  Spain  v  Council , paragraph 30, and  Luxembourg  v  Parliament and Council , paragraph 62).
100. As regards the lack of consultation of the Parliament and the Economic and Social Committee, it is clear from the Court ' s settled case-law that the requirement to consult the European Parliament in the legislative procedure, in the cases provided for by the Treaty, means that it must be consulted again whenever the text finally adopted, taken as a whole, differs in essence from the text on which the Parliament has already been consulted (see, to this effect, Case C-392/95  Parliament  v  Council  [1997] ECR I-3213, paragraph 15, and Case C-408/95  Eurotunnel and Others  [1997] ECR I-6315, paragraph 46).