Keywords
Summary

Keywords

Approximation of laws - Common system of taxation applicable in the case of parent companies and subsidiaries of different Member States - Directive 90/435 - Exemption, in the Member State of the subsidiary, from withholding tax on the profits distributed to the parent company - Derogation in favour of Portugal - Scope

(Council Directive 90/435, Art. 5(1) and (4))

Summary

$$Article 5(4) of Directive 90/435 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, in so far as it limits to 15% and 10% the amount of the withholding tax on profits distributed by subsidiaries established in Portugal to their parent companies in other Member States, must be interpreted as meaning that that derogation relates not only to corporation tax but also to any taxation, of whatever nature or however described, which takes the form of a withholding tax on dividends distributed by such subsidiaries.

The objective of the Directive, which is to encourage cooperation between companies in several Member States, would be undermined if the Member States were permitted deliberately to deprive companies in other Member States of the benefit of the Directive by subjecting them to taxes having the same effect as a tax on income, even if the name given to the latter places them in another category, such as that of a tax on assets.

( see paras 24, 27 and operative part )