Case C‑68/15

X

v

Ministerraad

(Request for a preliminary ruling from the Grondwettelijk Hof)

(Reference for a preliminary ruling — Freedom of establishment — Parent-Subsidiary Directive — Tax legislation — Tax on company profits — Distribution of dividends — Withholding tax — Double taxation — ‘Fairness tax’)

Summary — Judgment of the Court (First Chamber), 17 May 2017

1. Freedom of movement for persons—Freedom of establishment—Tax legislation—Tax on company profits—Distribution of dividends—Levying ‘fairness tax’ on both non-resident and resident companies during a distribution of untaxed dividends—Lawfulness—Condition—Not treating the non-resident company less advantageously than a resident company—Verification a matter for the national court

   (Arts 49 TFEU and 54 TFEU)

2. Approximation of laws—Common system of taxation applicable in the case of parent companies and subsidiaries of different Member States—Directive 2011/96/EU—Exemption, in the Member State of the subsidiary, from withholding tax on profits distributed to the parent company—Withholding tax—Definition—Levying ‘fairness tax’ on both non-resident and resident companies during a distribution of untaxed dividends—Taxing the distributing company, not the holder of the shares—Precluded

   (Council Directive 2011/96, Art. 5)

3. Approximation of laws—Common system of taxation applicable in the case of parent companies and subsidiaries of different Member States—Directive 2011/96—Prevention of double economic taxation—Levying ‘fairness tax’ on both non-resident and resident companies during a distribution of untaxed dividends—Taxation of the profits received by a parent company from its subsidiary during a redistribution of those profits—Taxation exceeding the 5% ceiling provided for in Directive 2011/96 in the event of redistribution after the year of receipt—Not permissible

   (Council Directive 2011/96, Art. 4(1)(a) and (3))

1.  Freedom of establishment must be interpreted as not precluding tax legislation of a Member State, such as that at issue in the main proceedings, under which both a non-resident company conducting an economic activity in that Member State through a permanent establishment and a resident company, including the resident subsidiary of a non-resident company, are subject to a tax such as the ‘fairness tax’ when they distribute dividends which, as a result of the use of certain tax advantages provided for by the national tax system, are not included in their final taxable profits, provided that the method of determining the taxable amount of that tax does not in fact lead to that non-resident company being treated in a less advantageous manner than a resident company, which is for the referring court to ascertain.

   In the context of that verification, the referring court will have to take account of the fact that the legislation at issue in the main proceedings seeks to tax profits falling within Belgian tax jurisdiction that were distributed, but on which that Member State, as a result of the use of certain tax advantages provided for by the national tax system, did not exercise that tax jurisdiction. Therefore, in a situation where the method of calculating the taxable amount of a non-resident company led to that company being taxed even on profits not falling within the tax jurisdiction of that Member State, that non-resident company would be treated less advantageously than a resident company.

   (see paras 48, 61, operative part 1)

2.  Article 5 of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States must be interpreted as not precluding tax legislation of a Member State, such as that at issue in the main proceedings, providing for a tax such as the ‘fairness tax’, to which non-resident companies conducting an economic activity in that Member State through a permanent establishment and resident companies, including the resident subsidiary of a non-resident company, are subject when they distribute dividends which, as a result of the use of certain tax advantages provided for by the national tax system, are not included in their final taxable profits.

   The settled case-law of the Court holds that, in order for a tax to be classified as a withholding tax within the meaning of Article 5 of the Parent-Subsidiary Directive, three cumulative criteria must be satisfied. Thus, first, the tax must be levied in the State in which the dividends are distributed and its chargeable event must be the payment of dividends or of any other income from shares; second, the taxable amount is the income from those shares; and third, the taxable person is the holder of the shares (see, by analogy, judgment of 24 June 2010, P. Ferrero e C. and General Beverage Europe, C‑338/08 and C‑339/08, EU:C:2010:364, paragraph 26 and the case-law cited).

   However, given that the taxable person for the purposes of a tax such as the ‘fairness tax’ is not the holder of the shares but the distributing company, the third condition is not met.

   (see paras 63, 65, 68, operative part 2)

3.  Article 4(1)(a) of Directive 2011/96, read in conjunction with Article 4(3) thereof, must be interpreted as precluding national tax legislation, such as that at issue in the main proceedings, in so far as that legislation, in a situation where profits received by a parent company from its subsidiary are distributed by the parent company after the year in which they were received, has the consequence of subjecting those profits to taxation exceeding the 5% ceiling provided for in that provision.

   In the first place, in providing that the Member State of the parent company and the Member State of the permanent establishment are to ‘refrain from taxing such profits’, that provision prohibits Member States from taxing the parent company or its permanent establishment in respect of the profits distributed by the subsidiary to its parent company, without drawing a distinction based on whether the chargeable event of the taxation of the parent company is the receipt of those profits or their redistribution.

   In the second place, as mentioned in paragraphs 70 and 71 of the present judgment, the Parent-Subsidiary Directive aims to eliminate double taxation of profits distributed by a subsidiary to its parent company at the level of the parent company. Taxation of those profits by the Member State of the parent company in the hands of that company when they are redistributed, which has the effect of subjecting those profits to taxation exceeding in fact the 5% ceiling provided for in Article 4(3) of the directive, would result in double taxation at the level of that company, which is prohibited by that directive.

   (see paras 79, 80, 82, operative part 3)