Case C‑545/19

AllianzGI-Fonds AEVN

v

Autoridade Tributária e Aduaneira

Judgment of the Court (Second Chamber), 17 March 2022

(Reference for a preliminary ruling – Article 63 TFEU – Free movement of capital – Taxation of dividends paid to undertakings for collective investment (UCIs) – Resident and non-resident UCIs – Difference in treatment – Withholding tax imposed solely on dividends paid to non-resident UCIs – Comparability of the situations – Assessment – Account to be taken of the tax regime applicable to shareholders or unitholders in UCIs and of whether resident undertakings are subject to other taxes – None)

1. Freedom to provide services – Free movement of capital – Provisions of the Treaty – Examination of a national measure affecting both freedoms – Criteria for determining the applicable rules

   (Arts 56 and 63 TFEU)

   (see paragraphs 31, 33, 34)

2. Free movement of capital and liberalisation of payments – Restrictions – Tax legislation – Taxation of dividends – Dividends paid to undertakings for collective investment in transferable securities – Exemption, under certain conditions, from withholding tax on nationally sourced dividends paid to resident undertakings – Taxation, by means of withholding tax, of nationally sourced dividends paid to undertakings resident in another Member State – Examination of comparability of a cross-border situation with an internal situation – Taking into account of the objective pursued by the national provisions – Prevention or mitigation of a series of charges to tax or economic double taxation – Member State in which the dividends are sourced exercising its power of taxation on the income received by non-resident undertakings – – Objectively comparable situations

   (Art. 63 TFEU)

   (see paragraphs 49, 59, 60, 63-66, 68, 69, 72, 74)

3. Free movement of capital and liberalisation of payments – Restrictions – Tax legislation – Taxation of dividends – Dividends paid to undertakings for collective investment in transferable securities – Exemption, under certain conditions, from withholding tax on nationally sourced dividends paid to resident undertakings – Taxation, by means of withholding tax, of nationally sourced dividends paid to undertakings resident in another Member State – Not permissible – Justification – None

   (Art. 63 TFEU)

   (see paragraphs 78-85 and operative part)

Résumé

AllianzGI-Fonds, an open-ended undertaking for collective investment (UCI), formed under German legislation and resident for tax purposes in Germany, is exempt there from corporation tax under national law. That tax status prevents it from recovering taxes paid abroad in the form of a tax credit in respect of international double taxation or from requesting any repayment of those taxes.

In 2015 and 2016, AllianzGI-Fonds held shares in various companies formed in Portugal. The dividends which it received on that basis during that period were taxed, in Portugal, at source in full discharge of its liability at a rate of 25%. AllianzGI-Fonds brought an action before the referring court seeking annulment of the acts by which the Portuguese tax authorities had withheld that tax at source. AllianzGI-Fonds submits that it is subject to less favourable tax treatment than UCIs that are resident in Portugal and receive dividends from resident companies, since they are exempt from corporation tax as regards dividends paid to them by resident companies. On that basis, AllianzGI-Fonds alleges, inter alia, a restriction on the free movement of capital prohibited by Article 63 TFEU.

The referring court asks the Court of Justice for a preliminary ruling on the compatibility with EU law of legislation under which dividends distributed by resident companies to a non-resident UCI are subject to a withholding tax, whereas dividends distributed to a resident UCI are exempt from such a withholding tax. By its judgment, the Court held that such legislation is not compatible with Article 63 TFEU.

Findings of the Court

After first determining the applicable freedom of movement as the free movement of capital, the Court carried out an analysis of a possible restriction on that freedom. In that regard, it states that the fact that the Portuguese legislation allows only resident UCIs to obtain the exemption from a withholding tax constitutes a less favourable treatment of dividends paid to non-resident UCIs which is liable to discourage, on the one hand, non-resident UCIs from investing in Portuguese companies and, on the other hand, investors resident in Portugal from acquiring shares in non-resident UCIs.

That difference in treatment is compatible with EU law only if it relates to situations which are not objectively comparable or if it is justified by an overriding reason in the public interest.

As regards the comparability of the situations concerned, it should be noted that the Portuguese Government submits, in essence, that the respective situations of resident and non-resident UCIs are not objectively comparable because, first, the taxation of dividends received by those two categories of investment undertakings from companies resident in Portugal is governed by different taxation techniques – namely, such dividends are subject to withholding tax when paid to a non-resident UCI whereas they are subject to stamp duty as well as to the specific tax provided for in Article 88(11) of the Corporation Tax Code when paid to a resident UCI. Second, the Portuguese Government submits that dividends distributed by resident UCIs to shareholders or unitholders resident in Portuguese territory are taxed at a rate varying between 25% and 28%, whereas dividends paid to shareholders or unitholders who do not reside in Portuguese territory are, in principle, exempt from personal income tax and corporation tax.

According to the case-law, different treatment of the taxation of dividends according to whether taxpayers are resident or non-resident, resulting from the application of two different methods of taxation, may be justified. However, subject to verification by the referring court, the national legislation at issue in the main proceedings does not merely lay down detailed rules for the collection of tax which differ depending on the place of residence of the UCI receiving nationally sourced dividends, but provides, in fact, for the imposition of systematic taxation of those dividends only on non-resident undertakings.

The Court examines, first, the Portuguese Government’s argument alleging, in essence, that the situations concerned are not comparable, on account of the existence, in the Portuguese tax regime, of taxes to which resident UCIs alone are subject. In particular, although nationally sourced dividends received by a resident UCI may be subject to specific taxation under the national legislation at issue, that taxation is provided for only in limited situations, with the result that it cannot be treated in the same way as the general tax applicable to nationally sourced dividends received by non-resident UCIs. Non-resident UCIs are therefore not in an objectively different situation from resident UCIs with regard to the taxation of dividends from Portuguese sources.

Second, in so far as the Portuguese Government’s arguments relate to the alleged need to take account of the situation of shareholders or unitholders, the Court points out that, according to the case-law, the comparability of the situations concerned must be examined having regard to the objective pursued by the national provisions at issue and the purpose and content of those provisions. Moreover, only the relevant distinguishing criteria established by the legislation concerned must be taken into account in determining whether the difference in treatment resulting from that legislation reflects situations which are objectively different.

In the present case, the Portuguese Government submits that the Portuguese regime on the taxation of dividends was conceived in accordance with the logic of ‘exit taxation’. ( 1 ) That regime was intended to achieve objectives such as, in particular, the avoidance of international economic double taxation and the transfer of taxation from the UCIs to the shareholders or unitholders, so that the taxation of that income is approximately equivalent to that which would have been applied if that income had been obtained directly by the shareholders or unitholders in those UCIs.

As regards the relevant distinguishing criteria, the Court finds that the only distinguishing criterion established by the national legislation at issue in the main proceedings, since it relates solely to the place of residence of the UCIs, does not make it possible to conclude that there is an objective difference between the situations of resident and non-resident entities.

As regards the possible existence of an overriding reason in the public interest capable of justifying the restriction found to exist, the Court considers, in the first place, that, in the absence of a direct link between the exemption from withholding tax on nationally‑sourced dividends received by a resident UCI and the taxation of those dividends as income of the shareholders or unitholders in that undertaking, the justification based on the need to preserve the coherence of the national tax regime should be rejected. In the second place, as regards the need to preserve a balanced allocation of the power of taxation between the Portuguese Republic and the Federal Republic of Germany, the Court points out that, where a Member State has chosen, as in the situation at issue in the main proceedings, not to tax resident UCIs 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 of taxation in order to justify the taxation of non-resident UCIs in receipt of such income.

( 1 ) Meaning that UCIs established and operating in accordance with Portuguese legislation are exempt from income tax, the burden of that tax being transferred to the shareholders or unitholders who are residents, while non-resident shareholders or unitholders are exempt.