Case C‑591/13
European Commission
v
Federal Republic of Germany
‛Failure of a Member State to fulfil obligations — Tax legislation — Deferral of taxation of capital gains realised on the sale of certain capital assets — Recovery of the tax — Freedom of establishment — Article 49 TFEU — Article 31 of the EEA Agreement — Difference in treatment between permanent establishments located within the territory of a Member State and permanent establishments located within the territory of another Member State of the European Union or of the European Economic Area — Proportionality’
Summary — Judgment of the Court (Third Chamber), 16 April 2015
Actions for failure to fulfil obligations — Right of the Commission to bring judicial proceedings — Limitation period — None — Discretion to choose when to initiate proceedings — Exception — Excessive duration of the pre-litigation procedure prejudicial to the rights of the defence — Burden of proof
(Art. 258 TFEU)
Actions for failure to fulfil obligations — Subject-matter of the dispute — Determination during the pre-litigation procedure — Initial complaints set out in greater detail in the application instituting proceedings — Lawfulness
(Art. 258 TFEU)
Freedom of establishment — Provisions of the Treaty — Scope
(Art. 49 TFEU)
Freedom of establishment — Restrictions — Tax legislation — Deferral of taxation of capital gains realised on the sale of certain capital assets by transferring them to replacement assets — Deferral subject to those assets forming part of the assets of a permanent establishment located within national territory — Restriction on freedom of establishment — Justification — Need to guarantee the coherence of the tax system — None — Maintenance of the division of powers of taxation between the Member States — Disproportionate
(Art. 49 TFEU; EEA Agreement, Art. 31)
International agreements — Agreement establishing the European Economic Area — Freedom of movement for persons — Freedom of establishment — Tax legislation — Deferral of taxation of capital gains realised on the sale of certain capital assets by transferring them to replacement assets — Deferral subject to those assets forming part of the assets of a permanent establishment located within national territory — Restriction on the freedom of establishment — Justification — Need to guarantee the coherence of the tax system — None — Maintenance of the division of powers of taxation between the Member States — Disproportionate
(Art. 49 TFEU; EEA Agreement, Art. 31)
See the text of the decision.
(see paras 14, 15)
See the text of the decision.
(see paras 19-25)
See the text of the decision.
(see paras 54-56)
A Member State fails to fulfil its obligations under Article 49 TFEU and Article 31 of the Agreement on the European Economic Area by adopting and maintaining in force a tax scheme which makes the benefit of the deferral of taxation of the capital gains realised on the sale of a capital asset forming part of the assets of a permanent establishment of the taxable person located within national territory subject to the condition that those capital gains are reinvested in the acquisition of replacement assets forming part of the assets of a permanent establishment of the taxable person located within that territory.
Such a difference in treatment with regard to the deferral of taxation of capital gains is liable to give rise to a cash-flow disadvantage for the taxable person wishing to reinvest those capital gains in order to acquire replacement assets intended for a permanent establishment located within the territory of another Member State. That difference in treatment is at the very least liable to make reinvestment effected outside national territory less attractive than reinvestment effected within that territory, without being explained by an objective difference in situation.
Although taxation of the capital gains at the time of reinvestment of those gains, for the purpose of acquiring replacement assets outside the national territory, may be justified on grounds related to the need to preserve the division of the powers of taxation between the Member States, such national legislation, which has the effect of providing, in all cases, for the immediate recovery of tax on those capital gains at the time of their reinvestment outside the national territory, goes, by reason of the existence of measures which are less restrictive of the freedom of establishment than an immediate recovery of tax, beyond what is necessary to attain the objective related to the need to preserve the division of powers of taxation between the Member States.
The taxable person should be given the choice between, on the one hand, the immediate payment of that tax and, on the other, the deferred payment of that tax, together, where relevant, with interest in accordance with the applicable national legislation.
In so far as a direct link is not established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy, such a restriction cannot be justified by the need to guarantee the coherence of the national tax system.
(see paras 58-60, 67, 72, 74, 83, operative part)
See the text of the decision.
(see paras 79-82, operative part)
Case C‑591/13
European Commission
v
Federal Republic of Germany
‛Failure of a Member State to fulfil obligations — Tax legislation — Deferral of taxation of capital gains realised on the sale of certain capital assets — Recovery of the tax — Freedom of establishment — Article 49 TFEU — Article 31 of the EEA Agreement — Difference in treatment between permanent establishments located within the territory of a Member State and permanent establishments located within the territory of another Member State of the European Union or of the European Economic Area — Proportionality’
Summary — Judgment of the Court (Third Chamber), 16 April 2015
Actions for failure to fulfil obligations — Right of the Commission to bring judicial proceedings — Limitation period — None — Discretion to choose when to initiate proceedings — Exception — Excessive duration of the pre-litigation procedure prejudicial to the rights of the defence — Burden of proof
(Art. 258 TFEU)
Actions for failure to fulfil obligations — Subject-matter of the dispute — Determination during the pre-litigation procedure — Initial complaints set out in greater detail in the application instituting proceedings — Lawfulness
(Art. 258 TFEU)
Freedom of establishment — Provisions of the Treaty — Scope
(Art. 49 TFEU)
Freedom of establishment — Restrictions — Tax legislation — Deferral of taxation of capital gains realised on the sale of certain capital assets by transferring them to replacement assets — Deferral subject to those assets forming part of the assets of a permanent establishment located within national territory — Restriction on freedom of establishment — Justification — Need to guarantee the coherence of the tax system — None — Maintenance of the division of powers of taxation between the Member States — Disproportionate
(Art. 49 TFEU; EEA Agreement, Art. 31)
International agreements — Agreement establishing the European Economic Area — Freedom of movement for persons — Freedom of establishment — Tax legislation — Deferral of taxation of capital gains realised on the sale of certain capital assets by transferring them to replacement assets — Deferral subject to those assets forming part of the assets of a permanent establishment located within national territory — Restriction on the freedom of establishment — Justification — Need to guarantee the coherence of the tax system — None — Maintenance of the division of powers of taxation between the Member States — Disproportionate
(Art. 49 TFEU; EEA Agreement, Art. 31)
See the text of the decision.
(see paras 14, 15)
See the text of the decision.
(see paras 19-25)
See the text of the decision.
(see paras 54-56)
A Member State fails to fulfil its obligations under Article 49 TFEU and Article 31 of the Agreement on the European Economic Area by adopting and maintaining in force a tax scheme which makes the benefit of the deferral of taxation of the capital gains realised on the sale of a capital asset forming part of the assets of a permanent establishment of the taxable person located within national territory subject to the condition that those capital gains are reinvested in the acquisition of replacement assets forming part of the assets of a permanent establishment of the taxable person located within that territory.
Such a difference in treatment with regard to the deferral of taxation of capital gains is liable to give rise to a cash-flow disadvantage for the taxable person wishing to reinvest those capital gains in order to acquire replacement assets intended for a permanent establishment located within the territory of another Member State. That difference in treatment is at the very least liable to make reinvestment effected outside national territory less attractive than reinvestment effected within that territory, without being explained by an objective difference in situation.
Although taxation of the capital gains at the time of reinvestment of those gains, for the purpose of acquiring replacement assets outside the national territory, may be justified on grounds related to the need to preserve the division of the powers of taxation between the Member States, such national legislation, which has the effect of providing, in all cases, for the immediate recovery of tax on those capital gains at the time of their reinvestment outside the national territory, goes, by reason of the existence of measures which are less restrictive of the freedom of establishment than an immediate recovery of tax, beyond what is necessary to attain the objective related to the need to preserve the division of powers of taxation between the Member States.
The taxable person should be given the choice between, on the one hand, the immediate payment of that tax and, on the other, the deferred payment of that tax, together, where relevant, with interest in accordance with the applicable national legislation.
In so far as a direct link is not established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy, such a restriction cannot be justified by the need to guarantee the coherence of the national tax system.
(see paras 58-60, 67, 72, 74, 83, operative part)
See the text of the decision.
(see paras 79-82, operative part)