Case C-128/08

Jacques Damseaux

v

État belge

(Reference for a preliminary ruling from the tribunal de première instance de Liège)

‛Free movement of capital — Taxation of investment income — Double taxation convention — Obligation of the Member States under Article 293 EC’

Judgment of the Court (First Chamber), 16 July 2009   I ‐ 6826

Summary of the Judgment

1. Preliminary rulings — Jurisdiction of the Court — Limits

   (Art. 234 EC)

2. Free movement of capital — Restrictions — Tax legislation — Taxation of dividends

   (Art. 56 EC)

1.  The Court does not have jurisdiction, under Article 234 EC, to rule on a possible infringement, by a contracting Member State, of provisions of bilateral conventions entered into by the Member States designed to eliminate or to mitigate the negative effects of the coexistence of national tax regimes. Nor may the Court examine the relationship between a national measure and the provisions of a double taxation convention, since that question does not fall within the scope of the interpretation of Community law.

   (see para. 22)

2.  In so far as Community law, in its current state, does not lay down any general criteria for the attribution of areas of competence between the Member States in relation to the elimination of double taxation within the European Community, Article 56 EC does not preclude a bilateral tax convention under which dividends distributed by a company established in one Member State to a shareholder residing in another Member State are liable to be taxed in both Member States, and which does not provide that the Member State in which the shareholder resides is unconditionally obliged to prevent the resulting juridical double taxation.

   The dividends distributed by a company established in one Member State to a shareholder residing in another Member State are liable to be subject to judicial double taxation where the two Member States choose to exercise their tax competence and to subject those dividends to taxation in the hands of the shareholder. The disadavantages which could arise from the parallel exercise of tax competences by different Member States, to the extent that such an exercise is not discriminatory, do not constitute restrictions prohibited by the Treaty.

   In a situation where both the Member State in which the dividends are paid and the Member State in which the shareholder resides are liable to tax those dividends, to consider that it is necessarily for the Member State of residence to prevent that double taxation would amount to granting a priority with respect to the taxation of that type of income to the Member State in which the dividends are paid. Although such an attribution of powers would comply, in particular, with the rules of international legal practice as reflected in the model tax convention on income and on capital drawn up by the Organisation for Economic Cooperation and Development (OECD), it is not in dispute that Community law, in its current state and in such a situation, does not lay down any general criteria for the attribution of areas of competence between the Member States in relation to the elimination of double taxation within the Community. Consequently, if a Member State cannot rely on a bilateral convention in order to avoid the obligations imposed on it by the Treaty, the fact that both the Member State in which the dividends are paid and the Member State in which the shareholder resides are liable to tax those dividends does not mean that the Member State of residence is obliged, under Community law, to prevent the disadvantages which could arise from the exercise of competence thus attributed by the two Member States.

   (see paras 26, 27, 32-35, operative part)