Keywords
Summary

Keywords

1. Freedom of movement for persons – Freedom of establishment – Tax legislation

(Arts 43 EC and 48 EC)

2. Freedom of movement for persons – Freedom of establishment – Tax legislation

(Arts 43 EC and 48 EC)

Summary

1. Article 43 EC and Article 48 EC preclude national legislation which, in imposing a liability to tax on dividends paid to a non-resident parent company and allowing resident parent companies almost full exemption from such tax, constitutes a discriminatory restriction on freedom of establishment.

Such a difference in the tax treatment of dividends between parent companies, based on the location of their registered office, makes it less attractive for companies established in other Member States to exercise freedom of establishment and they may, in consequence, refrain from acquiring, creating or maintaining a subsidiary in the State which adopts that measure, and constitutes a restriction on freedom of establishment, which is, in principle, prohibited by Article 43 EC and Article 48 EC.

It is true that, in the context of measures laid down by a Member State in order to prevent or mitigate the imposition of a series of charges to tax on, or the double taxation of, profits distributed by a resident company, resident shareholders receiving dividends are not necessarily in a situation which is comparable to that of shareholders receiving dividends who are resident in another Member State. However, as soon as a Member State, either unilaterally or by way of a convention, imposes a charge to tax on the income, not only of resident shareholders, but also of non-resident shareholders, from dividends which they receive from a resident company, the situation of those non‑resident shareholders becomes comparable to that of resident shareholders.

Once a Member State has chosen to relieve its residents of the imposition of a series of charges to tax on the profits of subsidiaries which are distributed by way of dividend to the parent companies of those subsidiaries, it must extend that relief to non-residents to the extent to which an imposition of that kind on those non-residents results from the exercise of its tax jurisdiction over them.

(see paras 29-30, 34-35, 37, 41, operative part 1)

2. Article 43 EC and Article 48 EC preclude national legislation which imposes, only as regards non-resident parent companies, a withholding tax on dividends paid by resident subsidiaries, even if a tax convention between the Member State in question and another Member State, authorising that withholding tax, provides for the tax due in that other State to be set off against the tax charged in accordance with the disputed system, whereas a parent company is unable to set off tax in that other Member State, in the manner provided for by that convention.

Irrespective of its extent, the difference in tax treatment resulting from the application of such a convention and legislation constitutes discrimination against parent companies on the basis of their registered office, which is incompatible with the freedom of establishment guaranteed by the Treaty.

(see paras 49, 56, operative part 2)