Language of document : ECLI:EU:C:1999:566

JUDGMENT OF THE COURT

18 November 1999 (1)

(Freedom of establishment — Payment made by a Swedish company to itssubsidiary — Exemption from corporation tax)

In Case C-200/98,

REFERENCE to the Court under Article 177 of the EC Treaty (now Article 234EC) by the Regeringsrätten, Sweden, for a preliminary ruling in the proceedingspending before that court between

X AB,

Y AB

and

Riksskatteverket

on the interpretation of Article 52 of the EC Treaty (now, after amendment,Article 43 EC), Article 53 of the EC Treaty (repealed by the Treaty ofAmsterdam), Article 54 of the EC Treaty (now, after amendment, Article 44 EC),Article 55 of the EC Treaty (now Article 45 EC), Articles 56 and 57 of the ECTreaty (now, after amendment, Articles 46 EC and 47 EC) and Articles 58, 73band 73d of the EC Treaty (now Articles 48 EC, 56 EC and 58 EC),

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, J.C. Moitinho de Almeida,D.A.O. Edward (Rapporteur), L. Sevón, R. Schintgen (Presidents of Chambers),C. Gulmann, P. Jann, H. Ragnemalm and M. Wathelet, Judges,

Advocate General: A. Saggio,


Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

—    Riksskatteverket, by K.-G. Kjell, Avdelningsdirektör at the Riksskatteverket,

—    the Commission of the European Communities, by H. Michard and K.Simonsson, of its Legal Service, and F. Riddy, a national official onsecondment to its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of the Swedish Government, represented byA. Kruse, Departementsråd at the Ministry of Foreign Affairs, acting as Agent; ofthe Netherlands Government, represented by A. Fierstra, Head of the EuropeanLaw Department at the Ministry of Foreign Affairs, acting as Agent; and of theCommission, represented by K. Simonsson and F. Riddy, at the hearing on 20 April1999,

after hearing the Opinion of the Advocate General at the sitting on 3 June 1999,

gives the following

Judgment

1.
    By order of 29 April 1998, received at the Court on 22 May 1998, theRegeringsrätten (Swedish Supreme Administrative Court) referred to the Court fora preliminary ruling under Article 177 of the EC Treaty (now Article 234 EC) aquestion on the interpretation of Article 52 of the EC Treaty (now, afteramendment, Article 43 EC), Article 53 of the EC Treaty (repealed by the Treatyof Amsterdam), Article 54 of the EC Treaty (now, after amendment, Article 44EC), Article 55 of the EC Treaty (now Article 45 EC), Articles 56 and 57 of theEC Treaty (now, after amendment, Articles 46 EC and 47 EC) and Articles 58, 73band 73d of the EC Treaty (now Articles 48 EC, 56 EC and 58 EC).

2.
    The question has been raised in proceedings brought by two Swedish companies,X AB and Y AB, against a preliminary decision delivered by theSkatterättsnämnden (Revenue Law Commission).

3.
    In the Swedish legal system, the Regeringsrätten is the body to which appealsagainst decisions of the Skatterättsnämnden may be made. Under Lagen(1951:442) om Förhandsbesked i Taxeringsfrågor (Law on Preliminary Decisionson Tax Matters 1951:442), the Skatterättsnämnden has jurisdiction to deliver, uponapplication by taxpayers, binding preliminary decisions on the application of taxlegislation, in particular national or local direct taxes.

4.
    As part of a group reorganisation, the Swedish companies X AB, which is theparent company, and Y AB, its subsidiary, applied in June 1996 to theSkatterättsnämnden for a preliminary decision on the application to them, for theyears 1997 to 1999, of the provisions governing intra-group transfers contained inArticle 2(3) of Lagen (1947:576) om Statlig Inkomstskatt (Law on State IncomeTax 1947:576, hereinafter 'the SIL‘). This provides that, on certain conditions,transfers between companies belonging to the same group may benefit from taxrelief. Under that rule, if a Swedish company owns more than nine tenths of theshares in another Swedish company, intra-group transfers between the firstcompany and the second company are treated as deductible expenses for thetransferring company and as taxable income for the transferee. The aim of thatgroup transfer rule is to prevent the tax burden borne by a business carried on bya number of undertakings in a group from being greater than if it is carried on bya single undertaking.

5.
    When the application for a preliminary decision was made, the group concernedowned 99.8% of the shares in Y AB. Approximately 58% of those shares wasowned directly by X AB. Subsidiaries controlled entirely by the latter companyheld the rest of the share capital of Y AB.

6.
    A preliminary decision was sought from the Skatterättsnämnden on in particularthe possibility of obtaining in three different cases the tax relief provided for byArticle 2(3) of the SIL.

7.
    In the first case, the shares in Y AB would be owned exclusively by X AB and itsSwedish subsidiary which it controls entirely. In the second case, the companyZ BV, a Netherlands subsidiary which X AB owns entirely, would acquire 15% ofthe shares in Y AB. In the third case, Z BV and the company Y GmbH, which isa German subsidiary wholly owned by X AB, would each acquire 15% of the sharesin Y AB.

8.
    On 22 November 1996, the Skatterättsnämnden delivered its preliminary decisionon the application made by the companies X AB and Y AB. As regards the firstcase, it considered that the rule in the first subparagraph of Article 2(3) of the SILdid not allow an intra-group transfer to benefit from the relief provided for in thatprovision. That rule requires that the Swedish company must own more than ninetenths of the shares in the other Swedish company. However, the transfer couldbenefit from those effects under the merger rule in the second subparagraph, which

extends the tax relief to transfers made by a parent company to a subsidiary whichit does not wholly own if throughout the tax year the ownership relationships weresuch that, as a result of the mergers between the parent company and thesubsidiary, the latter could have been absorbed by the parent company.

9.
    As regards the second case, the Skatterättsnämnden considered that the same rulewas applicable. It explained that, although only Swedish companies could benefitfrom this rule, it was clear from the case-law of the Regeringsrätten that it wouldbe contrary to the clause prohibiting discrimination on grounds of ownershipcontained in a convention for the prevention of double taxation, such as thatconcluded between the Kingdom of Sweden and the Kingdom of the Netherlands,for companies established in those Member States to be refused the possibility ofcarrying out intra-group transfers with the related tax advantages provided for bythe SIL.

10.
    However, in the third case, the Skatterättsnämnden ruled that the merger rule didnot apply. This ruling was based on the fact that the case-law of theRegeringsrätten prohibited the cumulative application of two double-taxationagreements such as those which had been concluded between the Kingdom ofSweden, on the one hand, and the Federal Republic of Germany and the Kingdomof the Netherlands, on the other. According to that case-law, the simultaneousapplication of two or more agreements is excluded because the provisions of eachof those agreements are meant to be applied only to undertakings of the signatoryStates and not to those of third States. The Skatterättsnämnden also ruled out thepossibility that the result at which it had arrived could be affected by Communitylaw.

11.
    The companies X AB and Y AB appealed against that preliminary decision to theRegeringsrätten. They argued that, as regards the refusal of tax relief for intra-group transfers in the third case, the decision arrived at by the Skatterättsnämndenconstituted discrimination prohibited by the Treaty in that it was contrary inparticular to Article 6 of the EC Treaty (now, after amendment, Article 12 EC)and Articles 52, 58 and 73b of that Treaty.

12.
    Taking the view that an interpretation of Community law was needed in order todecide the case, the Regeringsrätten stayed proceedings and referred the followingquestion to the Court for a preliminary ruling:

'Under Article 2(3) of Law 1947:576 on State Income Tax, an intra-group transferis treated, under certain conditions, as having fiscal effect if it is made by a Swedishlimited liability company to another Swedish limited liability company which iswholly owned either by the first-named company directly or by that companytogether with a wholly-owned Swedish subsidiary or subsidiaries. The fiscal resultis the same if one, or more, of the wholly-owned subsidiaries is foreign providedthat they have their seat in one and the same Member State and Sweden hasconcluded with that State a double-taxation agreement containing a non-discrimination clause. Against that background, is it compatible with existingCommunity law, in particular Article 52 in combination with Article 58 and Article73b and d of the Treaty of Rome, to apply a set of rules under which an intra-group transfer is not treated as having the same fiscal effect when the Swedishparent company instead owns the recipient company together with two or morewholly-owned foreign subsidiaries which have their seat in different Member Stateswith which Sweden has concluded a double-taxation agreement containing a non-discrimination clause?‘

Admissibility of the reference for a preliminary ruling

13.
    It should first be considered whether the Regeringsrätten may be regarded as a'national court or tribunal‘ for the purposes of Article 177 of the Treaty when itrules on an appeal from a preliminary decision delivered by theSkatterättsnämnden. It will then be necessary to verify that the Court is beingasked for an interpretation of Community law in the context of a genuine disputeand not in a purely hypothetical case.

14.
    It is settled case-law that in order to determine whether a body making a referencefor a preliminary ruling is a court or tribunal within the meaning of Article 177 ofthe Treaty, which is a question governed by Community law alone, the Court willtake account of a number of factors, such as whether the referring body isestablished by law, whether it is permanent, whether its jurisdiction is compulsory,whether its procedure is inter partes, whether it applies rules of law and whether itis independent (see Case 61/65 Vaassen (née Göbbels) [1966] ECR 261, at 272 and273, and Case C-54/96 Dorsch Consult [1997] ECR I-4961, paragraph 23).

15.
    Furthermore, national courts may refer questions to the Court only if there is acase pending before them and they are called upon to give judgment in proceedingsintended to lead to a decision of a judicial nature (see, in particular, the order of18 June 1980 in Case 138/80 Borker [1980] ECR 1975, paragraph 4 and thejudgment in Case C-134/97 Victoria Film [1998] ECR I-7023, paragraph 14).

16.
    As the Advocate General points out in paragraph 12 of his Opinion, since thereappears to be no doubt that the Regeringsrätten satisfies all the other conditionslaid down by the case-law of the Court, it only remains to determine whether theRegeringsrätten is called upon to give judgment in proceedings which are intendedto lead to a judicial decision, when seised with an appeal against a ruling of theSkatterättsnämnden.

17.
    It is sufficient to observe here that, in the case of an appeal, the purpose of theprocedure before the Regeringsrätten is to review the legality of a preliminarydecision which, once it becomes definitive, binds the tax authorities and serves asthe basis for the assessment to tax if and to the extent to which the person who

applied for the preliminary decision continues with the action envisaged in hisapplication. In those circumstances, the Regeringsrätten must be held to becarrying out a judicial function (see, in particular, Victoria Film, cited above,paragraph 18).

18.
    As regards the hypothetical nature of the question submitted, it is to beremembered that the Court has stated that, by virtue of the cooperation betweenthe Court of Justice and the national courts provided for by Article 177 of theTreaty, it is solely for the national court before which the dispute has been brought,and which must assume responsibility for the subsequent judicial decision, todetermine in the light of the particular circumstances of each case both the needfor a preliminary ruling in order to enable it to deliver judgment and the relevanceof the questions which it submits to the Court (see, for example, Case C-127/92Enderby [1993] ECR I-5535, paragraph 10, and Case C-125/94 Aprile [1995] ECRI-2919, paragraph 16).

19.
    Consequently, since the questions submitted by the national court relate to theinterpretation of a provision of Community law, the Court is in principle bound togive a ruling (see Case C-83/91 Meilicke [1992] ECR I-4871, paragraph 24, andAprile, cited above, paragraph 17).

20.
    The position would be different only if the Court were called on to give a ruling ona problem of a hypothetical nature (see Case 244/80 Foglia [1981] ECR 3045,paragraphs 18 and 20, and Meilicke, cited above, paragraph 25).

21.
    As regards the circumstances in which the Court has been asked to give apreliminary ruling in this instance, it is true that the national court which made thereference is called on to give a ruling in proceedings concerning the possibility forX AB to carry out in the future an intra-group transfer for the benefit of Y ABunder certain conditions. On the date on which its decision to make a referencewas made, X AB had still not carried out that transfer.

22.
    However, that circumstance is not by nature such as to render the preliminaryquestion inadmissible. The national court is seised of a genuine dispute, so that,far from being asked to rule on a hypothetical problem, the Court has sufficientinformation at its disposal regarding the circumstances with which the mainproceedings are concerned to enable it to interpret the rules of Community law andto give a helpful answer to the question submitted to it (see Aprile, cited above,paragraph 20).

23.
    Since that condition is satisfied by the reference for a preliminary ruling, theRegeringsrätten, when acting in the procedure which led to the making of thisreference for a preliminary ruling, must be regarded as a national court or tribunalwithin the meaning of Article 177 of the Treaty, so that the preliminary questionis admissible.

Substance

24.
    The case referred involves three types of intra-group transfer:

—    transfers made between two public limited companies in a Member Statewhen the second of those companies is wholly owned by the first, eitherdirectly or together with one or more subsidiaries which are themselvesestablished in that Member State and which the latter owns entirely(hereinafter referred to as 'type A intra-group transfers‘);

—    transfers made between two public limited companies established in aMember State when the second of those companies is wholly owned by thefirst together with one or more subsidiaries which it owns entirely and whichhave their seat in the same other Member State with which the firstMember State has concluded an agreement for the prevention of doubletaxation which contains a non-discrimination clause (hereinafter referred toas 'type B intra-group transfers‘);

—    transfers between two public limited companies in a Member State whenthe second of those companies is wholly owned by the first together withseveral other subsidiaries which it owns entirely and which have their seatsin various other Member States with which the first Member State hasconcluded agreements for the prevention of double taxation which containa non-discrimination clause (hereinafter referred to as 'type C intra-grouptransfers‘).

25.
    The national court is asking essentially whether Articles 52 and 58 of the Treaty,on freedom of establishment, and Articles 73b and 73d of the Treaty, on freemovement of capital, preclude national provisions, such as those at issue in themain proceedings, under which type A and type B intra-group transfers can benefitfrom certain tax concessions whereas type C transfers cannot.

26.
    As far as the provisions concerning freedom of establishment are concerned, itmust be pointed out that, even though, according to their wording, those provisionsare mainly aimed at ensuring that foreign nationals and companies are treated inthe host Member State in the same way as nationals of that State, they alsoprohibit the Member State of origin from hindering the establishment in anotherMember State of one of its nationals or of a company incorporated under itslegislation which comes within the definition contained in Article 58 of the Treaty(Case 81/87 Daily Mail and General Trust [1988] ECR 5483, paragraph 16, andCase C-264/96 ICI [1998] ECR I-4695, paragraph 21).

27.
    The legislation in question in the main proceedings does not allow Swedishcompanies which have used their right to free establishment to form subsidiaries

in other Member States to receive certain tax concessions upon a type C intra-group transfer.

28.
    Thus, such legislation entails a difference of treatment between various types ofintra-group transfers on the basis of the criterion of the subsidiaries' seat. In theabsence of justification, that difference of treatment is contrary to the provisionsof the Treaty concerning freedom of establishment. It does not make anydifference in this regard that the case-law of the Regeringsrätten allows type Btransfers to be given the same treatment accorded to type A transfers.

29.
    In the case submitted, the Swedish Government has not attempted to justify thedifference of treatment found above with regard to the provisions of the Treaty onfreedom of establishment. Moreover, at the hearing before this Court, the SwedishGovernment openly acknowledged that the legislation in question is contrary toArticle 52 of the Treaty.

30.
    Having regard to all the foregoing, it is not necessary to examine whether theprovisions of the Treaty relating to the free movement of capital precludelegislation such as that in question in the main proceedings.

31.
    Consequently, the answer to be given to the question submitted should be that,where a Member State grants certain tax relief in respect of intra-group transfersmade between two public limited companies established in that Member State andthe second of those companies is wholly owned by the first, either directly ortogether with

—    one or more subsidiaries which are themselves established in that MemberState and which it owns entirely, or

—    one or more subsidiaries which it owns entirely and which have their seatin another Member State with which the first Member State has concludedan agreement for the prevention of double taxation which contains a non-discrimination clause,

Articles 52 to 58 of the Treaty preclude that tax relief from being refused inrespect of transfers made between two public limited companies established in thatMember State, where the second of those companies is wholly owned by the firsttogether with several subsidiaries which it owns entirely and which have their seatin various other Member States with which the first Member State has concludedagreements for the prevention of double taxation which contain a non-discrimination clause.

Costs

32.
    The costs incurred by the Swedish and Netherlands Governments and by theCommission, which have submitted observations to the Court, are not recoverable.Since these proceedings are, for the parties to the main proceedings, a step in theproceedings pending before the national court, the decision on costs is a matter forthat court.

On those grounds,

THE COURT,

in answer to the question referred to it by the Regeringsrätten by order of 29 April1998, hereby rules:

Where a Member State grants certain tax relief in respect of intra-group transfersmade between two public limited companies established in that Member State andthe second of those companies is wholly owned by the first, either directly ortogether with

—    one or more subsidiaries which are themselves established in that MemberState and which it owns entirely, or

—    one or more subsidiaries which it owns entirely and which have their seatsin another Member State with which the first Member State has concludedan agreement for the prevention of double taxation which contains a non-discrimination clause,

Article 52 of the EC Treaty (now, after amendment, Article 43 EC), Article 53 ofthe EC Treaty (repealed by the Treaty of Amsterdam), Article 54 of the EC Treaty(now, after amendment, Article 44 EC), Article 55 of the EC Treaty (now Article45 EC), Articles 56 and 57 of the EC Treaty (now, after amendment, Articles 46EC and 47 EC) and Article 58 of the EC Treaty (now Article 48 EC) preclude thattax relief from being refused in respect of transfers made between two publiclimited companies established in that Member State, where the second of thosecompanies is wholly owned by the first together with several subsidiaries which itowns entirely and which have their seat in various other Member States with whichthe first Member State has concluded agreements for the prevention of doubletaxation which contain a non-discrimination clause.

Rodríguez Iglesias
Moitinho de Almeida
Edward

Sevón

Schintgen
Gulmann

Jann

Ragnemalm
Wathelet

Delivered in open court in Luxembourg on 18 November 1999.

R. Grass

G.C. Rodríguez Iglesias

Registrar

President

1: Language of the case: Swedish.