Case C-292/04

Wienand Meilicke and Others

v

Finanzamt Bonn-Innenstadt

(Reference for a preliminary ruling from the Finanzgericht Köln)

(Income tax – Tax credit for dividends paid by resident companies – Articles 56 EC and 58 EC – Limitation of the temporal effects of the judgment)

Summary of the Judgment

1.        Free movement of capital – Restrictions

(Arts 56 EC and 58 EC)

2.        Preliminary rulings – Interpretation – Effect of interpretative judgments ratione temporis

(Art. 234 EC)

1.        Articles 56 EC and 58 EC are to be interpreted as precluding tax legislation under which, on a distribution of dividends by a capital company, a shareholder who is fully taxable in a Member State is entitled to a tax credit, calculated by reference to the corporation tax rate on the distributed profits, if the dividend-paying company is established in that same Member State but not if it is established in another Member State.

Such tax legislation constitutes a restriction on the free movement of capital in that it could deter persons who are fully taxable in the Member State concerned for income tax purposes from investing their capital in companies established in other Member States; it is also liable to have a restrictive effect as regards those companies, in that it constitutes an obstacle to their raising capital in the Member State concerned.

Even if that tax legislation is based on a link between the tax advantage and the offsetting tax levy, in providing that the tax credit granted to the shareholder who is fully taxable in the Member State concerned for income tax purposes is to be calculated by reference to the corporation tax due from the company established in that Member State on the profits which it distributes, such legislation does not appear to be necessary in order to preserve the coherence of the national tax system. Having regard to the objective of preventing the double taxation of company profits distributed in the form of dividends, the granting to a shareholder, who is fully taxable in the Member State concerned for income tax purposes and who holds shares in a company established in another Member State, of a tax credit calculated by reference to the corporation tax payable by that company in that latter Member State would not threaten the coherence of the national tax system and would constitute a measure less restrictive of the free movement of capital.

Reduction in tax revenue in relation to dividends paid by companies established in other Member States cannot be regarded as an overriding reason in the public interest which may be relied on to justify a measure which is, in principle, contrary to a fundamental freedom.

(see paras 20, 23-24, 28-29, 30-31, operative part)

2.        In the exercise of the jurisdiction conferred on it by Article 234 EC, it is only exceptionally that, in application of a general principle of legal certainty which is inherent in the Community legal order, the Court may decide to restrict the right to rely upon a provision, which it has interpreted, with a view to calling in question legal relations established in good faith. Such a restriction may be allowed only in the actual judgment ruling upon the interpretation sought. There must necessarily be a single occasion when a decision is made on the temporal effects of the requested interpretation, which the Court gives of a provision of Community law. In that regard, the principle that a restriction may be allowed only in the actual judgment ruling upon that interpretation guarantees the equal treatment of the Member States and of other persons subject to Community law, under that law, fulfilling, at the same time, the requirements arising from the principle of legal certainty.

(see paras 34-37)