Case C‑365/16

Association française des entreprises privées (AFEP) and Others

v

Ministre des Finances and des Comptes publics

(Request for a preliminary ruling
from theConseil d’État (France))

(Reference for a preliminary ruling — Common system of taxation applicable in the case of parent companies and subsidiaries of different Member States — Directive 2011/96/EU — Prevention of double taxation — Contribution of 3% in addition to corporation tax)

Summary — Judgment of the Court (First Chamber), 17 May 2017

1.        Judicial proceedings — Request that the oral procedure be reopened – Request to lodge observations on points of law raised in the Advocate General’s Opinion – Conditions for reopening

(Art. 252, second para., TFEU; Statute of the Court of Justice, Art. 23 ; Rules of Procedure of the Court of Justice, Art. 83)

2.        Approximation of laws — Common system of taxation applicable in the case of parent companies and subsidiaries of different Member States – Directive 2011/96 – Prevention of economic double taxation – Tax measure, adopted by the Member State of a, providing for the levy of a tax when the parent company distributes dividends, the basis of assessment comprising the amounts of the dividends distributed, including those coming from non-resident subsidiaries of that company — Not permissible

(Council Directive 2011/96, as amended by Directive 2014/86, Recitals 7 and 9 and Art. 4(1)(a))

1.      See the text of the decision.

(see paras 17, 18)

2.      Article 4(1)(a) of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, as amended by Council Directive 2014/86/EU of 8 July 2014, must be interpreted as precluding a tax measure laid down by the Member State of a parent company, such as that at issue in the main proceedings, providing for the levy of a tax when the parent company distributes dividends and the basis of assessment of which tax is the amounts of the dividends distributed, including those coming from that company’s non-resident subsidiaries.

To that effect, Article 4(1) of Directive 2011/96 leaves the Member States a choice between two systems, namely between a system of exemption and one of deduction. In fact, in accordance with recitals 7 and 9 of that directive, where a parent company or its permanent establishment, by virtue of its association with its subsidiary, receives profits distributed otherwise than on the liquidation of that subsidiary, the Member State of the parent company and the Member State of its permanent establishment must either refrain from taxing such profits in so far as they cannot be deducted by the subsidiary and tax them in so far as the subsidiary can deduct them, or tax such profits while authorising the parent company and the permanent establishment to deduct from the amount of tax due that fraction of the corporation tax paid by the subsidiary and any lower-tier subsidiary which relates to those profits (judgment of 17 May 2017, X, C‑68/15, paragraph 71 and the case-law cited).

Thus, Article 4 of that directive seeks, in respect of profits distributed to a resident parent company by a non-resident subsidiary, to avoid that subsidiary being taxed thereon in its State of establishment first and the parent company then being taxed on the same profits in its State of establishment.

The Court has stated in paragraphs 79 and 80 of the judgment in X, firstly, that, by providing that the Member State of the parent company and the Member State of the permanent establishment are to ‘refrain from taxing such profits’, that provision prohibits the Member States from taxing the parent company or the permanent establishment in respect of profits distributed by the subsidiary to its parent company, without distinction as to whether the taxable event of the taxation of the parent company is the receipt of those profits or their redistribution. Secondly, since Directive 2011/96 pursues, in accordance with recital 3 thereof, the objective of eliminating double taxation of profits distributed by a subsidiary to its parent company at the level of the parent company, taxation of that parent company by its Member State in respect of those profits, which would have the effect of making the profits subject to taxation exceeding the ceiling of 5% laid down in Article 4(3) of that directive, would lead to a double taxation at the level of the parent company contrary to that directive.

Furthermore, it must be noted, in that context, that it is irrelevant whether or not the tax measure is classified as corporation tax. In that regard, it suffices to note that Article 4(1)(a) of Directive 2011/96 does not make its application subject to a tax in particular. That provision provides that the Member State of the parent company is to refrain from taxing the profits distributed by the non-resident subsidiary thereof. That provision thus seeks to avoid Member States adopting tax measures which lead to double taxation of parent companies in respect of those profits.

(see paras 22, 24, 31-33, 35, operative part)