Language of document : ECLI:EU:C:2018:811

Case C‑416/17

European Commission

v

French Republic

(Failure of a Member State to fulfil obligations — Articles 49 and 63 TFEU and the third paragraph of Article 267 TFEU — Series of charges to tax — Difference in treatment according to the Member State of residence of the sub-subsidiary — Reimbursement of the advance payment of tax unduly paid — Requirements relating to the evidence establishing a right to such reimbursement — Capping of the right to reimbursement — Discrimination — National court adjudicating at last instance — Obligation to make a reference for a preliminary ruling)

Summary — Judgment of the Court (Fifth Chamber), 4 October 2018

1.        Freedom of establishment — Free movement of capital — Restrictions — Tax legislation — Corporation tax — Option for a parent company to set off against the advance payment, payable when redistributing dividends, the tax credit applied to the dividends from a subsidiary established in the Member State of residence — Refusal of that option in the event of dividends from a sub-subsidiary established in another Member State — Not permissible

(Arts 49 and 63 TFEU)

2.        Freedom of establishment — Free movement of capital — Tax legislation — Corporation tax — Reimbursement to a parent company of sums which ensure the application of the same tax regime to dividends distributed by its subsidiaries established in a Member State and those distributed by subsidiaries established in other Member States — Reimbursement subject to the production of evidence by the parent company, relating to the tax rate and the amount of tax paid by those subsidiaries — Lawfulness — Conditions

(Arts 49 and 63 TFEU)

3.        Freedom of establishment — Free movement of capital — Restrictions — Tax legislation or Fiscal legislation — Corporation tax — Reimbursement to a parent company of sums which ensure the application of the same tax regime to dividends distributed by its subsidiaries established in a Member State and those distributed by subsidiaries established in other Member States — Capping of the right to reimbursement — Reimbursement of the advance payment equal to half the amount of the dividends received from a resident subsidiary — Reimbursement of the advance payment equal to one third of the amount of the dividends received from a non-resident subsidiary — National system which can lead to equivalent tax treatment of those dividends — Lawfulness

(Arts 49 and 63 TFEU)

4.        Questions referred for a preliminary ruling — Reference to the Court — Issues of interpretation — Obligation to refer — Scope — Obligation to refer in the event of reasonable doubt — National court having found that there is no reasonable doubt — Interpretation of provisions of EU law contrary to the Court’s interpretation of those provisions in the context of an action for failure to fulfil an obligation — Failure of a Member State to fulfil obligations

(Arts 267, para 3. TFEU)

1.      A Member State fails to fulfil its obligations under Articles 49 and 63 TFEU where it refuses to take into account, in order to calculate the reimbursement of the advance payment made by a resident company in respect of the distribution of dividends paid by a non-resident company via a non-resident subsidiary, the tax incurred by that second company on the profits underlying those dividends, even though the national mechanism for the avoidance of economic double taxation allows, in the case of a purely domestic chain of interests, the tax levied on the dividends distributed by a company at every level of that chain of interests to be offset.

In that regard, even though EU law 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 in the European Union, and even though each Member State remains free to organise its system for taxing distributed profits, provided that the system in question does not entail discrimination prohibited by the TFEU, the situation of a corporate shareholder receiving foreign-sourced dividends is comparable to that of a corporate shareholder receiving nationally-sourced dividends in so far as, in each case, the profits made are, in principle, liable to be subject to a series of charges to tax.

Articles 49 and Article 63 TFEU require a Member State which has a system for preventing economic double taxation as regards dividends paid to residents by resident companies to accord equivalent treatment to dividends paid to residents by non-resident companies, unless a difference in treatment is justified by overriding reasons in the public interest.

(see paras 35-37, 46, operative part 1)

2.      As regards proof that tax has been paid by a non-resident subsidiary on dividends distributed, the fact of not exempting a parent company claiming reimbursement of the advance payment from the obligation to produce supporting documents for which the statutory retention period under national law, has expired cannot constitute an infringement of the principle of effectiveness, to the extent that that obligation does not cover a period significantly longer than the statutory period for retention of administrative documents and accounts.

Compliance with the principle of effectiveness means that the evidence required can enable the tax authorities of the Member State of taxation to ascertain, clearly and precisely, whether the conditions for obtaining a tax advantage are met.

In addition, the production of information relating, for each dividend to the tax rate actually applied and to the amount of tax actually paid on profits made by subsidiaries established in other Member States can only be required on condition that it is not virtually impossible or excessively difficult to furnish proof of payment of the tax by the subsidiaries established in the other Member States, in the light in particular of the provisions of the legislation of those Member States concerning the avoidance of double taxation, the recording of the corporation tax which must be paid and the retention of administrative documents.

In that regard, the request for production of that information should be made within the statutory period for retention of administrative documents or accounts, as laid down by the law of the Member State in which the subsidiary is established, without the expiry of the statutory period for retention of the documents exempting a company which has submitted a claim from that obligation from possessing all the evidence capable of demonstrating that its application is well founded.

(see paras 73-76, 78, 80)

3.      A system for the avoidance of double economic taxation, by virtue of which the tax credit granted to a company distributing dividends received from a resident subsidiary is always equal to half of those dividends, while a cap, in the event of distribution of dividends from a non-resident subsidiary, on the reimbursement of the advance payment is made at one third of the amount of those dividends, does not constitute discrimination.

While it follows from the case-law that EU law requires a Member State which has a system for the avoidance of double economic taxation as regards dividends paid to residents by resident companies to treat dividends paid to residents by resident companies in the same way as dividends paid to residents by non-resident companies, that law does not require Member States to give taxpayers which have invested in foreign companies an advantage compared with those who have invested in domestic companies and cannot require that Member State to grant a tax credit in respect of tax paid, in another Member State, on distributed profits which exceeds the amount of tax resulting from the application of its own tax legislation.

Thus, since the cap on the reimbursement of the advance payment to the parent company at a third of the dividends distributed may also, ultimately, avoid economic double taxation of the profits distributed, like the reimbursement always equal to half of the dividends received from a resident subsidiary, that cap can remedy the difference in treatment between those dividends and dividends from a resident subsidiary.

(see paras 89, 91, 95, 96)

4.      A Member State has failed to fulfil its obligations under the third paragraph of Article 267 where a court or tribunal of that Member State against whose decisions there is no judicial remedy under national law has failed to make a reference to the Court, in accordance with the procedure provided for in the third paragraph of Article 267 TFEU, in order to determine whether it was necessary to refuse to take into account, for the purpose of calculating the reimbursement of the advance payment made by a resident company in respect of the distribution of dividends paid by a non-resident company via a non-resident subsidiary, the tax incurred by that second company on the profits underlying those dividends, even though its interpretation of the provisions of EU law in its case-law, was not so obvious as to leave no scope for doubt.

In that regard, whether such a possibility exists must be assessed in the light of the specific characteristics of EU law, the particular difficulties to which its interpretation gives rise and the risk of divergences in judicial decisions within the European Union. A solution adopted by a national court, based on an interpretation of provisions of EU law, at variance with the interpretation of those provisions in the context of an action for failure to fulfil obligations, implies that the existence of reasonable doubt concerning that interpretation could not be ruled out when the national court delivered its ruling. When that assessment allows for a finding of such doubt, the national court or tribunal against whose decisions there is no judicial remedy under national law is required to request a preliminary ruling from the Court of Justice concerning the risk of an incorrect interpretation of EU law.

(see paras 110, 112-114, operative part 2)