C-200/98

OPINION OF MR SAGGIO — CASE C-200/98

OPINION OF ADVOCATE GENERAL SAGGIO delivered on 3 June 1999 *

1. By order of 19 May 1998, the Reger- national or local direct taxes, upon appli- ingsrätten (Swedish Supreme Administra- cation by individual taxpayers. Applica- tive Court) referred to the Court for tions for decisions must be made in writing, preliminary ruling a question concerning no later than the latest date by which the the interpretation of Article 52 (now, after tax declaration must be submitted for the amendment, Article 43 EC), Article 73b tax year to which the application relates. (now Article 56 EC) and Article 73d (now The procedure is completely confidential. A Article 58 EC) of the EC Treaty, which had preliminary decision delivered by the Skat- arisen in proceedings between two Swedish terättsnämnden is binding on the tax companies and the body responsible for administration for the tax year in question delivering binding decisions on tax assess- if the taxpayer requests that it be so and ment matters. provides proof that all the conditions for its application have been fulfilled. Decisions may be referred to the Regeringsrätten by the taxpayer, by the Riksskatteverket (National Tax Board) and, in certain cases, by the local authority concerned. In prac- tice, decisions delivered by the Skatterätts- The national legislation nämnden have a significance that goes beyond the particular questions brought to its attention, inasmuch as they set precedents for the interpretation and appli- cation of Swedish tax rules. (a) Preliminary decisions on tax assessment matters

Statlig Inkomstskatt (Law on State Income countries. In a 1993 ruling, the Regerings- Tax 1947:576, hereinafter 'the SIL'), trans- rätten extended the benefits of the above- fers between companies belonging to the mentioned law to transfers made by a same group are treated under certain con- Swedish parent company to a subsidiary ditions as having fiscal effect. Under those controlled through a foreign company, on rules, if a Swedish company owns more condition that there was a double-taxation than nine tenths of the shares in another agreement in force between Sweden and the Swedish company, transfers which those State in question. That particular case companies make to each other are treated concerned transfers from a Swedish parent as deductible expenses for the transferor undertaking to another Swedish undertak- and as taxable income for the transferee. ing which was owned by the parent under- The aim of the group transfer rules is that taking's American subsidiary. the tax burden on a business carried on by a number of undertakings in a group should not be greater than if it is carried on by a single undertaking.

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Swedish subsidiary, Y AB, sought a pre- GmbH had each acquired 15% of the liminary decision from the Skatterätts- shares in X AB. nämnden on the application to their 1997-99 tax assessment of the provisions governing intra-group transfers laid down in Paragraph 2(3) SIL. At the time when their application for a preliminary decision was made, the group owned 99.8% of the shares in Y AB. That 99.8% was distri- buted as follows: 58% was owned by X AB directly and the rest by companies wholly 7. On 22 November 1996, the Skatterätts- controlled by X AB. In order to improve the nämnden delivered a preliminary decision financing of the acquisition of Y AB, the in which it found that the fiscal effects parent company intended to sell 15% of its applying to intra-group transfers were shareholding in Y AB to a wholly-owned applicable in the first case, by virtue of Dutch subsidiary, Z BV. It was also con- the merger rule contained in the second sidering the possibility of selling a further subparagraph of Paragraph 2(3) SIL. It held 15% to a wholly-owned German subsidi- that they were also applicable in the second ary, Y GmbH. case, by virtue of the non-discrimination clause contained in a double-taxation agreement signed by Sweden and the Neth- erlands. Finally, in the third case, the Skatterättsnämnden did not consider that there was any right to the fiscal effects since, although Sweden had signed two double-taxation agreements, with Germany and the Netherlands respectively, according to the case-law of Regeringsrätten, they could not apply simultaneously. Skatter- ättsnämnden also held that its decision could not be reviewed in the light of Community law.

Admissibility 9. In order to determine the matter, the Regeringsrätten considered it necessary to refer the following question to the Court for a preliminary ruling: 10. It must first be determined whether the Regeringsrätten is to be regarded as a 'court or tribunal of a Member State' within the meaning of Article 177 of the EC Treaty (now Article 234 EC) when it gives judgment on the annulment of a preliminary decision delivered by the Skat- terättsnämnden. 'Under Paragraph 2(3) of Law 1947:576 on State Income Tax, an intra-group transfer is treated, under certain conditions, as having fiscal effect if it is made by a Swedish limited liability company to another Swed- 11. In this connection, it is common knowl- ish limited liability company which is edge that the term 'court or tribunal' within wholly owned either by the first-named the meaning of that article is a 'Commu- company directly or by that company nity' term; in order to determine whether a together with a wholly-owned Swedish body such as the body in question is a subsidiary or subsidiaries. The fiscal result 'court or tribunal', the Court takes account is the same if one, or more, of the wholly- of a number of factors, such as whether the owned subsidiaries is foreign provided that body is established by law, whether it is they have their seat in one and the same permanent, whether its jurisdiction is com- Member State and Sweden has concluded pulsory, whether its procedure is inter with that State a double-taxation agree- partes, whether it applies rules of law and ment containing a non-discrimination whether it is independent. 1The Court has clause. Against that background, is it also stated that a national court may refer a compatible with existing Community law, question to the Court only if there is a case in particular Article 52 in combination pending before it and if it is called upon to with Article 58 and Article 73 b and d of give judgment in proceedings intended to the Treaty of Rome, to apply a set of rules lead to a decision of a judicial nature. 2 under which an intra-group transfer is not treated as having the same fiscal effect when the Swedish parent company instead 1 — See the judgments in Case 61/65 Vaassen [1966] ECR 261, Case 14/86 Pretore di Salò 1987 [ECR] 2545, and Case owns the recipient company together with C-54/96 Dorsch Consult [1997] ECR I-4961. two or more wholly-owned foreign subsi- 2 — Order in Case 318/85 Greis Unterweger [19861 ECR 955, and judgment in Joined Cases C-74/95 and C-129/95 diaries which are established in different Criminal proceedings against X [1996] ECR I-6609.

In the light of that last criterion, the Court 13. That view is confirmed by the Court's held, for example, that the questions refer- judgment in Victoria Film. 5 Inthat case, red by the Tribunale Civile e Penale di the Court held that the Skatterättsnämnden Milano (Civil and Criminal District Court, was not called upon to decide a dispute and Milan) in the context of non-contentious was not therefore to be regarded as a court proceedings under Article 2330 of the Ita- or tribunal for the purposes of Article 177 lian Civil Code for confirmation of the of the Treaty inasmuch as it does not have articles of association of a company were as its task to review the legality of the inadmissible. The Court considered that in decisions of the tax authorities 'but rather exercising that authority, the national court to adopt a view, for the first time, on how a was performing an administrative not a specific transaction is to be assessed to tax'. judicial function. 3However it held that the Consequently, the Court continued, 'where, reference by the Corte d'Appello di Milano upon application by a taxable person, the (Court of Appeal, Milan) in the context of Skatterättsnämnden gives a preliminary the appeal seeking to have the Tribunale's decision on a matter of assessment or decision set aside, was admissible inasmuch taxation, it performs a non-judicial func- as that court was a court or tribunal within tion which, moreover, in other Member the meaning of the Treaty. 4 States is expressly entrusted to the tax authorities' (paragraph 17). The Court therefore concluded that the Skatterätts- nämnden 'acts in an administrative capa- 12. As there appears to be no doubt that all city when giving a preliminary binding the other conditions specified in the case- law of the Court are satisfied in the present decision, which serves the taxpayer's inter- case, it remains to be ascertained whether est inasmuch as he is better able to plan his the Regeringsrätten, before which an activities, but it is not called upon to decide appeal has been brought against the deci- a dispute'. That being said, the Court sions of the Skatterättsnämnden, is being nevertheless immediately added that 'it is called upon to give judgment in proceed- only where the taxpayer or the Riksskatte- ings which are intended to lead to a judicial verket brings an action challenging a pre- decision. liminary decision that the court or tribunal, before which the matter is thus brought, could, for the purposes of Article 177 of the Treaty, be regarded as performing a I consider that the answer should be in the judicial function 6 with the object of affirmative. In the context of the proceed- reviewing the legality of an act determining ings described above, the Regeringsrätten is a taxpayer's assessment to tax' (paragraph intervening to determine by a binding 18). decision a genuine dispute concerning an action brought by the taxpayer. The dispute turns on the legality of a decision delivered by the Skatterättsnämnden that may affect the taxpayer's rights inasmuch as it is binding on the tax administration.

14. The conclusion that the Regeringsrät- the case I have just cited altogether con- ten is to be regarded as a 'court or tribunal' vincing in so far as it redefines the role of when it is called upon to review the legality the national court — I do not think that the of the decisions delivered by the Skatter- facts in the present case suggest that the ättsnämnden is not however sufficient rea- dispute is a fictitious one, artificially cre- son for holding the reference for a pre- ated to obtain a ruling from the Court on liminary ruling to be admissible. It must the compatibility of the Swedish rules with also be determined whether the Court is Community law. The parties submitted being asked to rule on the interpretation of three questions to the Skatterättsnämnden Community law in the context of a real on three company operations and subse- dispute, not a purely hypothetical one. The quently brought an appeal against the Court has occasionally considered that, in preliminary decision, which is detrimental order to determine whether it has jurisdic- to them, before the only judicial body with tion, it may examine the conditions in jurisdiction to determine its legality. The which the case has been referred to it by the dispute pending before the Regeringsrätten national court. In its judgment in Foglia v is thus a genuine dispute between the Novello, 7in particular, the Court observed applicants and the tax authorities over the that 'the duty assigned to the Court by content of the preliminary decision. The Article 177 is not that of delivering advi- applicants are seeking a ruling in their sory opinions on general or hypothetical favour so that they may benefit in the tax questions but of assisting in the adminis- years 1997-1999 from fiscal effects from tration of justice in the Member States. It which they would otherwise be debarred. accordingly does not have jurisdiction to reply to questions of interpretation which are submitted to it within the framework of procedural devices arranged by the parties in order to induce the Court to give its views on certain problems of Community law which do not correspond to an objec- tive requirement inherent in the resolution of a dispute' (paragraph 18). 8The Court intended, in this way, to limit the opportu- nities for abuse of the preliminary-ruling I consider that the condition is also met procedure whereby it might be induced to that a ruling by the Court must be neces- deliver rulings on artificial cases arranged sary in order to decide the dispute before by the parties. the national court. I do not think there is any reason to consider that the present case exhibits the features that have in the past led the Court to take the view that the question referred by the national court was manifestly irrelevant. 9It is clear from the order for reference that the national court 15. That being established — and inciden- finds that it is having to apply rules which tally I do not find the conclusion reached in are probably contrary to provisions of

Freedom of establishment

17. Turning now to the substance, it should be noted first that the national court, albeit in the form of a single question, is really seeking clarification from the Court on the interpretation of Treaty rules relating, on the one hand, to freedom to establish companies (Articles 52 and 58 of the 19. I take the view that, in order to provide Treaty) and, on the other, to free movement the national court with a full answer, the of capital (Articles 73b and 73d of the question should be extended to allow the Treaty). I shall therefore consider the Court to examine whether the Community question from both points of view. provisions on freedom of establishment preclude the rules contained in the Swedish legislation in principle, that is to say irrespective of whether or not there is a double-taxation agreement. It should there- fore be considered whether the abovemen- 18. By the first part of the question, the tioned articles of the Treaty preclude legis- national court is seeking to ascertain whe- lation of a Member State under which a ther the provisions on freedom of establish- parent company cannot benefit from fiscal ment preclude the application of national effects if the company to which a transfer is

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10—Judgments in Case 270/83 Commission v France [1986] 11 —Judgments in Case 81/87 Daily Mail and General Trust ECR 273, paragraph 18, and Case C-264/96 ICI [1998] [1988] ECR 5483, paragraph 16, and Case C-264/96 ICI, ECR I-4695, paragraph 20. cited above, paragraph 21.

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restrictions on a fundamental right guaran- does not permit those rights to be made teed by the Treaty. 12 subject to a condition of reciprocity imposed for the purpose of obtaining corresponding advantages in other Member States'. 13

12—Judgments in Case C-288/89 Gouda [1991] 1-4007 and 13 — Case 270/83 Commission v France, cited above, paragraph Case C-484/93 Svensson [1995] ECR I-3955. 26.

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permitted under the Treaty. It cannot be Member State with which Sweden has explained on the ground of protecting any concluded a double-taxation agreement. of the overriding interests envisaged in Article 56, namely public policy, public security or public health. As to the risk of tax evasion, the Swedish Government itself admitted in the course of the oral proce- dure that this is not a consideration in cases where the parent company to which the fiscal effect applies is established in Swe- Free movement of capital den. In any event, as the provisions at issue are discriminatory, it is sufficient to repeat that 'Article 52 of the EEC Treaty does not permit any derogation from the fundamen- tal principle of freedom of establishment on 28. That conclusion concerning the inter- such a ground'. 14 Considerations of a pretation of the Community rules on free- purely economic nature, such as loss of dom of establishment is sufficient in itself tax revenue, cannot justify restrictions of a to provide a useful answer to the question discriminatory character which fall within referred by the national court. However, the scope of Article 52 of the Treaty. 15 for the sake of completeness I shall now consider the second part of the question referred by the Regeringsrätten, concerning the interpretation of the Treaty provisions on free movement of capital.

32. That being said and having reiterated that, even in the absence of harmonisation 30. It is apparent from points (1) and (2) of measures, the Member States are required section I, 'Direct investments', in Annex I to exercise their powers in matters of to that directive, that capital movements taxation consistently with Community include: ' 1 . Establishment and extension of law, the application of tax measures must branches or new undertakings belonging not have the effect of obstructing capital solely to the person providing the capital, movements that comply with the provisions and the acquisition in full of existing of Community law. Legislation, such as the undertakings; 2. Participation in new or Swedish legislation, which imposes restric- existing undertakings with a view to estab- tions on freedom of establishment that are lishing or maintaining lasting economic not justified under the terms of the Treaty, links'. The present case is concerned with also constitutes a restriction on the free the acquisition and sale of shares in foreign movement of capital in so far as it is such as companies. Moreover, the Court has clas- to dissuade Swedish companies from sified various operations as 'capital move- investing in companies of other Member ments', including the export of bank notes, States, the result being to deprive them of the deposit of securities abroad, investing in the tax relief to which they would be foreign companies, and mortgage and entitled if all the companies involved in financial guarantees denominated in the the group were Swedish or were established currencies of other Member States. 17 in a State with which Sweden had con- cluded a double-taxation agreement.

Articles 52 (now, after amendment, Article 43 EC), 73b and 73d (now Articles 56 EC and 58 EC) of the EC Treaty are to be interpreted as precluding national legislation, such as the Swedish legislation, under which the grant of tax relief in the event of intra-group transfers depends on the transferor having its seat in its territory and the transferee being wholly owned by the transferor or by the transferor together with a company of a Member State with which Sweden has concluded a double-taxation agreement.

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