C-294/99
ECLI:EU:C:2001:263
- Súd
- Súdny dvor Európskej únie
- IČS
- 61999CC0294
- Zdroj
- eur-lex.europa.eu ↗
ATHINAIKI ZITHOPHA
OPINION OF ADVOCATE GENERAL ALBER delivered on 10 May 2001 1
I — Introduction I I — Legal framework
A — Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (hereinafter 'the Direc- tive') 2
2. The relevant provisions of the Directive are as follows: 1. By the present reference for a prelimin- ary ruling, the Diikitiko Protodikio (Administrative Court of First Instance), Athens, asks the Court to interpret Arti- cle 5(1) of the Directive on the common system of taxation applicable in the case of parent companies and subsidiaries of dif- ferent Member States. The national court 'Article 1 wishes to ascertain whether there is a withholding tax prohibited under that provision where, as laid down by Greek income tax law, in the event of the dis- 1. Each Member State shall apply this tribution of profits to a parent company Directive: which is not resident in Greece, certain tax exemptions in respect of those profits, which would be applicable if the profits remained within the company making the distribution, are withdrawn, so that by — to distributions of profits received by virtue of the distribution the tax burden of companies of that State which come the undertaking making the distribution from their subsidiaries of other Mem- increases. ber States,
1 — Original language: German. 2 — OJ 1990 L 225, p. 6.
I - 6799
OPINION OF MR ALBER — CASE C-294/99
— to distributions of profits by companies Article 7 of that State to companies of other Member States of which they are subsidiaries. 1. The term "withholding tax" as used in this Directive shall not cover an advance payment or prepayment (précompte) of corporation tax to the Member State of the subsidiary which is made in connection 2. ... with a distribution of profits to its parent company.
2. This Directive shall not affect the appli- cation of domestic or agreement-based provisions designed to eliminate or lessen economic double taxation of dividends, in particular provisions relating to the pay- ment of tax credits to the recipients of dividends.'
Article 5
1. Profits which a subsidiary distributed to B — Greek law its parent company shall, at least where the latter holds a minimum of 25% of the capital of the subsidiary, be exempt from withholding tax. 3. Article 106 of the Income Tax Code — Law No 2238/1994 — reads as follows:
2. ... '1. Where the income of legal persons... includes dividends or profits from shares in other companies, whose profits have been taxed in accordance with the provisions of the present article or Article 10, that income shall be deducted from total net profits for the purposes of calculating the
I - 6800
ATHINAIKI ZITHOPIIA
taxable profits of the legal person. How- C — Double taxation agreement between ever, in a case where the net profits of a Greece and the Netherlands, signed in Greek... company... also include, apart Athens on 16 July 1981 from the dividends and profits from shares in other companies referred to above, income subject to special taxation entailing extinction of tax liability or non-taxable 4. Article 10 of the double taxation agree- income and in addition distribution of ment states as follows: profits takes place [emphasis added], in order to determine the distributed profits corresponding to income, as referred to in paragraphs 2 and 3 of this article, total net profits arising from the balance sheet of those legal persons shall be taken into '1. Dividends paid by a company resident account. in one of the Contracting States to a resident of the other State are taxable in that other State.
2. Such dividends are none the less taxable in the State in which the company paying 2. If the net profits arising from the balance the dividends is resident, in accordance sheet of... Greek public limited compa- with the legislation of that State, but where nies... also include non-taxable income, in the recipient is the person entitled to the order to determine the taxable profits of dividends, the tax is not to exceed: the legal person there shall be added thereto the fraction of non-taxable income corresponding to distributed profits in any form, after transformation of that amount into a gross amount by the addition of the corresponding tax... (a) ...
(b) as regards dividends paid by a com- pany resident in Greece to a resident of the Netherlands: 35% of the gross amount of the dividends. 3. The provisions of the previous para- graph shall also apply by analogy to the distribution of profits by... Greek public limited companies... whose profits also include profits subject to special determi- nation or taxation in their own name.' 3. ...'
I - 6801
OPINION OF MR ALBER — CASE C-294/99
I I I— Facts 2 082 270 518 and corresponding to GRD 540 405 967 in tax; and
5. The applicant, Athinaiki Zithopiia AE, is a public limited company which pro- duces and markets beer. It has its seat in Aigaleo, Attica. 92.17% of its capital is owned by the Netherlands company Amstel (b) the 5% rebate allowed to it on the International. ground of its payment of income tax for the 1996 financial year in a l u m p s u m , a m o u n t i n g to GRD 309 329 555 and corre- sponding to GRD 80 279 452 in tax; and
6. In 1996, Athinaiki Zithopiia had income which, while in principle exempt from Greek income tax, was taxed because it distributed profits to Amstel International.
(2) income subject to special tax made up of interest on deposits in credit institu- tions (Article 12(1) and (2) of Law No 2238/1994), amounting to GRD 7. Athinaiki Zithopiia declared the follow- 1 170 631 283 and corresponding to ing amounts: GRD 173 606 134 in tax.
(1) n o n - t a x a b l e i n c o m e of GRD 2 391 600 073, made up of: 8. Athinaiki Zithopiia claimed that of the total of GRD 794 291 553 levied in additional tax, corresponding to its non- taxable income and its income subject to special taxation for the 1997 financial year, the sum of GRD 738 384 406 had been unduly paid. This consisted of 92.17% of (a) a surplus from the buying and the first mentioned amount, corresponding selling of shares in mutual funds to the distribution to Amstel, but the entire (Article 48(3) of Law N o amount of GRD 80 279 452 in respect of 1969/91), amounting to GRD the 5% rebate (referred to above under b).
I - 6802
ATHINAIKI ZITHOPIIA
9. Athinaiki Zithopiia contended that that has been subject to special taxation entail- sum had to be refunded to it, since ing extinction of tax liability and also non- A r t i c l e 1 0 6 ( 2 ) a n d (3) of Law taxable income, when those two categories No 2238/1994 imposed a type of taxation of income would not be taxable on the which, by the mere fact of being linked to basis of the national legislation if they the distribution of profits, constituted a remained with the subsidiary and were not 'withholding tax' and infringed Article 5( 1 ) distributed to the parent company?' of the Directive. Under the Greek provi- sions, the distributed profits were taxed in full even if a part of those profits derived from sources which, in the absence of a distribution, rendered them non-taxable income or income subject to special taxa- tion.
V — Analysis
IV — Question referred for a preliminary A — Interpretation of Article 5(1) of the ruling Directive
10. The Diikitiko Protodikio, Athens, Arguments of the parties therefore referred the following question to the Court of Justice for a preliminary ruling pursuant to Article 177 of the EC Treaty (now Article 234 EC):
11. The Greek Government submits that the Directive derogates from the principle of territoriality of tax systems in order, first, to prevent cross-border ownership of 'Is there a withholding tax within the companies from being disadvantaged in meaning of Article 5(1) of Council Direc- comparison with domestic ownership and, tive 90/435/EEC of 23 July 1990 where second, to create a taxation system that is national legislation provides that, in the neutral from the point of view of competi- event of distribution of profits by a sub- tion. The Directive's objective is to avoid sidiary (a public limited company or double taxation. Therefore, either distrib- equivalent company) to its parent com- uted profits are taxed in the hands of the pany, account is to be taken, in determining parent company, or the parent company the taxable profits of the subsidiary, of its can deduct the tax paid by the subsidiary total net profits, including income which from its own tax.
I - 6803
OPINION OF MR ALBER — CASE C-294/99
12. The Directive does not provide for a 16. The concept of withholding tax is not tax exemption. Article 4 of the Directive defined. It is merely delimited negatively in presupposes that the subsidiary is taxed Article 7(1) of the Directive. However, and Article 5(1) precludes a withholding Article 5(1) of the Directive grants a right tax only at the time when profits are to Community citizens and is thus to be distributed. interpreted broadly; exceptions, on the other hand, must be interpreted narrowly. It is immaterial how the tax is classified at national level. All that must be examined is whether it satisfies the conditions of a withholding tax.
13. The Greek Government emphasises that the provisions in question do not correspond to a withholding tax but come under taxation of the subsidiary's income. It refers to the fact that withholding taxes on the distribution of profits are expressly 17. The national tax provisions lead to prohibited by law. There is absolutely no special taxation where profits are distrib- question of understanding the income tax uted. Moreover, it is because of the dis- provisions in question as a withholding tax tributions that tax is levied. Thus, although on the distribution of profits. the taxation falls within the framework of income tax payable by the undertaking making the distribution, it involves a with- holding tax.
14. Athinaiki Zithopiia and the Commis- sion, for largely the same reasons as each other, consider that the tax provisions in question constitute a prohibited withhold- ing tax. 18. The exception in Article 7(1) of the Directive is not applicable in the present case, since it is not an advance payment or prepayment but definitive taxation that is at issue.
15. They submit that the Directive is sup- posed to create fiscal neutrality, in order to reduce the tax burden on cross-border cooperation and thereby to promote the freedom of establishment and the free 19. The fiscal sovereignty of the Member movement of capital. States does not preclude application of
I - 6804
ATHINAIKI Z I T H O P I I A
Article 5(1) of the Directive, since that 23. It follows that the issue to be consid- sovereignty must be exercised in a way ered is whether the provisions in question that is compatible with Community law. represent a withholding tax within the meaning of Article 5(1) of the Directive. The concept of a withholding tax is not defined in the Directive. However, the Court has already had the opportunity, in its judgment in Epson Europe, to interpret the Directive in this regard: 20. The representative of the Commission stated at the hearing, as a further argument in favour of classifying the tax as a tax on distributions, that no account is taken within its framework of losses of the 'As is clear in particular from the third undertaking making the distribution which recital in its preamble, the Directive seeks, have been carried forward. by the introduction of a common tax system, to ensure that cooperation between companies of different Member States is not penalised as compared with coopera- tion between companies in the same Mem- ber State and thereby to facilitate the grouping together of companies at Com- Assessment munity level. Thus, with a view to avoiding double taxation, Article 5(1) of the Direc- tive provides for exemption in the State of the subsidiary from withholding tax upon distribution of profits.
21. The conditions for application of the Directive are fulfilled. Athinaiki Zithopiia and Amstel are companies for the purposes of Article 2. Athinaiki Zithopiia is a sub- sidiary of Amstel, since Amstel holds more than 25% of its capital (Article 3(1 )(a) and (b)). Athinaiki Zithopiia distributes profits to Amstel (second indent of Article 1(1)). In order to determine whether the levying [of tax] on distributed profits falls within the scope of Article 5(1) of the Directive, reference must be made, in particular, to the wording of that provision. The term "withholding tax" contained in it is not limited to certain specific types of national 22. The derogation for Greece under Arti- taxation. In particular, Article 2(c) of the cle 5(2) of the Directive has in the mean- Directive enumerates, for the purpose of time come to an end. identifying those companies in the Member
I - 6805
OPINION OF MR ALBER — CASE C-294/99
States which are regarded as falling within source are normally taken into account in the scope of the Directive, the national settling their overall tax liability. taxes to which those companies are nor- mally subject... However, it cannot be inferred from this that other taxes having the same effect are authorised, particularly since the final part of Article 2 refers expressly to "any other tax which may be substituted for any of the above taxes".' 3
26. If, on the other hand, the recipients are not resident within the territory and are therefore taxed only at the place of their seat in respect of the aggregate of their worldwide income, there is usually no provision for such account to be taken. 24. It follows that the application of Arti- They must then in practice pay tax twice on cle 5(1) of the Directive depends not on the same income. In order to avoid, or at how the domestic tax provision is described least to limit, the cumulation of withhold- or on the tax regime it forms part of, but ing taxes and worldwide taxation, States exclusively on its effect. frequently conclude double taxation agree- ments. The Directive pursues exactly the same objective. It follows that, under the broad interpretation required by the Court, the concept of withholding tax includes every tax provision that has the effect of taxing distributions of profits by a resident subsidiary company to a non-resident par- ent company. The specific designation or 25. The concept of withholding tax the structure of the tax is immaterial. becomes even clearer when regard is had to the fact that, in the field of conflict of laws in taxation matters, it typically forms the counterpart to the principle of world- wide taxation. There it designates the imposition of local taxes on the local income of non-residents. When an under- taking's profits are distributed to non- residents (but also to residents), there is a withholding tax in that the undertaking 27. On the other hand, taxation of the making the distribution deducts the tax activity of the resident subsidiary company from the distribution and pays it directly to must be distinguished from withholding the tax authorities. Where the recipients of tax. In principle, the former is not affected the distribution are taxed domestically on by the Directive. However, a Member State their total income, deductions of tax at is unable in that context to enact provisions which are in practice equivalent to a with- holding tax. Thus, within the field of 3 — Case C-375/98 Epson Europe [2000] ECR 1-4243, para- application of the Directive, tax legislation graph 20 et seq., and the further references cited. that links particular fiscal charges to a
I - 6806
ATHINAIKI ZITHOPIIA
distribution of profits is prohibited if in the 30. The taxable amount for the increased absence of the distribution those fiscal tax burden is the distributed profit, since charges would not arise. In practice, the the amounts which are to be taken into distribution of profits is thereby equated to account in reducing tax are themselves their retention. 4 reduced in proportion to the fraction of the profit that has been distributed.
28. In Epson, the Court therefore took into account: 31. However, the taxable person in the present case is not the owner of the stake in the company which makes the distribution. The increase in tax affects as a matter of form the company making the distribution, — that the chargeable event was the whose income tax increases. In contrast to payment of dividends or of other Epson, here the applicant is thus not the income from shares, parent company resident in a different Member State, but the subsidiary resident in the Member State levying the tax.
— that the taxable amount was the income from the shares, and
32. Nevertheless, the fact that the tax burden is imposed on the subsidiary cannot be given decisive importance. The eco- — that the taxable person was the holder nomic effect of taxation of the subsidiary of those shares. 5 is tantamount to taxation of the parent company, since the tax — as is typical for withholding taxes — is retained, and paid directly to the tax authorities, by the company making the distribution.
29. In the present case, the tax burden increases only because the applicant distri- butes its profits. Thus, there is a compar- able chargeable event here.
4 — Sec Jutìa Forster and Andres Schollmeier, 'Harmonisierung 33. This analysis is confirmed by the Com- der Unternehmcnsbesreuerung', in Dieter Birk, Handbuch mission's argument that the provisions at des Europäischen Steuer- und Abgabenrechts, Verlag Neue Wirtschaftsbriefe Herne, 1995, § 30, point 131. issue do not take account of losses carried 5 — Epson, cited in footnote 3, paragraph 23. forward from previous years, whereas this
I - 6807
OPINION OF MR ALBER — CASE C-294/99
does usually occur within the framework of an exception to the general principles of the corporation tax. Directive.
34. Therefore, the provisions which lead to 37. Citing the reference for a preliminary the increase in tax are to be equated to a ruling pending in Océ van der Grinten, 6he withholding tax and are incompatible with also referred to doubts as regards the Article 5 of the Directive. legality of Article 7(2) of the Directive, since the Parliament was not consulted on this provision and the recitals in the preamble do not explain it.
B — Double taxation agreement between Greece and the Netherlands 38. At the hearing, the representative of the Commission invoked the supremacy of Community law over agreements between Member States. For that reason, the double taxation agreement could not restrict the Arguments of the parties effect of the prohibition on withholding tax.
35. The Greek Government relies on the double taxation agreement between Greece and the Netherlands, under which divi- Assessment dends arising from stakes held by foreign companies in Greek companies are taxed in Greece. In its submission, that is authorised by Article 7(2) of the Directive.
39. Under Article 7(2) of the Directive, domestic or agreement-based provisions designed to eliminate or lessen double taxation of dividends remain unaffected. 36. A representative of Athinaiki Zithopiia pleaded at the hearing for a narrow inter- pretation of Article 7(2), since it involved 6 — Case C-58/01.
I - 6808
ATHINAIKI ZITHOPIIA
40. That provision encompasses both ment with the Netherlands at all. However, domestic provisions and treaties under the provision does not make any direct public international law. Clearly, not every contribution to the avoidance of double domestic provision can fall within the taxation. Therefore, Article 7(2) of the scope of this exception, since otherwise Directive is inapplicable here. the prohibition on withholding tax would be without any practical effect. Rather, it is necessary to focus on the particular legal effect of the domestic provisions. Only provisions whose direct consequence is the avoidance of double taxation are not affected by the Directive.
43. Since Article 7(2) of the Directive thus has no bearing on the answer to the question referred for a preliminary ruling, it is unnecessary to forestall the proceedings in the case of Océ van der Grinten and take a view on the legality of Article 7(2). 41. This means that, equally, not every provision of a double taxation agreement between Member States of the Community remains unaffected, but only those provi- sions actually intended to avoid double taxation. By contrast, provisions which merely form part of the balancing of the interests of the States concerned with regard to allocation of the relevant tax revenue, but do not directly prevent double taxation, do not fall within the scope of Article 7(2) of the Directive. C — Application of fundamental freedoms
44. Since the direct application of Arti- 42. The double taxation agreement re- cle 5(1) of the Directive itself leads to the ferred to by Greece permits it to impose answer to the question referred for a tax of up to 35% of the gross amount on preliminary ruling and the effect of funda- dividends of Greek companies paid to mental freedoms is also not the subject of residents of the Netherlands. It may be the question referred, it is unnecessary in that this provision was a precondition for the present case to express a view on the Greece concluding a double taxation agree- application of fundamental freedoms.
I - 6809
OPINION OF MR ALBER — CASE C-294/99
VI — Temporal limitation of the effect of Assessment the judgment
47. Where the Court, in the exercise of its jurisdiction under Article 177 of the Treaty, interprets a rule of Community law, it ascertains the meaning and the scope of that rule as it must be or ought to have been understood and applied from the time of its Arguments of the parties coming into force. It follows that the rule as thus interpreted may, and must, be applied by the courts even to legal relationships arising and established before the judgment ruling on the request for interpretation, provided that in other respects the condi- tions enabling an action relating to the application of that rule to be brought before the courts having jurisdiction are 45. At the hearing, the Greek Govern- satisfied. 7 ment's representative requested that retro- spective effect of the judgment be excluded should it be found that Community law prohibits taxation of the type at issue in the main proceedings. Its representative re- ferred in justification to the high costs that were to be feared if the taxes withheld were repaid. 48. However, the Court restricts the retro- spective effect of preliminary rulings where the legal position was at least unclear prior to delivery of its judgment and serious — above all financial — consequences are to be feared in respect of legal relationships entered into in good faith in the past. 8 As regards financial consequences, the issue is frequently the budgets of the Member States concerned, but in the context of this second condition the number of legal 46. Athinaiki Zithopiia rejects a restriction on the temporal effect of the judgment. In its submission, there is no reason for 7 — Joined Cases C-197/94 and C-252/94 Bautiaa and Société allowing the Greek State to retain tax française maritime [1996] ECR 1-505, paragraph 47; see also Case C-437/97 EKW and Wein & Co. [2000] revenue levied unlawfully. On no account ECR 1-1157, paragraph 57, and the further references cited. can a restriction on retrospective effect 8 — Case 43/75 Defronte [1976] ECR 455, paragraphs 71 and 73 et seq., Case 24/86 Blaizot [1988] ECR 379, para- extend to cases pending before the courts or graph 31 et seq., Case C-415/93 Bosman [1995] administrative authorities, or to instances ECR I-4921, paragraph 143 et seq., Case C-262/96 Sürül [1999] ECR I-2685, paragraph 109 et seq., and EKW and where such legal recourse is still possible. Wein & Co., cited in footnote 7, paragraph 58 et seq.
I - 6810
ATHINAIKI ZITHOPIIA
relationships affected and possible detri- revenue law background, it was clear, even mental effects on private persons appear to in 1994, that taxation occasioned by the have particular weight. 9 In addition, the distribution of profits would carry with it Court has held that such a restriction on the the risk of contravening the prohibition on effect of a preliminary ruling must remain withholding tax. strictly exceptional. 10
49. In the present case, there is no need to fear any burden on private persons. How- ever, it appears conceivable that retrospec- tive application of the proposed answer to 52. Nor was there any basis for relying on the question referred for a preliminary the fact that the provisions in question were ruling would entail significant financial not expressly described as introducing a burdens for the Greek State. withholding tax but were incorporated into the rules on taxation of income of the company making the distribution. It is a general principle when applying Commu- nity law that it is not the designation of a provision but its practical effect alone that is decisive when assessing it. 50. As regards the clarity of the legal position, the Greek legislation giving rise to the reference for a preliminary ruling was enacted in 1994, that is to say after the period for implementation of the Directive expired on 1 January 1992.
53. Greece can thus rely on an alleged lack of clarity as to the scope of Article 5(1) of the Directive only if it assured itself of the 51. It follows that when Greece adopted compatibility of the provisions in question the legislation in question it was already with Article 5(1) — for example by required to comply with Article 5(1) of the addressing an enquiry to the Commission Directive. It is true that the concept of in advance. 11 The Greek Government has withholding tax used therein is not easily understood on its own. However, against a 11—See Defremie, paragraphs 71, 72 and 73, and Blaizot, paragraph 32 (both cited in footnote 8), and also EKW and Wein & Co., cited in footnote 7, paragraph 58, in 9 — Defrenne, paragraphs 71 and 73 et seq., and Bosman, each of which the Court, on the basis of potentially paragraph 143 (both cited in footnote 8). misleading conduct on the part of the Commission, the 10 — Bannan tind Société française maritime, cited in foot- Council or the Member States as regards the legal position, note 7, paragraph 48. limited the retrospective effect of its judgment.
I-6811
OPINION OF MR ALBER — CASE C-294/99
not, however, adduced any evidence to 54. Given the strictly exceptional nature of show that it assured itself that the provi- a restriction on the retrospective effect of sions in question were compatible with the judgments of the Court, there is thus no Directive. reason for such a restriction.
V I I — Conclusion
55. I accordingly propose that the question referred for a preliminary ruling should be answered as follows:
There is a withholding tax within the meaning of Article 5(1) of Council Directive 90/435/EEC of 23 July 1990 where national legislation provides that, in the event of distribution of profits by a subsidiary (a public limited company or equivalent company) to its parent company, account is to be taken, in determining the taxable profits of the subsidiary, of its total net profits, including income which has been subject to special taxation entailing extinction of tax liability and also non-taxable income, when those two categories of income would not be taxable on the basis of the national legislation if they remained with the subsidiary and were not distributed to the parent company.
I - 6812