Draft - Institut für Finanzrecht, Steuerrecht und Steuerpolitik

Georg Kofler
European Tax Law
Wednesday, 17 June 2009, 15:30 – 18:45, HS 6
Thursday, 18 June 2009, 15:30 – 18:45, HS 3
Wednesday, 24 June 2009, 15:30 – 18:45, HS 6
European Tax Law
Contents
Course Overview
Part I
Introduction and Fundamental Freedoms
Excerpts from the EC Treaty
Selected Articles:



A. Cordewener, G. Kofler and S. van Thiel, The ECJ, Fundamental EC Treaty Freedoms and
National Direct Tax Law: A Broader Picture and Some Snap -Shots of a Perpetuum Mobile
(unpublished draft).
Kofler, G., Wer hat das Sagen im Steuerrecht – EuGH, ÖStZ 2006/218, 106 und ÖStZ 2006/299,
154.
Vanistendeal, F., In Defence of the European Court of Justice, BIFD 2008, 93.
Part II
Tax Harmonization and Tax Competition
Texts of the Directives



Parent-Subsidiary-Directive
Merger Direct ive
Interest-Royalties-Directive
Course Overview
I already look forward to meeting you all for an Introduction to European Tax Law. This course
examines the influence of European Community law (fundamental freedoms, directives) on the
domestic tax systems of the EU Member States and discusses European Union tax policy. It will
follow along the lines set by the attached Powerpoint presentation; the additional readings and
materials in this compilation should help you prepare for the course and the exam.
Treaty Establishing the European Community*
Article 2
The Community shall have as its task, by establishing a common market and an economic and monetary union
and by implementing common policies or activities referred to in Articles 3 and 4, to promote throughout the
Community a harmonious, balanced and sustainable development of economic activities, a high level of
employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a
high degree of competitiveness and convergence of economic performance, a high level of protection and
improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic
and social cohesion and solidarity among Member States.
Article 3
1. For the purposes set out in Article 2, the activities of the Community shall include, as provided in this
Treaty and in accordance with the timetable set out therein: […]
(c) an internal market characterised by the abolition, as between Member States, of obstacles to the free
movement of goods, persons, services and capital; […]
Article 12
Within the scope of application of this Treaty, and without prejudice to any special provisions contained
therein, any discrimination on grounds of nationality shall be prohibited. […]
Article 14
[…]
2. The internal market shall comprise an area without internal frontiers in which the free movement of
goods, persons, services and capital is ensured in accordance with the provisions of this Treaty.
Article 18
1. Every citizen of the Union shall have the right to move and reside freely within the territory of the Member
States, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it
effect. […]
[Free movement of persons, services and capital: Workers]
Article 39
1. Freedom of movement for workers shall be secured within the Community.
2. Such freedom of movement shall entail the abolition of any discrimination based on nationality between
workers of the Member States as regards employment, remuneration and other conditions of work and
employment. […]
[Free movement of persons, services and capital: Right of establishment]
Article 43
Within the framework of the provisions set out below, restrictions on the freedom of establishment of
nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition
shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any
Member State established in the territory of any Member State.
Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to
set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of
Article 48, under the conditions laid down for its own nationals by the law of the country where such
establishment is effected, subject to the provisions of the Chapter relating to capital.
*
[2006] OJ (C 321E), 1.
Article 48
Companies or firms formed in accordance with the law of a Member State and having their registered office,
central administration or principal place of business within the Community shall, for the purposes of this Chapter, be
treated in the same way as natural persons who are nationals of Member States.
‘Companies or firms’ means companies or firms constituted under civil or commercial law, including
cooperative societies, and other legal persons governed by public or private law, save for those which are non-profitmaking.
[Free movement of persons, services and capital: Services]
Article 49
Within the framework of the provisions set out below, restrictions on freedom to provide services within the
Community shall be prohibited in respect of nationals of Member States who are established in a State of the
Community other than that of the person for whom the services are intended.
The Council may, acting by a qualified majority on a proposal from the Commission, extend the provisions of
the Chapter to nationals of a third country who provide services and who are established within the Community.
[Free movement of persons, services and capital: Capital and payments]
Article 56
1. Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital
between Member States and between Member States and third countries shall be prohibited. […]
Article 57
1. The provisions of Article 56 shall be without prejudice to the application to third countries of any
restrictions which exist on 31 December 1993 under national or Community law adopted in respect of the
movement of capital to or from third countries involving direct investment – including in real estate – establishment,
the provision of financial services or the admission of securities to capital markets. In respect of restrictions existing
under national law in Bulgaria, Estonia and Hungary, the relevant date shall be 31 December 1999.*
Article 58
1. The provisions of Article 56 shall be without prejudice to the right of Member States:
(a) to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the
same situation with regard to their place of residence or with regard to the place where their capital is
invested;
(b) to take all requisite measures to prevent infringements of national law and regulations, in particular in the
field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the
declaration of capital movements for purposes of administrative or statistical information, or to take measures which
are justified on grounds of public policy or public security.
2. The provisions of this Chapter shall be without prejudice to the applicability of restrictions on the right of
establishment which are compatible with this Treaty.
3. The measures and procedures referred to in paragraphs 1 and 2 shall not constitute a means of arbitrary
discrimination or a disguised restriction on the free movement of capital and payments as defined in Article
56.
[General and Final Provisions]
Article 293
Member States shall, so far as is necessary, enter into negotiations with each other with a view to securing
for the benefit of their nationals: […]
— the abolition of double taxation within the Community, […]**
*
This sentence was included by [2006] OJ (L 157), 203, 209.
To be striken by the Treaty of Lisbon, [2007] OJ (C 306), 1.
**
Part I
Introduction and Fundamental Freedoms
Excerpts from the EC Treaty
Selected Articles



A. Cordewener, G. Kofler and S. van Thiel, The ECJ, Fundamental EC Treaty Freedoms and
National Direct Tax Law: A Broader Picture and Some Snap-Shots of a Perpetuum Mobile
(unpublished draft).
Kofler, G., Wer hat das Sagen im Steuerrecht – EuGH, ÖStZ 2006/218, 106 und ÖStZ 2006/299,
154.
Vanistendeal, F., In Defence of the European Court of Justice, BIFD 2008, 93.
Treaty Establishing the European Community*
Article 2
The Community shall have as its task, by establishing a common market and an economic and monetary union
and by implementing common policies or activities referred to in Articles 3 and 4, to promote throughout the
Community a harmonious, balanced and sustainable development of economic activities, a high level of
employment and of social protection, equality between men and women, sustainable and non-inflationary growth, a
high degree of competitiveness and convergence of economic performance, a high level of protection and
improvement of the quality of the environment, the raising of the standard of living and quality of life, and economic
and social cohesion and solidarity among Member States.
Article 3
1. For the purposes set out in Article 2, the activities of the Community shall include, as provided in this
Treaty and in accordance with the timetable set out therein: […]
(c) an internal market characterised by the abolition, as between Member States, of obstacles to the free
movement of goods, persons, services and capital; […]
Article 12
Within the scope of application of this Treaty, and without prejudice to any special provisions contained
therein, any discrimination on grounds of nationality shall be prohibited. […]
Article 14
[…]
2. The internal market shall comprise an area without internal frontiers in which the free movement of
goods, persons, services and capital is ensured in accordance with the provisions of this Treaty.
Article 18
1. Every citizen of the Union shall have the right to move and reside freely within the territory of the Member
States, subject to the limitations and conditions laid down in this Treaty and by the measures adopted to give it
effect. […]
[Free movement of persons, services and capital: Workers]
Article 39
1. Freedom of movement for workers shall be secured within the Community.
2. Such freedom of movement shall entail the abolition of any discrimination based on nationality between
workers of the Member States as regards employment, remuneration and other conditions of work and
employment. […]
[Free movement of persons, services and capital: Right of establishment]
Article 43
Within the framework of the provisions set out below, restrictions on the freedom of establishment of
nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition
shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any
Member State established in the territory of any Member State.
Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to
set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of
Article 48, under the conditions laid down for its own nationals by the law of the country where such
establishment is effected, subject to the provisions of the Chapter relating to capital.
*
[2006] OJ (C 321E), 1.
Article 48
Companies or firms formed in accordance with the law of a Member State and having their registered office,
central administration or principal place of business within the Community shall, for the purposes of this Chapter, be
treated in the same way as natural persons who are nationals of Member States.
‘Companies or firms’ means companies or firms constituted under civil or commercial law, including
cooperative societies, and other legal persons governed by public or private law, save for those which are non-profitmaking.
[Free movement of persons, services and capital: Services]
Article 49
Within the framework of the provisions set out below, restrictions on freedom to provide services within the
Community shall be prohibited in respect of nationals of Member States who are established in a State of the
Community other than that of the person for whom the services are intended.
The Council may, acting by a qualified majority on a proposal from the Commission, extend the provisions of
the Chapter to nationals of a third country who provide services and who are established within the Community.
[Free movement of persons, services and capital: Capital and payments]
Article 56
1. Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital
between Member States and between Member States and third countries shall be prohibited. […]
Article 57
1. The provisions of Article 56 shall be without prejudice to the application to third countries of any
restrictions which exist on 31 December 1993 under national or Community law adopted in respect of the
movement of capital to or from third countries involving direct investment – including in real estate – establishment,
the provision of financial services or the admission of securities to capital markets. In respect of restrictions existing
under national law in Bulgaria, Estonia and Hungary, the relevant date shall be 31 December 1999.*
Article 58
1. The provisions of Article 56 shall be without prejudice to the right of Member States:
(a) to apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the
same situation with regard to their place of residence or with regard to the place where their capital is
invested;
(b) to take all requisite measures to prevent infringements of national law and regulations, in particular in the
field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the
declaration of capital movements for purposes of administrative or statistical information, or to take measures which
are justified on grounds of public policy or public security.
2. The provisions of this Chapter shall be without prejudice to the applicability of restrictions on the right of
establishment which are compatible with this Treaty.
3. The measures and procedures referred to in paragraphs 1 and 2 shall not constitute a means of arbitrary
discrimination or a disguised restriction on the free movement of capital and payments as defined in Article
56.
[General and Final Provisions]
Article 293
Member States shall, so far as is necessary, enter into negotiations with each other with a view to securing
for the benefit of their nationals: […]
— the abolition of double taxation within the Community, […]**
*
This sentence was included by [2006] OJ (L 157), 203, 209.
To be striken by the Treaty of Lisbon, [2007] OJ (C 306), 1.
**
Draft
The ECJ, Fundamental EC Treaty Freedoms and National Direct Tax Law:
A Broader Picture and Some Snap-Shots of a Perpetuum Mobile
Axel Cordewener, Georg Kofler and Servaas van Thiel
While in the early days of Community law the ECJ, sheltered from political constraints, was able to develop an uncompromising jurisprudence to enhance the development of Community law and to advance the Common Market, the case law in
the field of direct taxation has come more and more into the political limelight as fundamental tax policy questions and billions of tax revenue were at stake in high-profile tax cases such as D, Marks & Spencer, ACT Group Litigation, Cadbury
Schweppes and Denkavit Internationaal. As the Court’s decisions also take account of the dynamic evolution of the Community’s legal system and are much influenced by considerations of policy and economics, recent case law seems to put more
emphasis on a cautious re-balancing of domestic tax sovereignty and taxpayers’ rights under the fundamental freedoms. The
ECJ’s jurisprudence is, however, caught in a dilemma between two different levels of criticism: On the one hand, the Court is
accused of operating as a policy maker based on a deficient discrimination analysis, thereby intruding into the Member
States’ retained fiscal autonomy and traditional tax policy decisions. On the other hand, the Court’s recent attempts of a rebalancing have warranted criticism from the perspective of legal certainty due to the potential disregard of legal precedent
and the concern that the Court will deviate from Internal Market principles in this area. Against this background, this paper
aims at systematizing the dogmatic approaches underlying the vast body of case law in the field of direct taxation, also by
putting it in context with the non-tax jurisprudence and international tax principles. Without focusing on the nuances of
specific cases, we will scrutinize recent developments and analyze dogmatic underpinnings of the questions of when a domestic tax measure constitutes an Internal Market incompatible restriction (Chapter II), and on what grounds the continued
application of that restrictive measure can nevertheless be justified (Chapter III). This will lead to some general conclusions
that also allow for responses to some of the criticisms to which the Court’s direct tax case law has been subject (Chapter IV).
I.
II.
Preface: The ECJ and Direct Taxation
Discriminatory and Non-Discriminatory Restrictions, Disparities, and the Metaebene
A. Tax Obstacles to the Internal Market: The Constitutional Question
1. Introduction
2. “Disparities”, “Quasi-Restrictions” and the Metaebene
3. Discriminatory and Non-Discriminatory Restrictions
B. Discriminatory Restrictions: “Overt” and “Covert” Nationality Discrimination and Equal Treatment of Domestic
and Cross-Border Situations
1. A Roadmap for Non-Discrimination
2. Beyond Overt and Covert Nationality Discrimination: Equal Treatment of Cross-Border and Domestic Situations
3. The Concept of Comparability as the Cornerstone of the ECJ’s Case Law
a. “Inbound” Restrictions and the Comparability of Residents and Non-Residents
b. “Outbound” Restrictions, “Tax Base Fragmentations” and “Symmetry”
c. “Single Country Approach” versus “Overall Approach”
d. Equal Treatment of Different Situations
C. The Issue of “Horizontal Discrimination”: A Prohibition of Discrimination Among Different Cross-Border
Transactions?
1. Nationality-Based “Reverse” Discrimination of Cross-Border Activities
2. Free Choice of Secondary Establishment
3. Tax Treaties and “Most-Favoured-Nation” Treatment
4. Unilateral Distortion of Foreign Investment: The “Snooker Table Problem”
D. Non-Discriminatory Restrictions: “Double Burdens” and “Neutral” Rules
1. The Evolution of the “Restriction-Based Approach”
2. Types of “Non-Discriminatory” Restrictions: “Double Burdens”, “Formal” and “Material” Barriers
3. Double Taxation as a Forbidden “Double Burden”?
4. Conclusions: “Double Burdens” in Direct Taxation
E. Conclusions
III. Justifications and the “Rule of Reason” in Direct Taxation: Protection of Revenue versus Protection of Taxpayer
Rights
A. The “Rule of Reason” in Direct Taxation
B. Unacceptable Grounds of Justification: Loss of Revenue and Administrative Difficulties
C. National Anti-Avoidance Measures
D. Inter-Jurisdictional Equity versus Taxpayer Equity
E. Conclusions
IV. Summary and Conclusions
A. Main Findings
B. The Cyclical Pattern: Balancing Domestic Tax Sovereignty and Taxpayers’ Rights Under the Fundamental Freedoms
C. In Defence of the Court
1. Does the ECJ Go Beyond its Constitutional Role?
2. Does the Court Cause Unacceptable Budgetary Burdens for the Member States?
3.. Is the Court’s Direct Tax Case Law Inconsistent?
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Draft
I. Preface: The ECJ and Direct Taxation
Little has changed since the Commission has evaluated the scope for convergence of tax systems in the
Community in 1980 and noted that
“[t]ax sovereignty is one of the fundamental components of national sovereignty, and at present all the Member States
set great store by the inviolability of national sovereignty. It is important here to remember that one of the fundamental
prerogatives of national parliaments is the right to vote taxes”.1
This is because a State’s power to tax is part of its power of the purse, and in turn comprises legislative
power in the field of taxation, administrative power in tax matters, entitlement to tax revenue, and judicial authority in tax matters. The special significance of these powers is that governmental authority in modern societies
is inconceivable without public funds that are raised by taxation.2 Thus, the relationship between taxation and the
obligations arising from a State’s membership in the European Community touches on sensitive areas. In contrast to the “standing harmonisation order” for indirect taxation in Art. 93 EC,3 the EC Treaty does not contain
explicit provisions for the harmonization of direct taxes. Harmonization within the sphere of direct taxation is
possible only by means of Community legislation on the basis of Art. 94 EC relating to the establishment or
functioning of the Common Market, requiring unanimity of voting in the Council for legislation to be passed,4
and to date little Community legislation exists in the field.5 Therefore, not surprisingly, the Member States initially strongly held either to the view of a “strict sovereignty exception” and argued that direct taxation is a priori excluded from the scope of application of EC Law, especially the fundamental freedoms, or contended that,
conceptually based on the view of a “moderate sovereignty exception”, the EC Treaty applies to direct taxation
only after a certain degree of harmonization has been reached in this area6 – expressio unis est exclusio alterius.
These arguments, however, were unsoundly based since the ECJ had at this time already made it clear that directly applicable EC Law affects any area of national law,7 whether explicitly referred to in the EC Treaty or not,
and whether harmonized or not.8 Also, conversely, even if an area is (partially) harmonized by secondary Community law, the fundamental freedoms still apply if Member States have either exercised options in a discriminatory fashion9 or if the situation at hand is not covered by the objective or subjective scope of the directive.10
At the starting point, therefore, even if a matter, such as direct taxation, falls within the power of the Member States, they must exercise that power consistently with EC Law and therefore especially avoid any overt or
covert discrimination on grounds of nationality.11 This seemingly harmless proposition, however, means that
1 Report from the Commission to the Council on the “Scope for Convergence of Tax Systems in the Community”,
COM(80)139 final = Bulletin Supplement 1/80, para. 5.
2 See Lehner, “Limitation of the national power of taxation by the fundamental freedoms and non-discrimination clauses of the
EC Treaty”, 14 EC Tax Review (2005), 5; Snell, “Non-Discriminatory Tax Obstacles in Community Law”, 56 International and
Comparative Law Quarterly (2007), 339, 356 with further references.
3 See also Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 32
with note 33.
4 Art. 95(2) EC.
5 Harmonization in the field of direct taxation is still limited to some directives confined to circumscribed discrete areas of particular relevance to cross-border situations. See, e.g., the 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, [1990] OJ (L 225) 6, as amended
(aiming at eliminating double taxation of dividends paid by a subsidiary in one Member State to a parent company in another Member State); Council Directive 90/434/EEC of 23 July 1990 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States, [1990] OJ (L 225) 1, as amended (aiming
at facilitating cross-border reorganizations); Council Directive 2003/49/EC of 3 June 2003 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States, [2003] OJ (L 157) 49, as
amended (aiming at ensuring that interest and royalty payments are subject to tax only once in the EU).
6 This approach is apparent in the request for a preliminary ruling by the German Bundesfinanzhof in the Schumacker-case
(BFH, 14 April 1993, I R 29/92, BStBl 1994 II 27), asking, inter alia, whether Art. 39 EC (ex Art. 48 EEC) restricts “the right of the
Federal Republic of Germany to levy income tax on a national of another EC Member State.” For a discussion see also Lyons, “Discrimination Against Individuals and Enterprises on Grounds of Nationality: Direct Taxation and the European Court of Justice”, 1
EC Tax Journal (1995/96), 27, 28 et seq.; van Thiel, Free movement of Persons and Income Tax Law: the European Court in search
of principles (IBFD, 2002) 21 et seq. and 153 et seq.; Kokott and Henze, “Tendenzen der EuGH-Rechtsprechung im Bereich der
direkten Steuern – Diskriminierung, Kohärenz, Meistbegünstigung –”, in Lüdicke (Ed.), Tendenzen der Europäischen Unternehmensbesteuerung, Forum der Internationalen Besteuerung Vol. 30 (Beck, 2005), 69; de Hosson, “On the controversial role of the
European Court in corporate tax cases”, 34 Intertax (2006), 294, 297.
7 See, e.g., Case 82/71, SAIL, [1972] ECR 119, para. 5; Case C-20/92, Hubbard, [1993] ECR I-3777, para. 19.
8 See explicitly with regard to the lack of harmonization Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR
273, para. 24; Case C-1/93, Halliburton, [1994] ECR I-1137, para. 16; Case C-254/97, Société Baxter, [1999] ECR I-4809, para. 11.
9 Case C-168/01, Bosal, [2003] ECR I-9409, paras. 21-28, and Case C-471/04, Keller Holding, [2006] ECR I-2107, para. 45
(concerning non-deductibility of financing costs for the acquisition of a foreign subsidiary).
10 Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 54, and Case C-379/05, Amurta, [2007] ECR ___, paras. 20-24 (concerning inter-company dividends not covered by the Parent-Subsidiary-Directive). See also Lüdicke and Hummel,
“Zum Primat des primären Gemeinschaftsrechts”, 14 Internationales Steuerrecht (2006), 694 et seq., Kofler and Tumpel, “Double
Taxation Conventions and European Directives in the Direct Tax Area”, in M. Lang, Schuch and Staringer (Eds.), Tax Treaty Law
and EC Law (Linde, 2007), 191-226, and Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde,
2007), 826 et seq. For a critical position see Forsthoff, “EuGH versus Europäischer Gesetzgeber – oder Freiheiten über alles?”, 14
Internationales Steuerrecht (2006), 222 et seq., and Forsthoff, “Die eigenständige Bedeutung des sekundären Gemeinschaftsrechts”,
14 Internationales Steuerrecht (2006), 698 et seq.
11 See, e.g., Case C-264/96, ICI, [1998] ECR I-4695, para. 19; Case C-311/97, Royal Bank of Scotland, [1999] ECR I-2651,
para. 19; Case C-391/97, Gschwind, [1999] ECR I-5451, para. 20; Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 57. See
also the Council Conclusions on “Co-ordinating Member States’ direct tax systems in the Internal Market” at the 2792nd Economic
and Financial Affairs Council meeting (Brussels, 27 March 2007), where the Council “recalled that Member States are free to design
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Draft
domestic tax laws are to be scrutinized under directly applicable EC law. Already in 1974 Lord Denning noted
that “when we come to matters with a European element, the Treaty is like an incoming tide. It flows into the
estuaries and up the rivers. It cannot be held back.”12 In that respect, the EC Treaty makes up “the constitutional
charter of a Community based on the rule of law,”13 and even though its fundamental freedoms do not contain
explicit references to the area of tax law,14 they nevertheless serve as a quasi-constitutional yardstick for domestic tax rules in cross-border situations.15 The paramount importance of the Treaty freedoms results from the fact
that each freedom is directly applicable in the Member States,16 confers rights to individuals and companies, and
takes precedence over domestic legislation to the extent of any inconsistency. 17 In the latter respect, the fundamental freedoms do not only operate “negatively” by superseding national law,18 but also “positively” by granting taxpayers the right to benefits (e.g., deductions or a lower tax rate) that have been denied to them in breach
of Community law.19 A Member State’s breach of EC law may also result in the obligation to reimburse, with
interest,20 taxes charged in violation of the fundamental freedoms21 and, under certain circumstances, lead to
state liability under the Francovich-principles.22 Undoubtedly the fundamental freedoms of the EC Treaty apply
also to provisions in double taxation treaties and prevail by virtue of hierarchy – lex superior derogat de lege
inferiori.23 Although these principles are settled case law since the ECJ’s landmark decisions in Van
Gend & Loos24 and Costa/ENEL,25 the recognition of the principle of primacy of Community law in the direct
tax area by the administrations and the judiciary of the several Member States was not without hesitation.26
Only after the lack of experience with tax treaty non-discrimination clauses, the timid attitude of the European Commission and many non-tax obstacles to cross-border economic activities had been overcome, did the
paramount importance of the fundamental freedoms also for the field of direct taxation start to surface in the
early 1980s.27 This ongoing pocess was emphazised in the 1996 Monti report, which noted that,
“[a]s regulatory restrictions are disappearing, those tax hindrances or distortions that do remain are becoming more visble, and taxation is widely seen as one of the most important areas in which the Single Market has not been fully
achieved.”28
their direct tax systems so as to meet their domestic policy objectives and requirements, provided that they exercise that competence
consistently with Community law.”
12 HP Bulmer Ltd & Anor v. J. Bollinger SA & Ors, [1974] EWCA Civ 14 (22 May 1974).
13 Opinion 1/91, European Economic Area, [1991] ECR I-6079, para. 1.
14 See, however, the explicit references to taxation in Art. 58(1) EC and for a brief discussion infra III.A.
15 See, e.g., van Thiel, Free movement of Persons and Income Tax Law: the European Court in search of principles (IBFD,
2002), 1; J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International Tax Law
(Kluwer, 2006), 251, 261, also noting that the freedoms were destined to be included in the Treaty establishing a Constitution for
Europe.
16 While the provisions on the free movement of goods, services, and persons were considered to be directly applicable in the
Member States since the end of the transitional period on 31 December 1969 (see, e.g., Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] ECR I-1727, para. 41), the free movement of capital has quite a history. In a nutshell, Art. 67 of the EEC
Treaty was considered not to be directly applicable (Case 203/80, Casati, [1981] ECR 2595, paras. 10 et seq.; Case C-484/93, Svensson and Gustavsson, [1995] ECR I-3955, paras. 5 et seq.). However, it should be noted in that regard that restrictions on movements
of capital were abolished by the Directive for the implementation of Art. 67 (Council Directive 88/361/EEC of 24 June 1988 for the
implementation of Article 67 of the Treaty, 1988 OJ (L 178) 5); the decisive Arts 1 and 4 of this Directive had direct effect since
1.July 1990 (see Cases C-358/93 and C-416/93, Bordessa, [1995] ECR I-361, paras. 32 et seq.; Case C-484/93, Svensson and Gustavsson, [1995] ECR I-3955, para. 6). With effect of 1 January 1994, the Maastricht Treaty introduced new provisions on “Capital
and payments” in the EC Treaty, including Art. 73b, which substantially reproduced the contents of Art. 1 of Directive. After the
Treaty of Amsterdam, Art. 73b was renumbered as Art. 56 EC. Thus, effectively since 1 July 1990 the freedom of capital movement
is directly applicable in the Member States.
17 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 13; Case 81/87, Daily Mail, [1988] ECR 5483,
para. 15; Case C-1/93, Halliburton Services, [1994] ECR I-1137, para. 16; Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 33; Case C-311/97, Royal Bank of Scotland, [1999] ECR I-2651, para. 22; Case C-251/98, Baars, [2000] ECR I-2787, para. 27.
18 For that effect see generally Case 106/77, Simmenthal II, [1978] ECR 629, para. 17/18.
19 See Case C-18/95, Terhoeve, [1999] ECR I-345, para. 57; Case C-15/96, Schöning-Kougebetopoulou [1998] ECR I-47, para. 33.
20 For an instructive discussion on the calculation of interest see UK House of Lords, 18 July 2007, Sempra Metals Limited v.
Her Majesty’s Commissions of Inland Revenue, [2007] UKHL 34.
21 See Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] ECR I-1727, paras. 86, 89. For a recent discussion of the surrounding complexities see Wattel, “Use It or Lose It – Challenge the Charge, File for Restitution, Sue for Damages?”,
in L. Hinnekens and Ph. Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans
Vanistendael (Kluwer, 2008), 931.
22 Cases C-6/90 and C-9/90, Francovich, [1991] ECR I-5357; see also Cases C-46/93 and C-48/93, Brasserie du Pêcheur,
[1996] ECR I-1029; Case C-178/94, Dillenkofer [1996] ECR I-4845.
23 See, e.g., Pistone, The Impact of Community Law on Tax Treaties (Kluwer, 2002), 11 et seq., and Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 265 et seq.
24 Case 26/62, Van Gend & Loos, [1963] ECR 25.
25 Case 6/64, Costa/ENEL, [1964] ECR 1269.
26 For a comprehensive survey see the contributions in Brokelind (Ed.), Towards a Homogeneous EC Direct Tax Law – Assessment of the Member States‘ Responses to the ECJ‘s Case Law (IBFD, 2007). See also de Hosson, “On the controversial role of
the European Court in corporate tax cases”, 34 Intertax (2006), 294, 294-295.
27 See, e.g., J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International
Tax Law (Kluwer, 2006), 251, 252, and de Hosson, “On the controversial role of the European Court in corporate tax cases”, 34
Intertax (2006), 294, 298-299; for this so-called “reef-effect” see Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 30 et seq.
28 “Taxation in the European Union – Report on the Development of Tax Systems”, COM(96)546 final, para. 3.1.
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The impact of the fundamental freedoms on direct taxation first became clear in 1986,29 when the ECJ extended its case law on the four freedoms to the sphere of direct taxation in Commission v. France,30 commonly
known as the “Avoir Fiscal” case. The Court held that a national tax law that refused a dividend imputation tax
credit to permanent establishments of foreign (non-resident) companies, whilst granting it to resident companies,
was contrary to Community law. Unsurprisingly, this decision caused a great deal of confusion among practitioners of international tax law at the time as it was practically unheard of that non-residents and residents could not
be subjected to different tax treatment, which has always been a traditional cornerstone of domestic tax regimes.31 Since the decision in Avoir Fiscal, however, the jurisprudence in this area has developed rapidly and it
is fair to say that of all the Community institutions the Court has so far proved to be the most efficient in removing direct tax obstacles to cross-border economic activities within the EC. In any event, it is no surprise that
some of the developments on the fundamental freedoms have their counterparts in, for example, the OECD’s
interpretation of tax treaty non-discrimination clauses.32 Although, such clauses cover only specific cases and,
apart from these specific cases, different or less favorable treatment is possible, more and more emphazis is put
on the question whether the ECJ’s case law on the fundamental freedoms has potential impact on Art. 24 OECD
MC33 or might even provide insight in the interpretation of tax treaty non-discrimination clauses.34
As of 1 January 2008, the ECJ has rendered 91 decisions on the relationship between the fundamental freedoms and Member States’ income and corporate tax systems with increasing annual volumes and peak numbers
of decisions in the early- and mid-2000s (Graph 1). It is especially striking that direct tax cases constitute a considerable portion of all cases on the fundamental freedoms. In 2006, for example, the ECJ decided 62 cases35 on
the freedoms of establishment, workers, services, and capital, roughly 26% (16 cases) of which concerned Member States’ income and corporate tax provisions. “Negative integration” based on market particpants’ rights under the freedoms is supplemented, and partly overlaps, with the Commission’s activity in the field of prohibited
state aid.36 What is, however, also clear is that judicial activity alone is insufficient to give full force to the Internal Market and its undistorted functioning, as it necessarily leaves tax competition among Member States and
the diversified tax landscape and the resulting distortions untouched.37 Also, as the Court has recently pointed
out, less restrictive regimes than those that pass muster under the freedoms might “require harmonisation rules
adopted by the Community legislature.”38
29 For an exceptional case on the freedom of goods which was decided even a few months earlier see, however, Case 18/84,
Commission v. France, [1985] ECR 1339. This case is not included in Graph 1 below.
30 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273.
31 For an early discussion see van Raad, Nondiscrimination in International Tax Law (Kluwer, 1986), 38-43.
32 Compare, e.g., Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, and Case C-307/97, Saint-Gobain,
[1999] ECR I-6161, with the OECD Commentaries on non-discrimination (Art. 24 paras. 49-54).
33 See OECD, Application and Interpretation of Article 24 (Non-Discrimination), Public discussion draft (May 3, 2007), 29,
available at http://www.oecd.org/dataoecd/59/30/38516170.pdf, where Working Party No. 1 identified four potential interactions
between the fundamental freedoms and the OECD MC ranging from interpretative spill-over effects to more technical issues such as
the applicability of certain conclusions in the OECD Commentaries in intra-EU situations.
34 See, e.g., Morrison, “Treaty Nondiscrimination – Will Recent European Precedent Cross the Atlantic”, 33 Tax Management
International Journal 254 (Apr. 9, 2004). For an analysis of the differences and similarities see van Raad, “Nondiscrimination in
taxation of cross-border income under the OECD Model and EC Treaty rules – a concise comparison and assessment”, in van Arendonk, Engelen and Jansen (Eds.), A Tax Globalist, Essays in honour of Maarten J. Ellis (IBFD, 2005), 129; W. Loukota, “Verbot der
Betriebsstättendiskriminierung”, in M. Lang and Jirousek (Eds.), Praxis des Internationalen Steuerrechts, Festschrift H. Loukota
(Linde, 2005), 329; W. Loukota, “DBA-Diskriminierungsverbote und gemeinschaftsrechtliche Grundfreiheiten – Gemeinsamkeiten
und Unterschiede”, in M. Lang, Schuch and Staringer (Eds.), Die Diskriminierungsverbote im Recht der Doppelbesteuerungsabkommen (Linde, 2006), 265; Bennett, “Nondiscrimination in International Tax Law: A Concept in Search of a Principle”, 59 Tax
Law Review (2006), 439, 459-482; Staringer and Schneeweiss, “Tax Treaty Non-Discrimination and EC Freedoms”, in M. Lang,
Schuch and Staringer (Eds.), Tax Treaty Law and EC Law (Linde, 2007), 227; and van Raad, “Nondiscrimination from the Perspective of the EC Treaty – Structural and Conceptual Issues”, in Avi-Yonah, Hines and M. Lang (Eds.), Comparative Fiscal Federalism: Comparing the European Court of Justice and the US Supreme Court‘s Tax Jurisprudence (Kluwer, 2007), 55. Compare for a
recent discussion of Art. 24 OECD Model Convention also Avery Jones and Bobbett, “Interpretation of the Non-Discrimination
Article of the OECD Model”, 62 Bulletin for International Taxation (2008), 50.
35 See the Annual Report of the Activity of the Court of Justice for 2006 (at page 84), available at
http://curia.europa.eu/en/instit/presentationfr/rapport.htm.
36 See, e.g., the Commission Notice on the application of the State aid rules to measures relating to direct business taxation,
[1998] OJ (C 384), 3; for potential overlaps with scrutiny under the fundamental freedoms see de Hosson, “On the controversial role
of the European Court in corporate tax cases”, 34 Intertax (2006), 294, 297-298, and Case C-156/98, Germany v. Commission,
[2000] ECR I-6857, paras. 76 et seq. For more comprehensive overviews see, e.g., Pinto, “EC State Aid Rules and Tax Incentives: A
U-Turn in Commission Policy”, 39 European Taxation (1999), 295 and 343; Schön, “Taxation and State Aid Law in the European
Union”, 36 Common Market Law Review (1999), 911; and Panayi, “State Aid and Tax: the Third Way?”, 32 Intertax (2004), 283.
37 J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International Tax Law
(Kluwer, 2006), 251, 254.
38 See Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 58.
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Graph 1: Until 1 January 2008, the ECJ has ruled in 91 cases on the relationship between Member States’ income, corporate and
wealth tax provisions and the fundamental freedoms of the EC Treaty. 39 Although this direct tax jurisprudence roots back to the
Avoir Fiscal case in 1986, roughly three quarters of the cases have been decided since 2000 (68 cases). The graph also shows the
referrals by domestic courts and infringement proceedings initiated by the Commission, overall 114 as 1 January 2008,40 emphasizing the increasing importance of this field in the past few years.
A vast majority of these cases – nearly 80% – were won by taxpayers or the Commission and consequently
led to major turmoils in national tax systems (Graph 2). However, the “destruction of domestic tax systems”41 by
a Court not specialized in tax law42 resulted in ever increasing criticism as to the proper balance between market
integration and national sovereignty43 – “Member States will not go on accepting the Court overruling them with
the flimsiest of arguments forever”.44 Especially in the last few years, broad skepticism and frustration has surfaced in the Member States, domestic courts and academia,45 questioning the consistency and accuracy of the
ECJ’s case law.46 Many have pointed out that the ECJ
“has no power to create anything to put in place of the systems whose fairness it is unbalancing, and there is no other
institution or mechanism currently capable and willing to do this. It is unrealistic to expect Member States to adapt systems as fundamental as the income tax and social security systems to respond to decisions […] at the speed necessary to
stop the damage. The result is that in attempting to be fair the court will create unfairness, and in attempting to create it
will destroy”.47
Likewise, the Court is criticized for having created a substantial body of rather complex and still evolving
case law that results in an unacceptable level of unpredictability, 48 which rests uneasy with the notion that taxaFor a list and classification of cases visit www.steuerrecht.jku.at/gwk/ecj.pdf.
We consider all cases that have been referred to the ECJ up until the end of 2007, irrespective of when the references have
been published in the Official Journal.
41 Ahmann, “Das Ertragssteuerrecht unter dem Diktat des Europäischen Gerichtshof? – Können wir uns wehren?”, 93 Deutsche
Steuerzeitung (2005), 75, 78.
42 See for concerns in this regard Hey, “Perspektiven der Unternehmensbesteuerung in Europa”, 81 Steuer und Wirtschaft
(2004), 193, 197 with note 52, and Wattel, “Red Herrings in Direct Tax Cases before the ECJ”, 31 Legal Issues of Economic Integration (2004), 81 et seq.; for the suggestion that the ECJ should consult the OECD’s Fiscal Committee or an expert panel, see van
Raad, “Interpretation and Application of Tax Treaties by Tax Courts”, 36 European Taxation (1996), 3 et seq.
43 For a recent account see Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax (2006), 582 et seq.; Douma, “The Three Ds of Direct Tax Jurisdiction: Disparity, Discrimination
and Double Taxation”, 46 European Taxation (2006), 522 et seq.
44 Vermeend, “The Court of Justice of the European Communities and direct taxes: ‘Est-ce que la justice est de ce monde’?”, 5
EC Tax Review (1996), 54, 55.
45 See, e.g., Wattel, “Red Herrings in Direct Tax Cases before the ECJ”, 31 Legal Issues of Economic Integration (2004), 81 et
seq.; Seiler, “Das Steuerrecht unter dem Einfluss der Marktfreiheiten”, 82 Steuer und Wirtschaft (2005), 25 et seq.; Fischer, “Europa
macht mobil – bleibt der Verfassungsstaat auf der Strecke?”, 87 Finanz-Rundschau (2005), 457 et seq.; for a recent surveys of the
criticism see Schnitger, Die Grenzen der Einwirkungen der Grundfreiheiten des EG-Vertrages auf das Ertragsteuerrecht (IDW,
2006), 2 et seq., and Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 39 et seq.
46 See also Terra and Wattel, European Tax Law (Kluwer, 4th edition 2005), 162 et seq., and Farmer, “The Court’s case law on
taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75, 75 et seq.; see also Farmer, “EC law and national rules on
direct taxation: a phoney war?”, 7 EC Tax Review (1998), 13, 14 (blaming Member States and parties for poor submissions to the
ECJ).
47 Williams, “Asscher: the European Court and the power to destroy”, 6 EC Tax Review (1997), 4, 9; see also van Raad, “The
Impact of the EC Treaty’s Fundamental Freedoms Provisions on EU Member States’ Taxation in Border-crossing Situations – Current State of Affairs”, 4 EC Tax Review (1995), 190, 201: The ECJ “is restricted to pulling individual bricks from domestic law
structures without having the a builder’s means to redesign and rebuild these structures in conformity with EC law“.
48 See, e.g., J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International
Tax Law (Kluwer, 2006), 251, 253-254, and Farmer and Zalinski, “General Report” in Xenopoulos (Ed.), Direct tax rules and the
EU fundamental freedoms: origin and scope of the problem; National and Community responses and solutions (FIDE Congress,
2006), 399, 401; see also Snell, “Non-Discriminatory Tax Obstacles in Community Law”, 56 International and Comparative Law
Quarterly (2007), 339, 354-355, Mason, “Flunking the ECJ’s Tax Discrimination Test”, 46 Columbia Journal of Transnational Law
(2007), 72 et seq., and Malherbe, Malherbe, Richelle and Traversa, The Impact of the Rulings of the European Court of Justice in the
Area of Direct Taxation (Policy Department of the European Parliament, March 2008), 76.
39
40
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tion is “an area where predictability and legal certainty are crucially important, so that Member States can plan
their budget and design their […] tax systems on the basis of relatively reliable revenue predictions.”49 The
Court is also accused of judicial activism, overstepping its role and unduly constraining the tax autonomy of the
Member States.50 These controversies have even resulted in a political threat to curtail the ECJ’s powers in tax
matters during the debate on the European Constitution.51 As former Judge Melchior Wathelet reported,
“[d]uring the debates leading up to the adoption of the Constitutional Treaty, it was proposed to prohibit the ECJ from
drawing any tax-related conclusions whatsoever from the provisions of the Treaty relating to the fundamental freedoms
of circulation or to force it to treat Member States’ budgetary concerns as overriding reasons in the public interest to
justify a restriction.”52
Graph 2: Among the 91 decisions on the relationship between Member States’ income, corporate and wealth tax provisions and
the fundamental freedoms handed down by the ECJ until 1 January 2008, roughly 78% (70 cases) were won by taxpayers or the
Commission, while Member States were victorious in only 22% (20 cases). It is, however, noteworthy that approximately two
thirds of the Member States’ victories (13) were achieved in 2005, 2006 and 2007. The longest winning streak for taxpayers
lasted for 28 straight cases, starting with Saint-Gobain53 in 1999 and ending only in mid-2005 when the ECJ sided with the Netherlands in D. 54
Others have broadly scrutinized the ECJ’s jurisprudence from the perspective of international tax policy and
the principles of capital import and capital export neutrality.55 It has been noted that the “ECJ decisions to date
suggest potentially staggering constraints on countries’ freedom to resolve what strike us as quintessentially
legislative issues – constraints that are fundamentally inconsistent with the fiscal autonomy retained by the
member states in their right to veto EU taxing provisions.”56 Along the same lines it is argued that the ECJ’s case
law is incorrect from a dogmatic point of view because the Court does not pay heed to the consequences of its
own basic assumptions such as that the Member States are free to determine the criteria for taxation in order to
delimit tax jurisdiction and to avoid double taxation.57 The discrimination standard as the sole criterion, it is said,
Opinion of A.G. Geelhoed, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 3.
See Mason, “Flunking the ECJ’s Tax Discrimination Test”, 46 Columbia Journal of Transnational Law (2007), 72, 74 with
notes 7 and 8. For a recent discussion of the judicature’s role see also Gutmann, “Some Theoretical Thoughts on Judicial Power and
Tax Law, with Particular Focus on the ECJ”, in L. Hinnekens and Ph. Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 485 et seq.
51 See Terra and Wattel, European Tax Law (Kluwer, 4th edition 2005), 162; Vanistendael, “The ECJ at the Crossroads: Balancing Tax Sovereignty against the Imperatives of the Single Market”, 46 European Taxation (2006), 413, 413. See also on an
earlier discussion Pinto, “The Report on the Reorganization of EU Traties and Its Impact on EU Tax Law”, 20 Tax Notes Int’l 2481
et seq. (June 5, 2000).
52 Wathelet, “Marks & Spencer plc v Halsey: Lessons to be Drawn”, 53 British Tax Review (2006), 128, 131.
53 Case C-307/97, Saint-Gobain, [1999] ECR I-6161.
54 Case C-376/03, D, [2005] ECR I-5821.
55 See, in particular, the position taken by Graetz and Warren: “Income Tax Discrimination and the Political and Economic Integration of Europe”, 115 Yale Law Journal (2006), 1185 et seq.; “Dividend Taxation in Europe: When the ECJ Makes Tax Policy”,
44 Common Market Law Review (2007), 1577 et seq.; and “Income tax discrimination and the political and economic integration of
Europe”, in Avi-Yonah, Hines and M. Lang (Eds.), Comparative Fiscal Federalism: Comparing the European Court of Justice and
the US Supreme Court‘s Tax Jurisprudence (Kluwer, 2007), 263-320.
56 Graetz and Warren, “Income Tax Discrimination and the Political and Economic Integration of Europe”, 115 Yale Law
Journal (2006), 1185, 1207.
57 See Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34
Intertax (2006), 582 et seq.; Weber, “Community Report”, in Xenopoulos (Ed.), Direct tax rules and the EU fundamental freedoms:
origin and scope of the problem; National and Community responses and solutions (FIDE Congress, 2006), ___; for further criticism
along these lines see, e.g., Ghosh, Principles of the Internal Market and Direct Taxation (Oxford Key Haven Publications, 2007),
81-92. But see also the “counter-critique” by Farmer and Zalinski, “General Report”, in Xenopoulos (Ed.), Direct tax rules and the
EU fundamental freedoms: origin and scope of the problem; National and Community responses and solutions (FIDE Congress,
2006), 399, 401-407.
49
50
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“suppresses considerations of efficiency, fairness and administrability that should inform difficult tax policy
decisions.”58 It has also been suggested that inspiration may be taken from the US Supreme Court’s resolution of
similar problems of state taxation under the (“dormant”) US Interstate Commerce Clause, which has evolved
over the course of the past two centuries.59
We do not share this harsh criticism.60 Given the broad agreement that there is not one “right” decision
which neutrality or efficiency should be achieved from an international tax perspective61 on the one hand and the
fundamental policy choices made by Member States in 1957,62 1986,63 1992,64 1997,65 200166 and 200767 on the
other, the ECJ is quite correct in taking the different Member States’ tax systems as given, but demanding that
they be applied consistently and fairly to achieve an Internal Market. It is ultimately the Member State that is
free to define the conditions of application of national tax legislation, to make policy choices and to specify their
content; EC law merely requires the nondiscriminatory extension of such choices to comparable cross-border
situations when taxing competence is exercised.68 Unlike international taxation that is by definition based on
national borders, however, Articles 3(1)(c) and 14(2) of the EC Treaty aim at an Internal Market comprising “an
area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in
accordance with the provisions of this Treaty”, which in turn informs the interpretation and application of the
fundamental freedoms that serve to achieve this goal.69 It cannot be denied that this requires a re-thinking of
accepted tax principles from the perspective of the Member States, but the EC Treaty’s discrimination test and
the inherent feature of comparability are a sufficient and modest standard to achieve this goal without excessively restraining Member States’ tax policy choices. 70 Also, by accepting the international allocation of taxing
rights under tax treaties the ECJ avoids that tax jurisdiction and revenue is shifted contrary to Member States’
treaty policy considerations.71 It is, however, undisputed that the case law on direct taxation has multiple flaws,72
and that the Court is not only ill suited but also hesitant73 to actively support Member States in building international tax systems that comply with the requirements of the Internal Market. Given the Member States’ reluctance towards positive harmonization it seems therefore reasonable that the Commission, on the one hand, suggests tax co-ordination between the Member States to the benefit of both, national fiscs and cross-border economic operators,74 and, on the other hand, demonstrates increasing activity in confronting Member States with
infringement proceedings.75
58 Graetz and Warren, “Income Tax Discrimination and the Political and Economic Integration of Europe”, 115 Yale Law
Journal (2006), 1185, 1212.
59 Mason, “Made in America for European Tax: The Internal Consistency Test”, 44 Boston College Law Review (2008), ___;
Mason, “Flunking the ECJ’s Tax Discrimination Test”, 46 Columbia Journal of Transnational Law (2007), 72, 120 et seq.; for a
possible approach towards juridical double taxation see also Kofler and Mason, “Double Taxation: A European ‘Switch in Time’?”,
14 Columbia Journal of European Law (2007), 63 et seq., and Kofler and Mason, “Kerckhaert & Morres: A European ‘Switch in
Time?‘“, in van Thiel (Ed.), The internal market and direct taxation: Is the European Court of Justice taking a new approach? (CFE
Brochure on European Taxation, 2007), 176 et seq. For an analysis of this line of criticism see Vanistendael, “Does the ECJ have the
power of interpretation to build a tax system compatible with the fundamental freedoms?”, 17 EC Tax Review (2008), 52, 53-54. For
a brief overview of the respective standards of review see De Wolf, “The Power of Taxation in the EU and in the US”, 4 EC Tax
Review (1995), 124-135.
60 See infra IV.C. See also the recent “defence of the Court” by Vanistendael, “In Defence of the European Court of Justice”,
62 Bulletin For International Fiscal Documentation (2008), 90, and the critical remarks by Ellis, 62 Bulletin For International
Fiscal Documentation (2008), 99, 99-100; for a positive analysis of the case law see also van Thiel, “Why the ECJ Should Interpret
Directly Applicable European Law as a Right to Intra-Community Most-Favoured-Nation Treatment”, 47 European Taxation
(2007), 263; Vanistendael, “Does the ECJ have the power of interpretation to build a tax system compatible with the fundamental
freedoms?”, 17 EC Tax Review (2008), 52; van Thiel, “European Taxation: past trends and future developments”, 61 Tax Law Review (2008), ___.
61 For an extensive discussion see Graetz, “Taxing International Income: Inadequate Principles, Outdated Concepts, and Unsatisfactory Policies”, 54 Tax Law Review 261 et seq. (2000-2001), reprinted in The Tillinghast Lecture 1996-2005 (NYU School of
Law, 2007), 157 et seq.
62 Treaty establishing the European Economic Community (1957).
63 Single European Act, [1987] OJ (L 169), 10.
64 Treaty of Maastricht (Treaty on European Union), [1992] OJ (C 224), 2.
65 Treaty of Amsterdam, [1997] OJ (C 340), 1.
66 Treaty of Nice, [2001] OJ (C 80), 1.
67 Treaty of Lisbon, [2007] OJ (C 306), 1. After the Irish “No”, however, the future of this Treaty reform remains unclear.
68 See also García Prats, “Is It Possible to Set a Coherent System of Rules on Direct Taxation under EC Law Requirements?”,
in L. Hinnekens and Ph. Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans
Vanistendael (Kluwer, 2008), 429, 438-439, and Lenaerts, “’United in Diversity’ – also In Fiscalibus?”, in L. Hinnekens and Ph.
Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer,
2008), 617, 618.
69 See Opinion 1/91, European Economic Area, [1991] ECR I-6079, para. 18; see also J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International Tax Law (Kluwer, 2006), 251, 265.
70 Infra IV.
71 Infra II.B.3. and IV.C.
72 See, e.g., Wattel, “Red Herrings in Direct Tax Cases before the ECJ”, 31 Legal Issues of Economic Integration (2004), 81 et
seq.; for a comprehensive critique on the ECJ’s case law on dividend taxation see Graetz and Warren, “Dividend Taxation in Europe: When the ECJ Makes Tax Policy”, 44 Common Market Law Review (2007), 1577 et seq.
73 See, e.g., Case C-290/04, Scorpio, [2006] ECR I-9461 (where the ECJ left Member States in the dark concerning the permissibility of withholding taxes on active income after the entry into force of Directive 2001/44/EC on mutual assistance in the collection of direct tax claims), and the criticism by the CFE in its “Opinion Statement on withholding taxes on active income within the
EU” (Jan. 14, 2008), available at http://european-tax-adviser.com.
74 See the Commission’s Communications of 19 December 2003 on “Dividend taxation of individuals in the Internal Market”,
COM(2003)810 final; of 19 December 2006 on “Co-ordinating Member States’ direct tax systems in the Internal Market”,
COM(2006)823 final; on “Tax Treatment of Losses in Cross-Border Situations”, COM(2006)824 final; on “Exit taxation and the
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Our criticism is, however, twofold: First, the ECJ’s recent generosity on the level of justification76 and its
reluctance to pay heed to the Internal Market in cases of horizontal discrimination77 or double burdens78 are
questionable from a dogmatic point of view.79 Second, from a practical point of view, the ECJ would be well
advised to re-think its approach towards the temporal scope of its judgments and be more generous when issues
are highly disputed and Member States’ might need time to adjust their tax systems to the Court’s interpretation.80 In principle, the interpretation the ECJ gives to a rule of Community law is limited to clarifying and defining the meaning and scope of that rule as it ought to have been understood and applied from the time of its coming into force, i.e., 1 January 1970 in the cases of now Art 39, 43 and 49 EC and 1 July 1990 and 1 January 1994
respectively in the case of now Art 56 EC.81 It follows that such interpretation must be applied by the national
courts even to legal relationships arising and established before the respective ECJ’s judgment.82 Only in very
exceptional cases does the Court restrict such “retroactive” or – more precisely – ex tunc effects.83 Although a
1996 proposal by the United Kingdom to regard protection of national budgets as one such exceptional reason to
restrict “retroactive” effects was not successful,84 this aspect is becoming increasingly important in the direct tax
area.85
There is general consensus that the Court’s case law in the direct tax area has gradually evolved in different
generations, some of them turning their backs on lessons learned from the previous ones.86 While in the early
days the judges of the Court were able to develop the initial daring and uncompromising case law to advance the
Common Market in relative isolation and sheltered from political constraints,87 the ECJ’s case law in the field of
direct taxation has come more and more into the political limelight as fundamental tax policy questions and
billions of tax revenue88 were at stake in high-profile tax cases such as D,89 Marks & Spencer,90 ACT Group
need for co-ordination of Member States’ tax policies”, COM(2006)825 final; and of 10 December 2007 on “The application of antiabuse measures in the area of direct taxation – within the EU and in relation to third countries”, COM(2007)785 final.
75 See in the area of dividend taxation, e.g., “Direct Taxation: Commission requests Belgium, Spain, Italy, Luxembourg, the
Netherlands and Portugal to end discriminatory taxation of outbound dividends”, IP/06/1060 (July 26, 2006); “Direct Taxation:
Commission decides to refer Belgium, Spain, Italy, the Netherlands and Portugal to the Court over discriminatory taxation of outbound dividends and asks Latvia to end such discriminatory taxation”, IP/07/66 (Jan. 22, 2007); “Direct taxation: The Commission
decides to refer Belgium to the Court over discriminatory taxation of inbound dividends”, IP/07/67 (Jan. 22, 2007); “Direct Taxation: Commission asks 9 Member States for information on discriminatory taxation of dividends and interest paid to foreign pension
funds”, IP/07/616 (May 7, 2007); “Taxation of outbound dividends: Commission takes steps against Austria, Germany, Italy and
Finland”, IP/07/1152 (July 23, 2007); “Taxation of outbound dividends: Commission takes steps against Germany, Estonia and the
Czech Republic”, IP/08/143 (Jan. 31, 2008); “Corporate taxation: Commission requests Spain to amend discriminatory anti-abuse
rules”, IP/08/342 (Feb. 28, 2008); “Taxation of dividends: Commission takes steps against Bulgaria, Spain, Portugal and Romania,
and closes case against Luxembourg”, IP/08/712 (May 6, 2008).
76 Infra III.
77 Infra II.C.
78 Infra II.D.
79 See also van Thiel, “Why the ECJ Should Interpret Directly Applicable European Law as a Right to Intra-Community MostFavoured-Nation Treatment”, 47 European Taxation (2007), 263 (Part 1) and 314 (Part 2); Vanistendael, “In Defence of the European Court of Justice”, 62 Bulletin For International Fiscal Documentation (2008), 90, 96-98; van Thiel, “European Taxation: past
trends and future developments”, 61 Tax Law Review (2008), ___.
80 See infra IV.D. and also in this direction García Prats, “Is It Possible to Set a Coherent System of Rules on Direct Taxation
under EC Law Requirements?”, in L. Hinnekens and Ph. Hinnekens (Eds.), A Vision of Taxes within and outside European Borders
– Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 429, 436.
81 See supra note 15.
82 See, e.g., Case C-209/03, Bidar, [2005] ECR I-2119, paras. 66 et seq.
83 See, e.g., Case 24/86, Blaizot, [1988] ECR 379, paras. 28 and 30; Case C-209/03, Bidar, [2005] ECR I-2119, paras. 66 et
seq.
84 See the Memorandum of the United Kingdom of July 1996 concerning “The European Court of Justice”. The United Kingdom proposed three amendments to the Treaty in order to limit the financial consequences of certain judgments interpreting Community provisions in an unexpected way, one of which proposed to introduce an article explicitly conferring on the Court power to
exclude retroactive effect of a judgment interpreting a Community provision, thereby adding to the Court’s case law the taking into
account of serious consequences for the public finances of any Member State and the possible reliance of a Member State on the
conduct of a Community institution or, in the case of persons, reliance on the conduct of a Member State.
85 See especially the Opinion of A.G. Stix-Hackl, 5 October 2006, Case C-292/04, Meilicke, [2007] ECR I-1835; for recent
surveys on this issue see Kokott and Henze, “Die Beschränkung der zeitlichen Wirkung von EuGH-Urteilen in Steuersachen”, 59
Neue Juristische Wochenschrift (2006), 177 et seq.; Seer, “The Jurisprudence of the European Court of Justice: Limitation of the
Legal Consequences?”, 46 European Taxation (2006), 470; Schnitger, Die Grenzen der Einwirkungen der Grundfreiheiten des EGVertrages auf das Ertragsteuerrecht (IDW, 2006), 139 et seq.; M. Lang, “Limitation of the Temporal Effects of Judgments of the
ECJ”, in Weber (Ed.), The Influence of European Law on Direct Taxation – Recent and Future Developments (Kluwer, 2007), 157;
Lüdicke, “European Tax Law, quo vadis?”, 62 Bulletin For International Fiscal Documentation (2008), 8, 12.
86 For an impressive account of diverging case law see Wattel, “Köbler, CILFIT and Welthgrove: We Can’t Go On Meeting
Like This”, 41 Common Market Law Review (2004), 177 et seq.
87 See generally Timmermans, “The European Union’s Judicial System”, 41 Common Market Law Review (2004), 393, 396;
Timmermans, “The European Union’s judicial system”, in McDonnell (Ed.), A Review Of Forty Years Of Community Law: Legal
Developments in the European Communities and the European Union (Kluwer, 2005), 113, 114; de Hosson, “On the controversial
role of the European Court in corporate tax cases”, 34 Intertax (2006), 294, 295; see also Poiares Maduro, We The Court – The
European Court of Justice and the European Economic Constitution (Hart Publishing, 1998), 23, noting, by reference to Judge
Pescatore, that the economic and political union was the “supreme objective” that provided the decisive grounds for a great number
of decisions.
88 For estimations of the potential revenue impact of recent cases see, e.g., Gumbel, “Taking The Taxman To Court”, Time
(Apr. 10, 2005), available at www.time.com. See also the estimations for the UK budget by Craig, EU Law and British Tax: Which
Comes First? (Centre for Policy Studies, 2003), 49-50, available at www.cps.org.uk (approximately £10 billion in corporate income
taxes until 2003). In Meilicke, for example, the estimated tax at stake amounted to € 5 billion; see Opinion of A.G. Stix-Hackl, 5
October 2006, Case C-292/04, Meilicke, [2007] ECR I-1835, para. 61.
89 Case C-376/03, D, [2005] ECR I-5821.
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Litigation,91 Cadbury Schweppes92 and Denkavit Internationaal.93 In the vast body of direct tax case law that
developed over the last 22 years a broad pattern can be identified.94 After an initial hesitant phase,95 the Court
arrived at a long intermediate period, lasting from the early 1990s until 2005, in which it has routinely applied
Internal Market principles in the income tax area. Since 2005, however, the Court seems to have returned to a
more prudent phase, rearranging the relationship between the Internal Market and Member States’ tax sovereignty. 96 As the historical intentions of the Community’s founding fathers do not play a significant role in the
interpretation of EC law,97 the Court’s decisions, without doubt, also take account of the dynamic evolution of
the Community system of law and are much influenced by considerations of policy and economics, whose
change might require a change in rulings. As has been noted, it is symptomatic that criticism has been going in
both directions:
“[S]ome reproaching the Court not to sufficiently take into consideration the interests of the Member States, e.g. by further acknowledging the principles of territoriality of the tax systems or of fiscal cohesion, but others regretting the
Court to be too reluctant to promote full implementation of the idea of Internal market in tax matters, e.g. by condemning double taxation or applying the most-favoured nation’s principle to Member States’ DTCs.”98
Perhaps it is also due to the criticism voiced by Member States that the ECJ as the engine of harmonization
is probably “stuttering”,99 as recent case law seems to put more emphasis on a rebalancing of domestic tax sovereignty and the fundamental freedoms.100 Such rebalancing has, in turn, warranted criticism from the perspective of predictability and consistency with legal precedent, and was attributed to factors such as a sovereigntyfriendly attitude of some newly appointed justices, the increasing complexity of the tax cases, and the immense
budgetary implications of the ECJ’s decisions. Against this background, however, it seems noteworthy that the
ECJ itself has already made use of the acte éclairé exception of Art. 104 § 3 of the Rules of Procedure101 in the
field of direct taxation on five occasions,102 thus implying that, although it has no doctrine of stare decisis, there
is at least a principle of Community precedence in the interpretation and application of the fundamental freedoms.103 Indeed, even in times of a rebalancing, certain lines of the ECJ’s case law in the direct tax area may be
considered as “rock solid”.
Against this background, this paper aims at systematizing the underlying dogmatic approaches of the vast
body of case law in the field of direct taxation, also by putting it in context with the non-tax jurisprudence. Faced
with numerous inconsistencies in the ECJ’s case law, we will attempt to put the fragile balancing act between
Member States’ sovereignty and the Internal Market into a broader perspective. In doing so, we will take recourse to the immense literature in this field, including monumental monographs,104 anthologies,105 and comCase C-446/03, Marks & Spencer, [2005] ECR I-10837.
Case C-374/04, ACT Group Litigation, [2006] ECR I-11673.
92 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995.
93 Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949.
94 See also van Thiel, “European Taxation: past trends and future developments”, 61 Tax Law Review (2008), ___.
95 See, e.g., Case 81/87, Daily Mail, [1988] ECR 5483; Case C-204/90, Bachmann, [1992] ECR I-249; Case C-112/91, Werner, [1993] ECR I-429.
96 See, e.g., Case C-376/03, D, [2005] ECR I-5821; Case C-446/03, Marks & Spencer, [2005] ECR I-10837; Case C-374/04,
ACT Group Litigation, [2006] ECR I-11673; Case C-446/04, FII Group Litigation, [2006] ECR I-11753; Case C-524/04, Thin Cap
Group Litigation, [2007] ECR I-2107.
97 See J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International Tax
Law (Kluwer, 2006), 251, 263-264.
98 Malherbe, Malherbe, Richelle and Traversa, The Impact of the Rulings of the European Court of Justice in the Area of Direct
Taxation (Policy Department of the European Parliament, March 2008), 77.
99 See M. Lang, “Das EuGH-Urteil in der Rechtssache D. – Gerät der Motor der Steuerharmonisierung ins Stottern?”, 15 Steuer & Wirtschaft International (2005), 365 et seq.; see also Cordewener and Reimer, “The Future of Most-Favoured-Nation Treatment in EC Tax Law – Did the ECJ Pull the Emergency Brake without Real Need?”, 46 European Taxation (2006), 239 et seq.
(Part 1) and 291 et seq. (Part 2).
100 See M. Lang, “Eine Wende in der Rechtsprechung des EuGH zu den direkten Steuern?”, in Hebig, Kaiser, Koschmieder
and Oblau (Eds.), Aktuelle Entwicklungsaspekte der Unternehmensbesteuerung, Festschrift Wacker (Erich Schmidt, 2006), 365 et
seq.; M. Lang, “Direct Taxation: Is the ECJ Heading in a New Direction?”, 46 European Taxation (2006), 421 et seq.; M. Lang,
“Die Rechtsprechung des EuGH zu den direkten Steuern – Planungssicherheit für die nationalen Gesetzgeber?”, in Wagner and
Wedl (Eds.), Bilanz und Perspektiven zum europäischen Recht (ÖGB Verlag, 2007), 113 et seq.; Bizioli, “Balancing the Fundamental Freedoms and Tax Sovereignty: Some Thoughts on Recent ECJ Case Law on Direct Taxation”, 48 European Taxation (2008),
133 et seq. See also Kokott and Henze, “Tendenzen der EuGH-Rechtsprechung im Bereich der direkten Steuern – Diskriminierung,
Kohärenz, Meistbegünstigung”, in Lüdicke (Ed.), Tendenzen der Europäischen Unternehmensbesteuerung, Forum der Internationalen Besteuerung Vol. 30 (O. Schmidt, 2005), 67.
101 Rules of Procedure of the Court of Justice of the European Communities, [1991] OJ (L 176), 7, as amended by [2005] OJ
(L 203), 19.
102 See Case C-431/01, Mertens, [2002] ECR I-7073; Case C-268/03, De Baeck, [2004] ECR I-5961; Case C-492/04, Lasertec,
[2007] ECR I-3775; Case C-102/05, A and B, [2007] ECR I-3871; Case C-415/06, Stahlwerk Ergste Westig GmbH, [2007] ECR
___.
103 For an extensive analysis see the contributions in Dourado (Ed.), The Meaning and Scope of the Acte Clair Doctrine (IBFD,
forthcoming 2008). Without entering a discussion about the technical quality of “Community precedents,” it might be noted that the
ECJ obviously views its case law as having binding legal force beyond the actual case, as it equates disregard of its case law with a
breach of Community law; see, e.g., Case C-224/01, Gerhard Köbler, [2003] ECR I-10239, para. 56. For further analysis see
Komárek, “Federal Elements in the Community Judicial System: Building Coherence in the Community Legal Order”, 42 Common
Market Law Review (2005), 9, 15-17, and Mutén, “European Tax Law, quo vadis?”, 62 Bulletin For International Fiscal Documentation (2008), 2, 7, pointing, inter alia, at Art. 16 of the Statute of the Court of Justice.
104 See, e.g., Tumpel, Harmonisierung der direkten Unternehmensbesteuerung in der EU (Verlag Österreich, 1994); Dautzenberg, Unternehmensbesteuerung im EG-Binnenmarkt (Eul, 1997); Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002); Pistone, The Impact of Community Law on Tax Treaties (Kluwer, 2002); van Thiel, Free movement of
90
91
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parative studies,106 the recent attempts by some Advocates General to bring structure into this area,107 and the
Commission’s work on co-ordinating the Member States’ tax systems.108 We will, however, not enter into a
detailed discussion of the nuances of specific decisions, since a vast body of literature has already evaluated
recent decisions of the ECJ in general109 or focused specific issues, such as the taxation of non-residents individuals,110 permanent establishments,111 dividend flows,112 pensions,113 loss utilization,114 anti-avoidance provi-
Persons and Income Tax Law: the European Court in search of principles (IBFD, 2002); Dahlberg, Direct Taxation in Relation to
the Freedom of Establishment and the Free Movement of Capital (Kluwer, 2005); Englisch, Dividendenbesteuerung (O. Schmidt,
2005); Hilling, Free Movement and Tax Treaties in the Internal Market (Iustus Forlag, 2005); Schönfeld, Hinzurechnungsbesteuerung und Europäisches Gemeinschaftsrecht (Schmidt, 2005); Weber, Tax Avoidance and the EC Treaty Freedoms (Kluwer,
2005); Schnitger, Die Grenzen der Einwirkung der Grundfreiheiten des EG-Vertrages auf das Ertragsteuerrecht (IDW, 2006); W.
Loukota, EG-Grundfreiheiten und beschränkte Steuerpflicht (Linde, 2006); Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007); Panayi, Double Taxation, Tax Treaties, Treaty Shopping and the European Community (Kluwer, 2007); Ghosh, Principles of the Internal Market and Direct Taxation (Oxford Key Haven Publications, 2007); see also
Farmer and Lyal, EC Tax Law (Clarendon Press, 1994); Terra and Wattel, European Tax Law (Kluwer, 4th edition 2005); Mason,
Primer on Direct Taxation in the European Union (West, 2005); M. Lang, Die Rechtsprechung des EuGH zu den direkten Steuern
(P. Lang, 2007); Panayi, “European Community Tax Law and Companies: Principles of the European Court of Justice”, in Dine,
Gore-Browne on EU Company Law (Jordan Publishing, Looseleaf), 19[1] et seq..
105 See, e.g., Lehner (Ed.), Steuerrecht im Europäischen Binnenmarkt, Deutsche Steuerjuristische Gesellschaft (DStJG) Vol. 19
(Schmidt, 1996); Schön (Ed.), Gedächtnisschrift für Knobbe-Keuk (O. Schmidt, 1997); Burmester and Endres (Eds.), Außensteuerrecht, Doppelbesteuerungsabkommen und EU-Recht im Spannungsverhältnis, Festschrift Debatin (Beck, 1997); Fischer (Ed.), Grenzüberschreitende Aktivitäten deutscher Unternehmen und EU-Recht, Forum der Internationalen Besteuerung Vol. 13 (O. Schmidt,
1997); Essers, de Bont and Kemmeren (Eds.), The Compatibility of Anti-Abuse-Provisions in Tax Treaties with EC Law (Kluwer,
1998); Breuninger, Müller and Strobl-Haarmann (Eds.), Steuerrecht und europäische Integration, Festschrift Rädler (Beck, 1999);
Lechner, Staringer and Tumpel (Eds), Kapitalverkehrsfreiheit und Steuerrecht (Linde, 2000); Pelka (Ed.), Europa- und verfassungsrechtliche Grenzen der Unternehmensbesteuerung, Deutsche Steuerjuristische Gesellschaft (DStJG) Vol. 23 (O. Schmidt, 2000);
Gocke, Gosch and M. Lang (Eds.), Körperschaftsteuer – Internationales Steuerrecht – Doppelbesteuerung, Festschrift Wassermeyer
(Beck, 2005); Lüdicke (Ed.), Tendenzen der Europäischen Unternehmensbesteuerung, Forum der Internationalen Besteuerung Vol.
30 (Beck, 2005); van Arendonk, Engelen and Jansen (Eds.), A Tax Globalist, Essays in honour of Maarten J. Ellis (IBFD, 2005);
Cordewener, Enchelmaier and Schindler (Eds.), Meistbegünstigung im Steuerrecht der EU-Staaten (Beck, 2006); Vanistendael (Ed.),
EU Freedoms and Taxation, EATLP Congress 2004 (IBFD, 2006); van Thiel (Ed.), The European Union’s prohibition of discrimination, most-favoured-nation treatment and tax treaties: opinions and materials (CFE Brochure on European Taxation, 2006); M.
Lang, Schuch and Staringer (Eds.), Tax Treaty Law and EC Law (Linde, 2007); van Thiel (Ed.), The internal market and direct
taxation: Is the European Court of Justice taking a new approach? (CFE Brochure on European Taxation, 2007); Weber (Ed.), The
Influence of European Law on Direct Taxation: Recent and Future Developments (Kluwer, 2007); L. Hinnekens and Ph. Hinnekens
(Eds.), A vision on taxes within and outside European borders – Festschrift in honour of Prof. Dr. Frans Vanistendael (Kluwer,
2008).
106 See, e.g., Xenopoulos (Ed.), Direct tax rules and the EU fundamental freedoms: origin and scope of the problem; National
and Community responses and solutions (FIDE Congress, 2006); Brokelind (Ed.), Towards a Homogeneous EC Direct Tax Law –
Assessment of the Member States‘ responses to ECJ's case law (IBFD, 2007); Avi-Yonah, Hines and M. Lang (Eds.), Comparative
Fiscal Federalism: Comparing the European Court of Justice and the US Supreme Court‘s Tax Jurisprudence (Kluwer, 2007);
Dourado (Ed.), The Meaning and Scope of the Acte Clair Doctrine (IBFD, forthcoming 2008); see also M. Lang (Ed.), Direct Taxation: Recent ECJ Developments (Linde, 2003), and M. Lang, Schuch and Staringer (Eds.), ECJ – Recent Developments in Direct
Taxation (Linde, 2006, and Kluwer, 2006).
107 See especially the Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837,
and the Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673.
108 See the Communications mentioned supra in footnote 74.
109 See, e.g., Kingston, “A Light in the Darkness: Recent Developments in the ECJ’s Direct Tax Jurisprudence”, 44 Common
Market Law Review (2007), 1321; see also the study by Malherbe, Malherbe, Richelle and Traversa, The Impact of the Rulings of the
European Court of Justice in the Area of Direct Taxation (Policy Department of the European Parliament, March 2008), available at
http://www.europarl.europa.eu/activities/committees/studies/download.do?file=19994.
110 See infra II.B.3. and, e.g., Cordewener, “Personal Income Taxation of Non-Residents and the Increasing Impact of the EC
Treaty Freedoms”, in Weber (Ed.), The Influence of European Law on Direct Taxation: Recent and Future Developments (Kluwer,
2007), 35; M. Lang, “Steuerabzug, Haftung und Gemeinschaftsrecht”, 17 Steuer & Wirtschaft International (2007), 17; M. Lang,
“Die Zukunft des Steuerabzugs bei beschränkter Steuerpflicht”, in Ballwieser and Grewe (Eds.), Wirtschaftsprüfung im Wandel,
Festgabe 100 Jahre Südtreu/Deloitte (Beck, 2007), 445.
111 See, e.g., Cussons and FitzGerald, “EU Report”, in IFA (Ed.), The attribution of profits to permanent establishments, CDFI
92b (2006), 69.
112 See Englisch, Dividendenbesteuerung (O. Schmidt, 2005); O’Shea, “Dividend Taxation Post-Manninen: Shifting Sands or
Solid Foundations?”, 45 Tax Notes Int’l 887 (Mar. 5, 2007); Denys, “The ECJ Case Law on Cross-Border Dividends Revisited”, 47
European Taxation (2007), 221; Graetz and Warren, “Dividend Taxation in Europe: When the ECJ Makes Tax Policy”, 44 Common
Market Law Review (2007), 1577; M. Lang, “ECJ case law on cross-border dividend taxation – recent developments”, 17 EC Tax
Review (2008), 67; Bellingwout, “Amurta: A Tribute to (the Late) Advocate General Geelhoed”, 48 European Taxation (2008), 124;
Hellerstein, Kofler and Mason, “Constitutional Restraints on Corporate Tax Integration in the EU and the U.S.“, 61 Tax Law Review
(2008), ___. See also the EU Report by Ihli, Malmer, Schoneville and Tuominen, “Dividend taxation in the European Union”, in
IFA (Ed.), Trends in company/shareholder taxation: single or double taxation? CDFI LXXXVIIIa (2003), 71.
113 See, e.g., L’Estrange, “Tax discrimination in pension provision within the EU – The Safir, Danner and Skandia cases”, 9
Journal of Pensions Management (2003), 131.
114 See Cordewener, Dahlberg, Pistone, Reimer and Romano, “The Tax Treatment of Foreign Losses: Ritter, M & S, and the
Way Ahead”, 44 European Taxation (2004), 135 (Part I), and 218 (Part II); Cordewener, “Grenzüberschreitende Verlustberücksichtigung im Europäischen Recht”, in von Groll (Ed.), Verluste im Steuerrecht, Deutsche Steuerjuristische Gesellschaft (DStJG) Vol.
28 (O. Schmidt, 2005), 255; O’Shea, “Marks and Spencer v Halsey (HM Inspector of Taxes): restriction, justification and proportionality”, 15 EC Tax Review (2006), 66 with exhausting references in note 3; Douma and Naumberg, “Marks & Spencer: Are National Tax Systems Éclairé?”, 46 European Taxation (2006), 431; Cordewener and Dörr, “Case C-446/03, Marks & Spencer plc v.
David Halsey (HM Inspector of Taxes), Judgment of the Court of Justice (Grand Chamber) of 13 December 2005”, 43 Common
Market Law Review (2006), 855. See also the “Opinion Statement of the CFE Task Force on ECJ Cases on the Judgment in the Case
of Marks & Spencer plc v. Halsey (Case C-446/03)”, 47 European Taxation (2007), 51.
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sions115 (especially CFC rules,116 Limitation-on-Benefits-clauses,117 and thin capitalization rules118), and exit
taxation.119 Furthermore, we will not address the important current developments regarding the potential extension Community law protection beyond the EU border in relation to third States, which may find a legal basis in
the Treaty rule on free movement of capital (Art. 56(1) EC),120 the European Economic Area (EEA) Agreement,121 the Free Movement Agreement with Switzerland,122 and various Association or Partnership Agreements
with non-EU countries.123
115 For an overview of potential problems see the contributions in Essers, de Bont and Kemmeren (Eds.), The Compatibility of
Anti-Abuse-Provisions in Tax Treaties with EC Law (Kluwer, 1998), and the comprehensive analysis by Weber, Tax Avoidance and
the EC Treaty Freedoms (Kluwer, 2005); see also Thömmes, “Missbrauch und Missbrauchsverhütung aus EG-rechtlicher Sicht”, in
Gocke, Gosch and M. Lang (Eds.), Körperschaftsteuer – Internationales Steuerrecht – Doppelbesteuerung, Festschrift Wassermeyer
(Beck, 2005), 207; Tumpel, “Steuerumgehung im DBA-Recht und EG-Grundfreiheiten”, in M. Lang and Jirousek (Eds.), Praxis des
Internationalen Steuerrechts, Festschrift H. Loukota (Linde, 2005), 585; M. Lang and Heidenbauer, “Wholly Artificial Arrangements”, in L. Hinnekens and Ph. Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of
Frans Vanistendael (Kluwer, 2008), 597; Schön, “Rechtsmissbrauch und Europäisches Steuerrecht”, in Kirchhof and Nieskens
(Eds.), Festschrift für Wolfram Reiß (O. Schmidt, 2008), 571; De Broe, “Some observations on the 2007 communication from the
Commission: ‘The application of anti-abuse measures in the area of direct taxation within the EU and in relation to third countries’”,
17 EC Tax Review (2008), 142.
116 See Simpson, “Cadbury Schweppes plc v Commissioners of Inland Revenue: The ECJ Sets Strict Test for CFC Legislation”, 53 British Tax Review (2006), 677; Meussen, “Cadbury Schweppes: The ECJ Significantly Limits the Application of CFC
Rules in the Member States”, 47 European Taxation (2007), 13; Rønfelt and Werlauff, “CFC Rules Go Up in Smoke – with Retroactive Effect”, 35 Intertax (2007), 45; Axer, “Der Europäische Gerichtshof auf dem Weg zur ‘doppelten Kohärenz’ – Eine Zukunft der
Hinzurechnungsbesteuerung nach dem Cadbury Schweppes-Urteil”, 16 Internationales Steuerrecht (2007), 162; O‘Shea, “The UK’s
CFC rules and the freedom of establishment: Cadbury Schweppes plc and its IFSC subsidiaries – tax avoidance or tax mitigation? 16
EC Tax Review (2007), 13; Whitehead, “Practical implications arising from the European Court’s recent decisions concerning CFC
legislation and dividend taxation”, 16 EC Tax Review (2007), 176; Whitehead, “CFC Legislation and Abuse of Law in the Community”, in Weber (Ed.), The Influence of European Law on Direct Taxation: Recent and Future Developments (Kluwer, 2007), 1; see
also Schönfeld, Hinzurechnungsbesteuerung und Europäisches Gemeinschaftsrecht (O. Schmidt, 2005), and Rust, Hinzurechnungsbesteuerung (Beck, 2007), 112 et seq. See also the “Opinion Statement of the CFE ECJ Task Force on the Concept of Abuse in
European Law”, 48 European Taxation (2008), 33.
117 See Craig, “Open Your Eyes: What the ’Open Skies’ Cases Could Mean for the US Tax Treaties with the EU Member
States”, 57 Bulletin For International Fiscal Documentation (2003), 63; Panayi, “Open Skies for European Tax?”, 50 British Tax
Review (2003), 189; Kofler, “European Taxation Under an ‘Open Sky’: LoB Clauses in Tax Treaties Between the U.S. and EU
Member States”, 35 Tax Notes Int’l 45 (July 5, 2004); Plansky and Schneeweiss, “Limitation on benefits: From the US Model 2006
to the ACT Group Litigation”, 35 Intertax (2007), 484; Schneeweiss, “Mr. D. Meets LOB: Comment on the ECJ’s Decision in the
ACT Group Litigation”, IV Diritto E Pratica Tributaria Internazionale (2007), 365.
118 See Cordewener, “Company Taxation, Cross-Border Financing and Thin Capitalization in the EU Internal Market: Some
Comments on Lankhorst-Hohorst GmbH”, 43 European Taxation (2003), 102; Vinther and Werlauff, “The need for fresh thinking
about rules on thin capitalization: the consequences of the judgment of the ECJ in Lankhorst-Hohorst”, 12 EC Tax Review (2003),
97; Thoemmes, Stricof and Nakhai, “Thin Capitalization Rules and the Non-Discrimination Principles – An analysis of thin capitalization rules in light of the non-discrimination principle in the EC Treaty, double taxation treaties and friendship treaties”, 32 Intertax
(2004), 126
119 See Malmer, “Emigration Taxes and EC Law”, in IFA (Ed.), The tax treatment of transfer of residence by individuals,
CDFI LXXXVIIb (2002), 79; van Arendonk, “Hughes de Lasteyrie du Saillant: crossing borders?” in van Arendonk, Engelen and
Jansen (Eds.), A Tax Globalist, Essays in honour of Maarten J. Ellis (IBFD, 2005), 181; de Broe, “Hard times for emigration taxes in
the EC”, in van Arendonk, Engelen and Jansen (Eds.), A Tax Globalist, Essays in honour of Maarten J. Ellis (IBFD, 2005), 210; van
den Hurk and Korving, “The ECJ’s Judgment in the N Case against the Netherlands and its Consequences for Exit Taxes in the
European Union”, 61 Bulletin For International Fiscal Documentation (2007), 150; Führich, “Exit Taxation and ECJ Case Law”, 48
European Taxation (2008), 10.
120 See, e.g., Schön, “Der Kapitalverkehr mit Drittstaaten und das internationale Steuerrecht“, in Gocke, Gosch and M. Lang
(Eds.), Körperschaftsteuer – Internationales Steuerrecht – Doppelbesteuerung, Festschrift Wassermeyer (Beck, 2005), 489; Lyal,
„Free movment of Capital and Non-Member Countries – Consequences for Direct Taxation”, in Weber (Ed.), The Influence of European Law on Direct Taxation (Kluwer, 2007), 17; Cordewener, Kofler and Schindler, “Free Movement of Capital, Third Country
Relationships and National Tax Law: An Emerging Issue before the ECJ”, 47 European Taxation (2007), 107; Cordewener, Kofler
and Schindler, “Free Movement of Capital and Third Countries: Exploring the Outer Boundaries with Lasertec, A and B and Holböck”, 47 European Taxation (2007), 371; Panayi, “The Protection of Third-Country Rights in Recent EC Case Law”, 45 Tax Notes
Int’l 659 (Feb. 19, 2007); Fontana, “Direct Investments and Third Countries: Things are Finally Moving … in the Wrong Direction”,
47 European Taxation (2007), 431; Smit, “The relationship between the free movement of capital and the other EC Treaty freedoms
in third country relationships in the field of direct taxation: a question of exclusivity, parallelism or causality?”, 16 EC Tax Review
(2007), 252; Zorn, “EG-Grundfreiheiten und dritte Länder”, in Quantschnigg, Wiesner and Mayr (Eds), Steuern im Gemeinschaftsrecht, Festschrift Nolz (LexisNexis, 2008), 211. See generally also the contributions to M. Lang and Pistone (Eds.), The EU and
Third Countries: Direct Taxation (Linde, 2007).
121 See, e.g., Achatz, “Die steuerlichen Auswirkungen des EWR-Abkommens, 3 Steuer & Wirtschaft International (1993), 23;
Gjems-Onstad, “The EEA Agreement and Taxation”, 35 European Taxation (1995), 210; van den Hurk and Theunissen, “Several
institutional and fiscal aspects of the European Economic Area”, 10 EC Tax Review (2001), 26; Cordewener, “Das Abkommen über
den Europäischen Wirtschaftsraum: eine unerkannte Baustelle des deutschen Steuerrechts”, Finanz-Rundschau (2005), 236; Bullen,
EU, EØS og skatt – De fire friheter og direkte beskatning (Gyldendal, 2005).
122 See, e.g., Hinny, “Impact on Swiss Tax Law of the Non-Discrimination Requirement in the EC-Swiss Bilateral Agreements”, 41 European Taxation (2001), 423; Cadosch, “Switzerland: Taxation of Employment Income – Compliance of Swiss Tax
Law with the EC-Swiss Sectoral Agreement on Free movement of Persons”, 32 Intertax (2004), 586; Cadosch, The influence on
Swiss tax law of the Swiss-EC agreement on the free movement of persons (Staempfli, 2005); Hinny, “Steuerliche Aspekte der bilateralen Verträge zwischen der Schweiz und der Europäischen Union”, in: Lüdicke (Ed.), Europarecht – Ende der nationalen Steuersouveränität? (O. Schmidt, 2006), 45, 47 et seq.; Adamczyk, “The Agreement on the Free Movement of Persons and its Potential
Impact on Direct Tax Systems of EU Member States“, 35 Intertax (2007), 183; Jung, “The Switzerland-EC Agreement on the Free
Movement of Persons: Measures Equivalent to Those in the EC Treaty – A Swiss Income Tax Perspective”, 47 European Taxation
(2007), 508.
123 See, e.g., Pancham, Fibbe and Rulter, “The meaning of the association of the overseas countries and territopries with the
European Community for the fiscal relations between the Netherlands and Aruba”, 16 EC Tax Review (2007), 164; Kiekebeld and
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II. Discriminatory and Non-Discriminatory Restrictions, Disparities, and the “Metaebene”
A. Tax Obstacles to the Internal Market: The Constitutional Question
1. Introduction
The classical distinction between residents and non-residents in international taxation and the differential
tax regimes based on this distinction stand in a strained relationship with primary Community law. The possible
tension between an Internal Market and domestic international tax systems has indeed lead the Economic and
Social Committee to argue that
“it is no longer acceptable on the one hand to abolish European internal frontiers and on the other to distinguish within
the Member States between ‘residents’ and ‘non-residents’, as this implies the existence of frontiers.”124
This progressive call for a re-thinking of the traditional concepts of residents and non-residents, however,
faces inherent limits. The Internal Market is neither a market without borders between (taxing) jurisdictions nor
does it require a legal unification of the market.125 Hence, the ECJ pays heed to the fact that Member States remain sovereign taxing entities and accepts the inevitable restraints that follow from the coexistence of different
jurisdictions.126 The Court therefore accepts
“that by taxing resident companies on their worldwide profits and non-resident companies solely on the profits from
their activities in that State, the parent company’s Member State is acting in accordance with the principle of territoriality enshrined in international tax law and recognised by Community law.”127
It is neither the aim nor the intention of Community law “to call in question the limits inherent in any power
of taxation or to disturb the order of priority of the allocation of tax competences as between Member States”, as
– in the absence of harmonization – it is not for the ECJ to “interfere in the conception or organisation of the tax
systems of the Member States.”128 It is along these lines that Member States retain the power to define, by treaty
or unilaterally, the criteria for allocating their powers of taxation, particularly with a view to eliminating double
taxation.129 Hence, no confusion is to be made between tax law and tax policy.130
However, the questions of when and how national tax measures will be tested against the EC Treaty freedoms have a very fundamental constitutional dimension, as they concern the distribution of powers within the
Community. This has become very clear in what may undoubtedly be regarded as two of the most profound
inquiries into the nature and causes of the wealth of ECJ case-law on direct taxation. Advocate General Poiares
Maduro in the Marks & Spencer case131 and Advocate General Geelhoed in the ACT Group Litigation case132
have provided an extensive presentation of “principles of interpretation” of the EC fundamental freedoms in
general, and the freedom of establishment in particular. Taking as starting-point the classic statement of the ECJ
that “direct taxation does not as such fall within the purview of the Community”, but that “the powers retained
by the Member States must nevertheless be exercised consistently with Community law”,133 the Advocates General sketched a detailed picture of the limits set by the EC Treaty to national competences in the field of taxation,
and of the leeway Member States still enjoy from the perspective of Community law: EC law only applies “to
the competences exercised by the Member States”, which means that the “organisation and conception” of tax
systems still lies with the Member States just as they are free “to allocate between themselves the power of taxaSmit, “Freedom of establishment and free movement of capital in Association and Partnership Agreements and direct taxation”, 16
EC Tax Review (2007), 216.
124 Opinion of the Economic and Social Committee on Taxation in the European Union Report on the development of tax systems, [1997] OJ (C 296) 37, Point 4.2.2.1; see also in this direction Vanistendael, “The role of the European Court of Justice as the
supreme judge in tax cases”, 5 EC Tax Review (1996), 114, 121, and Heydt, “Der Einfluss der Grundfreiheiten des EG-Vertrags auf
das nationale Steuerrecht der Mitgliedstaaten und ihre Doppelbesteuerungsabkommen”, in Lehner (Ed), Grundfreiheiten im Steuerrecht der EU-Staaten (Beck, 2000), 25, 34.
125 See Lehner, “ Das Territorialitätsprinzip im Licht des Europarechts”, in Gocke, Gosch and M. Lang (Eds.), Körperschaftsteuer – Internationales Steuerrecht – Doppelbesteuerung, Festschrift Wassermeyer (Beck, 2005), 241, 251.
126 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 60. For the
question if Member States are restricted in defining unlimited tax liability see infra II.B.3.d).
127 Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 39, with reference to Case C-250/95, Futura, [1997] ECR I2471, para. 22; see also Opinion of A.G. Kokott, 12 September 2006, Case C-231/05, Oy AA, [2007] ECR I-6373, para. 51. See also
J. Malherbe, Ph. Malherbe, Richelle and Traversa, The Impact of the Rulings of the European Court of Justice in the Area of Direct
Taxation (Policy Department of the European Parliament, March 2008), 57.
128 See Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 60, referring to Case C-204/90, Bachmann, [1992] ECR I-249, para. 23.
129 See Case C-336/96, Gilly, [1998] ECR I-2793, paras. 24 and 30; Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 57; Case C-265/04, Bouanich, [2006] ECR I-923, para. 49; Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957,
para. 47; Case C-470/04, N, [2006] ECR I-7409, para. 44; Case C-290/04, Scorpio, [2006] ECR I-9461, para. 54; Case C-374/04,
ACT Group Litigation, [2006] ECR I-11673, para. 52; Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949, para. 44; see
also Opinion of A.G. Kokott, 12 September 2006, Case C-231/05, Oy AA, [2007] ECR I-6373, para. 49.
130 See also Gutmann, “Some Theoretical Thoughts on Judicial Power and Tax Law, with Particular Focus on the ECJ”, in
Hinnekens and Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 485, 492.
131 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837.
132 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673.
133 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 21 (referring
in particular to the ECJ’s “classic statement” in Case C-279/93, Schumacker, [1995] ECR I-225, para. 21), and Opinion of A.G.
Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 33.
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tion”.134 Consequently, the central obligation imposed on home States, or, in tax terms, States of residence of the
taxpayer, should be “to treat foreign-source income of its residents consistently with the way it has divided its
tax base“,135 and the central obligation imposed on the host State, or in tax terms, States of source of the income,
should be “to treat all non-residents in a comparable way to residents (non-discrimination), insofar as these nonresidents fall within their tax jurisdiction.”136 These analyses are based on the longstanding proposition that the
EC Treaty’s fundamental freedoms serve not only to evaluate rules of source States (host States of the economic
activity) but equally apply to residence States (home States from which the economic activity originates),137
whereby, quite surprisingly, the latter issues represent the majority of tax cases before the ECJ (Graph 3).
Graph 3: Among the 91 decisions on the relationship between Member States’ income, corporate and wealth tax provisions and
the fundamental freedoms as of 1 January 2008, roughly 65% (59 cases) dealt with discriminations by the taxpayer’s residence
State (either indirectly138 or through exit restrictions), while only about 35% (32 cases) concerned the “classic” direct discrimination of non-residents by source States.
2. “Disparities”, “Quasi-Restrictions” and the Metaebene
What is not covered by primary EC law are restrictions to market integration caused by “legislative disparities”, i.e., hindrances for market participants resulting from “mere differences in tax regimes as between Member
States”.139 In the traditional set up of the Treaty this is fully understandable, because a clear distinction is made
between restrictions on cross-border activity resulting from the co-existence on the Internal Market of unharmonised domestic regulatory systems of the Member States, and restrictions resulting from discrimination, understood as a single Member State applying, under its own regulatory framework, different rules to similar domestic and cross-border situations. The distinction runs parallel to the classical horizontal division of powers that
was envisaged between the various institutions at European level, under which the Community legislator was
given the task to ensure the removal of disparities by means of harmonisation of laws (“positive integration”),
whereas the Community judiciary (European and national courts) was given the task to remove discrimination
when so called upon by economic operators engaged in cross border activities (“negative integration”). In this
traditional set up private sector economic operators can, as a sort of constitutionally guaranteed minimum of
economic integration, rely on directly applicable Community law so as to be able to enjoy their rights to free
movement and non discrimination without any possible interference by domestic legislators or administrations.
On the other hand, differences between regulatory systems of the Member States are, in principle, to be removed
by means of active intervention by the Community legislator, without possible interference by the Community
judiciary.140
134 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 22 with reference, inter alia, to Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 57. The point the A.G. is hinting at is the allocation of
the right to tax a particular cross-border activity among the countries involved by way of bilateral treaties (double tax conventions).
Compare in this respect the ”distributive rules” contained in Arts. 6 to 22 of the OECD Model Convention on the taxation of income
and capital, and the previous Case C-336/96, Gilly, [1998] ECR I-2793, paras. 24 et seq.; for more details see infra II.A.2.
135 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 58.
136 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 66.
137 Infra II.B.
138 For the concept of “indirect” discrimination and its disctinction from “covert” discrimination see infra II.B.2.
139 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 23, referring,
e.g., to Case C-336/96, Gilly, [1998] ECR I-2793, para. 47 and also to Case C-379/92, Peralta, [1994] ECR I-3453, para. 34, where
the Court explained in a rather general sense that difficulties for cross-border activities (in case: maritime transport) resulting from
differences in technical rules between Member States ”do not affect freedom of establishment”, and that “those difficulties are no
different in nature from those which may originate in disparities between national laws governing, for example, labour costs, social
security costs or the tax system”.
140 See, however, infra II.D. for an analysis of the Court’s case law on “double burdens” and the principle of mutual recognition, which overcomes non-tax disparities that impede market access, and infra II.D.3. for issues surrounding juridical double taxation.
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The breadth of these “disparities” that should in principle remain outside the scope of directly applicable
Community law is further explored by A.G. Geelhoed, identifying a category of “quasi-restrictions” resulting
inevitably from the co-existence of national tax systems that, in contrast to “real” (discriminatory) restrictions, is
not covered by the fundamental freedoms:
“In accordance with Member State competence for the area in the present state of Community law, direct tax within the
EU is governed by co-existing discrete and varied national tax systems. Certain disadvantages for companies active in
cross-border situations result directly and inevitably from this juxtaposition of systems, and in particular from: (1) the
existence of cumulative administrative compliance burdens for companies active cross-border; (2) the existence of disparities between national tax systems; and (3) the necessity to divide tax jurisdiction, meaning dislocation of tax
base.”141
While this categorization has been heavily criticized,142 especially with regard to restrictions resulting from
the division of taxing jurisdiction,143 there is undoubtedly an unsuspicious broad range of legal rules that relate to
the “organisation and conception” of tax systems of the Member States and the freedom “to allocate between
themselves the power of taxation.” It is evident that disparities resulting from different rules are inevitable because “national tax systems are tailored to the specific macroeconomic circumstances existing in that Member
State at any given time”;144 likewise, “choices of economic policy may differ substantially between Member
States.”145 Although taxation as such makes economic activities “less attractive,”146 especially when a taxpayer
becomes subject of a high-tax jurisdiction by exercising a fundamental freedom, it is likewise clear that mere
“disparities”147 are without the scope of the fundamental freedoms.148 The EC Treaty is not to be exploited as a
means of challenging any national rules whose effect is simply to limit commercial freedom.149
Hence, the ECJ has consistently held, in its non-tax case law, that the mere fact that a Member State has
opted for a certain legal system which differs from less restrictive rules adopted by another Member State has no
bearing on the compatibility of the former with Community law. 150 Likewise, the ECJ’s tax jurisprudence in
cases such as Schumacker,151 Futura,152 Gilly,153 De Groot154 and Schempp155 and the EFTA Court’s holding in
Seabrokers156 have demonstrated that every Member State is free to decide about the collection and amount of
taxes levied on its residents, without taking into account the tax systems of other Member States, especially their
tax rates or the type of taxes levied or not levied.157 Mere differences between domestic tax systems can not give
rise to a forbidden restriction on their own.158 Different tax rates, different calculations of the tax base, and the
like, are to be classified as mere “disparities” between the tax systems of the Member States and “possible distortions resulting from mere disparities between tax systems do not fall within the scope of the free movement provisions of the Treaty”.159 Advocate General Geelhoed summarized the issue concisely:
“The existence of these disparities has inevitable distortive effects on investment, employment and, in the case of companies and self-employed persons, establishment decisions. Clearly, differences between Member States in levels of effective business taxation, of administrative tax burdens, and in the structure of national tax regimes influence the loca141 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 37 and
paras. 41 et seq.
142 See, e.g., Vanistendael, “The ECJ at the Crossroads: Balancing Tax Sovereignty against the Imperatives of the Single Market”, 46 European Taxation (2006), 413, 417-420; for a critical approach towards the category of “dislocations” see Douma, “The
Three Ds of Direct Tax Jurisdiction: Disparity, Discrimination and Double Taxation”, 46 European Taxation (2006), 522, 532-533.
143 For so-called “tax base fragmentations” see infra II.B.3. and for issues of juridical double taxation see infra II.D.
144 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 43
145 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 44
146 See also Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 289; Snell, “NonDiscriminatory Tax Obstacles in Community Law”, 56 International and Comparative Law Quarterly (2007), 339, 357-358 (for a
comparison with a regulatory context).
147 See for this term also Case C-385/00, De Groot, [2002] ECR I-11819, para. 85.
148 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 43-47.
149 Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493, para. 32, and Opinion of A.G. Mischo, 7 July 1998, C-255/97, Pfeiffer, [1999] ECR I-2835, para. 91: One “must not arrive at a situation where Member States are
required to justify as ‘imperative requirements’ all kinds of provisions of their legislation, for instance rates of corporate taxation or
their rates of VAT, which are higher than elsewhere,” whenever someone claims that such a provision makes the exercise of a fundamental freedom less attractive.
150 Case C-379/92, Peralta, [1994] ECR I-3453, para. 48; Case C-384/93, Alpine Investments, [1995] ECR I-1141, para. 27;
Case C-3/95, Reisebüro Broede, [1996] ECR I-6511, para. 42; Case C-124/97, Läärä, [1999] ECR I-6067, para. 36; Case C-108/96,
MacQuen, [2001] ECR I-837, para. 33; Case C-294/00, Gräbner, [2002] ECR I-6515, para. 46; Case C-6/01, Anomar, [2003] ECR
I-8621, paras. 80 et seq.
151 Case C-279/93, Schumacker, [1995] ECR I-225, and the analysis by D’Oreye de Lantremange, “Freedom of Establishment
in the Direct Tax Jurisprudence of the European Court – A Review”, 6 EC Tax Journal (2002), 187, 204.
152 Case C-250/95, Futura, [1997] ECR I-2471, para. 33.
153 Case C-336/96, Gilly, [1998] ECR I-2793, para. 47.
154 Case C-385/00, De Groot, [2002] ECR I-11819, para. 86.
155 Case C-403/03, Schempp, [2005] ECR I-6421, para. 45.
156 Case E-7/07, Seabrokers AS, [2008] EFTA Court Report ___, para. 52.
157 See for this conclusion from the “principle of territoriality,” e.g., German Bundesfinanzhof, 18 September 2003, X R 2/00,
BFHE 203, 263, ruling on the local German business trade tax (Gewerbesteuer), which does not exist in a similar form in most other
Member States; see also Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 846; Farmer and
Zalinski, “General Report”, in Xenopoulos (Ed.), Direct tax rules and the EU fundamental freedoms: origin and scope of the problem; National and Community responses and solutions (FIDE Congress, 2006), 399, 401-402.
158 See also D’Oreye de Lantremange, “Freedom of Establishment in the Direct Tax Jurisprudence of the European Court – A
Review”, 6 EC Tax Journal (2002), 187, 194 et seq.
159 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 46.
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tion of economic activity. However, as the Court has recently confirmed in Schempp, and as I emphasised in my Opinion in that case, possible distortions resulting from mere disparities between tax systems do not fall within the scope of
the free movement provisions of the Treaty. In that case, which concerned a claim under the citizenship provisions of
the Treaty, the Court recalled that, ‘the Court has already held that the Treaty offers no guarantee to a citizen of the Union that transferring his activities to a Member State other than that in which he previously resided will be neutral as regards taxation. Given the disparities in the tax legislation of the Member States, such a transfer may be to the citizen’s
advantage in terms of indirect taxation or not, according to circumstances.’ Precisely the same principle applies to
claims under Article 43 EC. Thus, obstacles to freedom of establishment resulting from disparities or differences between the tax systems of two or more Member States fall outside the scope of Article 43 EC. These may be contrasted
with obstacles resulting from discrimination, which occurs as a result of the rules of just one tax jurisdiction.”160
And also the ECJ itself, in a case concerning an indirect tax on the registration of cars, explicitly endorsed
the view that the fundamental freedoms (in case: Art. 39 EC) do not oppose to any mere objective difference
between the national legislation maintained by individual Member States:
“A rule such as that at issue in the main proceedings applies without regard to the nationality of the worker concerned
to all those who register a car in Austria and, accordingly, it is applicable without distinction. It is true that it is likely to
have a negative bearing on the decision of migrant workers to exercise their right to freedom of movement. However,
the Treaty offers no guarantee to a worker that transferring his activities to a Member State other than the one in which
he previously resided will be neutral as regards taxation. Given the disparities in the legislation of the Member States in
this area, such a transfer may be to the worker’s advantage in terms of indirect taxation or not, according to circumstance. It follows that, in principle, any disadvantage, by comparison with the situation in which the worker pursued his
activities prior to the transfer, is not contrary to Article 39 EC if that legislation does not place that worker at a disadvantage as compared with those who were already subject to it.”161
The identification of restrictions flowing from mere “disparities” – as opposed to prohibited discriminatory
and non-discriminatory restrictions – therefore provides a first important filter for the constitutional question of
when and how national tax measures will be tested against the EC Treaty freedoms. A possible approach for the
identification of mere disparities is to test if the disadvantage to the cross-border transaction would disappear
were the tax systems of all Member States hypothetically identical.162 Such a “filter” clearly removes tax rate and
tax base disparities from the ECJ’s radar, and it is, for example, before this background that the Court in FII
Group Litigation has found that it is, in principle, permissible that “nationally-sourced dividends are subject to
an exemption system and foreign-sourced dividends are subject to an imputation system”, “provided that the tax
rate applied to foreign-sourced dividends is not higher than the rate applied to nationally-sourced dividends” and
an indirect tax credit – up to the limitation – is granted.163 Indeed, a difference in treatment resulting from the
difference in relief boils down to be the effect of a mere disparity (e.g., the different tax rates or tax bases of the
Member States concerned), since both methods would have the same impact in absolute terms (i.e., no residual
taxation in the home State) were the tax systems of all Member States hypothetically identical.
The ultimate breadth of this concept of “disparities” is, however, not entirely clear. Hence, it has been
stressed that a test of “internal consistency” as employed by the US Supreme Court in cases under the dormant
Commerce Clause164 might provide a more reliable “filter” and help to identify unsuspicious disparities.165 Such
consistency test basically inquires whether a country treats both sides of the coin, the inbound and the corresponding outbound transaction, in a “consistent” manner, so that after a hypothetical mirror-inversion of this
State’s system to all other Member States the relevant disadvantage would disappear. Suppose, for example, that
a Member State grants personal and family benefits to both residents and non-residents in pro-rata relation to
their domestic source income; while, outside the Schumacker situation,166 it would not be required to grant any
such benefits as a source State, the question arises if it could limit benefits to a pro-rata portion as a residence
State. Although such treatment would be “consistent”, it is highly doubtful whether the ECJ would allow for
such a clear deviation from the principles set out in De Groot167.
160 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 46 (footnotes omitted).
161 See Case C-378/01, Weigel, [2004] ECR I-4981, paras. 53-55, referring to Joined Cases C-393/99 and C-394/99 Hervein
and Others, [2002] ECR I-2829, para. 51, concerning social security.
162 See Schön, “Der ‘Wettbewerb’ der europäischen Steuerordnungen als Rechtsproblem”, in Pelka (Ed.), Europa- und verfassungsrechtliche Grenzen der Unternehmensbesteuerung, Deutsche Steuerjuristische Gesellschaft (DStJG) Vol. 23 (Schmidt, 2000),
191, 211; Schön, “Tax Competition in Europe – the legal perspective”, 9 EC Tax Review (2000), 90, 98 et seq.; Terra and Wattel,
European Tax Law (Kluwer, 4th edition 2005), 57-58; Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht
(Linde, 2007), 124-125; see also Bellingwout, “Amurta: A Tribute to (the Late) Advocate General Geelhoed”, 48 European Taxation
(2008), 124-125.
163 Case C-446/04, FII Group Litigation, [2006] ECR I-11753, paras. 47-57.
164 For a detailed evaluation of the concept see, e.g., Hellerstein, “Is “Internal Consistency” Foolish?: Reflections on an Emerging Commerce Clause Restraint on State Taxation”, 87 Michigan Law Review 138 (1988), and Hellerstein, “Is ‘Internal Consistency’
Dead?: Reflections on an Evolving Commerce Clause Restraint on State Taxation”, 61 Tax Law Review 1 (2007); for the use of this
concept in cases concerning double taxation see also Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht
(Linde, 2007), 221-231.
165 Mason, “Made in America for European Tax: The Internal Consistency Test”, 44 Boston College Law Review (2008), ___;
see also Mason, “Flunking the ECJ’s Tax Discrimination Test”, 46 Columbia Journal of Transnational Law (2007), 72, 92 with note
77..
166 See infra II.B.3.
167 See Case C-385/00, De Groot, [2002] ECR I-11819, especially the arguments brought forward by the Netherlands in para. 59 of the judgment (concerning symmetrical treatment of the corresponding inbound situation).
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Therefore, even though a requirement of “consistency” or “symmetry” might play a useful role on the level
of justification,168 it does not seem to be an appropriate standard for the crucial assessment of whether a given
situation is to be scrutinized under the fundamental freedoms or not, as the – solely relevant – disadvantageous
treatment of the taxpayer is in no way mitigated by the fact that his incoming or outgoing counterpart receives
“symmetrical” treatment.169 Hence, one might argue that a “disparity” falling outside the fundamental freedoms’
scope is only at issue if there is no interaction of different national systems.170 Even so, it has further been suggested that unsuspicious “disparities” should not only entail situations where the disadvantage to the crossborder situation in comparison with a purely domestic situation would disappear in a hypothetically harmonized
Internal Market (e.g., rate and base differences), but also situations where such disadvantage would persist if the
Member States’ tax systems were hypothetically equalized.171 While under such approach, for example, limitations to cross-border loss utilization in situations of exempt foreign permanent establishments or subsidiaries
would be carved out from scrutiny under the fundamental freedoms, the ECJ’s discrimination analysis seems to
point in a different direction.172
The ECJ’s reasoning regarding legislative disparities in the field of direct taxation also transcends the allocation of taxing rights and the avoidance of double taxation under tax treaties. While domestic tax rules generally impose rights for or obligations on taxpayers, tax treaty provisions primarily allocate the rights between
Member States to give effect to such provisions. Rules on this Metaebene do not impose any restrictions or unequal treatment in a bilateral setting, but merely restrict the Member States in applying pre-existing national law.
An example for such a constellation can, again, be found in the Gilly case.173 In that case, the ECJ relied much
on the finding that the
“Member States are competent to determine the criteria for taxation on income and wealth with a view to eliminating
double taxation – by means, inter alia, of international agreements – and have concluded many bilateral conventions
based, in particular, on the model conventions on income and wealth tax drawn up by the Organisation for Economic
Cooperation and Development (‘OECD’).”174
Thus, taxpayers cannot complain that they suffer a higher tax burden in one Member State as compared to
another, if this is the mere consequence of the fact that the Member States involved have agreed to allocate taxing rights in a particular way175 – the taxpayer concerned will have to accept that “the question of a state’s taxation rights under a tax treaty is a question of ‘allocation not discrimination’”.176 Differentiations with regard to
the allocation of taxing rights, even when based on nationality, therefore do not amount to a forbidden discrimination, which flows, in the absence of any unifying or harmonizing measures adopted in the Community context,
“from the contracting parties’ competence to define the criteria for allocating their powers of taxation as between
themselves, with a view to eliminating double taxation.”177
Thus, the allocation of “tax sources” or “taxable objects” between Member States by way of distributive
rules (“Verteilungsnormen”)178 in their bilateral tax treaties is considered to have neutral effects from the perspective of the fundamental freedoms,179 irrespective of their alignment with OECD principles180 or any differ168 See in this direction the Opinion of A.G. Kokott, 30 March 2006, C-470/04, N, [2006] ECR I-7409, para. 107 (concerning a
symmetrical step-up for incoming assets in evaluating the coherence of an exit tax system); see also Opinion of A.G. Geelhoed, 29
June 2006, Case C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107, para. 79 (concerning the avoidance of economic double
taxation potentially resulting from the application of thin capitalization rules). For a hint in this direction see also Case C-168/01,
Bosal, [2003] ECR I-9409, para. 36, where the ECJ joined with the Commission and noted that “one is entitled to question the coherence of a system of taxation based on the existence of a link between costs incurred in relation to holdings and the existence of
profits taxable in the Netherlands within the same group of companies, while subsidiaries of parent companies established in other
Member States cannot deduct from their profits taxable in the Netherlands the costs in relation to holdings of those parent companies.”
169 In this sense also J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International Tax Law (Kluwer, 2006), 251, 299-300.
170 See Cordewener, “The prohibitions of discrimination and restriction within the framework of the fully integrated market”,
in Vanistendael (Ed.), EU Freedoms and Taxation, EATLP Congress 2004 (IBFD, 2006), 1, 38; Vanistendael, “The ECJ at the
Crossroads: Balancing Tax Sovereignty against the Imperatives of the Single Market”, 46 European Taxation (2006), 413, 418; for a
discussion of this approach see Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement
Within the EC”, 34 Intertax (2006), 582, 587-588.
171 See Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”,
34 Intertax (2006), 582, 585 with note 17.
172 See Case C-446/03, Marks & Spencer, [2005] ECR I-10837 (no group relief for losses of a foreign subsidiary), and Case C414/06, Lidl Belgium, [2008] ECR ___ (no utilization of losses incurred by a tax treaty “exempt” foreign permanent establishment);
see also Case C-293/06, Deutsche Shell GmbH, [2008] ECR ___ (currency losses).
173 Case C-336/96, Gilly, [1998] ECR I-2793.
174 Case C-336/96, Gilly, [1998] ECR I-2793, para. 24.
175 See also Gammie, “The Role of the European Court of Justice in the Development of Direct Taxation in the European Union”, Bulletin For International Fiscal Documentation 2003, 86, 89; Kofler, Doppelbesteuerungsabkommen und Europäisches
Gemeinschaftsrecht (Linde, 2007), 530-552.
176 Hughes, “Gilly and the Big Picture”, 52 Bulletin For International Fiscal Documentation (1998), 329, 331; see also Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 598, and Hohenwarter, “The Allocation of
Taxing Rights in the light of the Fundamental Freedoms of EC Law”, in M. Lang, Schuch and Staringer (Eds.), Tax Treaty Law and
EC Law (Linde, 2007), 83, 115.
177 Case C-336/96, Gilly, [1998] ECR I-2793, para. 30; see also Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 56;
for the further arguments of the ECJ on this point see, e.g., Vanistendael, “Case C-336/96, Mr and Mrs Robert Gilly”, 37 Common
Market Law Review (2000), 167, 171.
178 See generally Art. 6 to 22 of the OECD Model Convention.
179 Case C-336/96, Gilly, [1998] ECR I-2793, paras. 24 et seq.; Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 56;
Case C-385/00, De Groot, [2002] ECR I-11819, para. 93; Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957, para. 47;
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ence in treatment between different types of income within one tax treaty.181 It might be noted that this EC Law
perspective is perfectly coherent with the common view of double tax conventions functioning “like a stencil
that is placed over the pattern of domestic law and covers certain parts”182, as tax treaties generally do not create
taxing rights or restrictions, but rather serve to limit taxation under domestic law. Once taxing rights have been
allocated, however, each Member State may not exercise its rights in a way that treats nationals or residents of
other Member States or their establishments less favorably than domestic taxpayers in comparable circumstances.183
“[A]s far as the exercise of the power of taxation so allocated is concerned, the Member States must comply with the
Community rules and, more particularly, respect the principle of national treatment of nationals of other Member States
and of their own nationals who exercise the freedoms guaranteed by the Treaty.”184
Likewise, Member States are free to choose a method for the avoidance of international (juridical) double
taxation185 – neither the EC Treaty nor the Directives impose a preference for the credit or the exemption method
and therefore remain silent on the diverging approaches of capital export neutrality and capital import neutrality.186 Although many have voiced a (political) preference for the exemption method in the Internal Market,187
one has to concede that disadvantages resulting from the mere application of either method, including credit
limitations etc, are results of unsuspicious legislative disparities (e.g., different tax rates).188 Along the same lines
it becomes clear that effects of cross-border economic double taxation, resulting, for instance, from the nondiscriminatory application of transfer pricing provisions or thin capitalization rules by only one of the countries
involved, belong to the realm of irrelevant disparities189 and may therefore not be challenged under the fundamental freedoms.190
Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 52. Compare further Opinion of A.G. Colomer, 20 November
1997, Case C-336/96, Gilly, [1998] ECR I-2793, para. 44.
180 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 52. Explicitly M. Lang, Double Taxation and EC Law (2005), 29: “[E]ven if the ‘connecting factor’ in a bilateral tax treaty were to deviate
from the OECD Model Convention, this could not constitute discrimination. The ECJ allows the Contracting States to allocate the
taxing rights in which ever way they ever want”. See also Alber, “European Community Tax Law and Its Development in Light of
the Recent Case Law of the European Court of Justice”, 22 Fordham International Law Journal (1998-1999), 768, 770, and Vanistendael, “In Defence of the European Court of Justice”, 62 Bulletin For International Fiscal Documentation (2008), 90, 97.
181 Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 530-552 with further references.
182 Vogel, Double Taxation Conventions (Kluwer, 3rd edition, 1997), Introduction Para. 56.
183 See, e.g., Case C-385/00, De Groot, [2002] ECR I-11819, para. 94; Case C-265/04, Bouanich, [2006] ECR I-923 , para. 50;
Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949, para. 44; Case C-290/04, Scorpio, [2006] ECR I-9461, para. 55. See
also Gammie, “The Role of the European Court of Justice in the Development of Direct Taxation in the European Union”, 57 Bulletin For International Fiscal Documentation (2003), 86, 89.
184 Case C-385/00, De Groot, [2002] ECR I-11819, para. 94.
185 See, e.g., Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 51; see also Opinion of A.G. Geelhoed, 6 April 2006, Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, para. 33;
Opinion of A.G. Kokott, 12 September 2006, Case C-231/05, Oy AA, [2007] ECR I-6373, para. 55 with note 33; for further references see Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 619-694, and recently also
Kemmeren, “The Internal Market Approach Should Prevail over the Single Country Approach”, in Hinnekens and Hinnekens (Eds.),
A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 555, 573. Cf.
Case C-446/04, FII Group Litigation, [2006] ECR I-11753, paras. 47-57 (concerning permissibility of the use of the exemtption
method for domestic dividends and the indirect credit method for foreign-source dividends under domestic law). See, however, also
Ghosh, Principles of the Internal Market and Direct Taxation (Oxford Key Haven Publications, 2007), 159, who seems to take a
different approach by asking whether the tax rate internal to the marketplace of a particular Member State imposes any additional
cost to that of market participation.
186 Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 619-631.
187 See, e.g., Vogel, “Harmonisierung des Internationalen Steuerrechts in Europa als Alternative zur Harmonisierung des (materiellen) Körperschaftsteuerrechts”, 70 Steuer und Wirtschaft (1993), 380, 386 et seq.; Wattel, “Capital Export Neutrality and Free
Movement of Persons”, 23 Legal Issues of Economic Integration (1996), 115, 126; Lehner, “Wettbewerb der Steuersysteme im
Spiegel europäischer und US-amerikanischer Steuerpolitik”, 75 Steuer und Wirtschaft (1998), 159, 171 and 173; Kemmeren, Principle of Origin in Tax Conventions (Dongen, 2001), 132 et seq, especially 138 et seq.; Vogel, “Which Method Should the European
Community Adopt for the Avoidance of Double Taxation?”, 56 Bulletin For International Fiscal Documentation (2002), 4, 8 et seq.;
Schönfeld, “Doppelbesteuerung und EG-Recht”, 83 Steuer und Wirtschaft (2006), 79, 82-83.
188 For an extensive discussion, also of potentially discriminatory features of the concrete application of both methods under
domestic law, see Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 631-694; see also
Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax
(2006), 582, 610-611, and Case C-298/05, Columbus Container Services, [2007] ECR ___, paras. 38 et seq. For a specific case on
discriminatory features of a credit limitation due to cost-allocation see Case E-7/07, Seabrokers AS, [2008] EFTA Court Report ___.
189 For a detailed analysis see Schnitger, Die Grenzen der Einwirkung der Grundfreiheiten des EG-Vertrages auf das Ertragsteuerrecht (IDW, 2006), 267 et seq.; Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007),
874-915 with further references; see also Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of
Movement Within the EC”, 34 Intertax (2006), 582, 590-591. For a different position see H. Loukota and Jirousek, “Doppelbesteuerung und Gemeinschaftsrecht”, 17 Steuer & Wirtschaft International (2007), 295, 299-300, and Vanistendael, “In Defence of
the European Court of Justice”, 62 Bulletin For International Fiscal Documentation (2008), 97. For an analysis of juridical double
taxation see infra II.D.
190 See explcitily Case C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107, para. 89, stating in relation to a reclassification of cross-border interest payments under (non-discriminatory or justified) thin capitalization rules that “the Member State in
which the former company is resident may lawfully treat interest paid by that company as a distribution of profits, it is not, in principle, for that State to ensure that profits distributed to a non-resident shareholder company are not subject to a series of charges to
tax”.
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3. Discriminatory and Non-Discriminatory Restrictions
While the learned Advocates Generals’ Opinions mentioned above, as far as they deal with “legislative disparities”, serve to define the horizontal allocation of powers on the Community level between the ECJ (adjudicating on the basis of the Treaty freedoms), on the one hand, and the Commission, the Council and the European
Parliament (as the organs responsible for legislative acts harmonizing national tax systems), on the other, those
parts of the Opinions dedicated to the Member States’ exercise of taxing jurisdiction address the vertical allocation of powers between the Community and its Member States. The latter context raises the decisive question of
where exactly the EC Treaty freedoms set the boundaries to the exercise of Member States’ competences in the
field of direct taxation. In that respect, as stressed in particular by A.G. Poiares Maduro, the ECJ’s case-law had
always been governed by “the concern to maintain a balance between respect for national competences and the
requirements of the internal market”.191 This balance between national tax sovereignty and taxpayer’s freedoms
has multiple facets.192 While such balancing is necessary on the levels of justification and proportionality and
thus enables the Court to “fine-tune” its rulings,193 the first and foremost issue is to identify the requirements of
the Internal Market and thus the protective scope of the fundamental freedoms which aim at advancing it. According to Art. 14 EC, “[t]he internal market shall comprise an area without internal frontiers in which the free
movement of goods, persons, services and capital is ensured in accordance with the provisions of this Treaty”.
Consequently, the EC Treaty prohibits measures that “restrict”, or form obstacles to, the exercise of the freedoms, unless that restriction pursues a legitimate objective compatible with the Treaty, is justified by imperative
reasons in the public interest, and is appropriate to ensuring the attainment of the objective pursued and does not
go beyond what is necessary to attain it.194 Leaving technical distinctions aside for the moment and focusing on
the goal of an Internal Market, several constellations which may give rise to “obstacles” or, synonymously, “restrictions” created by Member States may come to mind:
First, and most obviously, disadvantageous treatment of cross-border as compared to domestic transactions
by the legal system of one country creates such a restriction, irrespective of whether such obstacle is created by
the home State (“export” or “exit” restriction) or the host State (“import” or “access” restriction). While discrimination may also arise from the application of the same or a similar rule to different situations,195 obstacles
are mainly created by the application different rules to comparable situations. Such a discriminatory obstacle
exists if there is a different tax treatment by one single Member State of similar cross-border and domestic activities on the basis of a prohibited criterion, causing a disadvantage for the cross border activity. As is clear
from the direct tax case law of the Court, these six constituent elements of the Community law prohibition of
discrimination are to be interpreted broadly. First, any different tax treatment may give rise to a prohibited discrimination, whether resulting from the definition of taxable or exempt income items, valuation methods, deductible expenses, tax rates, credits and even procedural rules. Second, the prohibition of tax discrimination
covers different tax treatment by either the home Member State (discriminatory exit restriction) or the host
Member State (discriminatory market access restriction). Third, in the framework of a deep economic integration
process, “similarity” or comparability of domestic and cross border activities depends primarily on objective
elements that concern the question whether two activities are in competition or substitutable. That is why, in
most direct tax cases, this question can be answered positively in a hypothetical way (assuming a competing
domestic activity). Only to prevent frontier workers from claiming personal and family related expenses twice
(in the workstate on the basis of Community law and in the residence state on the basis of international tax law)
did the Court design an “ability to pay” related similarity test, which allowed those workers to deduct those expenses in the workstate only if they could not deduct those expenses in the residence state, because they had no
income there (so that they were in the same ability to pay situation as their work state colleagues). Fourth,
though the comparison is mostly made between a domestic and a cross border situation (discrimination as a
denial of national treatment), there is in an Internal Market that should function as a domestic market, no reason
not to allow the comparison between two cross border situations (discrimination as a denial of most favoured
nationa treatment). Fifth, prohibited differentiation criteria mentioned by the Treaty include origin and nationality (overt discrimination), but, other Internal Market unfriendly differentiation criteria, the use of which typically
disadvantages the crossborder situation, such as residence, place of payment of expenses etc, are also prohibited
(covert discrimination). Finally, in Community law, a different treatment is prohibited only if it disadvantages
the cross border situation. A different treatment that disadvantages the domestic situation is allowed as “reverse
discrimination” because it favours cross border activity and thus economic integration. Member States must
therefore “endeavour to ensure that the choices made in tax matters take due account of the consequences which
may flow therefrom for the proper functioning of the internal market”, and “the Court has the task of ensuring
that transnational situations associated with the exercise of the freedoms of movement between the Member
States are not disadvantaged owing to the choices made by the national legislature”.196
Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 25.
See also Bizioli, “Balancing the Fudamental Freedoms and Tax Sovereignty: Some Thoughts on Recent Case Law on Direct Taxation”, 48 European Taxation (2008), 133-140.
193 For a detailed analysis of this “finetuning” see infra II.B.2.
194 See, for example, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 35; see also Case C-251/98, Baars, [2000]
ECR I-2787; Case C-307/97, Saint Gobain, [1999] ECR I-6161; Case C-264/96, ICI, [1998] ECR I-4695; Case C-250/95, Futura,
[1997] ECR I-2471.
195 See infra II.B.3.d).
196 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 24.
191
192
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It is abundantly clear that the Treaty freedoms aim at removing the borders between the Member States for
intra-EC economic activities, and that they first and foremost give specific expression to the general prohibition
of discrimination on grounds of nationality laid in Art. 12 EC, which itself is a manifestation of the (even more
general) principle of equal treatment.197 However, the ECJ’s case law has also accepted that there may be fiscal
discriminatory restrictions on the freedoms irrespective of any discrimination based overtly or covertly on nationality; it flows from this broad concept that all specific disadvantages on operators desirous of moving or
establishing themselves within the Community must be scrutinized even if such restrictions are imposed by the
operators‘ home States.198 Such restrictions are covered by what may be called the “equality-component”
(“gleichheitsrechtliche Komponente”) of the fundamental freedoms: The taxpayer who is put in a disadvantageous position by national legislation because he is a non-national, non-resident, or engages in a cross-border
activity, strives to be treated like a national, resident, or someone who is engaging in a domestic activity. This
group of restrictions arising from unequal treatment is the historical basis of the case law of the ECJ; it is usually
classified as “discriminations,” “discriminatory restrictions,” or “discriminatory obstacles,”199 and still proves to
be of overriding importance in the field of direct taxation. It covers a broad range of aspects: Much of the ECJ’s
case law on direct taxation deals with rules which employ nationality, residence, or establishment as a distinguishing criterion, whether applied by the host State in inbound (“import” or “access”) situations or the State of
origin in outbound (“export” or “exit”) situations.200 These issues will be explored in detail in Chapters II.B and
II.C.
Second, and on the other side of the spectrum, there are situations where the taxpayer is subjected (only) to
a certain set of relevant rules of the legal system of one country, which applies such rules without any discrimination but nevertheless creates obstacles to cross-border activities. One might consider, for example, a State
gaming monopoly that precludes both domestic and foreign market participants from offering such services.201
This group of provisions may be categorized as “even handed”202 or “neutral”203 rules and constitutes one aspect
of the broad range of “non-discriminatory restrictions.” By bringing also such non-discriminatory market access
barriers within the scope of the fundamental freedom, it is acknowledged that, although the principle of nondiscrimination is certainly a conditio sine qua non of market liberalization, the equality component is not per se
sufficient to overcome all relevant limits to the Internal Market: Thus, the “liberty-component” (“freiheitsrechtliche Komponente”) of the fundamental freedoms may require Member States to remove access barriers, even if
the same rules apply to nationals and non-nationals (or residents and non-residents, purely domestic and crossborder transactions, respectively) alike. Here it is not equal treatment that is striven for, but rather the removal of
barriers. Yet, to constitute such “non-discriminatory” restriction, a certain threshold of impact on the Internal
Market has to be passed – the fundamental freedoms provide for the removal of obstacles and not for limitless
deregulation. However, and although these principles are well accepted in many non-tax areas, there seems to be
no realistic field of application of such approach in the direct taxation sphere.204 These issues, which basically
197 See Case C-175/88, Biehl, [1990] ECR I-1779, paras. 12-13 and 16 (“principle of equal treatment”); Case C-330/91, Commerzbank, [1993] ECR I-4017, para. 14 (“rules regarding equality of treatment”); Case C-436/00, X and Y, [2002] ECR I-10829,
para. 37 (“inequality of treatment”); for a detailed analysis see also M. Lang and Englisch, “A European Legal Tax Order Based on
Ability to Pay”, in Amatucci (Ed.), International Tax Law (Kluwer, 2006), 251, 255 et seq.
198 See, e.g., Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 28,
and Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 58.
199 For sake of clarity, it should be noted that, of course, every discrimination automatically also entails a restriction; see e.g.,
Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 27; see also Opinion of A.G. La Pergola, 24 June 1999,
Case C-35/98, Verkooijen, [2000] ECR I-4071, para. 18; see also Eilmansberger, “Zur Reichweite der Grundfreiheiten des Binnenmarktes”, 121 Juristische Blätter (1999), 345, 347; Bergström and Bruzelius, “Home-State Restrictions on the Freedom of Establishment in a Swedish Income Tax Law Perspective”, 29 Intertax (2001), 233, 235.
200 For a different approach towards acess and exit restrictions see, e.g., Ghosh, Principles of the Internal Market and Direct
Taxation (Oxford Key Haven Publications, 2007), 18-78, 101-162 and 163-193.
201 For this line of case law see infra II.D.2.
202 Farmer, “The Court’s case law on taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75, 79.
203 For this terminology see, e.g., Opinion of A.G. Fennelly, 16 September 1999, C-190/98, Volker Graf, [2000] ECR I-493,
para. 31; British Court of Appeal (Civil Division), 21 December 2001, R v. Commissioners of Inland Revenue ex parte Professional
Contractor’s Group, [2001] EWCA Civ 1945, EuLR 2002, 329, para. 28.
204 For a complete rejection see, inter alia, in the Opinion of A.G. Geelhoed, Case C-374/04, ACT Group Litigation, [2006]
ECR I-11673, paras. 36 et seq., and the discussion by J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”,
in Amatucci (Ed.), International Tax Law (Kluwer, 2006), 251, 267-269. Still, an aspect that might deserve closer analysis are extremely high tax rates, in particular in situations when they serve as legislative tools to deter taxpayers from a certain behaviour. In
this respect it could be argued that an excessive tax rate, even though applicable to the cross-border just as to the purely domestic
exercise of a given activity, is in fact nothing else than a particular regulatory prohibition of that activity. For inbound activities of
that kind this could indeed mean that the prospect of having all profits taxed away has the effect of a serious barrier to “market
access”; see Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 848 et seq. A certain indication for the acceptance of this position may also be found in older decisions like Case 31/67, Stier, [1968] ECR 235, 241, where the
Court held that, “although Article 95 […] does not prohibit Member States from imposing taxation on imported products, nevertheless it would not be permissible for them to impose on products which, in the absence of comparable domestic production, would
escape from the application of the prohibitions contained in Article 95, charges of such an amount the the free movement of goods
within the Common Market would be impeded as far as those products were concerned.” However, in subsequent cases, dealing in
particular with high taxes on the registration on cars in Denmark, this has seemed to lead into a dead end street: It is true that in Case
C-47/88, Commission v. Denmark, [1990] ECR I-4509, paras. 10 et seq., the Court indicated that the general rules on free movement
of goods (Art. 28 EC) could come into play. But even though this indication was repeated in Case C-383/01, De Danske Bilimportører, [2003] ECR I-6065, paras. 40 et seq., the ECJ did not point out clearly where the critical tax level would start. As Engsig
Sørensen, “Towards a More Comprehensive Examination of the Compatibility of Indirect Taxes with the Internal Market” 35 Inter-
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touch on the “organisation and conception” of tax systems, are therefore only briefly touched upon in Chapter II.D.205
Third, and in between these two extremes, there is a range of obstacles created by the interplay of the legal
systems of at least two countries, whereby the interaction of the legislation of two or more Member States leads
to situations where also indistinctly applicable rules of one Member State create an unequal impact on domestic
and cross-border situations. The specific importance of this third category lies in the fact that two countries impose rules which expose a taxpayer to a dual regulatory regime. This group of obstacles may be referred to as the
“double burden” or the “double hurdle” problem.206 For the sake of clarity it must be pointed out that this third
category also involves the liberty-component (“freiheitsrechtliche Komponente”) of the fundamental freedoms:
The taxpayer restricted in his cross-border activities does not strive for equal treatment with, for example, a
resident of the host country or a service provider established there, but rather wants to be relieved from the (additional) burden imposed by such host State.207
It is, however, not immediately apparent why such “double burdens” should be scrutinized under the fundamental freedoms. In many cases the obstacles to cross-border activities would disappear had all Member
States adopted identical rules, thus implying that mere “disparities” are at issue.208 The Court has overcome this
obvious friction between legislative disparities on the one hand and obvious obstacles to the Common Market on
the other by adopting the principle of mutual recognition.209 First employed in Dassonville210 and Cassis-deDijon211 concerning the free movement of goods, this principle requires that “any product imported from another
Member State must in principle be admitted to the territory of the importing Member State if it has been lawfully
produced […] in the exporting country”.212 It has subsequently been extended to the other freedoms,213 and as
such, for example, fostered the acceptance of the legal personality of dual-resident corporations formed under
foreign law.214 Partly based on the principle of mutual recognition, the prohibition of double burdens is widely
accepted in other areas of Community law, 215 including for instance also social security and value added tax.216
Again, however, recent case law suggests that such a “double burden” approach is of limited importance in the
direct tax field. It may be doubted whether the mutual acceptance principle could be reasonably transposed into
the direct tax area in general217 and especially, for example, to counter conflicts of entity qualification.218 Howtax (2007), 246, 250 rightly remarks, it must be assumed that any application of Art. 28 EC must be “limited to those cases where the
tax is so high that it entirely, or almost entirely, prevents free movement.”
205 See, however, for a brief analysis of the case-law in the non-tax area infra II.D.2.
206 Lyal, “Non-discrimination and direct tax in Community law”, 12 EC Tax Review (2003), 68; Eilmansberger, “Zur Reichweite der Grundfreiheiten des Binnenmarktes”, 121 Juristische Blätter (1999), 345, 350 et seq. (“Doppelbelastung”); see also Opinion of A.G. Fennelly, C-190/98, Volker Graf, [2000] ECR I-493, para. 26.
207 Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 175 et seq.; Cordewener, “The
prohibitions of discrimination and restriction within the framework of the fully integrated market”, in Vanistendael (Ed.), EU Freedoms and Taxation, EATLP Congress 2004 (IBFD, 2006), 1, 26 et seq.; see also Schnitger, Die Grenzen der Einwirkung der Grundfreiheiten des EG-Vertrages auf das Ertragsteuerrecht (IDW, 2006), 170 et seq. For a different position see, e.g., M. Lang, “Kapitalverkehrsfreiheit und Doppelbesteuerungsabkommen”, in Lechner, Staringer and Tumpel (Eds.), Kapitalverkehrsfreiheit und
Steuerrecht (Linde, 2000), 181, 189 et seq., and M. Lang, “Eine Wende in der Rechtsprechung des EuGH zu den direkten Steuern?”,
in Hebig, Kaiser, Koschmieder and Oblau (Eds), Aktuelle Entwicklungsaspekte der Unternehmensbesteuerung, Festschrift Wacker
(Erich Schmidt, 2006), 365, 366 et seq., arguing that the prohibition of restrictions is only an argumentative shortcut for a discrimination analysis; see in this direction also Englisch, “Zur Dogmatik der Grundfreiheiten des EGV und ihren ertragsteuerlichen Implikationen”, 13 Steuer und Wirtschaft (2003), 88, 89-90; Englisch, Dividendenbesteuerung (O. Schmidt, 2005), 247 et seq.; Schönfeld,
Hinzurechnungsbesteuerung und Europäisches Gemeinschaftsrecht (O. Schmidt, 2005), 66 et seq.
208 For this rule of thumb see already note 145.
209 See Kapteyn and VerLoren van Themaat, Introduction to the Law of the European Communities (Kluwer, 3rd edition 1998),
579-580. It might be noted that the specific problem at issue in the Cassis case has subsequently been resolved by the Council Regulation (EEC) No 1576/89 of 29 May 1989 laying down general rules on the definition, description and presentation of spirit drinks,
1989 OJ (L 160) 1.
210 Case 8/74, Dassonville, [1974] ECR 837.
211 Case 120/78, Rewe-Zentral AG (“Cassis-de-Dijon”), [1979] ECR 649.
212 See the Communication from the Commission concerning the consequences of the judgment given by the Court of Justice
on 20 February 1979 in case 120/78 (“Cassis de Dijon”), 1980 OJ (C 256) 2.
213 See infra II.D.2.
214 See, e.g., Case C-212/97, Centros, [1999] ECR I-1459; Case C-208/00, Überseering, [2002] ECR I-9919; Case C-167/01,
Inspire Art, [2003] ECR I-10155.
215 See also Farmer and Zalinski, “General Report” in Xenopoulos (Ed.), Direct tax rules and the EU fundamental freedoms:
origin and scope of the problem; National and Community responses and solutions (FIDE Congress, 2006), 399, 402-403; van Thiel,
“Why the European Court of Justice should Interpret Directly Applicable Community Law as a Right to Most-Favored Nation
Treatment and a Prohibition of Double Taxation”, in Weber (Ed.), The Influence of European Law on Direct Taxation: Recent and
Future Developments (Kluwer, 2007), 75, 115-118.
216 See infra I.D.2. and II.D.3. and, for example, Case 15/81, Schul, [1982] ECR 1409; Case 47/84, Schul II, [1985] ECR 1491;
Case 16/84, Commission v. The Netherlands, [1985] ECR 2355; Case 17/84, Commission v. Ireland, [1985] ECR 2375; Case 39/85,
Bergeres-Becque, [1986] ECR 259; Case 50/88, Kühne, [1989] ECR 1925. See also van Thiel, “European Taxation: past trends and
future developments”, 61 Tax Law Review (2008), ___.
217 Rejecting such approach for lack of a natural priority of one of the taxing jurisdictions Terra and Wattel, European Tax Law
(Kluwer, 4th edition 2005), 604; see also Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of
Movement Within the EC”, 34 Intertax (2006), 582, 590.
218 For a detailed analysis of this issue see Fibbe and de Graaf, “Is double taxation arising from autonomous tax classification
of foreign entities incompatible with EC law?”, in van Arendonk, Engelen and Jansen (Eds.), A Tax Globalist – Essays in honour of
Maarten J. Ellis (IBFD, 2005), 237, 246 et seq. and 256 et seq., and the critical analysis by Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax (2006), 582, 590; for a survey concerning EC tax issues involving hybrid entities see Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde,
2007), 494-499.
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ever, and beyond the mutual acceptance principle, one could nevertheless ask inhowfar “double burdens” in the
direct tax area might create restrictions that can not be reduced to mere “disparities”. Juridical double taxation,
for example, would generally persist even if the respective Member States had identical tax systems. A.G. Geelhoed, however, identified such restrictions resulting purely from the division of tax jurisdiction between two tax
systems as unsuspicious “quasi-restrictions”219 and, by finding that the “double burden” created by a juridical
double taxation does not infringe on the freedoms, the ECJ seems to have endorsed such approach,220 and the
EFTA Court has recently followed this lead.221 These issues will be explored in more detail in Chapter II.D.
B. Discriminatory Restrictions: “Overt” and “Covert” Nationality Discrimination
and Equal Treatment of Domestic and Cross-Border Situations
1. A Roadmap for Non-Discrimination
“Discrimination,” in its pure meaning, is merely about situations where certain people who are like others in
many respects are treated differently or worse because they have certain characteristics. Conversely, “nondiscrimination” prohibits the use of certain traits as a criterion for different treatment. Based on the specific sociological or cultural environment, such “suspect criteria” are laid down in legal rules: Thus, anti-discrimination
rules indicate the classifications or differentiation criteria that are forbidden.222 There might not even be a scope
for the question of whether, for instance, national and non-nationals are comparable or not if the legislature has
already taken the decision as to which people should be treated alike with respect to a certain regulatory aim or
purpose. Starting from this viewpoint, and assuming for the sake of clarity that the residence of a taxpayer is
such a forbidden criterion, the question should be whether residents and non-residents are treated differently. If
this is answered in the affirmative, prima facie discrimination exists, irrespective of whether or not the situations
of these taxpayers are actually comparable – the relevant legislation itself has already answered this question by
creating the legal fiction, and not a mere supposition, that they are. It is only in a second step that a possible
justification could be explored. Suppose, for example, a national rule forbidding gender discrimination: Of
course, men and women are different in many ways (as are also residents and non-residents); but the legislature
has chosen a person’s gender as the forbidden criterion for discrimination (and in the same way it could choose a
person’s race, nationality, residence, etc.). Nevertheless, such discrimination can – if the non-discrimination
provision allows for this223 – be justified. Such justification can either be allowed on certain, enumerated reasons
(“closed-ended approach”) or on any “good” reasons under a “rule of reason” (“open-ended approach”).
The ECJ has, however, taken a non-discrimination approach based on the general principle of equality to be
found in the Member States’ domestic legal systems.224 In a first step, the ECJ examines whether “discrimination” (in a broad sense) exists. At the starting point, therefore, even if a given subject matter, such as direct taxation, falls within the power of the Member States, they must exercise that power consistently with EC Law and
therefore especially avoid any overt or covert discrimination on grounds of nationality. 225 Generally, and similarly to the framework of non-discrimination in tax treaties,226 such discrimination arises from the application of
219 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 41 et
seq., especially para. 48: A “restrictive consequence of the fact that direct tax systems are national is the necessity to divide tax
jurisdiction over the income of cross-border economic operators (dislocation of tax base). As with disparities, these restrictions
should be distinguished from discrimination, as they result not from the rules of just one tax jurisdiction, but from the co-existence of
two separate tax jurisdictions (i.e., no one tax jurisdiction is to blame for the tax disadvantage). However, unlike disparities, they
would continue to exist even if national tax systems were exactly the same in design and content.”
220 Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967; but see also Opinion of A.G. Kokott, 15 February 2007, Case
C-464/05, Geurts and Vogten, [2007] ECR I-9325, para. 60 with note 37, stating for the case of dual unlimited inheritance tax liability that it “remains to be seen” “[w]hether the Court of Justice, in accordance with the findings in Kerckhaert and Morres, would
actually accept this consequence, even in the case of a very high burden of inheritance tax.” For a detailed analysis see infra II.D.3.
and, e.g., Kofler and Mason, “Double Taxation: A European ‘Switch in Time’?”, 14 Columbia Journal of European Law (2007), 6398.
221 Case E-7/07, Seabrokers AS, [2008] EFTA Court Report ___, para. 48.
222 See van Raad, Nondiscrimination in International Tax Law (Kluwer, 1986), 9 et seq.
223 It is, for example, a common interpretation that the non-discrimination clauses in tax treaties are “absolute” prohibitions of
discrimination and do not allow for a justification analysis; see Rust in Vogel and Lehner (Eds.), Doppelbesteuerungsabkommen
(Beck, 5th ed. 2008), Art. 24 Paras. 4, 60.
224 The prohibition of discrimination “is merely a specific enunciation of a general principle of equality which is one of the
fundamental principles of Community law”; see Cases 117/76 and 16/77, Ruckdeschel, [1977] ECR 1753, para. 7; see also Case C20/92, Hubbard, [1993] ECR I-3777, para. 17; Case 175/88, Biehl, [1990] ECR I-1779, paras. 12-13 and 16 (“principle of equal
treatment”); Case C-330/91, Commerzbank, [1993] ECR I-4017, para. 14 (“rules regarding equality of treatment”); Case C-436/00, X
and Y, [2002] ECR I-10829, para. 37 (“inequality of treatment”). For a comparative overview see the contributions in Meussen (Ed.),
The Principle of Equality in European Taxation (Kluwer, 1999), and in Gribnau (Ed.), Legal Protection against Discriminatory Tax
Legislation – The Struggle for Equality in European Tax Law (Kluwer, 2003).
225 See, e.g., Case C-264/96, ICI, [1998] ECR I-4695, para. 19; Case C-311/97, Royal Bank of Scotland. [1999] ECR I-2651,
para. 19; Case C-391/97, Gschwind, [1999] ECR I-5451, para. 20; Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 57.
226 See OECD, Application and Interpretation of Article 24 (Non-Discrimination), Public discussion draft (May 3, 2007), 4,
available at http://www.oecd.org/dataoecd/59/30/38516170.pdf. This draft notes that, “although the wording of the various provisions of Article 24 differs, a common theme is that discrimination can only arise when all factors are equal and the different treatment is solely based on the difference that is prohibited by the relevant provision. A different treatment does not automatically result
in a violation of these provisions.”
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different rules to comparable situations227 or the application of the same or a similar rule to different situations.228 It therefore requires evaluating the comparability of situations and the finding of the relevant subject or
object of comparison, the tertium comparationis. This principle of non-discrimination permeates the whole EC
Treaty229 and forms a fundamental element of the Internal Market, as violations of the equal treatment principle
inevitably generate obstacles to cross-border economic activity.230 The principle finds its general expression in
the lex generalis of Art. 12(1) EC which forbids “any discrimination on grounds of nationality”, and it is also
inherent in the lex specialis of the various fundamental freedoms:231 Art. 39(2) EC guarantees “the abolition of
any discrimination based on nationality between workers of the Member States”, Art. 43(2) EC grants the “the
right to take up and pursue activities as self-employed persons and to set up and manage undertakings […] under
the conditions laid down for its own nationals by the law of the country where such establishment is effected”,
Art. 49 EC prohibits restrictions on freedom to provide services within the Community so that, pursuant to
Art. 50(3) EC, “the person providing a service may, in order to do so, temporarily pursue his activity in the State
where the service is provided, under the same conditions as are imposed by that State on its own nationals”, and
Art. 56(1) EC prohibits “restrictions” on the movement of capital, including “discrimination based on the nationality or on the place of residence of the parties or on the place where such capital is invested.”232 This protection
of economic transactions is supplemented by Art. 18(1) EC, which protects non-economic movement within the
Union’s borders,233 but does not cover situations that are proteced by the special provisions of Art. 39, 43 or 49
EC.234
Based on the simple notion of prohibition of discrimination the ECJ has built a broad body of case law also
in the area of direct taxation. Although considering “nationality” as the decisive element, Art. 12(1) EC as well
as the fundamental freedoms have been interpreted as not only prohibiting overt forms of discrimination based
on nationality, but also all covert forms of discrimination which, by the application of other criteria of differentiation (e.g., tax residence), lead in fact to the same result.235 The Court’s case law was long based on several
variations of this approach of nationality discrimination. Since those early days, however, the ECJ has created a
true “spider web” of dogmatic rules relating to the interpretation of the fundamental freedoms. The classical
analysis of covert discrimination has, however, caused the Court considerable problems in situations where the
reason for a disadvantageous treatment of a taxpayer by his own residence State lies solely in the fact that his
business partner is a non-resident. In this area, commonly denoted as indirect discrimination in the area of international taxation,236 the ECJ has gradually moved to a broader approach of protection of “active” and “passive”
market participants, where the “passive” paricipant in a certain transaction (e.g., the recipient of a cross-border
service or capital) is subjectively protected by the freedoms because the transaction is objectively covered by
them.237 This approach is especially important in cross-border corporate structures, for which the ECJ, without
hesitation, accepted that not only the company setting up a subsidiary in another Member State, but also the
subsidiary238 and even companies related to the parent company239 are entitled to rely on Art. 43 EC.240 It has,
227 Case C-279/93, Schumacker, [1995] ECR I-225, para. 30; Case C-80/94, Wielockx, [1995] ECR I-2493, para. 17; Case C107/94, Asscher, [1996] ECR I-3089, para. 40; Case C-311/97, Royal Bank of Scotland. [1999] ECR I-2651, para. 26; Case C391/97, Gschwind, [1999] ECR I-5451, para. 21; Case C-431/01, Mertens, [2002] ECR I-7073, para. 32.
228 See, e.g., Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, para. 19, and infra II.B.3.d).
229 See Hinnekens, “The search for the framework conditions of the fundamental EC Treaty principles as applied by the European Court to Member States’ direct taxation”, 11 EC Tax Review (2002), 112, 112 et seq.
230 See, e.g., “Company Taxation in the Internal Market”, SEC(2001)1681, 309 et seq.
231 See, e.g., Case C-419/92, Scholz, [1994] ECR I-505, para. 6; Case C-336/96, Gilly, [1998] ECR I-2793, para. 38; Case C311/97, Royal Bank of Scotland, [1999] ECR I-2651, para. 20. It follows from the wording of Art. 12 EC – “without prejudice to any
special provisions” contained in the EC Treaty – that the general prohibition of all discrimination on grounds of nationality laid
down by Art. 12 EC is a lex generalis that applies independently only to situations governed by Community law for which the EC
Treaty lays down no specific non-discrimination rules; according to settled case law, the fundamental freedoms constitute such
specific non-discrimination rules. See, e.g., Case 305/87, Commission v. Greece, [1989] ECR 1461, paras. 12 et seq.; Case C-246/89,
Commission v. UK, [1991] ECR I-4584, para. 17; Case C-1/93, Halliburton, [1994] ECR I-1137, para. 12; Case C-336/96, Gilly,
[1998] ECR I-2793, para. 37; Case C-311/97, Royal Bank of Scotland, [1999] ECR I-2651, para. 20; Case C-55/98, Vestergaard,
[1999] ECR I-7641, para. 16; Case C-251/98, Baars, [2000] ECR I-2787, para. 23; Cases C-397/98 and C-410/98, Metallgesellschaft
and Hoechst, [2001] ECR I-1727, paras. 38-39; Case C-443/06, Hollmann, [2007] ECR I-8491, paras. 28 and 29; Case C-105/07,
Lammers & Van Cleeff, [2008] ECR ___, para. 14.
232 For this wording see Art. 67(1) EEC Treaty, the predecessor of Art. 56(1) EC (ex Art. 73b(1) EC Treaty).
233 See, e.g., Case C-224/02, Pusa, [2004] ECR I-5763, and Case C-52/04, Turpeinen, [2006] ECR-I 10685.
234 Case C-193/94, Skanavi, [1996] ECR I-929, para. 22; Case C-348/96, Calfa, [1999] ECR I-11, para. 29-30.
235 See, e.g., Case C-398/92, Mund & Fester, [1994] ECR I-467, para. 14; Case C-237/94, O’Flynn, [1996] ECR I-2617, paras. 17 et seq; see also Case 143/87, Stanton, [1988] ECR 3877, para. 9; Case 152/73, Sotgiu, [1974] ECR 153, para. 11; and implicitly already Case 15/79, Ugliola, [1969] ECR 363. See also Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on
freedom of movement for workers within the Community, [1968] OJ (L 257), 2, which prohibits any discriminatory access restrictions including those that apply irrespective of nationality.
236 See Bennett, “Nondiscrimination in International Tax Law: A Concept in Search of a Principle”, 59 Tax Law Review
(2006), 439, 443.
237 See for Art. 49 EC e.g., Case C-224/97, Ciola, [1999] ECR I-2517, para. 11; Case C-55/98, Vestergaard. [1999] ECR I7641, para. 20; Case C-243/01, Gambelli, [2003] ECR I-13031, paras. 55 and 57; Case C-36/02, Omega, [2004] ECR I-9609, para. 25
238 See Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] ECR I-1727; Case C-324/00, LankhorstHohorst, [2002] ECR I-11779.
239 See for a grandparent company Case C-264/96, ICI, [1998] ECR I-4695.
240 See, e.g, Cordewener, “Company Taxation, Cross-Border Financing and Thin Capitalization in the EU Internal Market:
Some Comments on Lankhorst-Hohorst GmbH”, 43 European Taxation (2003), 102, 104; Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (Schmidt, 2002), 234 et seq.
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however, limits insofar as third-county situations will not be protected by the fundamental freedoms only because the “passive” market participant is resident in the Community.241
Moreover, the ECJ has opened the protection under the freedoms beyond all types of nationality discrimination by the host Member State (source State) to include also clear “exit restrictions” by the home Member State
(residence State), and it has developed a body of case law that encompasses all disadvantageous treatment of
cross-border as opposed to merely internal activities, hence assimilating not only the classical concepts of nationality discrimination but more generally restrictions imposed by a State on its own residents exercising their
freedoms.242 Art. 58(1)(a) EC implicitly acknowledges this type of “home State” restrictions, and also the wording of the fundamental freedoms clearly supports the notion that the EC Treaty’s protection expands beyond
mere national treatment to also cover “exit” restrictions: Under Art. 39(1) EC “[f]reedom of movement for
workers shall be secured within the Community”, Art. 43(1) EC prohibits “restrictions on the freedom of establishment”, Art. 49(1) EC applies to “restrictions on freedom to provide services within the Community”, and
under Art. 56(1) EC “all restrictions on the movement of capital between Member States […] shall be prohibited”. Until now, however, the ECJ’s “restriction-based approach” in the tax area is, in its substance, still a nondiscrimination approach requiring some form of (relative) comparison; it should, therefore, be distinguished
from “real” non-discriminatory restrictions where no such differential treatment exists, and hence an absolute
criterion of impact on the Internal Market is necessary to establish a prohibited obstacle. Due to the dogmatic
convergence of the fundamental freedoms in the ECJ’s case law, all freedoms basically follow the same pattern
of protection of cross-border economic activities in their respective form:243 This includes not only prohibition of
overt discrimination by reason of nationality but also all covert forms of discrimination, but more generally
every unjustified disadvantageous treatment of cross-border economic activities in comparison to similar domestic economic activities. It is, however, not entirely clear if and to what extent non-discriminatory direct tax rules
that impose certain market access restrictions, but do not entail differential treatment of comparable cross-border
and domestic situations, fall within the scope of the fundamental freedoms.244
The EC Treaty’s non-discrimination principle comprises a variety of aspects. The point of departure, however, is which traits for “different treatment” are to be viewed as suspect. The ECJ’s case law has taken an evolution that started with the different treatment based on nationality, interpreted as covering also covert discrimination based on (tax) residence, hence scrutinizing inbound transactions and disadvantageous tax treatment of nonresidents by the source State. The case law has then evolved to a broader perspective also covering disadvantageous treatment by a State of its own residents exercising their freedoms in outbound situations.245 Hence, as the
case law stands today, it is basically the different treatment of cross-border as opposed to domestic situations that
indicates a discrimination (thus making the border-crossing element a suspect criterion in the aforementioned
sense), which has to be justified to prevail in the light of EC Law. The Court accepts that there may be fiscal
“restrictions” on, e.g., freedom of establishment irrespective of any discrimination founded on nationality, as the
freedoms also prohibit the home Member State or Member State of origin from hindering the establishment in
another Member State of one of its nationals or of a company incorporated under its legislation.246 The ECJ, in
substance, evaluates both situations – inbound and outbound – under the standard of non-discrimination, and this
is perfectly logical because free movement on an Internal Market implies a right of exit from the home State,
before ecoomic operators can even begin to exercise their right of access to the host Member State. The main
cornerstone of such analysis is the question of comparability of situations,247 as “[i]n order to determine whether
a difference in tax treatment is discriminatory, it is […] necessary to consider whether, having regard to the national measure at issue, the companies concerned are in an objectively comparable situation.”248 If any such
discriminatory restriction is found, however, any possible disdavantage for the cross border situation is distortive
and thus prohibited, and no de minimis rule applies: If a national measure makes the exercise of a fundamental
freedom “less attractive”249 or has a “dissuasive effect,”250 even if such discriminatory restriction is of minor
See Case C-290/04, Scorpio, [2006] ECR I-9461, paras. 62 et seq.
For the relation to Art. 12 EC see, e.g., Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt,
2002), 245; see also Case 143/87, Stanton, [1988] ECR 3877, para. 9; Cases 154/87 and 155/87, Wolf, [1988] ECR 3897, para. 9.
243 See Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 103 et seq.; Vanistendael,
“A comparative and economic approach to equality in European Taxation”, in Gocke, Gosch and M. Lang (Eds.), Körperschaftsteuer – Internationales Steuerrecht – Doppelbesteuerung, Festschrift Wassermeyer (Beck, 2005), 534; Englisch, “The European
Treaties’ Implications for Direct Taxes”, 33 Intertax (2005), 310, 313; J. Lang and Englisch, “A European Legal Tax Order Based
on Ability to Pay”, in Amatucci (Ed.), International Tax Law (Kluwer, 2006), 251, 264.
244 See infra II.D.
245 See infra II.B.2.
246 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 27.
247 However, most criticism of the ECJ’s case law is voiced in this area. Indeed, the standards employed by the ECJ prima facie raise some doubts as to consistency and sensibility, but they neverthelss withstand scrutiny. See infra II.B.3. While most of these
issues are discussed with regard to a comparision between a purely domestic situation and a cross-border situation (“vertical” comparision), they likewise arise if one were to analyze the different treatment of two different cross-border situations (“horizontal”
comparison); these latter issues are discussed infra II.C.
248 Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 46.
249 See, e.g., Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 42; Case C-324/00, Lankhorst-Hohorst, [2002] ECR I11779, para. 32.
250 See, e.g., Case C-136/00, Danner, [2002] ECR I-8147, para. 31; Case C-9/02, de Lasteyrie du Saillant, [2004] ECR I-2409,
para. 45.
241
242
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scope or importance,251 it has to be justified in order to prevail. It is therefore not necessary to establish that the
legislation in question has actually had the effect of preventing market participants from exercising their freedoms, but it is sufficient to demonstrate that a national measure is potentially capable of restricting the exercise
of a freedom.252 Once a disadvantageous treatment of comparable situations has been established, the second
step brings the analysis to the issue of a possible justification, and a third step inquires whether a a three-prong
proportionality test is fulfilled.253
2. Beyond Overt and Covert Nationality Discrimination:
Equal Treatment of Cross-Border and Domestic Situations
The non-discrimination concept of the EC Treaty applies, in principle, by reference to nationality: As
Art. 12(1) EC states in general terms, “discrimination on grounds of nationality shall be prohibited”. This classical prohibition of discrimination – or, conversely, guarantee of national treatment – is also a common feature of
the fundamental freedoms and, unsurprisingly, partly also overlaps with the non-discrimination standards in tax
treaties.254 However, the ECJ has made it clear that these rules forbid not only overt discrimination by reason of
“nationality”,255 but also all covert forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result.256 The introduction of the concept of covert discrimination can first be
found in the non-tax case Sotgiu257 with regard to the place of origin or residence of a person, and then first explicitly adopted in the direct tax arena in Biehl, Bachmann, Commerzbank and Schumacker258 with regard to a
taxpayer’s (permanent) fiscal residence. In its early case law, however, the ECJ managed to create a spiderweb
of standards in order to bring national measures under this umbrella of nationality discrimination. In the area of
free movement of workers, for example, covert discrimination was considered to entail conditions imposed by
national law that, although applicable irrespective of nationality, affect essentially non-nationals,259 or the great
majority of those affected are non-nationals,260 that are indistinctly applicable but can more easily be satisfied by
nationals than by non-nationals,261 or where there is a risk that they may operate to the particular detriment of
non-nationals.262 This assessment, however, does not require statistical proof or empirical evidence that a rule
affects a certain percentage of non-residents.263
The recognition of forbidden covert discrimination is especially important for direct tax rules since, in principle, Member States do not exercise their taxing rights by reference to the nationality of the taxpayers, but they
rather operate their taxing rights on the basis of the concept of residence.264 Moreover, international taxation is
251 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 21; Case C-9/02, de Lasteyrie du Saillant,
[2004] ECR I-2409, para. 43.
252 Case C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107, para. 62; Case C-231/05, Oy AA, [2007] ECR I-6373, para. 42.
253 See infra III.
254 See, e.g., the analyses by Bennett, “Nondiscrimination in International Tax Law: A Concept in Search of a Principle”, 59
Tax Law Review (2006), 439, 459-482; for the relationship between the fundamental freedoms and OECD non-discrimination clauses see also the references in supra note 34.
255 In this respect, “nationality” of an individual is – as the Declaration on the nationality of a Member State ([1992] OJ
(C 191), 98) explicitly states – to be settled solely by reference to the national law of the Member State concerned. With regard to
companies or firms formed in accordance with the laws of a Member State, their corporate seat serves to determine, like nationality
for natural persons, their connection to a Member State’s legal order (see, e.g., Joint Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] ECR I-1727, para. 42), without any regard to the residence of their shareholders (see Case C-299/02,
Commission v. The Netherlands, [2004] ECR I-9761, paras. 16 and 20-21). This is because Arts 48, 55 EC require that companies
formed in accordance with the law of a Member State, and having their registered office, central administration or principal place of
business within the EU, are to be treated in the same way as natural persons who are nationals of Member States; see, e.g., Case C330/91, Commerzbank, [1993] ECR I-4017, para. 13. See also note 265 for the distinction between overt and covert discrimination in
case of companies.
256 Instructively Case C-237/94, O’Flynn, [1996] ECR I-2617, paras. 17 et seq. For the application of this concept of covert
discrimination see e.g., with regard to Art. 39 EC Case 175/88, Biehl, [1990] ECR I-1779, para. 13, Case C-279/93, Schumacker,
[1995] ECR I-225, paras. 26 and 29, Case C-80/94, Wielockx, [1995] ECR I-2493, para. 16, Case C-151/94, Commission v. Luxembourg (“Biehl II”), [1995] ECR I-3685, para. 14, Case C-107/94, Asscher, [1996] ECR I-3089, para. 39, Case C-391/97, Gschwind,
[1999] ECR I-5451, para. 20; Case C-87/99, Zurstrassen, [2000] ECR I-3337, para. 18; and Case C-385/00, De Groot, [2002] ECR
I-11819, para. 75; with regard to Art. 43 EC in Case C-330/91, Commerzbank, [1993] ECR I-4017, para. 14, Case C-1/93, Halliburton, [1994] ECR I-1137, para. 15, and Case C-254/97, Société Baxter, [1999] ECR I-4809, para. 10; and with regard to Art. 49 EC in
Case C-234/01, Gerritse, [2003] ECR I-5933, para. 53, and Case C-334/02, Commission v. France, [2004] ECR I-2229, para. 21.
257 Case 152/73, Sotgiu, [1974] ECR 153, para. 11; instructively Case C-237/94, O’Flynn, [1996] ECR I-2617, para. 18
258 Case 175/88, Biehl, [1990] ECR I-1779; Case C-204/90, Bachmann, [1992] ECR I-249; Case C-330/91, Commerzbank,
[1993] ECR I-4017; Case C-279/93, Schumacker, [1995] ECR I-225.
259 See, e.g., Case 41/84, Pinna, [1986] ECR 1, para. 24; Case 33/88, Allué, [1989] ECR 1591, para. 12.
260 See, e.g., Case C-279/89, Commission v. United Kingdom, [1992] ECR I-5785, para. 42; Case C-272/92, Spotti, [1993]
ECR I-5185, para. 18; Case C-279/93, Schumacker, [1995] ECR I-225, para. 28.
261 See, e.g., Case C-349/87, Paraschi, [1991] ECR I-4501, para. 23.
262 See, e.g., Case 175/88, Biehl, [1990] ECR I-1779, para. 14; Case C-204/90, Bachmann, [1992] ECR I-249, para. 9; Case C151/94, Commission v. Luxembourg (“Biehl II”), [1995] ECR I-3685, para. 15.
263 Case C-237/94, O’Flynn, [1996] ECR I-2617, para. 21: It “is not necessary in this respect to find that the provision in question does in practice affect a substantially higher proportion of migrant workers. It is sufficient that it is liable to have such an effect.” See for this also Wouters, “The principle of non-discrimination in European Community law”, 8 EC Tax Review (1999), 98,
104.
264 See, ex multis, Knobbe-Keuk, “Restrictions on the Fundamental Freedoms Enshrined in the EC Treaty by Discriminatory
Tax Provisions – Ban and Justification”, 3 EC Tax Review (1994), 74, 76; Gammie and Brannan, “EC Law Strikes at the UK Corporation Tax – The Death Knell of UK Imputation?”, 23 Intertax (1995), 389, 396; Jann, “Die Auswirkungen des EU-Rechts auf die
Abkommensberechtigung von beschränkt Steuerpflichtigen”, in Gassner, M. Lang and Lechner (Eds.), Doppelbesteuerungsabkom-
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traditionally based on treating residents and non-residents differently, which gives rise to many areas of friction
with the EC non-discrimination principles. Thus, generally speaking, differences in treatment based on tax residence – of individuals as well as of corporations – are, in principle, treated as giving rise to covert discrimination
on the basis of the assumption that non-residents usually are nationals of other Member States.265 This “classic”
discrimination of non-residents by source States has resulted in a vast body of case law and is still a guiding light
in the ECJ’s case law. For example, the ECJ already dealt with tax base266 and tax-rate267 discriminations of nonresident individuals and corporations, especially in situations involving permanent establishments;268 the denial
of tax allowances in respect of non-resident taxpayers’ personal and family circumstances;269 discriminatory
refund procedures;270 and the non-extension of regimes for the avoidance or mitigation of economic double taxation to outgoing profit distributions.271
In any event, the classical analysis of covert nationality discrimination loses its appeal if the reason for a
disadvantageous tax treatment of a taxpayer by his residence State lies solely in the fact that his business partner
is a non-resident or established in another Member State. National rules oftentimes cause twofold effects: The
first and main one usually concerns those who are subject to unfavorable rules because their economic counterpart (e.g., the service provider) is established in another Member State; the second, a corollary of the first, consists of the different treatment to which such counterpart established in another Member State is in fact subject
to.272 These situations are commonly denoted as indirect discrimination in the area of international taxation.273
men und EU-Recht (Linde, 1996), 43, 57; Thömmes, “Tatbestandsmäßigkeit und Rechtfertigung steuerlicher Diskriminierungen
nach EG-Recht”, in Schön (Ed.), Gedächtnisschrift für Knobbe-Keuk (O. Schmidt, 1997), 795, 801 et seq. However, the application
of this distinction between overt and covert discrimination is more complex with regard to corporations: Since their corporate seat
within the meaning of Art. 48, 55 EC qualifies them as “nationals” of a Member State, and the criteria of Art. 48 EC (registered
office, central administration, or principal place of business) will often coincide with the criteria for tax residence (usually the place
of effective management, the place of incorporation, or the statutory seat), it has been suggested that discrimination based on the tax
residence of a corporation will usually amount to overt discrimination if the tax system attaches itself to corporate law (see, e.g.,
Lyons, “Discrimination Against Individuals and Enterprises on Grounds of Nationality: Direct Taxation and the European Court of
Justice”, 1 EC Tax Journal (1995/96), 27, 33; see also Ståhl, “Taxing Companies by Reason of Nationality and/or Place of Management: What Says the ECJ?”, in Andersson, Melz and Silfverberg (Eds.), Liber Amicorum Sven-Olof Lodin (Kluwer, 2001), 252, 254256; see also J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International Tax
Law (Kluwer, 2006), 251, 289-290). However, the ECJ and legal scholarship seem to emphasize whether the difference in treatment
is based on tax residence, rather than on the seat under corporate law and even if both coincide, which gives rise (only) to covert
discrimination (see Case C-330/91, Commerzbank, [1993] ECR I-4017, para. 15; D’Oreye de Lantremange, “Freedom of Establishment in the Direct Tax Jurisprudence of the European Court – A Review”, 6 EC Tax Journal (2002), 187, 191 and 209 et seq.), as
the “use of the criterion of fiscal residence within national territory […] is liable to work more particularly to the disadvantage of
companies having their seat in other Member States” (see Case C-254/97, Société Baxter, [1999] ECR I-4809, para. 13). On the
other hand, the ECJ seems to have identified rules that exclude from benefits companies that do not have a certain (domestic) legal
form as overtly discriminatory (Case C-1/93, Halliburton, [1994] ECR I-1137; Case C-311/97, Royal Bank of Scotland, [1999] ECR
I-2651).
265 See also, e.g., Gammie, “The Role of the European Court of Justice in the Development of Direct Taxation in the European
Union”, 57 Bulletin For International Fiscal Documentation (2003), 86, 88.
266 Case C-234/01, Gerritse, [2003] ECR I-5933 (gross withholding taxation); Case C-265/04, Bouanich, [2006] ECR I-923
(gross taxation of redemption proceeds); Case C-346/04, Conijn, [2006] ECR I-6137 (disallowance of deductions for tax compliance
costs); Case C-386/04, Stauffer, [2006] ECR I-8203 (no tax exemption for foreign non-profit organizations); Case C-290/04, Scorpio, [2006] ECR I-9461 (gross withholding taxation); Case C-345/04, Centro Equestre, [2007] ECR I-1425 (gross taxation and
limited possibility of business expense deductions); Case C-433/04, Commission v. Belgium, [2006] ECR I-10653 (gross withholding taxation); Case C-383/05, Talotta, [2007] ECR I-2555 (minimum tax base); Case C-443/06, Hollmann, [2007] ECR I-8491 (no
reduction of tax base for capital gains).
267 Case C-107/94, Asscher, [1996] ECR I-3089 (higher tax rate for non-residents); Case C-234/01, Gerritse, [2003] ECR I5933 (gross withholding taxation); Case C-152/03, Ritter-Coulaus, [2006] ECR I-1711 (negative progressivity); Case C-520/04,
Turpeinen, [2006] ECR I-10685 (higher tax rate on pension payments for non-residents); Case C-451/05, ELISA, [2007] ECR I-8251
(exemption from wealth tax on real estate only available for resident corporations and corporations in certain treaty partner States).
268 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273 (denial of imputation credit); Case C-311/97, Royal
Bank of Scotland, [1999] ECR I-2651, and Case C-253/03, CLT-UFA, [2006] ECR I-1831 (higher tax rates on permanent establishments); Case C-307/97, Saint-Gobain, [1999] ECR I-6161 (denial of participation exemption and foreign tax credits); see also Case
C-330/91, Commerzbank, [1993] ECR I-4017 (no interest on the refund of overpaid taxes of a branch).
269 See, e.g., Case C-279/93, Schumacker, [1995] ECR I-225 (splitting tariff); Case C-80/94, Wielockx, [1995] ECR I-2493,
(tax deduction for transfers of funds to a pension reserve); Case C-87/99, Zurstrassen, [2000] ECR I-3337 (splitting tariff); Case C169/03, Wallentin, [2004] ECR I-6443 (zero-bracket); Case C-376/03, D, [2005] ECR I-5821 (tax-free allowance); Case C-182/06,
Lakebrink, [2007] ECR I-6705 (negative progressivity); see also the Opinion of A.G. Megozzi, 25 June 2008, Case C-527/06, Renneberg, [2008] ECR ___ (negative progressivity).
270 Case 175/88, Biehl, [1990] ECR I-1779, and Case C-151/94, Commission v. Luxembourg (“Biehl II”) [1995] ECR I-3685
(tax-refund due to progressivity of the tax-system denied to taxpayers who change their residence during the taxable year); Case C330/91, Commerzbank, [1993] ECR I-4017 (no interest payment on the refund of overpaid taxes of a branch).
271 Case C-374/04, ACT Group Litigation, [2006] ECR I-11673 (imputation system); Case C-170/05, Denkavit Internationaal,
[2006] ECR I-11949, and Case C-379/05, Amurta, [2007] ECR ___ (exemption systems); further Case E-1/04, Fokus Bank, [2004]
EFTA Court Report 11 (imputation system and withholding taxation). For situations involving permanent establishments see also
Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273 (imputation credit), and Case C-307/97, Saint-Gobain,
[1999] ECR I-6161 (participation exemption and foreign tax credits).
272 However, systematizing the existing case law according to these criteria is a difficult task, due to the different perspectives
taken and the inconsistent language used by the ECJ. Bachmann, for example, was concerned with a provision of Belgian tax law
which allowed pension and life assurance contributions to be deducted only if paid in Belgium to a Belgian undertaking or the Belgian establishment of a foreign undertaking. This provision applied regardless of the taxpayer’s (i.e., in casu Mr Bachmann’s German) nationality, but it amounted to covert discrimination because it was likely to operate “to the particular detriment of those workers who are, as a general rule, nationals of other member states” (Case C-204/90, Bachmann, [1992] ECR I-249, para. 9). This finding was based on the hypothesis that workers who first carry out an occupation in one Member State and then move on to an employment in another Member State, will “normally” have concluded their pension and insurance contracts in the first Member State.
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While initially the ECJ has struggled with this concept because Art. 39, 43 and 49 EC literally only refer to the
“active” exercise of a freedom (e.g., the provision of services),274 it has gradually moved to a broader approach
of protection of “active” and “passive” market participants, where the “passive” part of the transaction (e.g., the
recipient of a cross-border service or capital investment) is subjectively protected by the freedoms because the
transaction is objectively covered by them.275 This situation is evidenced in cases concerning unfavorable taxation276 or increased administrative burdens277 because a service is received across the border,278 disadvantageous
treatment of a company because its shareholders are non-residents,279 the requirement for tax benefits that both
spouses are residents,280 or the disallowance of deductions for payments to a non-resident recipient,281 including
interest payments on shareholder debt.282 The Court has overcome this dogmatic challenge by implicitly accepting that direct and indirect discrimination283 may be scrutinized under the fundamental freedoms.284 Hence, usViewed from this angle, such treatment amounted to an infringement of the freedom of movement of workers under Art. 39 EC in
form of a covert (and direct) discrimination on grounds of nationality of Mr Bachmann. On the other hand, the discrimination was
based on the foreign establishment of the service provider, and may thus clearly be classified as an indirect discrimination: First, Mr
Bachmann was subject to unfavorable rules because his economic counterpart, i.e., the insurer (service provider), was established in
another Member State, second the service provider was also discriminated against as a corollary of the first discrimination. Based on
this, the ECJ also found an infringement of the freedom to provide services under Art. 49 EC. However, since the establishment of
the service provider was the decisive factor, one may argue that the latter amounts to an indirect discrimination against Mr Bachmann on grounds of nationality of the service provider (for a qualification of this aspect of the Bachmann case as overt discrimination see, e.g., Opinion of A.G. Jacobs, 21 March 2002, Case C-136/00, Danner, [2002] ECR I-8147, para. 36). Similar patterns can
be found, e.g., in Case C-484/93, Svensson and Gustavsson, [1995] ECR I-3955; Case C-118/96, Safir, [1998] ECR I-1897; Case C55/98, Vestergaard, [1999] ECR I-7641; Case C-136/00, Danner, [2002] ECR I-8147 (for the qualification of this case as overt
discrimination see, e.g., Opinion of A.G. Jacobs, 21 March 2002, Case C-136/00, Danner, [2002] ECR I-8147, para. 37; Cordewener, “Case C-136/00, Rolf Dieter Danner”, 40 Common Market Law Review (2003), 965, 969); Case C-422/01, Ramstedt,
[2003] ECR I-6817 (for a qualification of this case as one of covert discrimination see, e.g., Opinion of A.G. Léger, 3 April 2003,
Case C-422/01, Ramstedt, [2003] ECR I-6817, paras. 31 et seq., although referring to an “indirect form of discrimination”); Case C42/02, Lindman, [2003] ECR I-13519 (for a qualification of this case as an overt discrimination see, e.g., Opinion of A.G. StixHackl, 10 April 2003, Case C-42/02, Lindman, [2003] ECR I-13519, paras. 74 et seq.)
273 Bennett, “Nondiscrimination in International Tax Law: A Concept in Search of a Principle”, 59 Tax Law Review (2006),
439, 443.
274 See, e.g., Case C-1/93, Halliburton, [1994] ECR I-1137.
275 See for Art. 49 EC e.g., Cases 286/82 and 26/83, Luisi and Carbone, [1984] ECR 377, paras 10 and 16; Case C-224/97, Ciola, [1999] ECR I-2517, para. 11; Case C-55/98, Vestergaard. [1999] ECR I-7641, para. 20; Case C-243/01, Gambelli, [2003] ECR
I-13031, paras. 55 and 57; Case C-36/02, Omega, [2004] ECR I-9609, para. 25; Case C-290/04, Scorpio, [2006] ECR I-9461, paras. 63-64; Case C-76/05, Schwarz, [2007] ECR I-6849, para. 36; Case C-294/97, Eurowings, [1999] ECR I-7447, para. 34; Case
281/06, Jundt, [2007] ECR ___, para. 52.
276 Case C-294/97, Eurowings, [1999] ECR I-7447 (compensatory taxation in case of foreign leases); Case C-42/02, Lindman,
[2003] ECR I-13519 (taxation of foreign lottery winnings); Case C-334/02, Commission v. France, [2004] ECR I-2229 (higher
taxation of interest received from investment contracts with non-resident financial and life assurance institutions); Case C-39/04,
Laboratoires Fournier, [2005] ECR I-2057 (research tax credit only for domestic research but not if contracted out to non-resident
research centres).
277 See, e.g., Case C-290/04, Scorpio, [2006] ECR I-9461, and Case C-433/04, Commission v. Belgium, [2006] ECR I-10653
(concerning obligations of a withholding agent).
278 See also Case C-1/93, Halliburton, [1994] ECR I-1137 (higher tax on sale to non-resident company).
279 Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] ECR I-1727 (no relief from obligation to pay advance corporate tax); see also Case C-231/05, Oy AA, [2007] ECR I-6373 (non-deductibility of group contributions).
280 Case C-87/99, Zurstrassen, [2000] ECR I-3337, and Case C-329/05, Meindl, [2007] ECR I-1113 (denial of splitting tariff
because spouse was a non-resident).
281 See, e.g., Case C-204/90, Bachmann, [1992] ECR I-249, and Case C-300/90, Commission v. Belgium, [1992] ECR I-305
(non-deductibility of contributions to foreign insurance schemes); Case C-118/96, Safir, [1998] ECR I-1897 (differential tax treatment of capital life insurances at the level of the insured person based on the place of establishment of the insurance company); Case
C-55/98, Vestergaard, [1999] ECR I-7641 (administrative practice under which deduction of costs for the attendance at professional
conferences held in other countries was disallowed unless justified on professional grounds); Case C-136/00, Danner, [2002] ECR I8147 (restriction of deductibility of contributions to foreign-established voluntary pension schemes); Case C-422/01, Ramstedt,
[2003] ECR I-6817 (unfavorable tax treatment of an occupational pension insurance policy taken out with companies established in
other Member States); Case C-150/04, Commission v. Denmark, [2007] ECR I-1169, and Case C-522/04, Commission v. Belgium,
[2007] ECR I-5701 (non-deductibility of contributions to foreign insurance schemes); see also Case C-403/03, Schempp, [2005]
ECR I-6421 (non-deductibility of alimony payments because former spouse resides in a Member State where such payments are not
taxable); Case C-318/05, Commission v. Germany, [2007] ECR I-6957, and Case C-76/05, Schwarz, [2007] ECR I-6849 (nondeductibility of tuition payments to a foreign school).
282 Case C-324/00, Lankhorst-Hohorst, [2002] ECR I-11779, and Case C-524/04, Thin Cap Group Litigation, [2007] ECR I2107 (thin capitalization rules); see also Case C-492/04, Lasertec, [2007] ECR I-3775 (thin capitalization rules in a third-country
setting).
283 See also van Raad, “Nondiscrimination from the Perspective of the EC Treaty – Structural and Conceptual Issues”, in AviYonah, Hines and M. Lang (Eds.), Comparative Fiscal Federalism: Comparing the European Court of Justice and the US Supreme
Court‘s Tax Jurisprudence (Kluwer, 2007), 55, 58. Those terms are generally used interchangeably with overt and covert discrimination, but may be distinguished on account of whether subject and object of a distinction are identical. For the interchangeable use of
this terms see, ex multis, Case C-237/94, O’Flynn, [1996] ECR I-2617, paras. 17 et seq.; Case C-107/94, Asscher, [1996] ECR I3089, para. 49; Case C-234/01, Gerritse, [2003] ECR I-5933, paras. 28 and 53, where the Court found that a national tax provision
which refused non-residents to deduct business expenses, whereas residents were allowed to do so, risks operating mainly to the
detriment of nationals of other Member States and “therefore constitutes indirect discrimination on grounds of nationality.” See, e.g.,
Wouters, “The principle of non-discrimination in European Community law”, 8 EC Tax Review (1999), 98, 103 et seq.; Oliveira,
“Workers and Other Persons: Step-by-step from Movement to Citizenship”, 39 Common Market Law Review (2002), 77, 85; Farmer,
“The Court’s case law on taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75, 76; for a different position see
Lyal, “Non-discrimination and direct tax in Community law”, 12 EC Tax Review (2003), 68, 74.
284 It is still not entirely clear whether, in the context of the freedom to provide services under Art. 49 EC, a distinction based
on the origin of the service, that is, the service provider’s place of establishment to which Art. 49 EC explicitly refers, gives rise to
an overt discrimination so that restrictions based on the establishment of a service provider are to be viewed as overt discriminations
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ing international tax language, indirect discrimination may be deemed to occur where a rule treats one part of a
given cross-border transaction less favorably because of a certain characteristic such as foreign residency or
establishment of the other participant in that transaction.285 Nevertheless, and although this analysis of indirect
discrimination is still viewed as a discrimination on grounds of nationality,286 it has gradually merged with the
ECJ’s broader analysis of equal treatment of cross-border and domestic situations also from the perspective of
the taxpayer’s home State.287 An analysis of the cases presented to the ECJ demonstrates that such issues concerning “active” and “passive” market participation arose rather frequently (Graph 4).
Graph 4: Covert discrimination is of paramount importance in the ECJ’s case law on the relationship between Member States’
direct tax provisions and the fundamental freedoms. Until 1 January 2008, 46 out of 76288 cases (i.e., roughly 53%) have been
decided on this basis. Most of these cases (26 cases or 65%) dealt with the “classic” direct source State discrimination against
non-residents. However, a considerable number of cases (20 cases or 35%) have dealt with rights of “passive” market participants
or – to use this term for sake of clarity – indirect nationality discrimination where the taxpayer’s residence State had employed
unfavorable tax treatment because the taxpayer’s counterpart, who has actively exercised one of the freedoms (e.g., by providing
services or by establishing the taxpayer as a subsidiary), was a non-resident or non-national.
Although the ECJ has forcefully extended the concept of prohibited discrimination on grounds of nationality to encompass also a broad variety of nationality-based discriminations, even these concepts have limits when
it comes to real “exit restrictions”289 by a taxpayer’s residence State, hindering the taxpayer from “actively”
exercising one of the freedoms. The early Biehl case290 may illustrate this dilemma: Biehl, decided in 1990, concerned the Luxembourg provisions on the repayment of excess income tax, which was withheld from wages.
Such a repayment could be made only if the taxpayer was resident in Luxembourg for the whole of the tax year.
Mr Biehl, a German national, had been employed in Luxembourg as of 1973 and returned to Germany on 1 November 1983. The Luxembourg revenue authorities refused to repay him the amount of tax deducted in the first
ten months of 1983, based on the progressivity of a full year’s income, which exceeded his total liability to tax,
as calculated on the progressivity triggered by only 10 months of employment. The Court, however, compared
Mr Biehl with a taxpayer who also worked for part of the year but did not leave Luxembourg (and therefore was
entitled to such repayment), and it adopted the view that the criterion of permanent residence in the national
territory applied irrespective of nationality, but there was nevertheless a risk that it would work in particular
that can only be justified by overriding reasons in the public interest where those reasons are not specified in the Treaty. In this
direction Case 352/85, Bond van Adverteerders, [1988] ECR 2085, paras. 32 et seq.; Case C-288/89, Stichting Collectieve Antennevoorziening Gouda, [1991] ECR I-4007, para. 11; Case C-353/89, Commission v. The Netherlands, [1991] ECR I-4069, para. 15;
Case C-484/93, Svensson and Gustavsson, [1995] ECR I-3955, para. 15; but see also Case C-118/96, Safir, [1998] ECR I-1897, and
the discussion in the Opinion of A.G. Tesauro, 23 September 1997, Case C-118/96, Safir, [1998] ECR I-1897, paras. 23, 27 et seq.
For a recent this discussion see, e.g., Opinion of A.G. Jacobs, 21 March 2002, Case C-136/00, Danner, [2002] ECR I-8147, paras. 36-41, Opinion of A.G. Stix-Hackl, 10 April 2003, Case C-42/02, Lindman, [2003] ECR I-13519, paras. 63-83, and Opinion of
A.G. Stix-Hackl, 1 June 2006, Case C-150/04, Commission v. Denmark, [2007] ECR I-1163, paras. 42-47.
285 Bennett, “Nondiscrimination in International Tax Law: A Concept in Search of a Principle”, 59 Tax Law Review (2006),
439, 443.
286 See, e.g., Case C-105/07, Lammers & Van Cleeff, [2008] ECR ___, paras. 12-14.
287 See also Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, paras. 5354, pointing out that the UK’s limitation of group relief to domestic situations constitutes is “an ‘exit restriction’ which is characterised by unfavourable treatment of companies wishing to establish subsidiaries in other Member States. […] Since the measure at
issue is well established as constituting an obstacle, it is of no use inquiring […], whether non-resident subsidiaries, on distribution
of part of their profits to the parent company, are in regard to it in a situation comparable to that of subsidiaries established in the
United Kingdom.”
288 For purposes of this chart we disregard cases in which the ECJ has either found the fundamental freedoms to be inapplicable or did not regard the domestic measure as discriminatory. Hence, out of the total of 91 decisions, we disreagard 8 cases on direct
or indirect nationality discrimination (i.e., Case C-112/91, Werner, [1993] ECR I-429; Case C-250/95, Futura, [1997] ECR I-2471
(on loss utilization); Case C-391/97, Gschwind, [1999] ECR I-5451; Case C-403/03, Schempp, [2005] ECR I-6421; Case C-376/03,
D, [2005] ECR I-5821; Case 512/03, Blanckaert, [2005] ECR I-7685; Case C-374/04, ACT Group Litigation, [2006] ECR I-11673;
Case C-492/04, Lasertec, [2007] ECR I-3775) and 7 cases on “exit restrictions” (i.e., Case 81/87, Daily Mail, [1988] ECR 5483;
Case C-336/96, Gilly, [1998] ECR I-2793; Case C-513/04, Kerckhaert and Morres, [2006] ECR I-10967; Case C-102/05, A and B,
[2007] ECR I-3871; Case C-157/05, Holböck, [2007] ECR I-4051; Case C-415/06, Stahlwerk Ergste Westig GmbH, [2007] ECR
___; Case C-298/05, Columbus Container Services, [2007] ECR ___).
289 See for this terminology Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I10837, para. 53.
290 Case C-175/88, Biehl, [1990] ECR I-1779.
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against nationals of other Member States, since it was often such persons who left the country or took up residence there in the course of the year.291 Thus the ECJ found the Luxembourg legislation to provide for an unjustified covert discrimination. Still the question arises how the Court would have solved the case if it had concerned not a German but a Luxembourg national. It seems quite clear that the reasoning adopted by the Court,
based on covert discrimination, would not have been adequate: The Luxembourgian would have been treated
like a Luxembourgian. Yet, the exercise of the right to freedom of movement would have been subjected to the
same unfavorable conditions in both constellations.292
This dilemma has caused to Court to extend the concept of covert discrimination also to situations of unfavorable treatment of non-resident nationals by their own Member States.293 While the general application of the
reverse variation of the logic behind covert discrimination (namely that non-residents of one Member State are
“typically” nationals of another Member State) was assumed to be outruled by the 1993 Werner decision,294 the
1996 Asscher case295 covered exactly such a situation where a non-resident national was discriminated against.
The ECJ, though in the form of a rather artificial reasoning, obviously moved against discrimination of nonresidents engaging in cross-border economic activities, even if such discrimination is caused by their country of
nationality – a remarkable extension of Art. 12(1) EC.296 In this respect, the ECJ argued that Art. 43 EC
“cannot be interpreted in such a way as to exclude a Member State’s own nationals from the benefit of Community law
where by reason of their conduct they are, with regard to their Member State of origin, in a situation which may be regarded as equivalent to that of any other person enjoying the rights and liberties guaranteed by the Treaty.”297
Despite such this artificial argumentation under the heading of covert discrimination, the ECJ in substance
moved to a view where a disadvantageous treatment based on the exercise of a fundamental freedom does not
cease to be a discrimination merely because it is neither overtly nor covertly discriminatory on grounds of nationality.298
This substantive shift in analysis was, however, preceded by the Court’s case law in the non-tax area.
There, the ECJ had found rather early that unjustified “discrimination on grounds on migration”299 is contrary to
EC law and prohibited accordingly.300 Those cases mainly concerned situations where a migrant worker returned
to his country of origin, after having worked in another Member State,301 or where he works simultaneously in
more than one Member State.302 Cases such as Stanton, Wolf, and Masgio303 demonstrated that the freedoms of
movement aim at facilitating the pursuit by Community citizens of occupational activities of all kinds throughout
the Community, and that they precludes all “measures which might place Community citizens at a disadvantage
when they wish to pursue an economic activity in the territory of another Member State.”304 Likewise, Scholz
and Terhoeve305 made it clear that any Community national who, “irrespective of his place of residence and his
nationality, has exercised the right to freedom of movement for workers and who has been employed in another
Member State,” falls within the scope of Art. 39 EC.306 This development took place in the realm of all freedoms, including the freedom to provide services307 and the freedom of establishment.308 The common denomina291 For criticism of the Court’s analysis see, e.g., Ghosh, Principles of the Internal Market and Direct Taxation (Oxford Key
Haven Publications, 2007), 134-135.
292 Opinion of AG Lenz, 20 September 1995, Case C-415/93, Bosman, [1995] ECR I-4921, para. 180; see also Knobbe-Keuk,
“Niederlassungsfreiheit: Diskriminierungs- oder Beschränkungsverbot?”, 42 Der Betrieb (1990), 2573, 2576, and Ghosh, Principles
of the Internal Market and Direct Taxation (Oxford Key Haven Publications, 2007), 134-135.
293 See, e.g., Case C-107/94, Asscher, [1996] ECR I-3089.
294 See Case C-112/91, Werner, [1993] ECR I-429.
295 Case C-107/94, Asscher, [1996] ECR I-3089. This type of restriction is sometimes also qualified as “reverse discrimination,” since the taxing state imposes a more burdensome tax on its own non-resident nationals; see Hinnekens, “The search for the
framework conditions of the fundamental EC Treaty principles as applied by the European Court to Member States’ direct taxation”,
11 EC Tax Review (2002), 112, 114; see also Farmer, “The Court’s case law on taxation: a castle built on shifting sands?”, 12 EC
Tax Review (2003), 75, 77.
296 See for this Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 192 et seq.
297 Case C-107/94, Asscher, [1996] ECR I-3089, para. 32.
298 See for this extensively Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 200 et
seq.; see also Farmer, “The Court’s case law on taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75, 77.
299 For this terminology see the Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493,
pars. 21; see also Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 212 et seq.
300 See also Oliveira, “Workers and Other Persons: Step-by-step from Movement to Citizenship”, 39 Common Market Law Review (2002), 77, 91 et seq.
301 See, e.g., Case C-370/90, Singh, [1992] ECR I-4265 (concerning the right of residence of a migrant worker’s spouse); Case
C-18/95, Terhoeve, [1999] ECR I-345.
302 See, e.g., Case 143/87, Stanton, [1988] ECR 3877; Cases 154/87 and 155/87, Wolf, [1988] ECR 3897.
303 Case 143/87, Stanton, [1988] ECR 3877; Cases 154/87 and 155/87, Wolf, [1988] ECR 3897; Case C-10/90, Masgio, [1991]
ECR I-1119; see for this also Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 184 et seq.
304 Case 143/87, Stanton, [1988] ECR 3877, para. 13; Cases 154/87 and 155/87, Wolf, [1988] ECR 3897, para. 13; see also,
e.g., Case C-370/90, Singh, [1992] ECR I-4265, para. 16; Case C-18/95, Terhoeve, [1999] ECR I-345, para. 37.
305 Case C-419/92, Scholz, [1994] ECR I-505; Case C-18/95, Terhoeve, [1999] ECR I-345.
306 Case C-419/92, Scholz, [1994] ECR I-505, paras. 8 et seq.; Case C-18/95, Terhoeve, [1999] ECR I-345, para. 27.
307 Here, the ECJ explicitly states that Art. 49 EC “precludes the application of any national rules which have the effect of making the provision of services between Member States more difficult than the provision of services purely within one Member State.”
See, e.g., Case C-49/89, Corsica Ferries France, [1989] ECR 4441, paras. 7 and 16; Case C-118/96, Safir, [1998] ECR I-1897,
para. 23; Case C-17/00, De Coster, [2001] ECR I-9445, para. 30; Case C-136/00, Danner, [2002] ECR I-8147, para. 29; Case C422/01, Ramstedt, [2003] ECR I-6817, para. 26.
308 See, inter alia, Case C-436/00, X and Y, [2002] ECR I-10829, para. 27; Case C-168/01, Bosal, [2003] ECR I-9409, para. 27; Case C-141/99, AMID, [2000] ECR I-11619, para. 23; Case C-9/02, Hughes de Lasteyrie du Saillant, [2004] ECR I-2409,
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tor of this non-tax case law is that the market participant who exercises a Treaty freedom wants to be compared
to a market participant who engages in an activity or transaction in a purely domestic setting and not be treated
less favorable than the latter. Clearly, these issues merge with the old concepts of overt or covert discrimination
on grounds of nationality when, for example, the cause for this disadvantage is a national rule which differentiates based on nationality, residence, or establishment of the economic operator, because of the presumption that
foreign market participants are principally affected thereby. 309 However, such assumption does not apply if the
country of origin employs such differentiated treatment,310 so that the two categories are more readily distinguishable. This approach, however, demonstrates that overt and covert discrimination on grounds of nationality
are to be viewed as mere subsets of a broad concept of discrimination inherent in the fundamental freedoms.311
Hence, the concept of “discrimination” (or “discriminatory restrictions”) is to be understood not only to include
overt and covert discrimination on grounds of nationality, but rather any disadvantageous treatment of crossborder as compared to domestic transactions.312
The development in the non-tax area and the gradual shift to a broad concept of prohibition of both “import” and “export” restrictions has, of course, also influenced the case law in the area of direct taxation. Although much of the case law on direct taxation is concerned with non-residents who are nationals of another
Member State, that is with “import situations” in a broad sense, “exit restrictions” can – from the perspective of
the State of origin – not be approached in a convincing manner by the traditional notion of overt or covert discrimination on grounds of nationality.313 Even though an approach based on non-discrimination on the ground of
nationality may have appeared more respectful of the integrity of national tax systems and the principles already
found in international tax conventions, it was not regarded as exclusive:314 It is neither sufficient to safeguard all
the objectives comprised in the establishment of an Internal Market, nor would it secure for the citizens of the
Union all the benefits inherent in the exercise of the freedoms of movement.315
First hints to a broader approach can already be found in the 1988 Daily Mail case, where the Court noted
that the provisions on freedom of establishment are “directed mainly to ensuring that foreign nationals and companies are treated in the host Member State in the same way as nationals of that State”, they also “prohibit the
Member State of origin from hindering the establishment in another Member State of one of its nationals or of a
company.”316 Starting with ICI317 in 1998, this perspective informed the subsequent case law of the Court on exit
restrictions under all freedoms,318 and it clearly demonstrates that the EC Treaty may also serve to protect taxpayers from measures adopted by their own “home” Member State which restrict the exercise of Treaty freedoms.319 The sensibility of this approach becomes instantly visible in the case of an exit-tax that imposes tax on
unrealized hidden reserves if the taxpayer exercises one of the freedoms and leaves the taxing jurisdiction.320
Such a situation can hardly be subsumed under the traditional pattern of overt or covert discrimination, since
such rule applies without regard to citizenship and covers only residents of the exit State.321 It seems, however,
clear that an exit tax is basically only triggered when and because the taxpayer exercises either his freedom of
movement as a worker or his freedom of establishment, while no tax would be due if the taxpayer moved within
in his Member State:
para. 45; and in regard to free movement of capital, Case C-35/98, Verkooijen, [2000] ECR I-4071, para. 34; Case C-319/02, Manninen, [2004] ECR I-7477, para. 22; and Case C-315/02, Lenz, [2004] ECR I-7063, para. 20.
309 See Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493, pars. 21; see also, e.g., Case
96/85, Commission v. France, [1986] ECR 1475 (Member States cannot make the practice of dentistry in that Member State conditional, for dentists established in another Member State, upon their removal from the register in that other Member State).
310 See, e.g., Case 143/87, Stanton, [1988] ECR 3877, para. 9.
311 See Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 246.
312 See for this approach, with a multitude of further references, Cordewener, Europäische Grundfreiheiten und nationales
Steuerrecht (O. Schmidt, 2002), 200 et seq., 243 et seq.
313 Opinion of A.G. Lenz, 20 September 1995, C-415/93, Bosman, [1995] ECR I-4921, para. 189; see also Farmer, “The
Court’s case law on taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75, 77; Lyal, “Non-discrimination and
direct tax in Community law”, 12 EC Tax Review (2003), 68, 71.
314 For a recent account Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I10837, paras. 29-30.
315 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 34 (“transnational dimension of European citizenship”).
316 Case 81/87, Daily Mail, [1988] ECR 5483, para. 16.
317 Case C-264/96, ICI, [1998] ECR I-4695, para. 21.
318 See, e.g., Case C-294/97, Eurowings, [1999] ECR I-7447, para. 33; Case C-200/98, X AB and Y AB, [1999] ECR I-8261,
paras. 26-28; Case C-251/98, Baars, [2000] ECR I-2787, para. 28; Case C-141/99, AMID, [2000] ECR I-11619, paras. 20-21; Case
C-431/01, Mertens, [2002] ECR I-7073, para. 26; Case C-385/00, De Groot, [2002] ECR I-11819, paras. 76-80; Case C-168/01,
Bosal, [2003] ECR I-9409, para. 27; Case C-446/03, Marks & Spencer, [2005] ECR I-10837, paras. 31 and 34; Case C-471/04,
Keller Holding, [2006] ECR I-2107, para. 30; Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, para. 42.
319 See, e.g., Case C-264/96, ICI, [1998] ECR I-4695, para. 21; Case C-200/98, X AB and Y AB, [1999] ECR I-8261, para. 26;
Case C-251/98, Baars, [2000] ECR I-2787, para. 28; Case C-141/99, AMID, [2000] ECR I-11619, para. 21; Case C-431/01, Mertens, [2002] ECR I-7073, para. 27; Case C-385/00, De Groot, [2002] ECR I-11819, paras. 76 et seq.; Case C-9/02, Hughes de Lasteyrie du Saillant, [2004] ECR I-2409, para. 42; see also Lyal, “Non-discrimination and direct tax in Community law”, 12 EC Tax
Review (2003), 68, 71; Farmer, “The Court’s case law on taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75,
77.
320 Thus, “exit taxes” may be seen as the peak of a set of rules which treat taxpayers less favorably because they engage in
cross-border activities; see for the latter constellation in general, e.g., Case C-251/98, Baars, [2000] ECR I-2787; Case C-141/99,
AMID, [2000] ECR I-11619.
321 One could, however, think about the argument that usually non-nationals leave a country to return to their home State; see
Case 175/88, Biehl, [1990] ECR I-1779, para. 14.
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A moving taxpayer “becomes liable, simply by reason of such a transfer, to tax on income which has not yet been realised and which he therefore does not have, whereas, if he remained in France, increases in value would become taxable
only when, and to the extent that, they were actually realised. That difference in treatment concerning the taxation of increases in value, which is capable of having considerable repercussions on the assets of a taxpayer wishing to transfer
his tax residence outside France, is likely to discourage a taxpayer from carrying out such a transfer.”322
Based on the EC Treaty’s terminology323 and the ECJ’s rather vague terminology (e.g., “less attractive”324,
“dissuasive effect”325 etc.), the assessment of such “exit restrictions” by a taxpayer’s home State is frequently
denoted as a “restriction-based approach”. Despite this terminological ambiguity it seems nevertheless clear that
the approach chosen is still about a relative assessment of cross-border as compared to domestic situations, while
“real” (non-discriminatory) restrictions require an absolute criterion and serve to achieve access to a foreign
market.326 Consequently, the ECJ has moved to extend the principle of non-discrimination from a prohibition of
discrimination towards foreign nationals or residents, based on an ad personam comparison in inbound situations, to a broad concept of prohibition of disadvantageous treatment of cross-border economic activities also of
a State’s own nationals and residents327 as compared with hypothetical purely domestic activities, based on an ad
rem comparison in outbound situations.328 It is the disadvantage caused by the residence State’s measures that is
liable to discourage its own nationals to exercise a freedom.329 As Advocate General Poiares Maduro noted,
“it is to such a restriction on Community trade which the Court is alluding when it seeks to pursue ‘all measures prohibiting, impeding or rendering less attractive the exercise of the freedoms of movement’.”330 And while “not every restriction on economic or commercial freedom is a restriction on the exercise of the freedoms of movement,” those restrictions scrutinized by the Court always entail “a kind of ‘discrimination’ owing to Member States’ elaborating measures
without taking account of their effects on transnational situations.”331
Hence, the “restriction-based approach” in the area of direct taxation is structurally a discrimination analysis that (also) requires a comparison between purely domestic and cross-border situations: Member States
“may not apply to their nationals taking advantage of the freedoms of movement given by Community law, a less favorable treatment than that they would have received if they not taken advantage of those freedoms. In taxation matters,
the Member States are therefore prohibited from applying to taxpayers who go to undertake an economic activity in another Member State, either as salaried employees or on their own account, to provide services there or otherwise within
the freedom of establishment, treatment which is less favourable than they would have received had they undertaken
their activities within the national territory.”332
The non-discrimination rule is therefore not absent in outbound situations,333 although it is no longer linked
to the criterion of nationality but rather based on the exercise of a freedom.334 The same discrimination test is
employed in cases where the freedom of capital movement is at issue, although the ECJ will scrutinize unequal
treatment at the level of justification, asking whether situations are objectively comparable or not.335 A national
measure is therefore suspect if
322 See Case C-9/02, de Lasteyrie du Saillant, [2004] ECR I-2409, para. 46; see also Case C-470/04, N, [2006] ECR I-7409, para. 35, and Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957.
323 Under Art. 39 “[f]reedom of movement for workers shall be secured within the Community”, under Art. 43 EC “restrictions
on the freedom of establishment […] shall be prohibited”, under Art. 49 EC “restrictions on freedom to provide services within the
Community shall be prohibited”, and under Art. 56 EC “all restrictions on the movement of capital between Member States […]
shall be prohibited”.
324 See, e.g., Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 42; Case C-324/00, Lankhorst-Hohorst, [2002] ECR I11779, para. 32.
325 See, e.g., Case C-136/00, Danner, [2002] ECR I-8147, para. 31; Case C-9/02, de Lasteyrie du Saillant, [2004] ECR I-2409,
para. 45.
326 Infra II.D.
327 Case C-385/00, De Groot, [2002] ECR I-11819, paras. 77-80.
328 Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 200 et seq. and 824 et seq.;
Rädler, “Most-favoured nation principle and internal market – some afterthoughts to Case D.”, in van Thiel (Ed.), The European
Union’s prohibition of discrimination, most-favoured-nation treatment and tax treaties: opinions and materials (CFE Brochure on
European Taxation, 2006), 64, 64-65; see also the Opinion of A.G. Kokott, 12 September 2006, Case C-231/05, Oy AA, [2007] ECR
I-6373, para. 27.
329 Case C-385/00, De Groot, [2002] ECR I-11819, para. 84.
330 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 40.
331 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 40.
332 Opinion of A.G. Léger, 30 June 2005, Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957, para. 71 with
note 34; see also Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957, para. 46.
333 See instructively Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I11673, para. 58. See also Englisch, Dividendenbesteuerung (O. Schmidt, 2005), 232; Englisch, “The European Treaties’ Implications for Direct Taxes”, 33 Intertax (2005), 310, 314; Cordewener, “The prohibitions of discrimination and restriction within the
framework of the fully integrated market”, in Vanistendael (Ed.), EU Freedoms and Taxation, EATLP Congress 2004 (IBFD, 2006),
1, 15 et seq. This is also consistent with the ECJ’s case law in the area of indirect taxation, where the ECJ has interpreted Art. 90(1)
EC as to also prohibit discrimination of exports; see Case 51/74, Van de Hulst, [1975] ECR 80, para. 35; Case 142/77, Statens Kontrol, [1978] ECR 1543, para. 21/27, and instructively the Opinion of A.G. Capotorti, 6 June 1978, Case 142/77, Statens Kontrol,
[1978] ECR 1543, paras. 4 et seq.
334 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 28, referring
to Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493, pars. 21.
335 For an outbound investment and home State discrimination see Case C-319/02, Manninen, [2004] ECR I-7477, paras. 2632; for inbound investments and source State discrimination see, e.g., Case C-265/04, Bouanich, [2006] ECR I-923, paras. 39-41,
and Case C-386/04, Stauffer, [2006] ECR I-8203, paras. 33-42
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“it imposes a specific disadvantage on operators desirous of moving or establishing themselves within the Community.
It is therefore a matter of pursuing discrimination against Community nationals wishing to assert their rights derived
from the freedoms of movement.”336
Such “exit restrictions” based on discriminatory treatment of outbound activities or investments by a taxpayer’s home State have resulted in a vast and diverse body of case law. Under this approach, the ECJ has already scrutinized the denial of tax benefits (including taxation of capital gains, or the avoidance or mitigation of
economic double taxation) for shareholdings in non-resident companies;337 limitations of loss utilization (either
of domestic losses338 or of foreign losses incurred in subsidiaries339 or permanent establishments340), the denial of
benefits, such as deductions for write-downs341 or interest payments for acquisition costs;342 the denial of personal and family tax allowances in relation to foreign source income;343 the non-deductibility of research expenses incurred abroad;344 the denial of benefits for foreign investments;345 the application of anti-abuse provisions only to cross-border situations;346 and exit taxation regimes.347
Graph 5: The ECJ’s case law on the relation between the fundamental freedoms and Member States’ direct tax systems is based
on a broadly understood discrimination analysis. A majority (46 cases or roughly 60%) of the 76 348 decisions as of 1 January 2008
concerned direct or indirect discrimination (covertly) based on nationality. However, starting in 1998 with ICI,349 a considerable
number of 30 cases (roughly 40%) dealt with “exit restrictions” where the ECJ examined whether a taxpayer actively exercising
the freedoms (e.g., by establishing a subsidiary, investing or working abroad etc) is put in a disadvantageous position by his
residence State as compared with a similar situation in a purely domestic setting.
Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 28.
See, e.g., Case C-251/98, Baars, [2000] ECR I-2787 (dividends received exemption); Case C-35/98, Verkooijen, [2000]
ECR I-4071 (tax free allowance for dividends); Case C-268/03, De Baeck, [2004] ECR I-5961 (tax only on sale of shares in a foreign company); Case C-315/02, Lenz, [2004] ECR I-7063 (schedular system for dividend taxation); Case C-242/03, Weidert and
Paulus, [2004] ECR I-7379 (tax free amount for the acquisition of shares in domestic companies); Case C-319/02, Manninen, [2004]
ECR I-7477, Case C-446/04, FII Group Litigation, [2006] ECR I-11753, and Case C-292/04, Meilicke, [2007] ECR I-1835 (imputation systems); C-219/03, Commission v. Spain (tax regime for capital gains which is less favourable to shares quoted in markets
other than Spanish regulated markets); Case C-513/04, Kerckhaert and Morres, [2006] ECR I-10967 (deduction system for foreign
withholding tax); Case C-101/05, A, [2007] ECR ___ (schedular system in a third-country situation); see also Case C-334/02, Commission v. France, [2004] ECR I-2229 (beneficial tax rate only on domestic on interest income).
338 Case C-141/99, AMID, [2000] ECR I-11619, and Case C-431/01, Mertens, [2002] ECR I-7073 (limitation of utilization of
domestic losses because of exempt foreign profits).
339 Case C-446/03, Marks & Spencer, [2005] ECR I-10837 (group relief); see also Case C-231/05, Oy AA, [2007] ECR I-6373
(group contributions); see further Case C-264/96, ICI, [1998] ECR I-4695 (consortium relief was denied unless the business of the
holding company owned by the consortium consisted wholly or mainly in holding shares of companies resident in the UK), and
Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] ECR I-1727 (preferential option to a group relief was only
available where parent and subsidiary were residents).
340 See Case C-293/06, Deutsche Shell GmbH, [2008] ECR ___ (currency losses); Case C-414/06, Lidl Belgium, [2008] ECR
___ (losses in an “exempt” foreign permanent establishment).
341 Case C-347/04, Rewe Zentralfinanz, [2007] ECR I-2647 (write-down of a holding in a foreign subsidiary).
342 Case C-168/01, Bosal, [2003] ECR I-9409, and Case C-471/04, Keller Holding, [2006] ECR I-2107 (non-deductibility of
financing costs for the acquisition of a foreign subsidiary).
343 Case C-385/00, De Groot, [2002] ECR I-11819 (pro-rata denial of a tax allowance based on the source of income).
344 Case C-254/97, Société Baxter, [1999] ECR I-4809 (nondeductibility of research expenses incurred in another Member
State from branch profits).
345 Case C-39/04, Laboratoires Fournier, [2005] ECR I-2057 (tax benefit only for domestic research); Case C-345/05, Commission v. Portugal, [2006] ECR I-10633, and Case C-104/06, Commission v. Sweden, [2007] ECR I-677 (tax benefits only for
domestically reinvested capital gains).
346 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995 (CFC rules); Case C-298/05, Columbus Container Services,
[2007] ECR ___ (switch-over clause); see also Case C-324/00, Lankhorst-Hohorst, [2002] ECR I-11779, and Case C-524/04, Thin
Cap Group Litigation, [2007] ECR I-2107 (thin capitalization rules).
347 Case C-436/00, X and Y, [2002] ECR I-10829 (unfavorable tax treatment of the transferor based on the residence of the
transferee); Case C-9/02, de Lasteyrie du Saillant, [2004] ECR I-2409, and Case C-470/04, N, [2006] ECR I-7409 (exit tax on substantial shareholdings); see also Case 81/87, Daily Mail, [1988] ECR 5483 (requirement of the consent of the UK tax authorities for
a company to give up residency in the UK); see also Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957 (deemed residency of emigrants for Dutch inheritance tax purposes).
348 See supra note 283.
349 Case C-264/96, ICI, [1998] ECR I-4695; see, however, already Case 81/87, Daily Mail, [1988] ECR 5483.
336
337
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3. The Concept of Comparability as the Cornerstone of the ECJ’s Case Law
a) “Inbound” Restrictions and the Comparability of Residents and Non-Residents
From a European perspective, disadvantageous direct taxation of foreign investments or activities in a
Member State usually puts a focus on the concept of covert discrimination. This form of discrimination can arise
through an unjustified disadvantageous difference in treatment of non-residents by the Member State of source
(discriminatory market access restriction by the host Member State). In evaluating whether such a discriminatory
access restriction exists, the comparability of situations is a main cornerstone of the ECJ’s case law.350 It requires
the finding of the relevant subject or object of comparison, the tertium comparationis, and basically imposes an
obligation on the Member State of source to treat all non-residents in a comparable way to residents, insofar as
these non-residents fall within their tax jurisdiction and are in an objectively similar or comparable situation, i.e.,
subject to the difference in the extent of their tax jurisdiction over residents and non-residents.351 In an Internal
Market the concept of comparability must be understood in an economic sense as covering all products and production factors that stand in a competitive relationship to each other or are substituable from the user’s point of
view. Obviously assuming that similarity generally exists between competing market participants, the ECJ has
already accepted comparability of residents and non-residents who have a presence in the source State in the
form of a permanent establishment,352 a comparison between resident and non-resident (frontier) workers,353
even if the non-resident has the nationality of the source state,354 as well as a comparison between residents and
non-residents who earn their income directly from the source State without carrying out an employment or having a permanent establishment there.355
Hence, beginning with the famous Avoir Fiscal case,356 the ECJ construed the freedom of establishment as
meaning that tax benefits accorded to resident companies must be accorded in the same way to branches (permanent establishments) of non-resident companies if these branches are otherwise subject to corporate tax in the
same way as resident companies,357 and irrespective of the differences between branches and subsidiaries in
other areas of law. Thus, as for example in Avoir Fiscal, branches of non-resident companies are entitled to the
same imputation credits for dividends received if they are taxed on these dividends in the same way as resident
companies,358 irrespective of other differences between branches and subsidiaries.359 In Saint-Gobain360 the ECJ
extended its case law on permanent establishments to the benefits of treaty relief provisions.361 Unlike in international tax law, under the freedom of establishment a Member State has to grant benefits accorded to resident
companies including those granted pursuant to tax treaties to permanent establishments of non-resident companies as well, thereby viewing a branch of a non-resident as a virtual resident.362 Although Saint-Gobain concerned treaty relief for dividends foreseen in a third-country agreement, there can be little doubt that the same
reasoning also applies to intra-EC treaties as well as to interest and royalty payments363 and generally all types of
350 See e.g. Case C-279/93, Schumacker, [1995] ECR I-225, para. 30; Case C-80/94, Wielockx, [1995] ECR I-2493, para. 17;
Case C-107/94, Asscher, [1996] ECR I-3089, para. 40; Case C-311/97, Royal Bank of Scotland, [1999] ECR I-2651, paras. 26 et
seq.; Case C-391/97, Gschwind, [1999] ECR I-5451, para. 21; Case C-431/01, Mertens, [2002] ECR I-7073, para. 32.
351 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 66-73.
352 See, e.g., Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273; Case C-330/91, Commerzbank, [1993]
ECR I-4017; Case C-250/95, Futura, [1997] ECR I-2471; Case C-311/97, Royal Bank of Scotland, [1999] ECR I-2651; Case C307/97, Saint-Gobain, [1999] ECR I-6161.
353 Case C-279/93, Schumacker, [1995] ECR I-225; Case C-80/94, Wielockx, [1995] ECR I-2493; Case C-107/94, Asscher,
[1996] ECR I-3089; Case C-336/96, Gilly, [1998] ECR I-2793; Case C-391/97, Gschwind, [1999] ECR I-5451; see also Case C234/01, Gerritse, [2003] ECR I-5933.
354 Case C-107/94, Asscher, [1996] ECR I-3089; Case C-336/96, Gilly, [1998] ECR I-2793.
355 See, e.g., Case C-80/94, Wielockx, [1995] ECR I-2493; Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst,
[2001] ECR I-1727.
356 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273.
357 See, e.g., Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 19 et seq.; see also Case C-311/97,
Royal Bank of Scotland, [1999] ECR I-2651, paras. 29 et seq. (concerning tax-rate discrimination); Case C-307/97, Saint-Gobain,
[1999] ECR I-6161, paras. 48 et seq. (concerning tax treaty benefits); Case C-330/91, Commerzbank, [1993] ECR I-4017 (branch of
non-resident company entitled to same interest on repayment of overpaid taxes); Case C-250/95, Futura, [1997] ECR I-2471 (branch
of non-resident company entitled to same loss carry-over possibilities).
358 See Kostense, “The Saint-Gobain case and the application of tax treaties. Evolution or revolution?”, 9 EC Tax Review
(2000), 220 et seq.; Offermanns and Romano, “Treaty Benefits for Permanent Establishments: The Saint-Gobain Case”, 40 European Taxation (2000), 180, 188; Martín Jiménez, García Prats and Calderón Carrero, “Triangular Cases, Tax Treaties and EC Law:
The Saint-Gobain Decision of the ECJ”, 55 Bulletin For International Fiscal Documentation (2001), 241, 243 et seq.
359 For criticism see, e g., Wattel, “Corporate tax jurisdiction in the EU with respect to branches and subsidiaries; dislocation
distinguished from discrimination and disparity; a plea for territoriality”, 12 EC Tax Review (2003), 194.
360 Case C-307/97, Saint-Gobain, [1999] ECR I-6161.
361 Case 235/87, Matteucci, [1988] ECR 5589; Case C-55/00, Gottardo, [2002] ECR I-413; Case C-467/98, Commission v.
Denmark (“Open Skies”), [2002] ECR I-9519.
362 Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 59; for comments, see Jann and Toifl, “EuGH entscheidet über
Abkommensberechtigung von Betriebstätten”, 9 Steuer & Wirtschaft International (1999) 488, 492; Kostense, “The Saint-Gobain
case and the application of tax treaties. Evolution or revolution?” 9 EC Tax Review (2000), 220, 222 et seq.; critically Avery Jones,
“Flows of capital between the EU and third countries and the consequences of disharmony in European international tax law”, 7 EC
Tax Review (1998), 95, 103.
363 In this sense Jirousek, “Der Fall Saint-Gobain im Lichte der österreichischen DBA-Anwendungspraxis”, 52 Österreichische
Steuerzeitung (1999), 606 et seq.; Jann and Toifl, “EuGH entscheidet über Abkommensberechtigung von Betriebstätten”, 9 Steuer &
Wirtschaft International (1999), 488, 493; Kostense, “The Saint-Gobain case and the application of tax treaties. Evolution or revolution?”, 9 EC Tax Review (2000), 220, 223 et seq.; Martín Jiménez, García Prats and Calderón Carrero, “Triangular Cases, Tax Treaties and EC Law: The Saint-Gobain Decision of the ECJ”, 55 Bulletin For International Fiscal Documentation (2001), 241 et seq.;
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income attributed to the branch.364 It remains to be seen inhowfar this case law will lead to a far-reaching ”fiction
of independence” for permanent establishments, also in cases of intra-company dealings.365 What is clear, however, is that insofar as a source State exercises tax jurisdiction over a branch of a non-resident company, it cannot
impose a higher corporate tax rate on this branch than applied to (distributing) resident subsidiaries.366
In the area of individual income taxation this perspective led the Court to the conclusion that source States
may not distinguish between residents and non-residents in the case of income-related deductions from individual income tax. However, this concerns deductions that are “directly linked”367 to the activity that generated the
taxable income in the source State (e.g., business expenses) have to be granted in a non-discriminatory fashion,368 as this direct link between expenses and the activity that generated the taxable income in the source State
places residents and non-residents “in a comparable situation in that respect.”369 However, in cases where a taxpayer’s “ability to pay” is the decisive factor for the question of comparability, such assessment can only be
made in an overall perspective, considering worldwide income.370 A good example of this approach is the Schumacker line of case law,371 concerning personal and family-related benefits.372 Based on the heavily criticized373
notion that “the situations of residents and of non-residents are generally not comparable,” because non-residents
are generally taxed only on the income sourced in the host State and it is easer for their residence State to assess
a taxpayer’s personal ability to pay tax,374 under Schumacker375 source States may in principle refuse to grant
non-residents personal and family-related benefits granted to residents. As in international tax law,376 it is generally for the home State to take personal and family circumstances,377 including a basic tax-free allowance
(Grundfreibetrag),378 fully into account for individual income taxation and wealth taxation.379 The ECJ has,
however, laid down an exception to this principle: A source State may be required to act as a home State in taking personal circumstances into account, “where the non-resident receives no significant income in the state of
his residence and obtains the major part of his taxable income [90%]380 from an activity performed in the state of
employment, with the result that the state of his residence is not in a position to grant him the benefits resulting
from the taking into account of his personal and family circumstances.”381 The reason for this exception is to
avoid situations where, in cases where a taxpayer earns insufficient income in his home State for it to take ac-
Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 689; Zanotti, “Taxation of InterCompany Dividends in the Presence of a PE: The Impact of the EC Fundamental Freedoms”, 44 European Taxation (2004), 493,
497; see also Oliver, “Entitlement of a Permanent Establishment to Third State Treaty Benefits”, 45 British Tax Review (2000), 174,
181 (interest payments).
364. See European Commission, EC Law and Tax Treaties, DOC(05)2306/B (9 June 2005), para. 27; in this sense also Kemmeren, Principle of Origin in Tax Conventions (Dongen, 2001), 192.
365 For this approach see Hintsanen, “Attribution of Income to Permanent Establishments under EC Law”, 43 European Taxation (2003), 114 et seq.; in this direction also European Commission, EC Law and Tax Treaties, DOC(05)2306/B (9 June 2005),
Appendix A, 6. For recent developments on the level of the OECD see the “Report on the Attribution of Profits to Permanent Establishments” (Dec. 2006) and the “Discussion draft on a revised Commentary on Article 7 (Business Profits) of the OECD Model Tax
Convention” (Apr. 2007), both available at www.oecd.org.
366 Case C-311/97, Royal Bank of Scotland, [1999] ECR I-2651, and Case C-253/03, CLT-UFA, [2006] ECR I-1831; see also
Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 67, and J. Malherbe, Ph. Malherbe, Richelle and Traversa, The Impact of the Rulings of the European Court of Justice in the Area of Direct Taxation (Policy Department of the European Parliament, March 2008), 27.
367 Case C-290/04, Scorpio, [2006] ECR I-9461; Case C-345/04, Centro Equestre, [2007] ECR I-1425.
368 Case C-234/01, Gerritse, [2003] ECR I-5933; Case C-290/04, Scorpio, [2006] ECR I-9461.
369 Case C-234/01, Gerritse, [2003] ECR I-5933, para. 27.
370 For a detailed discussion of an “overall approach” see infra II.B.3.c).
371 Case C-279/93, Schumacker, [1995] ECR I-225; see also, e.g., Case C-80/94, Wielockx, [1995] ECR I-2493; Case C107/94, Asscher, [1996] ECR I-3089; Case C-336/96, Gilly, [1998] ECR I-2793; Case C-391/97, Gschwind, [1999] ECR I-5451;
Case C-87/99, Zurstrassen, [2000] ECR I-3337; Case C-385/00, De Groot, [2002] ECR I-11819.
372 For critical remarks, see Englisch, Dividendenbesteuerung (O. Schmidt, 2005), 240.
373 See, e.g., Wattel, “The EC Court’s Attempts to Reconcile the Treaty Freedoms with International Tax Law”, 33 Common
Market Law Review (1996), 223, 229-231, and Terra and Wattel, European Tax Law (Kluwer, 4th edition 2005), 83-105.
374 Case C-279/93, Schumacker, [1995] ECR I-225, paras. 31 and 32; Case C-391/97, Gschwind, [1999] ECR I-5451, para. 22;
Case C-87/99, Zurstrassen, [2000] ECR I-3337, para 21; Case C-234/01, Gerritse, [2003] ECR I-5933, para. 43.
375 Case C-279/93, Schumacker, [1995] ECR I-225; see also Case C-80/94, Wielockx, [1995] ECR I-2493; Case C-107/94, Asscher, [1996] ECR I-3089; Case C-336/96, Gilly, [1998] ECR I-2793; Case C-391/97, Gschwind, [1999] ECR I-5451; Case C-87/99,
Zurstrassen, [2000] ECR I-3337; Case C-169/03, Wallentin, [2004] ECR I-6443; see also Case C-376/03, D, [2005] ECR I-5821,
para. 26 et seq. (extension of the Schumacker principles to wealth taxation).
376 Case C-234/01, Gerritse, [2003] ECR I-5933, para. 45: “Moreover, for tax purposes, residence is the connecting factor on
which international tax law, in particular the Model Convention of the Organisation for Economic Cooperation and Development
(OECD) […] is as a rule founded for the purpose of allocating powers of taxation between States in situations involving extraneous
elements.”
377 For the limitation of the Schumacker doctrine to personal and family-related benefits see Opinion of A.G. Léger, 9 March
2006, Case C-346/04, Conijn, [2006] ECR I-6137, para. 33, Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht
(O. Schmidt, 2002), 888 et seq., and Cordewener, “Personal Income Taxation of Non-Residents and the Increasing Impact of the EC
Treaty Freedoms”, in Weber (Ed.), The Influence of European Law on Direct Taxation: Recent and Future Developments (Kluwer,
2007), 35, 59-61.
378 Case C-234/01, Gerritse, [2003] ECR I-5933, paras. 48 et seq.; Case C-169/03, Wallentin, [2004] ECR I-6443, para. 19.
379 For wealth taxation see Case C-376/03, D, [2005] ECR I-5821, paras. 31 et seq.
380 For this threshold see Case C-391/97, Gschwind, [1999] ECR I-5451, para. 32, and Opinion of A.G. Geelhoed, 23 February
2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 68; see also Wattel, “Progressive Taxation of NonResidents and Intra-EC Allocation of Personal Allowances: Why Schumacker, Asscher, Gilly and Gschwind Do Not Suffice”, 40
European Taxation (2000), 210, 216.
381 See, e.g., Case C-279/93, Schumacker, [1995] ECR I-225, paras. 36 et seq.
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count of his personal circumstances, these circumstances are not taken into account anywhere.382 In Lakebrink383
and Turpeinen,384 this approach has been extended to the notion that
“proper application of the principle of non-discrimination […] requires the State of employment to treat a non-resident
all or virtually all of whose income is generated in its territory in the same way as a resident, not only as regards the
grant of tax benefits linked to the non-resident’s personal and family circumstances, but also in relation to any aspect of
his overall ability to pay which is relevant for according tax benefits to residents.”385 A taxpayer in the Schumackersituation may therefore claim “all the tax advantages connected with the non-resident’s ability to pay tax which are not
taken into account either in the State of residence or in the State of employment.”386
It is therefore, in principle, necessary to distinguish between the objective and the subjective ability to
pay: 387 On the one hand, it is clear that a source State has to treat all non-residents in a comparable way to residents with regard to their objective ability to pay, 388 and that it may not distinguish between residents and nonresidents, for example in respect of income-related deductions,389 the objective criteria of the tax base,390 or deductibility of compliance costs.391 This approach is entirely visible in cases involving corporations, where no
subjective issues are attached.392 On the other hand, the Schumacker-line of case law finds resident individuals
and non-resident individuals not to be in comparable situations in regard to their ability to pay, but is, in principle, limited to benefits resulting from the taking into account of personal and family circumstances,393 such as a
splitting tarif,394 tax-free allowances395 or the deduction of aliminony payments.396 This distinction between objective and subjective circumstances is, however, not easy to draw and becomes blurred in the area of tax rates.
While, for example, rate discriminations in the corporate area have always been viewed as an infringement on
the freedom of establishment,397 the typical progressive rates for individuals generally also take aspects of a
taxpayer´s subjective ability to pay into account. It is against this background that the ECJ has found that a zerobracket has “a social purpose, allowing the taxpayer to be granted an essential minimum exempt from all income
tax”398 so that it falls under the Schumacker principles.399 Leaving aside the still unresolved question of whether
withholding taxes on active income are – at least after the extension of the Recovery Directive400 to direct tax
claims – per se a violation of the freedoms,401 it also remains unclear if a non-resident outside the Schumacker
382 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 68. For a
brief overview of the application of Schumacker in the Member States see J. Malherbe, Ph. Malherbe, Richelle and Traversa, The
Impact of the Rulings of the European Court of Justice in the Area of Direct Taxation (Policy Department of the European Parliament, March 2008), 17.
383 Case C-182/06, Lakebrink, [2007] ECR I-6705.
384 Case C-520/04, Turpeinen, [2006] ECR I-10685.
385 Opinion of A.G.Mengozzi, 29 March 2007, Case C-182/06, Lakebrink, [2007] ECR I-6705, para. 36, and such position explicitly endorsing Case C-182/06, Lakebrink, [2007] ECR I-6705, para. 34.
386 Case C-182/06, Lakebrink, [2007] ECR I-6705, para. 34 (concerning the decrease of progressivity because of negative rental income derived from a taxpayer’s property abroad).
387 For recent analyses see J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.),
International Tax Law (Kluwer, 2006), 251, 257-258, and Cordewener, “Personal Income Taxation of Non-Residents and the Increasing Impact of the EC Treaty Freedoms”, in Weber (Ed.), The Influence of European Law on Direct Taxation: Recent and Future Developments (Kluwer, 2007), 35; see also Van Crombrugge, “The Concept, History and Significance of European Tax Law
(Private)”, in Hinnekens and Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of
Frans Vanistendael (Kluwer, 2008), 239, 248-249.
388 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 66-73.
389 Case C-234/01, Gerritse, [2003] ECR I-5933; Case C-279/93, Schumacker, [1995] ECR I-225. See also Case C-107/94, Asscher, [1996] ECR I-3089 (no higher tax rate for non-residents), and Case C-80/94, Wielockx, [1995] ECR I-2493 (source States
must allow deduction of pension contributions by non-residents from income earned within their territory in the same way as residents).
390 Case C-265/04, Bouanich, [2006] ECR I-923; Case C-383/05, Talotta, [2007] ECR I-2555 (concerning a minimum tax base
only for non-residents).
391 Case C-346/04, Conijn, [2006] ECR I-6137, paras. 16-24.
392 See, e.g., Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273 (denial of imputation credit); Case C311/97, Royal Bank of Scotland, [1999] ECR I-2651, and Case C-253/03, CLT-UFA, [2006] ECR I-1831 (higher tax rates on permanent establishments); Case C-307/97, Saint-Gobain, [1999] ECR I-6161 (denial of participation exemption and foreign tax credits);
see also Case C-330/91, Commerzbank, [1993] ECR I-4017 (no interest on the refund of overpaid taxes of a branch).
393 See., e.g., Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), ___ et seq.; see also
D’Oreye de Lantremange, “Freedom of Establishment in the Direct Tax Jurisprudence of the European Court – A Review”, 6 EC
Tax Journal (2002), 187, 200. It should be noted that the ECJ applied this reasoning also in the Wielockx case (Case C-80/94, Wielockx, [1995] ECR I-2493, para. 18) with regard to business-related expenses (“source-related relieves”); this judgment was, however, based on a probably mistaken classification of these expenses as “personal relieves” and seems therefore, in substance, be
outdated by subsequent case law; see, e.g., Case C-107/94, Asscher, [1996] ECR I-3089; Case C-234/01, Gerritse, [2003] ECR I5933.
394 Case C-279/93, Schumacker, [1995] ECR I-225; Case C-391/97, Gschwind, [1999] ECR I-5451; Case C-87/99, Zurstrassen, [2000] ECR I-3337, para. 21.
395 Case C-234/01, Gerritse, [2003] ECR I-5933, paras. 48 et seq.; Case C-169/03, Wallentin, [2004] ECR I-6443, para. 19;
Case C-376/03, D, [2005] ECR I-5821; Case C-520/04, Turpeinen, [2006] ECR I-10685, paras. 26 et seq.
396 Case C-385/00, De Groot, [2002] ECR I-11819.
397 Case C-311/97, Royal Bank of Scotland, [1999] ECR I-2651, and Case C-253/03, CLT-UFA, [2006] ECR I-1831.
398 Case C-234/01, Gerritse, [2003] ECR I-5933, para. 48.
399 Case C-234/01, Gerritse, [2003] ECR I-5933, paras. 48 et seq.; Case C-169/03, Wallentin, [2004] ECR I-6443, para. 19.
400 Council Directive 2001/44/EC of 15 June 2001 amending Directive 76/308/EEC on mutual assistance for the recovery of
claims resulting from operations forming part of the system of financing the European Agricultural Guidance and Guarantee Fund,
and of agricultural levies and customs duties and in respect of value added tax and certain excise duties [2001] OJ (L 175), 17.
401 See, e.g., Case C-290/04, Scorpio, [2006] ECR I-9461 (where the ECJ left Member States in the dark concerning the permissibility of withholding taxes on active income after the entry into force of Directive 2001/44/EC on mutual assistance in the
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situation may even challenge a disadvantageous (withholding) rate and claim access to a source State’s progressive rates on net income (adjusted for the zero-bracket). In this respect, the Court has found comparability in the
source State if the taxpayer’s residence State includes foreign-source income for the calculation of the tax rate,
e.g., under a system of exemption with progression,402 but seems to find this inclusion irrelevant if the taxpayer
is in a Schumacker situation in the source State.403
However, several issues surrounding the Schumacker doctrine are still unresolved,404 two of which may be
highlighted briefly. First, in the De Groot case405 the ECJ obliged the Member State of residence to fully grant
personal and family-related benefits if the taxpayer is not in a Schumacker situation in a Member State of source.
The Court thereby rejected the approach of a pro-rata-allocation of such benefits on the various Member States
of activity (known as “fractional taxation”),406 an approach already envisaged in a 1979 Commission proposal,407
although the Court announced that Member States are free to agree on such an approach on the bilateral level of
a tax treaty.408 It therefore remains unclear how a taxpayer should be treated who derives income from several
Member States but neither is in a Schumacker situation in the source State nor has sufficient income in the
Member State of residence to take into account his personal and family circumstances. Second, it is not clear
how the 90% Schumacker threshold is to be calculated if the taxpayer receives tax-free income in his residence
State. This question arose from the relationship between the ECJ’s decisions in Wallentin,409 D410 and Meindl.411
In Wallentin and Meindl, the ECJ disregarded tax-free amounts received in the taxpayers’ residence States in
deciding whether or not they had reached the Schumacker-threshold in another Member State.412 Conversely, in
the D case the ECJ (rightly413) did not disregard property held in Germany in respect of the Schumacker
threshold for the purposes of Netherlands wealth taxation.414 This was despite the fact that the German wealth
was not taxed in Germany. The apparent inconsistency between these decisions has already given rise to
collection of direct tax claims), and the criticism by the CFE in its “Opinion Statement on withholding taxes on active income within
the EU” (Jan. 14, 2008), available at http://european-tax-adviser.com.
402 Case C-107/94, Asscher, [1996] ECR I-3089; Case C-234/01, Gerritse, [2003] ECR I-5933, paras. 52-53; for an extensive
critical analysis see, e.g., Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 896 et seq. and
901 et seq.
403 Case C-520/04, Turpeinen, [2006] ECR I-10685, paras. 26-31.
404 For criticism of Schumacker see, e.g., Wattel, “The EC Court’s Attempts to Reconcile the Treaty Freedoms with International Tax Law”, 33 Common Market Law Review (1996), 223, 226-238; Wattel, “Progressive Taxation of Non-Residents and IntraEC Allocation of Personal Tax Allowances: Why Schumacker, Asscher, Gilly and Gschwind Do Not Suffice”, 40 European Taxation
(2000) 210, 218; M. Lang, “Ist die Schumacker-Rechtsprechung am Ende?” 51 Recht der Internationalen Wirtschaft (2005), 336;
Wattel, “EC law does not require most-favoured nation tax treatment and a disparity is not a discrimination: D. v. Inspecteur van de
Belastingdienst”, in van Thiel (Ed.), The European Union’s prohibition of discrimination, most-favoured-nation treatment and tax
treaties: opinions and materials (CFE Brochure on European Taxation, 2006), 53, 58-59; see also the comprehensive analysis by
Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 888 et seq., and Cordewener, “Personal
Income Taxation of Non-Residents and the Increasing Impact of the EC Treaty Freedoms”, in Weber (Ed.), The Influence of European Law on Direct Taxation: Recent and Future Developments (Kluwer, 2007), 61-64.
405 Case C-385/00, De Groot, [2002] ECR I-11819.
406 For the alternative approach of “fractional taxation”, see van Raad, “Fractionele belastingheffing van EU buitenlands belastingpflichtigen”, in Verburg, de Vries and Ydema (Eds.), Liberale Gifte – Vriendenbundel Ferdinand Grapperhaus (Kluwer, 1999),
297 et seq.; Wattel, “Progressive Taxation of Non-Residents and Intra-EC Allocation of Personal Tax Allowances: Why Schumacker, Asscher, Gilly and Gschwind Do Not Suffice”, 40 European Taxation (2000), 210, 218; van Raad, “Non-Discriminatory Income
Taxation of Non-Resident Taxpayers by Member States of the European Union: A Proposal”, 26 Brooklyn Journal of International
Law (2000-2001), 1481, 1490 et seq.; van Raad, “Fractional Taxation of Multi-State Income of EU Resident Individuals – A Proposal”, in Andersson, Melz and Silfverberg (Eds.), Liber Amicorum Sven-Olof Lodin (Kluwer, 2001), 211, 219 et seq.
407 See Art. 7(2) of the Commission’s Proposal for a Council Directive concerning the harmonisation of income taxation provisions with respect to freedom of movement of workers within the Community, COM(79)737 final, reprinted in [1980] OJ (C 21), 6,
and 8 Intertax (1980), 194.
408 Case C-385/00, De Groot, [2002] ECR I-11819, para. 99: “The Member States are of course free, in the absence of unifying
or harmonising measures adopted in the Community, to alter, by way of bilateral or multilateral agreements for the avoidance of
double taxation, that correlation between the total income of residents and residents’ general personal and family circumstances to be
taken into account by the State of residence. The State of residence can therefore be released by way of an international agreement
from its obligation to take into account in full the personal and family situation of taxpayers residing in its territory who work partially abroad.”
409 Case C-169/03, Wallentin, [2004] ECR I-6443.
410 Case C-376/03, D, [2005] ECR I-5821.
411 Case C-329/05, Meindl, [2007] ECR I-1113.
412 Compare Kofler, “Wallentin: Voller Grundfreibetrag in Schweden für einen deutschen Ferialpraktikanten ohne steuerbares
Einkommen in Deutschland”, 57 Österreichische Steuerzeitung (2004), 423, 425, with M. Lang, “Die Neuregelung der beschränkten
Steuerpflicht nach dem Abgabenänderungsgesetz 2004”, 15 Steuer & Wirtschaft International (2005), 156, 163.
413 Had the ECJ followed the recommendation of the Advocate General (see the Opinion of A.G. Colomer, 26 October 2004,
Case C-376/03, D, [2005] ECR I-5821, paras. 63 et seq.) and found that the non-imposition of wealth tax in Germany was of decisive importance, the borderline between prohibited discrimination and allowed disparities between the tax systems of the Member
States would be completely blurred (see supra II.A.2.). As every Member State is free to establish its own tax system as it wishes
without being bound by the systems of other Member States, differences in tax rates, the calculation of the tax base and the like are
outside the scope of the fundamental freedoms (see, e.g., Case C-385/00, De Groot, [2002] ECR I-11819, para. 85). In addition, the
mere existence of a particular tax in one Member State, which does not exist in another Member State, cannot have any effect on
evaluating the tax system of the latter Member State in the light of the fundamental freedoms (see, however, Case C-439/97, Sandoz,
[1999] ECR I-7041, para. 19, and the critical statements by Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht,
(O. Schmidt, 2002), 845 et seq.). Conversely, the non-existence of a tax in one Member State cannot influence a discrimination
analysis of the tax system of another Member State, in which such a tax exists.
414 See Case C-376/03, D, [2005] ECR I-5821, paras. 39 et seq.; for a different position see Opinion of A.G. Colomer, 26 October 2004, Case C-376/03, D, [2005] ECR I-5821, paras. 63 et seq., and consenting Schnitger, “Vermögensteuer-Freibeträge in
Holland, weil keine Vermögensteuer in Deutschland”, 13 Internationales Steuerrecht (2004), 793, 801.
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criticism in legal writing.415 As the ECJ did not overrule, but rather distinguished, its highly questionable
Wallentin decision,416 the difference may at first sight only be explained by the mere existence of the tax in the
Member State of residence.417
b) “Outbound” Restrictions, “Tax Base Fragmentations” and “Symmetry”
As we have seen, the ECJ has moved to extend the principle of non-discrimination from a prohibition of
discrimination towards foreign nationals or residents, based on an ad personam comparison in inbound situations, to a broad concept of prohibition of disadvantageous treatment of cross-border economic activities also of
a State’s own residents as compared with hypothetical purely domestic activities, based on an ad rem comparison in outbound or “exit” situations.418 It is the disadvantage caused by the residence State’s measures that is
liable to discourage its own nationals to exercise a freedom.419 This ad rem-comparison in “exit” situations has
for instance become increasingly important in cross-border corporate structures. Not only has the Court found in
inbound situations that less favorable tax treatment by a Member State of a permanent establishment of a company resident in another Member State (as opposed to a domestic company, e.g. a subsidiary of a foreign parent
company) is discriminatory and incompatible with the freedom of establishment under Art. 43, 48 EC,420 it is
also settled case law that discriminatory tax treatment by the host State of a subsidiary based on the reason that
its parent company is resident in another Member State is prohibited.421 Conversely, in “exit” situations, the case
law implies that a home State may not provide less advantageous treatment of a domestic parent company because their subsidiaries422 or branches423 are located abroad. As Advocate General Sharpston recently put it in a
case concerning the prohibition of cross-border loss utilization of treaty-exempt branches,
“a German company with a permanent establishment in Luxembourg which has made a loss is manifestly treated less
favourably than a German company with a domestic permanent establishment which has made a loss: in the latter case,
the loss is taken into account in computing the company’s profits, in the former case, it is not. That suffices to trigger
Article 43 EC.”424
The ECJ’s comparability test in outbound situations, however, overturns common concepts of taxing jurisdiction and symmetry. Usually, a State can be seen as a partner in a taxpayer’s venture, participating via the tax
system in the venture’s profits and losses. It is therefore, in principle, a sensible approach for Member States to
disregard expenses or losses if they do not exercise taxing jurisdiction over the corresponding profits. Advocate
General Geelhoed restated this idea when he argued that the central obligation imposed on home States should
be “to treat foreign-source income of its residents consistently with the way it has divided its tax base.”425 Indeed, the ECJ seemingly applied this standard in cases such as AMID426 and Mertens427 to the taxpayer’s benefit
and thus in effect forced States to adhere to how they had divided their tax bases. It is therefore an infringement
415 See M. Lang, “Das EuGH-Urteil in der Rechtssache D. – Gerät der Motor der Steuerharmonisierung ins Stottern?” 15 Steuer & Wirtschaft International (2005) 365, 367 et seq.; Kofler, “Das Ende vom Anfang der gemeinschaftsrechtlichen Meistbegünstigung”, 58 Österreichische Steuerzeitung (2005), 432, 433-434; Kofler and Schindler, “Dancing with Mr D: The ECJ's Denial of
Most-Favoured-Nation Treatment in the “D” Case”, 45 European Taxation (2005), 530, 534-535; Cordewener, “Personal Income
Taxation of Non-Residents and the Increasing Impact of the EC Treaty Freedoms”, in Weber (Ed.), The Influence of European Law
on Direct Taxation: Recent and Future Developments (Kluwer, 2007), 35,63-64.
416 Case C-376/03, D, [2005] ECR I-5821, para. 42.
417 However, D may be distinguished from Wallentin under the assumption that the payments at issue in Wallentin, i.e. alimony
payments and a public grant, would not have been taxable in Sweden had they been of Swedish source, while – had Germany imposed a wealth tax – the wealth of Mr D would have been taxable in Germany; the ECJ, however, did not indicate whether this
assumption was material in deciding the cases.
418 See, e.g., Case C-385/00, De Groot, [2002] ECR I-11819, paras. 77-80. See also Cordewener, Europäische Grundfreiheiten
und nationales Steuerrecht (O. Schmidt, 2002), 200 et seq. and 824 et seq.; Rädler, “Most-favoured nation principle and internal
market – some afterthoughts to Case D.”, in van Thiel (Ed.), The European Union’s prohibition of discrimination, most-favourednation treatment and tax treaties: opinions and materials (CFE Brochure on European Taxation, 2006), 64, 64-65; see also the
Opinion of A.G. Kokott, 12 September 2006, Case C-231/05, Oy AA, [2007] ECR I-6373, para. 27.
419 Case C-385/00, De Groot, [2002] ECR I-11819, para. 84.
420 See, e.g., Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273; Case C-307/97, Saint-Gobain, [1999]
ECR I-6161; Case C-311/97, Royal Bank of Scotland, [1999] ECR I-2651; Case C-253/03, CLT-UFA, [2006] ECR I-1831.
421 See, e.g., Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] ECR I-1727 (preferential option to a group
relief was only available where parent and subsidiary were residents); Case C-324/00, Lankhorst-Hohorst, [2002] ECR I-11779, and
Case C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107, and Case C-105/07, Lammers & Van Cleeff, [2008] ECR ___ (thin
capitalization or requalification rules); Case C-231/05, Oy AA, [2007] ECR I-6373 (group contributions).
422 Case C-264/96, ICI, [1998] ECR I-4695 (consortium relief was denied unless the business of the holding company owned
by the consortium consisted wholly or mainly in holding shares of companies resident in the UK); Case C-168/01, Bosal, [2003]
ECR I-9409, and Case C-471/04, Keller Holding, [2006] ECR I-2107 (non-deductibility of financing costs for the acquisition of a
foreign subsidiary); Case C-347/04, Rewe Zentralfinanz, [2007] ECR I-2647 (write-down of a holding in a foreign subsidiary); Case
C-446/03, Marks & Spencer, [2005] ECR I-10837; Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995 (CFC rules); Case C446/04, FII Group Litigation, [2006] ECR I-11753 (imputation system).
423 Case C-141/99, AMID, [2000] ECR I-11619 (limitation of utilization of domestic losses because of exempt foreign profits);
Case C-293/06, Deutsche Shell GmbH, [2008] ECR ___ (currency losses); Case C-414/06, Lidl Belgium, [2008] ECR ___ (losses in
an “exempt” foreign permanent establishment).
424 Opinion of A.G. Sharpston, 14 February 2008, Case C-414/06, Lidl Belgium, [2008] ECR ___, para. 7, and similarly Case
C-414/06, Lidl Belgium, [2008] ECR ___, para. 23-26, noting that “[b]y reason of that difference in tax treatment, a German company could be discouraged from carrying on its business through a permanent establishment situated in another Member State”
(para. 26).
425 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 58.
426 Case C-141/99, AMID, [2000] ECR I-11619.
427 Case C-431/01, Mertens, [2002] ECR I-7073.
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of the EC Treaty if profits of a treaty-exempt foreign permanent establishment are used to offset home State
losses and hence reduce the loss carry-forward available to the taxpayer,428 as
“a Belgian company which, having no establishments outside Belgium, incurs a loss during a given tax year finds itself,
for tax purposes, in a comparable situation with that of a Belgian company which, having an establishment in Luxembourg, incurs a loss in Belgium and makes a profit in Luxembourg during that same tax year.”429
However, the ECJ seems to have abandoned this reliance on the division of taxing rights under (overridden)
tax treaties in Columbus Container Services,430 and one might speculate that arguments of symmetry or a balanced allocation of taxing powers might at most gain some relevance on the level of justification.431 This “new
approach” is clearly visible in cases such as Bosal Holding,432 Marks & Spencer,433 Oy AA434 and Lakebrink435.436
Both Bosal Holding and Marks & Spencer, in essence, found that the split of the tax base over several taxing
jurisdictions is not per se sufficient to release a Member State that does not exercise taxing jurisdiction over
positive income (e.g., of a foreign subsidiary) from the responsibility to allow corresponding utilization of expenses or losses (e.g., expenses for the acquisition of the subsidiary or its permanent losses) if it would allow for
such deductions in a purely domestic setting. Quite to the contrary, A.G. Poiares Moduro in his Opinion in
Marks & Spencer found it “sufficient to note that the United Kingdom legislation by itself creates an obstacle
such as to dissuade companies established in the United Kingdom from establishing subsidiaries in other Member States.”437 As in Schumacker, the ECJ’s case law in Bosal and Marks & Spencer implies that deductions,
including losses, which are granted in a domestic setting must be taken into account in a non-discriminatory
fashion also in cross-border situations, even if this creates asymmetrical effects: In Bosal, the Court found contrary to Art. 43 of the EC Treaty a Dutch rule by which Netherlands-resident parent companies could only deduct
costs relating to a subsidiary if that subsidiary was taxable in the Netherlands, or if its costs were indirectly instrumental in the making of profits taxable in the Netherlands.438 Similarly, in Marks & Spencer, the Court has
held that, in exceptional circumstances, where there is absolutely no possibility for subsidiaries resident in another Member State to set off their losses, a home State must extend domestic group relief to such losses, despite
the fact that the home State does not otherwise exercise any tax jurisdiction over those subsidiaries.439 Similar
issues arise in situations of losses in treaty-exempt permanent establishments.440
Although the Court was willing to “fine-tune” the verdict of discrimination on the level of justification in
Marks & Spencer and Lidl Belgium,441 many had ab initio insisted that such effects of “tax base fragmentations”
or “dislocations” are outside the sphere of the fundamental freedoms442 and argued that their scrutiny under the
freedoms would confuse the exercise and the existence of taxing jurisdiction and would inevitably and inadmis-
428 For a detailed discussion of this effect and the resulting juridical double taxation see Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 795-796, and Kofler, Doppelbesteuerungsabkommen und Europäisches
Gemeinschaftsrecht (Linde, 2007), 182-183.
429 Case C-141/99, AMID, [2000] ECR I-11619, para. 29.
430 Case C-298/05, Columbus Container Services, [2007] ECR ___; for detailed analysis of this decision and the ECJ’s reluctance to scrutinize treaty overrides, see Meussen, “Columbus Container Services – A Victory for the Member States’ Fiscal Autonomy”, 48 European Taxation (2008), 169. For further discussion of this case from the perspective of “horizontal discrimination” see
infra II.C.
431 See infra III. and, e.g., Englisch, “Grundfreiheitsbeschränkungen zwecks Wahrung der Aufteilung der Besteuerungsbefugnis”, 17 Steuer & Wirtschaft International (2007), 399 et seq.
432 Case C-168/01, Bosal, [2003] ECR I-9409.
433 Case C-446/03, Marks & Spencer, [2005] ECR I-10837
434 Case C-231/05, Oy AA, [2007] ECR I-6373.
435 Case C-182/06, Lakebrink, [2007] ECR I-6705.
436 See also the detailed discussion by Kemmeren, “ECJ should not unbundle integrated tax systems!”, 17 EC Tax Review
(2008), 4.
437 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 53.
438 Case C-168/01, Bosal, [2003] ECR I-9409.
439 See especially Case C-446/03, Marks & Spencer, [2005] ECR I-10837, and the critical remarks in the Opinion of A.G.
Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 65.
440 See also Case C-414/06, Lidl Belgium, [2008] ECR ___ (losses in an “exempt” foreign permanent establishment), and, for a
different analysis on the level of justification, the Opinion of A.G. Sharpston, 14 February 2008, Case C-414/06, Lidl Belgium,
[2008] ECR ___.
441 See Case C-446/03, Marks & Spencer, [2005] ECR I-10837, paras. 35 et seq. (finding that an infringement on Art 43 EC
only occurs where the non-resident subsidiary has exhausted the possibilities available in its State of residence of having the losses
taken into account in the current, previous or future taxable periods), and Case C-414/06, Lidl Belgium, [2008] ECR ___, paras. 27 et
seq. (finding no infringment on Art 43 EC in cases where losses can be taken into account in the taxation of the income of that permanent establishment in future accounting periods). See also infra III.
442 See Wattel, “Corporate tax jurisdiction in the EU with respect to branches and subsidiaries; dislocation distinguished from
discrimination and disparity; a plea for territoriality”, 12 EC Tax Review (2003), 194, 200, Wattel, “Red Herrings in Direct Tax
Cases before the ECJ”, 31 Legal Issues of Economic Integration (2004), 81, 89-90; Terra and Wattel, European Tax Law (Kluwer,
4th edition 2005), 59 and 151-152; Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax (2006), 582, 591-596; see also Wattel, “Fiscal Cohesion, Fiscal Territoriality and Preservation of
the (Balanced) Allocation of Taxing Power; What is the Difference?”, in Weber (Ed.), The Influence of European Law on Direct
Taxation: Recent and Future Developments (Kluwer, 2007), 139, 144-156. This approach was also taken in the Opinion of A.G.
Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 58 et seq., arguing (at para. 65)
that he sees “no reason why companies which decide to relocate their activities to another Member State, in full knowledge of the
local tax legislation, should be awarded highly selective and distortional tax relief in the home State in the circumstance where their
source State activities incur losses that cannot be offset in the latter State.” For further analysis and criticism see Ghosh, Principles of
the Internal Market and Direct Taxation (Oxford Key Haven Publications, 2007), 81-92.
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sibly lead to the creation of (negative) taxing rights under Community law; 443 for instance, it has been argued in
discussing Marks & Spencer, “[t]he absence of group relief in relation to those non-resident companies’ losses
arises because the UK has not exercised its jurisdiction over these subsidiaries at all” and that the fundamental
freedoms as tools of negative integration have no application to such situations.444 The ECJ, giving force to the
Community dimension of these issues of “tax base fragmentations”, has clearly not shared this view as, “in the
absence of common rules on the subject, [it] would be tantamount to depriving the fundamental freedoms enshrined in the Treaty of all practical effect.”445 Moreover,
“a difference in tax treatment between resident parent companies according to whether or not they have subsidiaries
abroad cannot be justified merely by the fact that they have decided to carry on economic activities in another Member
State, in which the State concerned cannot exercise its taxing powers.”446 Although the ECJ acknowledged that “the
Member State in which a parent company is established may tax resident companies on the whole of their worldwide
profits but may tax non-resident subsidiaries solely on the profits from their activities in that State”, this “does not in itself justify the Member State of residence of the parent company refusing to grant an advantage to that company on the
ground that it does not tax the profits of its non-resident subsidiaries.”447
Finally, it may be noted that the Court has also found that “symmetrical treatment” does not exclude source
State’s systems from the verdict of discrimination. In Oy AA, for example, where Finland did not allow the deduction of group contributions from a Finish subsidiary to its UK parent, the Court still found discrimination, as
“the mere fact that parent companies which have their corporate establishment in another Member State are not
subject to tax in Finland does not differentiate the subsidiaries of those parent companies from the subsidiaries of
parent companies which have their establishment in Finland, and does not render the positions of those two categories of subsidiary incomparable.”448 Likewise, in Lakebrink the ECJ found it incompatible with the free
movement of a worker in the Schumacker situation that the source State does not take into account negative
rental income relating to property situated in another Member State for purposes of calculating the tax rate, while
residents may benefit from such negative progressivity. The Court hereby implicitly disregarded the fact that the
source State likewise excludes positive foreign income for determining the tax rate of non-residents.449 Such
asymmetry may, however, induce source States to change their systems to tax domestic source income at a progressive rate determined by reference to worldwide income. Such approach, however, has already been suggested in literature, as it would not only be in line with the fundamental freedoms but also solve the problem of
salary splitting and some open issues surrounding the Schumacker case law.450
c) “Single Country Approach” versus “Overall Approach”
Generally, the ECJ applies a narrow rather than a broad similarity test, focusing on certain relevant fiscal
aspects that affect taxpayer equity on a case-by-case basis.451 Identifying the relevant aspects is, however, not
443 Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax (2006), 582, 6591-596; Ghosh, Principles of the Internal Market and Direct Taxation (Oxford Key Haven Publications, 2007),
82-84.
444 Ghosh, Principles of the Internal Market and Direct Taxation (Oxford Key Haven Publications, 2007), 85. Likewise, the
UK Special Commissioners had asserted that the restriction on utilization of foreign subsidiaries’ losses in Marks & Spencer should
be regarded as involving a case of “dislocation”: “What the appellant is really complaining about is the interaction of the host and
origin states’ tax systems; that none of the countries concerned – the United Kingdom, France, Belgium and Germany – has given
relief for the losses. There is no case law, however, in which the Court has characterised such dislocation as a restriction on the
freedom of establishment, akin to an exclusion from the markets of other member states. The fact that by choosing to establish
through foreign subsidiaries it found itself subject to different tax rules was in this respect not a restriction akin to an exclusion from
those other markets, but a reflection of the failure of member states to harmonise their corporate tax systems, as Futura and Gilly
illustrate.” See UK Special Commissioners, 26 November 2002, Marks and Spencer Plc v. David Hasley (HM Inspector of Taxes)
[2003] STC (SCD) 70, EuLR 2003, 46, para. 75.
445 Opinion of A.G. Poiares Maduro, 31 May 2006, Case C-347/04, Rewe Zentralfinanz, [2007] ECR I-2647, para. 30; see also
Farmer, “Tax Law and Policy in an Adolescent European Union”, 61 Bulletin For International Fiscal Documentation (2007), 42,
43, noting that Member States “cannot design systems, albeit ones with perfect symmetry between taxation and reliefs, without
taking account of the impact on the Internal Market.” Likewise, Englisch, “Grundfreiheitsbeschränkungen zwecks Wahrung der
Aufteilung der Besteuerungsbefugnis”, 17 Steuer & Wirtschaft International (2007), 399, 402-403, argues that in evaluating symmetrical treatment with the Internal Market, the former has less weight from the perspective of the residence State than from the
perspective of the source State. See also Farmer and Zalinski, “General Report”, in Xenopoulos (Ed.), Direct tax rules and the EU
fundamental freedoms: origin and scope of the problem; National and Community responses and solutions (FIDE Congress, 2006),
399, 405, arguing that a degree of asymmetry might be necessary “to take account of the Community dimension.” For a detailed
discussion see Vanistendael, “In Defence of the European Court of Justice”, 62 Bulletin For International Fiscal Documentation
(2008), 90, 92-95.
446 Case C-347/04, Rewe Zentralfinanz, [2007] ECR I-2647, para. 43.
447 Case C-347/04, Rewe Zentralfinanz, [2007] ECR I-2647, para. 69; see also Case C-446/03, Marks & Spencer, [2005] ECR
I-10837, para. 40.
448 Case C-231/05, Oy AA, [2007] ECR I-6373, para. 38 The ECJ, in para. 37, acknowledged nevertheless, that, “even if the
Member State in which the subsidiary is established does not have competence over the parent company, which is established in
another Member State and is not subject to tax in the first Member State, it may nevertheless make deductibility of the intra-group
financial transfer from the transferor’s taxable income subject to conditions concerning the treatment to be applied to the transfer by
that other Member State.”
449 For a critical analysis see Kemmeren, “ECJ should not unbundle integrated tax systems!”, 17 EC Tax Review (2008), 4, 7-8.
450 Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 666-668 with further references.
451 The ECJ’s approach is not always entirely transparent: While the Court puts a focus on the legal situation of the taxpayer in
some cases (see, e.g., Case C-311/97, Royal Bank of Scotland, [1999] ECR I-2651, paras. 24 et seq.; Case C-376/03, D, [2005] ECR
I-5821, paras. 58 et seq.), it concentrates on the factual situation in other cases (see, e.g., Case C-279/93, Schumacker, [1995] ECR I225) or mixes both approaches (see Case C-431/01, Mertens, [2002] ECR I-7073, para. 32). For a recent analysis see, e.g., M. Lang,
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always an easy task. Although the ECJ has obviously introduced a proportionality-test in respect of whether a
differentiating measure is proportional to the extent of non-comparability,452 the correct finding of comparables
is a not always entirely transparent, and sometimes becomes a value judgment in itself,453 whenever there are
good arguments both for comparability and against it.454 Furthermore, the risk exists that already at the objective
level of whether a provision is discriminatory, factors of a subjective nature slip into the test,455 including the
purpose of a distinction.456 Nevertheless, in most cases the Court does not have to explicitly establish similarity
between actual domestic and cross border situations, because it can assume similarity between a disadvantaged
cross border situaton as compared to a hypothetical domestic situation that is in competition.
In principle, however, the ECJ does not take into account the tax treatment in another country in considering whether the taxation in the first country is discriminatory; 457 this approach is logical (because discrimination
is the different treatment of similar situations by one single Member State) and also consistent with the prohibition of compensatory taxation.458 Such single-country-oriented perspective of comparability blanks out collateral
effects or alternative (hypothetical) policy options of Member States.459 Therefore, each Member State is obliged
to non-discriminatory treatment within its legal system, irrespective of the legal circumstances of the same taxable activity in other Member States;460 this perspective is often described as aiming at “equality in a box”
(“Kästchengleichheit”), indicating the right of a taxpayer to non-discriminatory treatment in each partial market
of the Internal Market.461
In some instances, however, the Court takes a perspective that reaches beyond a single Member State. This
question touches on a broader issue, which is usually described as the “single country approach” versus the
“overall approach”.462 Under a strict “single country approach” the discrimination analysis focuses only one
State, while the “overall approach” – which is also referred to as “pan-European approach”463 or “Internal Market approach”464 – takes an integrated view of the taxpayer’s overall situation, combining her treatment in the
source and the residence State. Such broader perspective may apply in at least three distinct ways.
First, the factual treatment in another Member State may be relevant when it comes to assessing comparability of situations, as is clearly visible in Schumacker,465 Manninen466 and Meilicke.467 In Schumacker the dis“Die Rechtsprechung des EuGH zu den direkten Steuern – Planungssicherheit für die nationalen Gesetzgeber?”, in Wagner and
Wedl (Eds.), Bilanz und Perspektiven zum europäischen Recht (ÖGB Verlag, 2007), 113, 117-118.
452 See Case C-234/01, Gerritse, [2003] ECR I-5933, para. 47 et seq.; see also Lyal, “Non-discrimination and direct tax in
Community law”, 12 EC Tax Review (2003), 68, and M. Lang, “Die Rechtsprechung des EuGH zu den direkten Steuern – Planungssicherheit für die nationalen Gesetzgeber?”, in Wagner and Wedl (Eds.), Bilanz und Perspektiven zum europäischen Recht (ÖGB
Verlag, 2007), 113, 119-120.
453 One line of the criticism focuses on which variables the ECJ employs in determining comparability. See Mason, “Flunking
the ECJ’s Tax Discrimination Test”, 46 Columbia Journal of Transnational Law (2007), 72, 92-112.
454 See, e.g., the the lengthy discussion of the UK Special Commissioners, 26 November 2002, Marks and Spencer Plc v. David Hasley (HM Inspector of Taxes) [2003] STC (SCD) 70, EuLR 2003, 46.
455 See for this Prechal, “Equality of Treatment, Non-Discrimination and Social Policy: Achievements in Three Themes”, 41
Common Market Law Review (2004), 533, 544.
456 See, e.g., ECJ, Case 152/73, Sotgiu, [1974] ECR 153.
457 See, ex multis, Brigitte Knobbe-Keuk, “Restrictions on the Fundamental Freedoms Enshrined in the EC Treaty by Discriminatory Tax Provisions – Ban and Justification”, 3 EC Tax Review (1994), 74, at 77 et seq.; for a broader perspective see Glória
Teixera, “Tax Systems and Non-Discrimination in the European Union”, 34 Intertax (2006), 50, at 52. However, the comparison
analysis is not an “all or nothing” approach: Because even if taxpayers are in objectively different situations, the extent of differential treatment has to be proportionate to that difference in situations; see Case C-234/01, Gerritse, [2003] ECR I-5933, paras. 47 et
seq., and Lyal, “Non-discrimination and direct tax in Community law”, 12 EC Tax Review (2003), 68.
458 See, e.g., Case C-294/97, Eurowings, [1999] ECR I-7447, paras. 43 et seq.; Case C-136/00, Danner, [2002] ECR I-8147,
para. 56; Case C-385/00, De Groot, [2002] ECR I-11819, para. 97.
459 See, e.g., Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 21.
460 Extensively, Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 828 et seq.; Englisch, Dividendenbesteuerung (O. Schmidt, 2005), 240.
461 Birk, “Besteuerungsgleichheit in der Europäischen Union”, in Lehner (Ed.), Steuerrecht im Europäischen Binnenmarkt (O.
Schmidt, 1996), 63, 65 et seq.; Reimer, “Die Auswirkungen der Grundfreiheiten auf das Ertragsteuerrecht der Bundesrepublik Deutschland”, in Lehner (Ed.), Grundfreiheiten im Steuerrecht der EU-Staaten (Beck, 2000), 39, 73 et seq.; Cordewener, Europäische
Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 829; Hey, “Perspektiven der Unternehmensbesteuerung in Europa”,
81 Steuer und Wirtschaft (2004), 193, 194.
462 This issue was first raised after the ECJ’s decision in Schumacker (Case C-279/93, Schumacker, [1995] ECR I-225) as it
remained unclear if this decision has an impact on countries that do not exempt foreign-source wages but rather provide a foreign tax
credit. See for this discussion, e.g., Toifl, “Can a discrimination in the state of residence be justified by the taxable situation in the
state of source?”, 5 EC Tax Review (1996), 165; Farmer, “EC law and national rules on direct taxation: a phoney war?”, 7 EC Tax
Review (1998), 13, 15 et seq.; Eden, “Some awfully big questions on tax sovereignty v level playing field”,4 EC Tax Journal (1999),
11, 36; Avery Jones, “A Comment on ‘Progressive Taxation of Non-Residents and Intra-EC Allocation of Personal Tax Allowances’”, 40 European Taxation (2000), 375 with response by Wattel, 40 European Taxation (2000), 375, 376 et seq. Compare now
also Kemmeren, “The Internal Market Approach Should Prevail over the Single Country Approach”, in Hinnekens and Hinnekens
(Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 555 et
seq.
463 García Prats, “Is It Possible to Set a Coherent System of Rules on Direct Taxation under EC Law Requirements?”, in Hinnekens and Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael
(Kluwer, 2008), 429, 432-433.
464 Kemmeren, “The Internal Market Approach Should Prevail over the Single Country Approach”, in Hinnekens and Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008),
555, 561-564.
465 For the Schumacker-line of case law see already supra II.B.3.a).
466 Case C-319/02, Manninen, [2004] ECR I-7477.
467 Case C-292/04, Meilicke, [2007] ECR I-1835.
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criminatory nature of the refusal by the host State to allow an inbound frontierworker the deduction of personal
expenses, was co-determined by the factual question whether the frontier worker earned incoée in his home
State, so that he could claim the deductions there. The latter two cases concerned the question of whether a taxpayer’s residence State, when employing a corporate imputation system for the avoidance of economic double
taxation, has to grant an imputation credit also for foreign corporate taxes. Although Manninen and Meilicke
seemingly take an “overall approach”, as they force the taxpayer’s residence State to “take account of the tax
actually paid by the company established in that other Member State,”468 this conclusion is obviously based on
the fact that “the situation of [residents] might differ according to the place where they invested their capital.”469
Hence, comparability of situations might be rejected “where the tax legislation of the Member State in which the
investments were made already eliminated the risk of double taxation of company profits distributed in the form
of dividends, by, for example, subjecting to corporation tax only such profits by the company concerned as were
not distributed.”470 Likewise, comparability of situations might be assumed to exist only to the extent of foreign
corporate taxation, so that the taxpayer’s residence State may limit the imputation credit to the foreign corporate
tax actually paid.471 On might also consider the Schempp472 case in this respect, where the ECJ upheld a German
statute that denied deductions for maintenance payments if those are not taxable in the hands of the recipient
under foreign law: The Court acknowledged that any resulting disadvantages are mere disparities in treatment,
and it found that no comparability can be established between a taxable payment to a recipient resident in Germany and a payment to a recipient resident in a country where such maintenance payments remain tax free.473
Second, on a legal level, the Court has allowed Member States to link their tax systems to another Member
State’s system, mainly to avoid double benefits for taxpayers that would be contrary to a true Internal Market
without tax borders. This is evidenced in De Groot474 and Oy AA:475 In De Groot, for example, the ECJ acknowledged that the residence State may be released from its obligation to fully grant personal and family benefits, not
only where the taxpayer is in a Schumacker-situation in the source State or where a bilateral agreement provides
for a pro-rata allocation of benefits,476 but also “if it finds that, even in the absence of a convention, one or more
of the States of employment, with respect to the income taxed by them, grant advantages based on the personal
and family circumstances of taxpayers who do not reside in the territory of those States but receive taxable income there.”477 Likewise, in Oy AA,478 investigating Finish rules that denied deduction of group contributions
from a Finish subsidiary to its UK parent, the ECJ stated in an obiter dictum that a Member State may make such
deductibility depended on the treatment in the recipient country to avoid asymmetrical double benefits. Hence,
“even if the Member State in which the subsidiary is established does not have competence over the parent company,
which is established in another Member State and is not subject to tax in the first Member State, it may nevertheless
make deductibility of the intra-group financial transfer from the transferor’s taxable income subject to conditions concerning the treatment to be applied to the transfer by that other Member State.”479
An extension of this approach might be seen in situations where the Court, on the level of justification, imposes only a residual obligation on the discriminating Member State conditioned on the factual circumstances in
another Member State, as, for example, in Marks & Spencer.480 Here, the Court held that where there is absolutely no possibility for subsidiaries resident in another Member State to set off their losses, a home State must
extend domestic group relief to such losses, despite the fact that the home State does not otherwise exercise any
tax jurisdiction over those subsidiaries.481 Hence, the ECJ’s approach towards cross-border utilization á la
Marks & Spencer seems to employ some form of an overall approach on the level of proportionality by making
the obligation of the home State conditional upon the tax treatment in the source State.482
Third, the ECJ may assess the “overall situation” of a taxpayer in order to determine whether a relevant disadvantage exists. Suppose, for example, that the source State employs a discriminatory tax rate on a permanent
establishment of a non-resident EU company, but that the company’s home State has a higher tax rate and unilaterally gives a full credit for the (discriminatory) source State tax on the permanent establishment’s profits. In
such a situation, there would not be an overall disadvantage to the taxpayer but rather a shift of tax revenues
between the two States (in the sense that the home State is not only responsible for determining the final overall
tax burden, but also has to “pay” out of its own budget for the discrimination actually caused by the source
Case C-319/02, Manninen, [2004] ECR I-7477, para. 54.
Case C-319/02, Manninen, [2004] ECR I-7477, para. 34; but see also Case C-315/02, Lenz, [2004] ECR I-7063, para. 43
(concerning a schedular system).
470 Case C-319/02, Manninen, [2004] ECR I-7477, para. 34.
471 See for this result, e.g., Case C-319/02, Manninen, [2004] ECR I-7477, and Case C-292/04, Meilicke, [2007] ECR I-1835.
472 Case C-403/03, Schempp, [2005] ECR I-6421.
473 Case C-403/03, Schempp, [2005] ECR I-6421, paras. 31-36.
474 Case C-385/00, De Groot, [2002] ECR I-11819.
475 Case C-403/03, Schempp, [2005] ECR I-6421.
476 See for this approach supra II.B.3.a).
477 Case C-385/00, De Groot, [2002] ECR I-11819, para. 100.
478 Case C-231/05, Oy AA, [2007] ECR I-6373.
479 Case C-231/05, Oy AA, [2007] ECR I-6373, para. 37.
480 Case C-446/03, Marks & Spencer, [2005] ECR I-10837; see also Case C-414/06, Lidl Belgium, [2008] ECR ___, paras. 27
et seq.
481 Case C-446/03, Marks & Spencer, [2005] ECR I-10837, paras. 55 and 56. For criticism see Opinion of A.G. Geelhoed, 23
February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 65, and the discussion supra II.B.3.b).
482 See Case C-446/03, Marks & Spencer, [2005] ECR I-10837, and the remarks by Weber, “In Search of a (New) Equilibrium
Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax (2006), 582, 596-597.
468
469
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State). The ECJ has implicitly483 and explicitly484 found such overall approach unsuitable for the Internal Market.
And quite correctly so, as it would make the compatibility of one Member State’s tax system with Community
law dependent on which tax system another Member State has chosen; this, in turn, would clearly impede on the
fiscal sovereignty of Member States, as each State would then be required to adjust its system to the systems of
its fellow Member States.485 However, in Denkavit Internationaal and Amurta the ECJ has taken a middle
ground when tax treaties are involved and if the effects of such treaty lead to a compensation or “neutralization”
of one State’s discriminatory treatment by its treaty partner State.486
The latter issue of “tax treaty neutralization” basically concerned the question whether or not tax treaty relief in the shareholder’s residence State under a tax treaty might relief the source State from the discrimination
verdict, as a disadvantage in the source State might effectively be neutralized in the residence State under a tax
treaty.487 In other words: Can a tax treaty relief from source country taxation of the shareholder (i.e., the relief
from juridical double taxation from the residence State’s perspective) “neutralize” the discriminatory effects of a
non-extension of the source State’s relief (i.e., the relief from domestic economic double taxation from the
source State’s perspective)? Forcefully, however, the ECJ has again rejected a general “overall approach” for the
issue of cross-border dividends in the Amurta case, by holding that
“a Member State may not rely on the existence of a full tax credit granted unilaterally by another Member State to a recipient company established in the latter Member State in order to escape the obligation to prevent economic double
taxation of dividends resulting from the exercise of its power to tax in a situation where the first Member State prevents
economic double taxation of dividends distributed to companies established in its territory.”488
This position is completely sensible. Had the ECJ taken an overall approach, the discrimination verdict for
the source State would effectively have depended on another State’s tax system, which in turn would create a
friction to the still existing tax sovereignty of the Member States.489 Implicitly rejecting the EFTA Court’s holding in Fokus Bank,490 the ECJ has, however, chosen an approach that can be described as a “treaty-based overall
approach” by acknowledging that Member States may shift their obligations under EC law by way of bilateral
treaties (typically a double tax convention, DTC).491 In line with its previous decisions in Gilly492 and De
Groot,493 and based on the insight that bilateral tax treaties are part of both the legal systems of the concluding
States and may therefore influence a taxpayer’s position, the ECJ constantly found that the effect of treaties has
to be considered in determining discrimination.494 Most recently, the ECJ made it clear in Amurta that
“it cannot be excluded that a Member State may succeed in ensuring compliance with its obligations under the Treaty
through the conclusion of a convention for the avoidance of double taxation with another Member State.“495 It is hence
“for the national court to establish whether account should be taken, in the main proceedings, of the DTC, and, if so, to
determine whether that convention enables the effects of the restriction on the free movement of capital […] to be neutralised.”496
483 See, e.g., Case C-311/97, Royal Bank of Scotland, [1999] ECR I-2651 (no consideration of potential credit in the home
State in case of discriminatory taxation of a branch in the source State); Case C-345/04, Centro Equestre, [2007] ECR I-1425 (no
consideration of potential credit in the home State in case of discriminatory denial of cost deductions in the source State)
484 Case C-379/05, Amurta, [2007] ECR ___, para. 78.
485 See Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”,
34 Intertax (2006), 582, 590-591; see also M. Lang, “ECJ case law on cross-border dividend taxation – recent developments”, 17 EC
Tax Review (2008), 67, 70-72; Vanistendael, “Does the ECJ have the power of interpretation to build a tax system compatible with
the fundamental freedoms?”, 17 EC Tax Review (2008), 52, 60-61.
486 Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949, paras. 45-55; Case C-379/05, Amurta, [2007] ECR ___, paras. 79-83. See already Case C-319/02, Manninen, [2004] ECR I-7477, para. 21, stating that “the tax convention concluded between
the States of the Nordic Council for the prevention of double taxation is not capable of eliminating that unfavourable treatment.” See
also Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 71, where the ECJ noted that “[i]t is for the national court to
determine, in each case, whether that obligation has been complied with, taking account, where necessary, of the provisions of the
DTC that that Member State has concluded with the State in which the shareholder company is resident”. For a similar reasoning see
Case C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107, para. 54 (discussing “the fact that, under the provisions of a DTC,
an increase in taxable profits resulting from a re-characterisation of interest may be matched by a corresponding reduction in taxable
profits in the State in which the lending company is resident”). For a discussion of this approach see also Pons, “The Denkavit Internationaal Case and Its Consequences: The Limit between Distortion and Discrimination?”, 47 European Taxation (2007), 214-220;
Meussen, “Denkavit Internationaal: The Practical Issues”, 47 European Taxation (2007), 244, 245-246.
487 Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949; Case C-379/05, Amurta, [2007] ECR ___.
488 Case C-379/05, Amurta, [2007] ECR ___, paras. 84 and 78. Possibly different Opinion of A.G. Geelhoed, 27 April 2006,
Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949, para. 52 (“whether pursuant to the applicable DTC or otherwise”).
For a broader approach see Kemmeren, “ECJ should not unbundle integrated tax systems!”, 17 EC Tax Review (2008), 4, 9, and
Kemmeren, “The Internal Market Approach Should Prevail over the Single Country Approach”, in Hinnekens and Hinnekens (Eds.),
A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 555, 561-564
(arguing to consider also unilateral relief).
489 See also Case C-293/06, Deutsche Shell GmbH, [2008] ECR ___, para. 43; see already Toifl, “Can a discrimination in the
state of residence be justified by the taxable situation in the state of source?”, 5 EC Tax Review (1996), 165, 167; Weber, “In Search
of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax (2006), 582, 590-591
and 599-600.
490 Case E-1/04, Fokus Bank, [2004] EFTA Court Report 11 (imputation system and withholding taxation).
491 See Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 564-604.
492 Case C-336/96, Gilly, [1998] ECR I-2793.
493 Case C-385/00, De Groot, [2002] ECR I-11819, para. 99.
494 Case C-265/04, Bouanich, [2006] ECR I-923, para. 51; Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 71; Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949, paras. 44 et seq.
495 Case C-379/05, Amurta, [2007] ECR ___, para. 79; Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 71.
496 Case C-379/05, Amurta, [2007] ECR ___, para. 83.
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The ECJ’s result can be underpinned by various dogmatic considerations.497 First, “the Member States are
free to apportion between themselves not only tax jurisdiction but also priority to taxation”.498 It already follows
from this that it is open to the source State which imposes double economic taxation on dividends to ensure, by
DTC, that this will be relieved by the home State. Second, “if the effect of the DTC in an individual case were
not taken into account, this would ignore the economic reality of that taxable subject’s activity and incentives in
a cross-border context. Put otherwise, it could distort the real effect on that taxpayer of the combination of home
and source State obligations.”499 Conversely, however, it “would be no defense, for example, to argue that the
home State had been in breach of its DTC obligations by failing to relieve the relevant economic double taxation.”500 This is exactly the ECJ’s approach which focuses on the effects of a tax treaty and finds that through
such treaty the effects of the restriction on the free movement of capital may be neutralized.501 Such conclusion
is perfectly aligned with the ECJ’s decision in Gilly,502 according to which the Member States remain at liberty
to determine the connecting factors for the “inter se allocation” of fiscal jurisdiction by means of bilateral
agreements. If, however, the source State would be prohibited to levy a tax on outbound dividends although it
has obliged the residence State to credit such tax, this would result to a shift in taxing jurisdiction, as the residence State would be relieved from granting a credit without improving the overall position of the taxpayer.
Such result would clearly be in conflict with Gilly as it would undermine the bilateral allocation of taxing jurisdiction (and tax revenue) contrary to a tax treaty.503
In essence, the inclusion of a tax treaty’s effects in the discrimination analysis under the fundamental freedoms effectively provides a tie-breaker rule by accepting the agreed taxing priorities between the involved States
and thus avoids a circular argumentation to the detriment of the taxpayer. Clearly, a residence State would argue
that only such foreign tax could be credited that had been paid by the taxpayer after exhausting all possibilities of
reduction, including challenges under the fundamental freedoms.504 Conversely, the source State would rely on
the obligation of the residence State to grant a credit under the tax treaty and, arguing that the residence State is
obliged to credit such tax, would not refrain from taxation at source. The ECJ in Denkavit Internationaal and
Amurta has broken this tie between source and residence States and between treaty law and fundamental freedoms to the benefit of the source State. It also implicitly rejected the contrary view of the EFTA Court in Fokus
Bank,505 which had adhered to a “single-country approach”.506 As already implied in De Groot,507 a tax treaty
obligation to grant relief (e.g., through a credit) is an obligation under international public law. It is therefore part
of the legal systems of both the contracting states, and as such provides a link between those two systems. From
this it also becomes clear that a “neutralization” argument is in vain if a credit limitation, which also forms part
of both jurisdictions that are linked through a tax treaty, takes effect and does not oblige the residence State to
any further relief.508 If, therefore, a credit is – either legally or facutally – not available in the residence State
(e.g., because of a participation exemption, or due to losses, low income, etc.), the source State will still be under
an obligation to tax the shareholder in a nondiscriminatory fashion.509 To put it differently, the mere fact that the
residence State has “allowed” the source State to levy a (withholding) tax does not relief the latter from scrutiny
under the fundamental freedoms.510 It should, however, be noted that many details of such “treaty-based overall
See Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 564-604.
Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 71.
499 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 71.
500 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 71.
501 Case C-379/05, Amurta, [2007] ECR ___, para. 83; see also Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949,
paras. 46-47.
502 Case C-336/96, Gilly, [1998] ECR I-2793.
503 See in this direction also H. Loukota, “Ist § 94a EStG wirklich europarechtswidrig?”, 16 Steuer & Wirtschaft International
(2006), 13, 16; Bellingwout and Baranger, “The Advocate General’s Opinion in Denkavit II”, 46 European Taxation (2006) 457,
461 with note 4. However, Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement
Within the EC”, 34 Intertax (2006), 582, 598-600 (2006), tries to separate the budgetary effects and the allocation of taxing jurisdiction, but seems to neglect the bilateral effect of tax treaties and the reciprocal obligations. See regarding the latter also Opinion of
A.G. Kokott, 14 July 2005, Case C-265/04, Bouanich, [2006] ECR I-923, para. 68 with note 55: In a tax treaty, the contracting States
are ultimately only “demarcating their respective tax jurisdictions, thereby governing the division of the tax revenues between themselves.”
504 See in this respect Cordewener and Schnitger, “Europarechtliche Vorgaben für die Vermeidung der internationalen Doppelbesteuerung im Wege der Anrechnungsmethode“, 83 Steuer und Wirtschaft (2006), 50, 66 et seq.
505 Case E-1/04, Fokus Bank, [2004] EFTA Court Report 11.
506 See also the press release on “Taxation of outbound dividends: Commission takes steps against Austria, Germany, Italy and
Finland”, IP/07/1152 (July 23, 2007), where the Commission noted that, according to Denkavit Internationaal, “it may be relevant to
take into account whether the State of residence of the shareholder gives a tax credit to the shareholder for the withholding tax levied
by the source State. Up to now, the Commission followed the same approach as the EFTA Court in the Fokus Bank case (Case E1/04), where it explicitly ruled that it was not relevant whether a tax credit was given in the State of residence.”
507 Case C-385/00, De Groot, [2002] ECR I-11819.
508 Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949, para. 53.
509 It has been argued against the “treaty-based overall approach” that credit and exemption are only two different methods to
eliminate juridical double taxation. Nevertheless, both methods work in quite different ways leading to different results for the taxpayer; it is, for example, clear that a final withholding tax in the source State becomes a real cost factor if the residence State exempts such foreign income (and possibly tries to achieve capital import neutrality). It therefore seems to be the wrong approach to
assess the effects of both relief mechanisms based on a hypothetical equlization of the involved tax systems, as it is exactly the tax
treaty that links the effectively different systems involved. For a different viewpoint see Weber, “In Search of a (New) Equilibrium
Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax (2006), 582, 603-604.
510 See also Pistone, “Expected and Unexpected Developments of European Integration in the Field of Direct Taxes”, 35 Intertax (2007), 70, 73.
497
498
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approach” remain unclear. While some have argued that only a “full credit” will suffice, 511 the ECJ seems to take
a result-oriented approach, asking if the credit “enables the effects of the restriction on the free movement of
capital to be neutralised.”512 While the ECJ is obviously not concerned with potential liquidity disadvantages
resulting from the time delay between (discriminatory) withholding taxation and the availability of the credit,513
it remains to be seen how the ECJ and domestic courts will deal with situations of credit limitations, credit carryforwards etc.514 The much bigger issue is, however, whether such “treaty-based overall approach” will be applied
not only to dividend income or withholding issues but also to all other income.515
d) Equal Treatment of Different Situations
While the ECJ consistently stresses that discrimination may also arise from the application of the same or a
similar rule to different situations,516 this form of comparision is only inconsistently applied by the Court517 and
has not yet lead to the finding of discrimination in the direct tax area.518 Even in in cases such as AMID519 and
Mertens520, where the Belgian rules required that profits of a treaty-exempt permanent establishment had to be
used to offset home State losses and as such created “equal treatment” of domestic and cross-border situations,521
the Court reversed the tertium comparationis, seemingly disregarding the proft-making Luxembourg permanent
establishment, and noted that
“a Belgian company which, having no establishments outside Belgium, incurs a loss during a given tax year finds itself,
for tax purposes, in a comparable situation with that of a Belgian company which, having an establishment in Luxembourg, incurs a loss in Belgium and makes a profit in Luxembourg during that same tax year.”522
Likewise, the ECJ found no discriminatory application of the same or a similar rule to different situations if
a State does not take into accound foreign taxation and thus exposes the taxpayer to juridical double taxation.523
Indeed, in Kerckhaert-Morres,524 where Belgium taxed domestic and cross-border dividends at the same rate
without crediting foreign withholding tax, the Court noted that
“in respect of the tax legislation of his State of residence, the position of a shareholder receiving dividends is not necessarily altered, in terms of that case-law, merely by the fact that he receives those dividends from a company established
in another Member State, which, in exercising its fiscal sovereignty, makes those dividends subject to a deduction at
source by way of income tax.”525
Along the same lines it has been questioned whether Member States may tie worldwide taxation to a minimal nexus with their taxing jurisdiction, such as a vacation residence, or extend their unlimited taxing power by
way of a trailing tax to taxpayers that exercise their freedoms by moving away. In both instances it could be
argued that such “residents” are (more) comparable to (classical) non-residents and should be treated as such
under the freedoms, implying that taxation of their worldwide profits constitutes discriminatory equal treatment
of different situations.526 Much focusing “national treatment”, the Court obviously does not regard this as a problem.527 Quite to the contrary, in van Hilten, which concerned trailing provisions that applied to nationals for
purposes of inheritance taxation but avoided double taxation by way of a unilateral credit, the Court noted that
511 So Opinion of A.G. Mengozzi, 7 June 2007, Case C-379/05, Amurta, [2007] ECR ___, paras. 87-88; see also, e.g,. Lüdicke,
“European Tax Law, quo vadis?”, 62 Bulletin For International Fiscal Documentation (2008), 8, 10; M. Lang, “ECJ case law on
cross-border dividend taxation – recent developments”, 17 EC Tax Review (2008), 67, 71.
512 Case C-379/05, Amurta, [2007] ECR ___, para. 84; see also Englisch, 16 Internationales Steuerrecht (2007), 853, 859; Vanistendael, “Does the ECJ have the power of interpretation to build a tax system compatible with the fundamental freedoms?”, 17
EC Tax Review (2008), 52, 60 (“effective impact of a tax treaty”).
513 See Meussen, “Denkavit Internationaal: The Practical Issues”, 47 European Taxation (2007), 244, 245-246; and M. Lang,
“ECJ case law on cross-border dividend taxation – recent developments”, 17 EC Tax Review (2008), 67, 71, both drawing a comparison with Case C-290/04, Scorpio, [2006] ECR I-9461.
514 For a recent discussion see Pons, “The Denkavit Internationaal Case and Its Consequences: The Limit between Distortion
and Discrimination?”, 47 European Taxation (2007), 214, 218; Bellingwout, “Amurta: A Tribute to (the Late) Advocate General
Geelhoed”, 48 European Taxation (2008), 124, 129.
515 For example, the potential impact of a tax treaty was not even mentioned in Case C-311/97, Royal Bank of Scotland, [1999]
ECR I-2651 (concerning a tax rate discrimination of a Greek branch of a UK bank). Likewise, in Case C-345/04, Centro Equestre,
[2007] ECR I-1425, paras. 33-35, the ECJ did not evaluate whether a discriminatory disallowance of deductions in the source State
may be neutralized by a treaty credit in the home State, but rather noted (at para. 35) that the credit method is “appropriate for preventing the double counting of costs since, where it is applied by the first State, that State can check the operating expenses that have
been taken into account in calculating the tax paid in the second State.”
516 See,e .g., Case C-279/93, Schumacker, [1995] ECR I-225, para. 30, and Case C-311/97, Royal Bank of Scotland,
[1999] ECR I-2651, para. 26; Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, para. 19; Case C-284/06, Burda,
[2008] ECR ___, para. 82.
517 See also M. Lang, “Die Rechtsprechung des EuGH zu den direkten Steuern – Planungssicherheit für die nationalen Gesetzgeber?”, in Wagner and Wedl (Eds.), Bilanz und Perspektiven zum europäischen Recht (ÖGB Verlag, 2007), 113,119-120.
518 See, most recently, Case C-284/06, Burda, [2008] ECR ___, para. 82-84.
519 Case C-141/99, AMID, [2000] ECR I-11619.
520 Case C-431/01, Mertens, [2002] ECR I-7073.
521 See Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 794-796.
522 Case C-141/99, AMID, [2000] ECR I-11619, para. 29.
523
For a detailed analysis of this issue see infra II.D.3.
See, e.g., Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967.
525 See, e.g., Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, para. 19.
526 See, e.g., M. Lang, “Wohin geht das Internationale Steuerrecht?”, 14 Internationales Steuerrecht (2005), 289, 291, and Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 449-450.
527 See Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957, and the detailed analysis by Opinion of A.G. Léger,
30 June 2005, Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957, paras. 69 et seq.
524
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“[n]ational legislation […], which provides that the estate of a national of a Member State who dies within 10 years of
ceasing to reside in that Member State is to be taxed as if that national had continued to reside in that Member State,
while providing for relief in respect of the taxes levied in the State to which the deceased transferred his residence, does
not constitute a restriction on the movement of capital. […] By enacting identical taxation provisions for the estates of
nationals who have transferred their residence abroad and of those who have remained in the Member State concerned,
such legislation cannot discourage the former from making investments in that Member State from another State nor the
latter from doing so in another Member State from the Member State concerned, and, regardless of the place where the
assets in question are situated, nor can it diminish the value of the estate of a national who has transferred his residence
abroad. The fact that such legislation covers neither nationals resident abroad for more than 10 years nor those who
have never resided in the Member State concerned is irrelevant in that regard. Since it applies only to nationals of the
Member State concerned, it cannot constitute a restriction on the movement of capital of nationals of the other Member
States.”528
C. The Issue of “Horizontal Discrimination”:
A Prohibition of Discrimination Among Different Cross-Border Situations
All types of “discriminatory” restrictions discussed above have one dominant feature in common, and that
is the choice of the relevant tertium comparationis: In particular as regards the broad (and more recently “discovered”) category of ad rem outbound restrictions,529 it is obvious that the treatment of a given cross-border
activity by a certain Member State is being compared with the treatment of a (hypothetical) purely domestic
activity of an otherwise (ceteris paribus) identical kind. Yet, the same underlying idea can be identified with
respect to the more traditional type of “overt” or “covert” nationality discrimination (ad personam) in inbound
situations, and it also applies irrespective of whether a situation is analyzed on the basis of a “single country” or
an “overall” approach.530 In all these constellations the ECJ has in substance always looked for unequal treatment of transactions containing an element which crosses a Member State´s border as compared to equivalent
transactions lacking that particular cross-border element, and the Court has found it suspicious if the latter situation was treated more favourably. This choice of the relevant tertium comparationis has been described as the
concept of “vertical” non-discrimination.531
However, one can also imagine other situations where certain cross-border activities are put at a disadvantage, even though not in comparison to purely domestic activities but put into a relative perspective as regards
other cross-border activities. Thus, what is at stake is a potential discrimination based on the use of a different
tertium comparationis than in the situations addressed above, and this approach has been described as the concept of “horizontal” non-discrimination.532 There are in fact quite a number of situations falling into this category, and even though many authors have suggested that also these situations should be protected by EC law,
and in particular by the fundamental freedoms, the ECJ until now has shown a remarkably hesitant attitude in
this respect.
1. Nationality-Based “Reverse” Discrimination of Cross-Border Activities
To start with a first example, the van Hilten533 case was about a Dutch national who had emigrated from the
Netherlands first to Belgium in 1988, and from there finally in 1991 to Switzerland where she died in 1997. The
problem her heirs were faced with was that Dutch inheritance law contained a legal fiction providing that, in case
Netherland nationals emigrate to a country with a lower level of inheritance taxes, they will be deemed to be
resident in the Netherlands for another ten years following the day of their emigration. Leaving aside the issue of
differing foreign tax levels for a moment,534 it should be pointed out that one of the aspects the national court
considered dubious about this legislation from an EC law perspective was the fact that it exclusively applied to
Dutch nationals. The ECJ, however, refrained from any closer analysis and considered this to be an issue of
allocation of taxing rights (and therefore a “disparity” under the Gilly doctrine535). In this respect, it simply stated
that,
“As regards the differences in treatment between residents who are nationals of the Member State concerned and those
who are nationals of other Member States resulting from national legislation such as that in question in the main proceedings, it must be observed that such distinctions, for the purpose of allocating powers of taxation, cannot be regarded
as constituting discrimination prohibited by Article 73b of the Treaty. They flow, in the absence of any unifying or
harmonising measure adopted in the Community context, from the Member States’ power to define, by treaty or unilaterally, the criteria for allocating their powers of taxation”.536
528
Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957, paras. 45-46.
Supra II.B.3.b.
530 On this particular issue see supra II.B.3.c.
531 See Cordewener, “The prohibitions of discrimination and restriction within the framewoork of the fully integrated internal
market”, in Vanistendael (Ed.), EU Freedoms and Taxation (IBFD 2006), 1, 25.
532 See Cordewener, “The prohibitions of discrimination and restriction within the framewoork of the fully integrated internal
market”, in Vanistendael (Ed.), EU Freedoms and Taxation (IBFD 2006), 1, 25 et seq.; Cordewener, “EC law protection against
`horizontal´ tax discrimination on the rise – or how to play snooker in an Internal Market”, 16 EC Tax Review (2007), 210.
533 Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957.
534 See for this issue the example of the Columbus case which will be discussed infra II.C.4.
535 See supra II.A.2.
536 Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957, para. 47, referring to Case C-336/96, Gilly, [1998] ECR I2793, para. 30 (as regards Art. 39 EC), and to Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 57 (as regards Art. 43, 48
EC).
529
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Still it is striking that all other residents, whether EU or even third country nationals, could leave the Netherlands completely untouched by the provision at issue, while that Member State’s own nationals were subject to
an “extended” unlimited tax liability there for a considerable period. What the situation actually boils down to is
that a certain Member State creates an “exit hurdle” for its own nationals (triggering a tax burden for their heirs)
under its own domestic legislation, while no such hurdle exists for foreign nationals who leave the Netherlands
under otherwise completely identical circumstances. It is indeed more than questionable whether such a situation
can be put on the same level as the allocation of taxing rights within the framework of a bilateral treaty, even
though on the basis of a taxpayer´s nationality, which the Court had placed outside the scope of the fundamental
freedoms in Gilly. In our view it should indeed be considered whether, in cases like van Hilten, the relevant
fundamental freedom(s) could not be applied in conjunction with Art. 12(1) EC, which prohibits “any discriminination on grounds of nationality” within the scope of the EC Treaty and therefore also covers such situations of
“discrimination à rebours”.537
2. Free Choice of Secondary Establishment
A second example of a situation where the above-mentioned concept of “horizontal” non-discrimination
could come into play, and in fact has gained a certain degree of acceptance on the part of the ECJ, can be identified with regard to the scope of protection under the freedom of establishment guaranteed by Art. 43, 48 EC (exArt. 52, 58 EC Treaty). More specifically, this concerns the prohibition of “restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member States established in the territory of any other Member
State”, and its application to situations where a taxpayer set up a certain type of secondary establishment in another Member State, and national legislation provided for less advantageous treatment than if another type of
secondary establishment had been chosen. Already in the groundbreaking Avoir Fiscal judgment, although still
rather with the quality of an obiter dictum, the ECJ had pointed out that,
“The second sentence of the first paragraph of Article 52 expressly leaves traders free to choose the appropriate legal
form in which to pursue their activities in another Member State and that freedom of choice must not be limited by discriminatory tax provisions.”538
This approach was then developed a bit further in Compagnie de Saint-Gobain, where a French company
had argued that, due to the denial of a tax exemption for third country shareholdings, its German permanent
establishment was treated worse than German corporate taxpayers, including German subsidiaries of French
companies, holding such shares. The Court in fact endorsed both parts of the argument and stated that,
“In those circumstances, the refusal to grant the tax concessions in question to the permanent establishments in Germany of non-resident companies makes it less attractive for those companies to have intercorporate holdings through
German branches, since under German law and double-taxation treaties the tax concessions in question can only be
granted to German subsidiaries which, as legal persons, are subject to unlimited tax liability, which thus restricts the
freedom to choose the most appropriate legal form for the pursuit of activities in another Member State, which the second sentence of the first paragraph of Article 52 of the Treaty expressly confers on economic operators. The difference
in treatment to which branches of non-resident companies are subject in comparison with resident companies as well as
the restriction of the freedom to choose the form of secondary establishment must be regarded as constituting a single
composite infringement of Articles 52 and 58 of the Treaty.”539
After the latter ruling it was strongly advocated in academic writing that Art. 43(1) EC protected the free
choice among different types of secondary establishments, in the sense of a guarantee of “neutrality of legal
form” of those establishments.540 And a few years later the Court indeed seems to have completed its path towards the direction of a specific “horizontal” non-discrimination principle, when it had to rule on a special tax
rate applying only to permanent establishments of foreign corporate taxpayers under German law in CLT-UFA.
In that case the Court summed up its previous case-law and found that,
“freedom of establishment for nationals of one Member State on the territory of another Member State includes the
right to take up and pursue activities as self-employed persons and to set up and manage undertakings under the conditions laid down for its own nationals by the law of the country where such establishment is effected. The abolition of
restrictions on freedom of establishment also applies to restrictions on the setting up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of another Member State […]. The second sentence of
the first paragraph of Article 52 expressly leaves traders free to choose the appropriate legal form in which to pursue
their activities in another Member State and that freedom of choice must not be limited by discriminatory tax provisions
[…]. Therefore, the freedom to choose the appropriate legal form in which to pursue activities in another Member State
primarily serves to allow companies having their seat in a Member State to open a branch in another Member State in
order to pursue their activities under the same conditions as those which apply to subsidiaries. In that regard, it must be
pointed out that the definitive tax rate of 42% applicable to the profits of branches of parent companies having their seat
537 See, with respect to an identical German inheritance tax legislation, also Höninger, Internationale Doppelbesteuerung im
Erbschaft- und Schenkungsteuerrecht (P. Lang, 2003), 137 et seq.
538 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 22.
539 Case C-307/97, Saint-Gobain, [1999] ECR I-6161, paras. 42 et seq.
540 See, in particular, Schön, “Freie Wahl zwischen Zweigniederlassung und Tochtergesellschaft – ein Grundsatz des Europäischen Unternehmensrechts“, 11 Europäisches Wirtschafts- und Steuerrecht (2000), 281 et seq.; Schön, “The Free Choice between the Right to Establish a Branch and to Set-up a Subsidiary – a Principle of European Business Law“, 2 European Business
Organization Law Review (2001), 339 et seq.; Schön, “Die Niederlassungsfreiheit von Kapitalgesellschaften im System der Grundfreiheiten“, in Schneider et al. (Eds.), Deutsches und europäisches Gesellschafts-, Konzern- und Kapitalmarktrecht – Festschrift für
Lutter (O. Schmidt, 2000), 685, 693. Compare also Dautzenberg, “Das EG-rechtliche Gleichbehandlungsgebot für Betriebsstätten
und Tochtergesellschaften“, 12 Europäisches Wirtschafts- und Steuerrecht (2001), 270 et seq. For a more critical view see Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 831 et seq.
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in another Member State constitutes, generally speaking, unfavourable treatment in relation to the tax rate reduced to
33.5%, or even 30%, which is applicable to the profits of the subsidiaries of such companies. It follows from the above
that the refusal to apply the reduced tax rate to branches renders the possibility, for companies having their seat in another Member State, of exercising the right to freedom of establishment through a branch less attractive. It follows that
a national law such as the one in dispute in the main proceedings restricts the freedom to choose the appropriate legal
form in which to pursue activities in another Member State.”541
As the judgment in this case rested only on the comparison between branches and subsidiaries, it might indeed be considered to form the final step towards the emancipation of an independent “horizontal” nondiscrimination principle guaranteed by Art. 43(1) EC: Starting from a mere obiter dictum in Avoir Fiscal, the
Court moved towards a “single composite infringement” of the traditional (“vertical”) non-discrimination rule
and the free choice concept in Compagnie de Saint-Gobain, before it finally appears to have arrived at an isolated application of the latter concept in CLT-UFA. Neverthess, also in this respect a number of question marks
remain. The most striking aspect is in fact that all the afore-mentioned cases concern “inbound” situations, whereas the application of the free choice concept has categorically been rejected in “outbound” situations.
A first example of this approach is Marks & Spencer, where the plaintiff had argued, inter alia, that losses
suffered by its foreign subsidiaries should be taken into account within the framework of UK group relief, just
like losses of foreign permanent establishments were generally included in the UK tax base (due to inlimited tax
liability on worldwide income under UK domestic law and, in case of a tax treaty, under the usually employed
credit method). Advocate General Maduro, however, acknowledged that there was indeed “a disadvantage connected to the choice of the legal form of the foreign establishment”, but made sure to point out that subsidiaries
and permanent establishments are not comparable when it comes to the application of domestic legislation on
loss relief.542 The A.G. therefore excluded any application of the free choice concept, and the ECJ in its subsequent judgment did not even mention it but only applied the “vertical” principle of non-discrimination.543 And a
second example of the Court´s clear disinclination to apply the “horizontal” non-discrimination (or free choice)
concept to home State rules is the judgment in Columbus Container Services, where the plaintiff had argued that
the relevant provisions of the German Außensteuergesetz (AStG) led to a distortion of the choice between the
establishment, in another Member State, of a subsidiary and a foreign partnership (which, for tax purposes, was
“transparent” and treated as a permanent establishment of the partners). The Court responded in a rather sharp
tone and rejected a violation of Art. 43 EC, emphasizing that,
“In this respect it must be recalled that the fiscal autonomy […] also means that the Member States are at liberty to determine the conditions and the level of taxation for different types of establishments chosen by national companies of
partnerships operating abroad, on condition that those companies or partnerships are not treated in a manner that is discriminatory in comparison with comparable national establishments.”544
It is in particular this development in the area of “outbound” activities, and the ECJ’s clear reluctance to
scrutinize home State rules under the “horizontal” free choice concept, which raises doubts as to whether one can
really speak of an independent legal principle in this respect. Eventually this may even lead to a reassessment of
the judgments handed down until now with regard to “inbound” activities, since at least one thing is obvious:
The common denominator of the cases decided until now is that they all concerned the tax treatment of permanent establishments of foreign corporations in the host State, and that in principle the disadvantages permanent
establishments suffered (in a “horizontal” perspective) as compared to subsidiaries were the same disadvantages
non-resident corporate taxpayers suffered (in a “vertical” perspective) as compared to resident corporate taxpayers. As Advocate General Maduro rightly pointed out in Marks & Spencer,
“It is clearly apparent that in all those cases discrimination in the choice of form of establishment is inextricably bound
up with discrimination as to the choice of place of residence. That is owing to the fact that the State concerned chose to
place the different form of establishment on the same footing for the purposes of taxation in its territory. If in such a
case a difference of treatment is none the less established it is because it in fact conceals a case of discrimination on the
ground of nationality, as against the companies operating those establishments.”545
Against this background, the ground for an independent “horizontal” free choice concept is less solid than it
appears, and therefore it is hardly surprising that this issue is still under debate.546 It might even be argued that
the concept is not independent at all, but merely a supporting test to establish the existence of a “vertical” discrimination in “inbound” situations. One would then have to take the Court’s statement in Compagnie de SaintGobain literally that what is at stake is merely “a single composite infringement” of Art. 43 EC, with the main
emphasis on the traditional non-discrimination principle and its focus on residents and non-residents as the relevant pair of comparison.
541 Case C-253/03, CLT-UFA S.A., [2006] ECR I-1831, paras. 31 et seq. See on this case Schnitger, “The CLT-UFA Case and
the `Principle of Neutrality of Legal Form´, 44 European Taxation (2004), 522 et seq.
542 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, paras. 42 et seq.
543 Case C-446/03, Marks & Spencer plc, [2005] ECR I-10837. Compare in this respect also Cordewener and Dörr, “Case C446/03, Marks & Spencer plc. v. David Halsey (HM Inspector of Taxes), Judgment of the Court of Justice (Grand Chamber) of 13
December 2005”, 43 Common Market Law Review (2006), 855, 861 et seq., 873 et seq.
544 Case C-298/05, Columbus Container Services BVBA & Co., [2007] ECR ___, para. 53.
545 Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 47.
546 See M. Lang, “Gemeinschaftsrechtliche Verpflichtung zur Rechtsformneutralität?”, 15 Internationales Steuerrecht (2006),
397 et seq.
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3. Tax Treaties and “Most-Favoured-Nation” Treatment
Another issue that has not only been subject to an intense debate among scholars but also international tax
practitioners is often referred to as the question of “most favoured nation” (MFN) treatment.547 This is a term
that is very well known in the sphere of public international law, in particular the multilateral WTO sphere
(Art. I GATT, Art. II GATS, Art. 4 TRIPS),548 but it also appears in the field of double tax treaties, and this
actually more frequently than some may think.549 Still, for the realms of Community law this is a new concept, as
it is not mentioned as such in the EC Treaty, and the few hidden provisions which may be hinting at it did not
gain any relevance in practice and in the ECJ´s case law.550 Probably it was only when the discussion came up in
the tax area whether a Community law principle of “most favoured nation” treatment existed that many EC law
practitioners took notice of the problem for the very first time. And at a closer look, also this is an issue of equal
treatment, or of potential “horizontal” discrimination:551 What it boils down to is the question of whether a
Member State (A) may treat a certain cross-border transaction, taking place in relation to another Member State
(B), less favourably than it treats an otherwise identical cross-border situation that takes place in relation to a
third Member State (C). The different constituent elements of the discrimination concept remain the same: Different treatment, by a single Member State, of two comparable situations, on the basis of a prohibited criterion,
the use of which arbitrarily disadvantages one of these situations. The only difference is that instead of comparing a cross border and a domestic situation, the comparison is made between two cross border situations, or, in
other words two inward (or outward) economic activities originating in (or destined for) two different other
Member States.
As a result of its potentially significant effects, the issue of “most-favoured-nation treatment” in EC tax law
has been intensely discussed in legal writing. The opinions ranged from favouring such approach,552 over sympa-
547 Sometimes the problem, or at least some of its facettes, are also dealt with under the headline “Community preference”. See
Kofler, “Most-Favoured-Nation-Treatment in Direct Taxation: Does EC Law Provide for Community Preference in Bilateral Double
Tax Treaties?”, 5 Houston Business and Tax Law Journal (2005), 1, 64 et seq. For a recent discussion see Sørensen, “The MostFavoured-Nation Principle in the EU”, 34 Legal Issues of Economic Integration (2007), 315.
548 On the historic origins in the middle ages and current applications of the concept see Herrmann, “Meistbegünstigung im
Völkerrecht”, in Cordewener, Enchelmaier and Schindler (Eds.), Meistbegünstigung im Steuerrecht der EU-Staaten (C.H. Beck,
2006), 29 et seq.
549 More than 500 MFN clauses are mentioned by Hofbauer, Das Prinzip der Meistbegünstigung im grenzüberschreitenden Ertragsteuerrecht (Linde, 2005). Compare on the issue also Rust, “Meistbegünstigungsklauseln in den Doppelbesteuerungsabkommen”, in Cordewener, Enchelmaier and Schindler (Eds.), Meistbegünstigung im Steuerrecht der EU-Staaten (C.H. Beck, 2006), 77
et seq.
550 See for example Art. 54 EC, providing that, “[a]s long as restrictions on freedom to provide services have not been abolished, each Member State shall apply such restrictions without distinction on grounds of nationality or residence to all persons providing services within the meaning of the first paragraph of Article 49”. On the lack of discussion concerning the existence of an
MFN concept under EC law in general see Enchelmaier, “Meistbegünstigung im EG-Recht – Allgemeine Grundsätze”, in Cordewener, Enchelmaier and Schindler (Eds.), Meistbegünstigung im Steuerrecht der EU-Staaten (C.H. Beck, 2006), 93 et seq. For a
very early discussion see, however, Hay, “The European Common Market and the Most-Favored-Nation Clause”, 23 University of
Pittsburgh Law Review (1961-1962), 661 et seq., and roughly three decades later Bourgeois, “Market Access for non-EC Goods and
Businesses after 1992”, 11 Michigan Journal of International Law (1990), 531.
551 Compare also Weber and Spierts, “The ‘D Case’: Most-Favoured-Nation Treatment and Compensation of Legal Costs before the European Court of Justice”, 58 Bulletin for International Fiscal Documentation (2004), 65, at 67 et seq.
552 See, with different nuances towards a possible justification, e.g., Rädler, “Tax treaties and the Internal Market (Annex 6)”,
in Report of the Committee of Independent Experts on Company Taxation (Ruding Report) (Brussels, 1992), 378; Herzig and Dautzenberg, “Der EWG-Vertrag und die Doppelbesteuerungsabkommen – Rechtsfragen im Verhältnis zwischen Doppelbesteuerungsabkommen und den Diskriminierungsverboten des EWGV”, Der Betrieb (1992), 2519, 2521; Rädler, “Most-favoured-nation Clause
in European Tax Law?”, 4 EC Tax Review (1995), 66, 67; Gammie and Brannan, “EC Law Strikes at the UK Corporation Tax – The
Death Knell of UK Imputation?”, 23 Intertax (1995), 389, 402; Farmer, “EC Law and Direct Taxation – Some Thoughts on Recent
Issues”, 1 EC Tax Journal (1995), 91, 101; Schuch, “’Most favoured nation clause’ in Tax Treaty Law”, 5 EC Tax Review (1996),
161 et seq; Schuch, “Verpflichtet das EU-Recht zur DBA-rechtlichen Meistbegünstigung?”, 6 Steuer & Wirtschaft International
(1996), 267 et seq; Schuch, “Will EC Law Transform Tax Treaties into Most Favoured-Nation Clauses?”, in Gassner, M. Lang and
Lechner (Eds.), Tax Treaties and EC Law, (Linde, 1996), 89 et seq; Wassermeyer, “Die Vermeidung der Doppelbesteuerung im
Europäischen Binnenmarkt”, in Lehner (Ed.), Steuerrecht im Europäischen Binnenmarkt, Deutsche Steuerjuristische Gesellschaft
(DStJG) Vol. 19 (O. Schmidt, 1996), 151, 162; Herzig and Dautzenberg, “Die Einwirkungen des EG-Rechts auf das deutsche Unternehmenssteuerrecht”, Der Betrieb (1997), 8, 16; Schuch, “EC Law Requires Multilateral Tax Treaty”, 7 EC Tax Review (1998), 29,
36; Toifl, “Austria”, in Essers, de Bont and Kemmeren (Eds.), The Compatibility of Anti-Abuse-Provisions in Tax Treaties with EC
Law (Kluwer, 1998), 41, 60; Rädler, “Most Favoured Nation Concept in Tax Treaties”, in M. Lang et al (Eds.), Multilateral Tax
Treaties (Linde, 1998), 1, 3; Wassermeyer, “Does the EC-Treaty Force the EU Member States to Conclude a Multilateral Tax Treaty?”, in M. Lang et al (Eds.), Multilateral Tax Treaties (Linde, 1998), 15, 21; Schuch, “Bilateral Tax Treaties Multilateralized by the
EC Treaty”, in M. Lang et al (Eds.), Multilateral Tax Treaties (Linde, 1998), 33, 35; Dautzenberg, “Die Kapitalverkehrsfreiheit des
EG-Vertrages, der Steuervorbehalt des Art 73d EGV und die Folgen für die Besteuerung”, 44 Recht der Internationalen Wirschaft
(1998), 537, 544; Farmer, “EC Law and Double Taxation Agreements”, 4 EC Tax Journal (1999), 137, 152; M. Lang, “Die Zukunft
des Internationalen Steuerrechts in Europa”, in Gassner, Hemetsberger-Koller, M. Lang, Sasseville and Vogel (Eds.), Die Zukunft
des Internationalen Steuerrechts (Linde, 1999), 71, 78; van Thiel, Free Movement of Persons and Income Tax Law: the European
Court in Search of Principles (Amsterdam: IBFD, 2002), 486 et seq; Rädler, “Most-Favourite-Nation-Treatment in Direct Taxation
– Some New Aspects”, 13 Steuer & Wirtschaft International (2003), 360 et seq; De Ceulaer, “Community Most-Favoured-Nation
Treatment: One Step Closer to the Multilateralization of Income Tax Treaties in the European Union?”, 57 Bulletin for International
Fiscal Documentation (2003), 493, 494; van der Linde, “Some thoughts on most-favoured-nation treatment within the European
Community legal order in pursuance of the D case”, 13 EC Tax Review (2004), 10 et seq; see also Tietje, “Die Meistbegünstigungsverpflichtung im Gemeinschaftsrecht", 30 Europarecht (1995), 398, 406. van Thiel, “Why the ECJ should interpret directly applicable European law as a right to intra Community most favoured nation treatment”, 47 European Taxation (2007), 263-279 and 314328.
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thetic,553 neutral,554 and antipathetic555 statements, to vehement rejections.556 This diversity of opinions was quite
understandable. Supporters argued that a judicial application of the MFN doctrine to tax treaties would undoubtedly ensure full compatibility with EC law and the concept of a Single Market, that should work like any domestic market of a Member State. They also felt it only logical that if a Member State had to grant national treatment
to any inbound (or outbound) economic activity, it had to give the same treatment to all incoming (or outbound)
activity irrespective of origin (or destination). But opponents claimed that a judicail application of the MFN
obligation would clearly impair the reciprocity of tax treaties and domestic law. From a policy perspective, it has
been argued that “such a most favoured nation effect would really ruffle settled international tax law”,557 that it
“would result in the abolition of the principle of reciprocity which, however, forms the backbone of bilateral
agreements”,558 or that “one of the pillars of tax treaty law, the reciprocity principle, would have been demolished”.559 Than again those supporting a most-favoured nation treatment recalled that Community law, including
Art. 14 EC, Art. 12 EC and the freedoms, prohibit discrimination between non-residents without being dependent on “reciprocity”, and they argued that the judicial application of MFN treatment, and, therefore, a loss in
revenue, would be a powerful motivation for the Community and the Member States to harmonize international
tax law on the EC level.560 Conversely, it was argued that the EC Treaty prohibits “any discrimination on
grounds of nationality”, but does not explicitly provide for most-favoured-nation treatment; rather a “free-rider
course” (including the prevention of multiple non-taxation) and a potential “chaos” that MFN treatment wuld
cause, should be prevented and the “sovereignty” of the Member States in direct tax matters and the “reciprocity” of bilateral tax treaties should be honored. This conclusion has also been reached by a number of national
courts that have dealt with the issue.561 Ultimately, those extreme positions have made place for a differentiated
view based on Gilly562, arguing that only provisions that confer a “unilateral” or a substantive tax treaty benefit
(beyond allocation of tax jurisdiction and avoidance of double taxation), and not those providing for an alloca553 See, e.g., Kergall, “Aspects of Treaty Overriding”, 21 Intertax (1993), 458, 459; M. Lang, “Doppelbesteuerungsabkommen
und Gemeinschaftsrecht”, in Breuninger, Müller and Strobl-Haarmann (Eds.), Steuerrecht und Europäische Integration, Festschrift
Rädler (C.H. Beck, 1999), 429, 432; Züger, “Neue Internationale Steuerfälle vor dem EuGH”, 10 Steuer & Wirtschaft International
(2000), 133, 137.
554 See, e.g., van Raad, “The Impact of the EC Treaty’s Fundamental Freedoms Provisions on EU Member States’ Taxation in
Border-crossing Situations – Current State of Affairs”, 3 EC Tax Review (1994), 190, 201; see also Pistone, “An EU Model Tax
Convention”, 11 EC Tax Review (2002), 129, 130; Pistone, The Impact of Community Law on Tax Treaties, (Kluwer, 2002), 211 et
seq.; Weber and Spierts, “The ‘D Case’: Most-Favoured-Nation Treatment and Compensation of Legal Costs before the European
Court of Justice”, 44 European Taxation (2004), 65 et seq.
555 See the brief statements to the negative by Wattel, “The EC Court’s Attempts to Reconcile the Treaty Freedoms with International Tax Law”, 33 Common Market Law Review (1996), 223, 252; Vogel, “Some Observations Regarding ‘Gilly’”, 7 EC Tax
Review (1998), 150 et seq.; see also van den Hurk, “The European Court of Justice knows its limits – A discussion inspired by the
Gilly and ICI cases”, 8 EC Tax Review (1999), 211, 216; Offermanns and Romano, “Treaty Benefits for Permanent Establishments:
The Saint-Gobain Case”, 40 European Taxation 5 (2000), 180, 188; Lehner, “The Influence of EU Law on Tax Treaties from a
German Perspective”, 54 Bulletin for International Fiscal Documentation (2000), 461, 470; Gammie, “Double taxation, bilateral
treaties and the fundamental freedoms of the EC Treaty”, in van Arendonk, Engelen and Jansen (Eds.), A Tax Globalist, Essays in
honour of Maarten J. Ellis (IBFD, 2005), 266, 280.
556 See, e.g., L. Hinnekens, “Compatibility of Bilateral Tax Treaties with European Community Law – The Rules”, 3 EC Tax
Review (1994), 146, 152; L. Hinnekens, “Compatibility of Bilateral Tax Treaties with European Community Law – Application of
the Rules”, 4 EC Tax Review (1995), 202, 209; Vogel, “Problems of a Most-Favoured-Nation Clause in Intra-EU Treaty Law”, 4 EC
Tax Review (1995), 264, 264; L. Hinnekens, “Non-Discrimination in EC Income Tax Law: Painting in the Colours of a ChameleonLike Principle”, 36 European Taxation 9 (1996), 286, 297; Kemmeren, “The termination of the ‘most favoured nation clause’ dispute in tax treaty law and the necessity of a Euro Model Tax Convention”, 6 EC Tax Review (1997), 146, 147; Hughes, “Withholding Taxes and The Most Favoured Nation Clause”, 51 Bulletin for International Fiscal Documentation (1997), 126 et seq; Hughes,
“Gilly and the Big Picture”, 52 Bulletin for International Fiscal Documentation (1998), 329, 332; Kemmeren, “EC Law: Specific
Observations”, in Essers, de Bont and Kemmeren (Eds.), The Compatibility of Anti-Abuse-Provisions in Tax Treaties with EC Law
(Kluwer, 1998), 17, 22; Avery Jones, “Flows of capital between the EU and third countries and the consequences of disharmony in
European international tax law”, 7 EC Tax Review (1998), 95, 97; Lehner, “Annotations on the Judgment of the European Court of
Justice, Case 336/96 – The Gilly Case – of 12 May 1988”, 52 Bulletin for International Fiscal Documentation (1998), 334, 335;
Martín-Jiménez, García Prats and Calderón, “Triangular Cases, Tax Treaties and EC Law: The Saint-Gobain Decision of the ECJ”,
55 Bulletin for International Fiscal Documentation (2001), 241, 250; Dourado, “From the Saint-Gobain to the Metallgesellschaft
case: scope of non-discrimination of permanent establishments in the EC Treaty and the most-favoured-nation clause in EC Member
States tax treaties”, 11 EC Tax Review (2002), 147, 151.
557 Wattel, “The EC Court’s Attempts to Reconcile the Treaty Freedoms with International Tax Law”, 33 Common Market Law
Review (1996), 223, 252.
558 Lehner, “The Influence of EU Law on Tax Treaties from a German Perspective”, 54 Bulletin for International Fiscal Documentation (2000), 461, 470.
559 Kemmeren, “The termination of the ‘most favoured nation clause’ dispute in tax treaty law and the necessity of a Euro
Model Tax Convention”, 6 EC Tax Review (1997), 146, 148.
560 See, e.g., M. Lang, “Doppelbesteuerungsabkommen und Gemeinschaftsrecht”, in Breuninger, Müller and Strobl-Haarmann
(Eds.), Steuerrecht und Europäische Integration, Festschrift Rädler (C.H. Beck, 1999), 429, 435.
561 See the German Bundesfinanzhof, 31 October 1990, II R 176/87, BStBl 1991 II 161 (regarding the wealth taxation of an Italian corporation in Germany); and the German Bundesfinanzhof, 26 May 2004, I R 54/03, BStBl 2004 II 767 (concerning German
dividend withholding tax on profit distributions paid to a Russian parent company in light of the free movement of capital). Also, an
Austrian Tax Court has denied MFN treatment in a case regarding royalty payments made by an Austrian to a Netherlands corporation, as the Austrian withholding tax did not create a disadvantage and the Netherlands had to credit the Austrian tax. See UFS Wien,
23 June 2005, RV/1799-W/03, and the discussion of this case by Hofbauer, “UFS verneint die Geltung der Meistbegünstigung im
Europarecht”, 15 Steuer & Wirtschaft International 8 (2005), 376 et seq. In two other reported cases, a Netherlands court denied the
application of MFN treatment with regard to a certain tax benefit for individuals without posing preliminary questions to the ECJ.
See Betten, “Lower Courts Deny Application of Most-Favoured-Nation Clause: A Lost Opportunity?”, 37 European Taxation
(1997), 417 et seq.
562 Case C-336/96, Gilly, [1998] ECR I-2793.
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tion of taxing rights, could result in horizontal discrimination and require most-favoured-nation treatment.563 The
Commission also supported this position and, as a result, has put the focus on whether or not a tax treaty provision is allocative in nature.564
Taking another (even hypothetical) cross-border activity as the relevant tertium comparationis, one can in
fact form numerous examples of situations that might be suspect of “horizontal” discrimination, both from an
inbound or an outbound perspective, and under domestic just as under tax treaty law. 565 Some of the most striking examples made their way to the ECJ, and they concerned the question of whether a source State may deny to
residents of one Member State what it grants to residents of another Member State on the basis of a bilateral
double tax treaty. The first case to be decided in this respect was D, and it is highly interesting to see how the
ECJ, after Advocate General Colomer had pleaded in favour of endorsing the “horizontal” comparison as a part
of the prohibition of restrictions on capital movements between Member States under Art. 56(1) EC,566 briefly
looked at the issue – and then dropped it like a hot potatoe. The Court in fact attributed a special status to the
reciprocity of legal positions enshrined in a tax treaty, and decided that
“The fact that those reciprocial rights and obligations apply only to persons resident in one of the two Contracting
Member States is an inherent consequence of bilateral double taxation conventions. It follows that a taxable person resident in Belgium is not in the same situation as a taxable person resident outside Belgium so far as concerns wealth tax
on real property situated in the Netherlands.”567
Thus, what happened was more or less that the ECJ took a short cut in order to get out of the nondiscrimination analysis, by stating that, from the perspective of the source State and for the purpose of determining its obligation to comply with non-discrimination requirements, non-residents belonging to a Member State
with whom the source State has concluded a bilateral double tax treaty, are always in a “unique” position: Simply due to the existence of that tax treaty, they can not be considered comparable to non-residents belonging to
any other Member State, be it a State with whom the source State has also concluded a bilateral tax treaty or a
State with whom no such treaty exists. As the question in D was whether a provision in a double tax treaty was
discriminatory (in the sense, above all, of the “horizontal” non-discrimination concept analyzed here), and the
answer was that no discrimination could exist simply because the very tax treaty under scrutiny itself made situations uncomparable, the argument appears indeed circular and has triggered a multitude of critical reactions.568
The main criticism is a rather fundamental one, namely that the ECJ should not create an immunity zone for
Member States´ activities, in the sense that discriminatory behaviour should not be excluded from the reach of
the fundamental freedoms simply because it takes place on a bilateral level in a concerted action of two Member
States within the framework of a double taxation treaty.569
563 See van Thiel, Free Movement of Persons and Income Tax Law: the European Court in Search of Principles (Amsterdam:
IBFD, 2002), 486 et seq; Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 836 et seq.;
Weggenmann, “EG-rechtliche Aspekte steuerlicher Meistbegünstigung im Abkommensrecht”, 12 Internationales Steuerrecht 19
(2003), 677, 681 et seq.; van der Linde, “Some thoughts on most-favoured-nation treatment within the European Community legal
order in pursuance of the D case”, 13 EC Tax Review (2004), 10, 14 et seq; Kofler, “Most-Favoured-Nation Treatment in Direct
Taxation: Does EC Law Provide for Community MFN in Bilateral Double Taxation Treaties?”, 5 Houston Business and Tax Law
Journal 1, 68 et seq. (2005); van Thiel, “Why the ECJ should interpret directly applicable European law as a right to intra Community most favoured nation treatment”, 47 European Taxation (2007), 263-279 and 314-328.
564 See Lyal, “The Position Taken by the Commission in Case C-376/03 D. v. Belastingdienst”, 45 European Taxation (2005),
340 et seq. See also the Working Paper “Company Taxation in the Internal Market”, COM(2001)582 final, 316, in which the Commission stated that it “remains unclear whether all differences between tax treaties will be incompatible with the equal treatment
principle. In particular it is arguable that the equal treatment principle does not allow reciprocal concessions which go beyond mere
allocation of taxing rights, such as differences in concessions to avoid economic double taxation (refunds of imputation credits).” It
should also be noted that the Commission had already taken measures regarding an MFN case in respect of the previous French
branch profits tax. See the European Commission’s press release, “Company taxation: European Commission Pursues Infringement
Proceedings against France and Greece”, IP/97/730 (31 July 1997), and Tutt, “European Commission Threatens Legal Action Regarding French Taxation of Profits”, 15 Tax Notes Int’l 443 (Aug. 11, 1997), Schuch, “EC Law Requires Multilateral Tax Treaty”, 7
EC Tax Review (1998), 29 et seq., and Berlin and Chaulin, “Legislation: France”, 7 EC Tax Review (1998), 296 et seq. Conversely,
most-favoured-nation treatment in respect of withholding taxes was rejected by the Commission when it stated that “that current
community law does not oblige a Member State to grant automatically the withholding tax rate of its most favourable bilateral
agreement to taxpayers of another Member State which is not covered by that agreement”. Regarding this, see the answer given by
Mrs Scrivener on behalf of the Commission, [1993] OJ (C 40) 13.
565 Compare the survey procided by Cordewener, “EG-rechtliche Meistbegünstigungspflicht im Steuerrecht: Aktuelle und potenzielle Fallgestaltungen”, in Cordewener, Enchelmaier and Schindler (Eds.), Meistbegünstigung im Steuerrecht der EU-Staaten
(C.H. Beck, 2006), 123 et seq. See with regard to a much disputed issue also Hughes, “Withholding Taxes and the Most Favoured
Nation Clause“, 51 Bulletin for International Fiscal Documentation (1997), 129 et seq.
566 Opinion of A.G. Colomer, 26 October 2004, Case C-376/03, D, [2005] ECR I-5821, paras. 72 et seq.
567 Case C-376/03, D, [2005] ECR I-5821, para. 61.
568 See, e.g., Kofler and Schindler, “‘Dancing with Mr D’: The ECJ’s Denial of Most-Favoured-Nation Treatment in the ‘D’
case”, 45 European Taxation (2005), 530 et seq.; Schuch, “Marktintegration durch Meistbegünstigung im EG-Steuerrecht”, in Cordewener, Enchelmaier and Schindler (Eds.), Meistbegünstigung im Steuerrecht der EU-Staaten (C.H. Beck, 2006), 151 et seq.;
Cordewener and Reimer, “The Future of Most-Favoured-Nation Treatment in EC Tax Law – Did the ECJ Pull the Emergency Brake
without Real Need?”, 46 European Taxation (2006), 239 et seq. (part I) and 291 et seq. (part II); van den Hurk and Korving, “The
`D´ Case against the Netherlands and the ECJ´s Decision – Is There Still a Future for MFN Treatment?”, 50 Bulletin for International Fiscal Documentation (2006), 365 et seq.; van Thiel, “Why the European Court of Justice should Interpret Directly Applicable
Community Law as a Right to Most-Favoured Nation Treatment and a Prohibition of Double Taxation, in Weber (Ed.), The Influence of European Law on Direct Taxation – Recent and Future Developments (Kluwer, 2007), 75 et seq., at 99 et seq.
569 M. Lang, “Das EuGH-Urteil in der Rechtssache D. – Gerät der Motor der Steuerharmonisierung ins Stottern?”, Steuer &
Wirtschaft International (2005), 365 et seq., at 370 et seq.; Weber, “Most-Favoured-Nation Treatment under Tax Treaties Rejected
in the European Community: Background and Analysis of the D Case – A proposal to include a most-favoured-nation clause in the
EC Treaty”, 33 Intertax (2005), 429 et seq., at 440 et seq.; van Thiel, “A Slip of the European Court in the D case (C-376/03): Denial
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Yet, until now the ECJ has not shown any sign that it intends to reconsider its approach. On the contrary,
claims based on “most favoured nation treatment” have been rejected in a number of cases where inbound situations were at stake, and comparability of non-resident taxpayers connected to different home Member States has
categorically been denied by the Court570 and its Advocate Generals.571 And even though the ECJ has not yet
ruled on the issue in an outbound situation,572 it can hardly be expected that the Court will opt for a different
approach when it is asked to rule not on the (ad personam) comparability of non-resident taxpayers belonging to
different home States from the perspective of the source State, but on the (ad rem) comparability of cross-border
activities in relation to different foreign States from the perspective of a resident taxpayer’s home Member State:
Once a certain cross-border activity is covered by the bilateral double tax treaty concluded by the Member States
concerned, the ECJ, if it wants its jurisprudence to be consistent in substance, will have to apply the position
developed in D also to the latter situation and declare that particular cross-border situation to be “unique”, i.e.
uncomparable to other cross-border activities related to other foreign States (with or without a separate tax treaty). As there are still cases pending before national courts in this respect,573 the ECJ may have a chance to clarify
its view on this point in the near future.
4. Unilateral Distortion of Foreign Investment: The “Snooker Table Problem”
Last but not least, one may consider a constellation that comes very close to the situations that have just
been mentioned, but with one decisive alteration: This is the question of whether a Member State is free to treat a
cross-border activity related to a certain Member State less favourably than otherwise identical activities in relation to other Member States, when the relevant “horizontal” distinction is not contained in a bilateral treaty but
follows from a unilateral measure onder the first-mentioned Member State´s domestic legislation.
This problem first came up in an outbound situation from the home State’s perspective, and this was the
Cadbury Schweppes plc case dealing with the UK rules on “controlled foreign companies” (CFC). In his Opinion, and after a thorough analysis of the details of the relevant national legislation, Advocate General Léger had
discovered discriminatory features of the UK CFC rules from two different angles: First of all, they provided for
less favourable treatment of cross-border investments in the trational “vertical” way, i.e., as compared as to purely domestic investments to which the CFC rules could never be applied. Secondly, however, these rules were
also problematic from a “horizontal” perspective, as they only triggered a special tax burden for investments in a
“low tax” Member State but not for investments made in Member States with a tax burden that was considered
acceptable by the UK legislature. And it was in particular the latter distinction which, in the eyes of the Advocate
General, caused a basic problem, as it created a situation that “would manifestly lead to a result contrary to the
very notion of the ‘single market’” even if the former (“vertical”) distinction did not exist, i.e. “if the legislation
at issue were tax-neutral as compared to a purely domestic situation”.574 It is true that the ECJ in its ruling did
not make this clear distinction between the “vertical” and the “horizontal” approach. Nevertheless, it also acknowledged the latter approach when it ruled that the tax disadvantage created by the UK rules did not arise in
relation to the establishment, by a resident company, of “a subsidiary taxed in the United Kingdom or a subsidiary established outside that Member State which is not subject to a lower level of taxation”.575
Following Cadbury Schweppes, two other Advocates General recently took up the idea that the “horizontal”
non-discrimination concept should be applicable irrespective of whether a home State rule also caused a “vertical” distinction between purely domestic and cross-border activities. First it was A.G. Mengozzi who, when
dealing with a German quasi-CFC rule in Columbus Container Services, argued that this national measure could
not be considered discriminatory in the traditional (“vertical”) sense,576 but that it nevertheless should be subject
to scrutiny under the EC Treaty freedoms: The learned Advocate General found it necessary, in order to avoid a
fragmentation of the Internal Market by unilateral measures of the Member States, to apply the “horizontal” nondiscrimination concept, based on a comparison between the cross-border investment at hand (in a Belgian coordination centre with a low effective tax burden) and an equivalent outbound investment of the German plaintiffs
in another Member State. Against this background, A.G. Mengozzi pleaded that the “horizontal” approach should
be accepted as an independent element of the prohibition of “restrictions” under Art. 43 EC, and that the German
of the Most-Favoured-Nation Treatment because of Absence of Similarity?”, 33 Intertax (2005), 454 et seq.; van den Hurk and
Korving, “The ‘D’ Case against the Netherlands and the ECJ´s Decision – Is There Still a Future for MFN Treatment?”, 50 Bulletin
for International Fiscal Documentation (2006), 365 et seq., at 317 and 372 et seq.
570 See Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 93 et seq. It may be added that a Dutch case similar
to D was withdrawn by the national court after the Court’s decision in D; see Case C-8/04, Bujara (removed from the register),
[2006] OJ (C 60) 32.
571 See Opinion of A.G. Stix-Hackl, 15 December 2005, Case C-386/04, Centro di Musicologia Stauffer, [2006] ECR I-8203,
paras. 97 et seq.
572 A question in a Belgian case had already been referred to the ECJ, but the reference for a preliminary ruling was found to be
inadmissible on procedural grounds. See Case C-436/05, de Graaf and Daniels, [2006] OJ (C 326) 24.
573 For example, two Dutch cases concerning investments in Spain and Belgium are currently pending before the Hoge Raad
where access via MFN treatment to a “tax sparing credit” granted under the Netherlands’ tax treaties with Brazil and Greece under
dispute. In his Opinions of 5 June 2007 on cases nrs. CPG 43507 and 43777, Advocate General Wattel proposed to reject these
claims; see www.rechtspraak.nl.
574 See Opinion of A.G. Léger, 2 May 2006, Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, paras. 77 et seq.
575 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, para. 45.
576 The rule concerned triggers a switch-over from the exemption to the credit method if a permanent establishment set up in
the other Contracting State is subject to a low tax burden there, so that in the end the foreign PE suffers the same tax burden as if it
had been set up in Germany.
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rule in question should be considered unlawful.577 This approach was obviously endorsed by the Commission,
which likewise argued that a Member State may not unilaterally apply harsher rules in relation to only one other
Member State.578
A quite similar view was then also taken by A.G. Bot in the Orange European Smallcap Fund case, which
concerns the entitlement of Dutch investment organisms to credits (and refunds) of foreign withholding tax on
dividends flowing from investments abroad. Such relief could not be obtained with regard to investments in
Germany or Portugal, while on the other hand the Netherlands, on a unilateral basis, had decided to extend the
credit mechanism provided by the tax treaty with Italy also to investment organisms (which as such did not fall
into the scope of that treaty). According to the Advocate General, the prohibition of discriminatory treatment
should also be applied to national measures creating distinctions between Member States, thereby treating a
certain investment in one State of the EU less favourably than an equivalent investment made in another Member
State. Thus, A.G. Bot considered Art. 56(1) EC to oblige the Netherlands to grant resident investment organisms
the same favourable treatment not only for investments in Italy, but also with respect to dividends from Germany
or Portugal.579
From an Internal Market perspective these views are indeed convincing. For example, it is a guiding principle of EC competition law that measures taken by undertakings that are “capable of bringing about a partitioning
of the market in certain products between Member States and thus rendering more difficult the interpenetration
of trade which the Treaty is intended to create”, are prohibited.580 But the same principle can also be discovered
in the area of the fundamental freedoms: As in particular A.G. Van Gerven had pointed out with respect to the
scope of the free movement of goods, the prohibition of market fragmentation should not only apply to agreements between private parties under Art. 81 EC (ex Art. 85 EC Treaty), but also to measures taken by the Member States.581 This argument is indeed very much in line with the well-known description given by Vanistendael
with regard to the functioning of the prohibition of “restrictions” from a home State perspective:
“It views the EU market as a whole where all economic actors can move from one end to the other. It views the EU
market as a huge snooker table, where all the economic balls roll smoothly from one corner to the other”.582
Moreover, it may even be added that the “horizontal” situations addressed above in the context of Columbus Container Services and Orange European Smallcap Fund could be distinguished from the one the ECJ had
to deal with in the D case discussed above. 583 As both A.G. Mengozzi and A.G. Bot emphasized, the national
rules under scrutiny in those two cases did not represent “integral parts” of existing double tax treaties with other
Member States (leading, at least in the Court’s view, to a per se uncomparability of persons within the scope and
persons outside the scope of the respective treaty584) but, quite to the contrary, unilateral deviations from tax
treaties.585
Keeping this in mind it was somewhat surprising that the ECJ, in its judgment in the Columbus case, did not
seize the opportunity to establish, as an independend legal principle under the EC Treaty freedoms, a prohibition
for a taxpayer’s home Member State to create “horizontal” discrimination and distortions of choice between
outbound investments in different foreign Member States. The Court, after having stated that the relevant German provision did not cause any difference of treatment in a “vertical” perspective, i.e. between the cross-border
activity at hand and similar (hypothetical) purely domestic activities, openly refused to deal with the relevance of
the “horizontal” approach: After a rather general reference to its earlier Kerckhaert-Morres judgment and the
role of tax treaties in the Internal Market under Art. 293 EC,586 the Court simply stated that,
“in the current state of harmonisation of Community tax law, Member States enjoy a certain autonomy. It follows from
that tax competence that the freedom of companies and partnerships to choose, for the purposes of establishment, between different Member States in no way means that the latter are obliged to adapt their own tax systems to the different systems of tax of the other Member States in order to guarantee that a company or partnership that has chosen to es-
577 Opinion of A.G. Mengozzi, 29 March 2007, Case C-298/05, Columbus Container Services, [2007] ECR ___, paras. 71 et
seq., 109 et seq. See also Cordewener, “EC law protection against ‘horizontal’ tax discrimination on the rise – or how to play snooker in an Internal Market”, 16 EC Tax Review (2007), 210 et seq., at 211; Cordewener, “German ‘Anti-avoidance’ Measures versus
Belgian Coordination Centres: A Long Struggle without Survivors?”, in L. Hinnekens and Ph. Hinnekens (Eds.), A Vision of Taxes
within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 203, at 230 et seq.
578 See the Commission’s press release “Direct Taxation: Commission requests Ireland to end discriminatory taxation of income sourced in the United Kingdom and asks the United Kingdom for information about similar rules applied in its territory”,
IP/07/445 (30 March 2007), concerning Irish legislation that excludes from the principle of remittance base taxation income sourced
in the UK and thus treats such income less favourably than income arising elsewhere in the EU.
579 Opinion of A.G. Bot, 3 July 2007, Case C-194/06, Orange European Smallcap Fund NV, [2008] ECR ___, paras. 100 et
seq.
580 See already Case 56/65, LTM v. MBU, [1966] ECR 235, at 249.
581 Opinion of A.G. Van Gerven, 29 June 1989, Case C-145/88, Torfaen Borough Council, [1989] ECR 3851, paras. 21 et seq.
582 Vanistendael, “The compatibility of the basic economic freedoms with the sovereign national tax systems of the Member
States”, 12 EC Tax Review (2003), 136 et seq., at 139.
583 See supra II.C.3.
584 See supra II.C.3.
585 See Opinion of A.G. Mengozzi, 29 March 2007, Case C-298/05, Columbus Container Services, [2007] ECR ___, paras. 134
et seq.; Opinion of A.G. Bot, 3 July 2007, Case C-194/06, Orange European Smallcap Fund NV, [2008] ECR ___, paras. 102 et seq.
See also Schnitger, “German CFC legislation pending before the European Court of Justice – abuse of the law and revival of the
most-favoured-nation clause?”, 15 EC Tax Review (2006), 151, at 158 et seq.
586 See infra III.A.
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tablish itself in a given Member State is taxed, at national level, in the same way as a company or partnership that has
chosen to establish itself in another Member State.”587
And it may be added that the ECJ in its recent judgment in Orange European Smallcap Fund continued on
this rather concervative road. It is true that the Court, in a first step, acknowledged that the Dutch tax provisions
in question resulted in “different treatment of dividends from different Member States” and that, due to a unilateral decision on the part of the Netherlands, collective investment enterprises resident in that State were deterred
from investing in certain other Member States. The ECJ even explicitly stated that such legislation “constitues a
a restriction on the free movement of capital prohibited in principle by Article 56 EC”.588 However, in a second
step the Court then had recourse to Art. 58(1)(a) EC589 and came to the conclusion that,
“under such legislation, where a fiscal investment enterprise receives dividends from Member States with which the
Kingdom of the Netherlands has concluded a convention providing for shareholders who are national persons to be entitled to credit the tax which those Member States have deducted from the dividends to the income tax for which those
shareholders are liable in the Netherlands, the situation of that enterprise is different from that in which it finds itself
when receiving dividends from Member States with which the Kingdom of the Netherlands has not concluded such a
convention, as there is no such entitlement in respect of those dividends.”590
As the Court explained, it is only in a situation where a double tax treaty with another Member State provides a tax credit for individual shareholders (natural persons), that an indirect foreign investment by an individual resident in the Netherlands through a fiscal investment enterprise could run the risk of being less advantageous to that shareholder than a direct investment, Hence, a violation of Art. 56 and 58 EC could not be assumed, since investments made through fiscal investment enterprises in such a Member State (like, e.g., Italy)
were not in “objectively comparable situations” as investments in Member States with whom either no tax treaty
had been concluded (e.g., Portugal in the relevant tax year) or with whom a tax treaty had been concluded but no
tax credit was provided for (e.g., Germany in the relevant tax year).591
D. Non-Discriminatory Restrictions: “Double Burdens” and “Neutral” Rules
1. The Evolution of the Real “Restriction-Based Approach”
For several decades the prevailing opinion held to the view that the scope of the freedom of movement of
goods under Art. 28 EC, on the one hand, and of the fundamental freedoms under Art. 39, 43, and 49 EC, on the
other, should be drawn along different lines: On the one hand, Art. 28 EC was considered as a far-reaching prohibition of any measures enacted by Member States “which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade.” The base of this line of case law was built on the famous Dassonville592 and Cassis-de-Dijon593 cases. It stood for the proposition that, for example, domestic product regulations
cannot be applied to products imported from other Member States, even though they did not discriminate against
imported goods, unless such restrictions can be justified on imperative grounds such as fair trading, consumer
protection, or environmental protection. On the other hand, the question whether Art. 39, Art. 43, and Art. 49 EC
also exceed beyond the prohibition of discrimination was disputed for a long time.594 Although many older cases
already pointed in this direction,595 the ECJ, starting in 1991, answered this question affirmatively with regard to
these freedoms in Säger,596 Gebhard,597 and Bosman.598
Case C-298/05, Columbus Container Services, [2007] ECR ___, para. 51.
Case C-194/06, Orange Smallcap Fund NV, [2008] ECR ___, paras. 52 et seq.
589 See infra II.D.3.
590 Case C-194/06, Orange Smallcap Fund NV, [2008] ECR ___, paras. 57 et seq.
591 Case C-194/06, Orange Smallcap Fund NV, [2008] ECR ___, paras. 61 et seq.
592 Case 8/74, Dassonville, [1974] ECR 837.
593 Case 120/78, Rewe-Zentral AG (“Cassis-de-Dijon”), [1979] ECR 649.
594 See, e.g., Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 106 et seq.
595 See, e.g., Case 36/75, Rutili, [1975] ECR 1219; for a comprehensive compilation of indicia for the “restriction based approach” in the ECJ’s case law before Case C-76/90, Säger, [1991] ECR I-4221, Case C-55/94, Gebhard, [1995] ECR I-4165, and
Case C-415/93, Bosman, [1995] ECR I-4921, respectively, see Opinion of A.G. Lenz, 20 September 1995, Case C-415/93, Bosman,
[1995] ECR I-4921, paras. 167 et seq.
596 Case C-76/90, Säger, [1991] ECR I-4221.
597 Case C-55/94, Gebhard, [1995] ECR I-4165; see already Case C-19/92, Kraus, [1993] ECR I-1663. Kraus is generally said
to have had offered some guidance on the issues dealt with by Gebhard. The case resulted from a challenge to the German authorities’ refusal of the use in Germany of the title of a postgraduate degree by Mr Kraus, a German national who had obtained the relevant degree in the United Kingdom. The Court noted that Mr Kraus should be able to avail himself of his freedom of movement
guaranteed under the EC Treaty. He could therefore rely on Art. 43 EC against his own state, despite the fact that there was no
Community directive at the time regulating the academic qualification he had obtained abroad. However, the Court ultimately ruled
that, in the absence of Community harmonization of such qualifications, Member States could regulate the conditions relating to the
use of degree titles provided that they did not do so in a discriminatory manner. Kraus is said to be an example of the prohibition of
non-discriminatory restrictions because of the Court’s assertion that national rules that impede the exercise of freedom of establishment would be contrary to that freedom unless adequately justified. In particular, the Court pointed out that Art. 43 EC prevents the
legislation of a Member State from hindering the use of an academic title issued by another Member State, unless it pursues a legitimate aim, it is not excessive or disproportionate and is excused by reason of the protection of the general interest (Case C-19/92,
Kraus, [1993] ECR I-1663, para. 32). Not surprisingly, Kraus was cited in Gebhard as a precedent for the test that the Court applied
there (see Case C-55/94, Gebhard, [1995] ECR I-4165, para. 37). However, Kraus can also be seen as a ruling on indirect, or even
direct, discrimination: Under the relevant German legislation, the use of postgraduate academic titles required special authorization
in the case of degrees issued abroad. Since no such authorization was required of German postgraduate degrees, the German rules
obviously were discriminatory. See Kaldellis, “Freedom of Establishment versus Freedom to Provide Services: An Evaluation of
587
588
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The crucial question, however, is what exactly gives rise to a forbidden non-discriminatory restriction. It is,
for example, commonly understood that mere disadvantages, such as poor infrastructure, the language, the climatic environment, and the like, although forming obstacles for economic operators, do not fall in this category. 599 A first attempted rapprochement may be that only legal measures addressing the economic activity may
give rise to such restriction. A good starting point to approach this question is the development in the area of
Art. 28 EC, and the pivot of the Court’s ruling in Cassis de Dijon600 is well known. It results in a highly relaxed
regime for the free movement of goods within the Community: Goods which “have been lawfully produced and
marketed in one of the Member States”601 are prima facie free to circulate in all other Member States irrespective
of the importing State’s own regulatory requirements. Non-discriminatory measures that hinder the interstate
movement of goods are presumed incompatible with Art. 28 EC, unless the Member State concerned demonstrates that there is another (“overriding”) public interest that must be protected and Community law does not
already protect this public interest. Naturally, governmental action is in this way limited to action that is indispensable for the protection of the public interest. The case law of the Court has on occasions recognized exceptions to the principle of mutual recognition of technical standards, however the scope of these exceptions is
tightly confined by the Court and is generally small in comparison with the new commercial freedom stemming
from Cassis.602 Exceptions include the protection of the consumer,603 the environment,604 public health,605 fiscal
supervision,606 fair competition,607 intellectual property rights and trademark.608 At all events, national measures
in pursuit of justification may not restrict imports or exports of goods more than is necessary to achieve a legitimate aim, that is, the principle of proportionality.
With regard to the post-Cassis application of Art. 28 EC, the ECJ took a step back in Keck609 and the body
of subsequent cases that attempted to clarify that latter decision in a number of aspects by differentiating between product-bound measures, which continued to be covered by the Cassis de Dijon approach, and the regulation of selling arrangements, which was henceforth subject only to a discrimination test.610 It is recalled that in
Keck the Court exempted from the prohibition under Art. 28 EC import State rules that amount to “selling arrangements,” insofar as they are nondiscriminatory in law and fact. “Selling arrangements” would include restrictions on when, where, and by whom goods may be sold;611 advertising restrictions;612 and price controls.613
Nonetheless, Keck has not altered the application of the principle of equivalence of State rules relating to product
characteristics.614 Recent case law, for example, clarified that national rules that require products to be modified,
or the package to be altered, do not constitute “selling arrangements” within the meaning of Keck.615 The impact
therefore of Keck on the pre-existing case law is only limited. Furthermore, the Keck case law has suggested that,
when doubt exists as to whether a national measure is “product-bound” or relates to a “selling arrangement,” the
Court is inclined towards the former.616
Although the Keck judgment has been harshly criticized for its somewhat formalistic approach and its meager reasoning, much can be said in favor of the analysis by Advocate General Fennelly in the Graf case with
regard to Art. 39 EC.617 Fennelly, with the benefit of the Court’s more recently refined approach to Keck, employed a global approach to the issue of nondiscriminatory barriers. He found “useful guidance” in the Keck
jurisprudence and considered it applicable to the free movement of workers,
“if it is reduced to its essential elements, shorn of the more rigid and formalist distinctions – between product rules and
Case-law Developments in the Area of Indistinctly Applicable Rules”, 28 Legal Issues of Economic Integration (2001), 23, 37 et
seq.
598 Case C-415/93, Bosman, [1995] ECR I-4921.
599 Otherwise, “the UK Government would be in breach because of the poor state of this country’s public transportation infrastructure”; see British Court of Appeal (Civil Division), 21 December 2001, R v. Commissioners of Inland Revenue ex parte Professional Contractor’s Group, [2001] EWCA Civ 1945, EuLR 2002, 329, para. 74.
600 Case 120/78, Rewe-Zentral AG (“Cassis-de-Dijon”), [1979] ECR 649.
601 Case 120/78, Rewe-Zentral AG (“Cassis-de-Dijon”), [1979] ECR 649, para. 14.
602 See for this Kaldellis, “Freedom of Establishment versus Freedom to Provide Services: An Evaluation of Case-law Developments in the Area of Indistinctly Applicable Rules”, 28 Legal Issues of Economic Integration (2001), 23, 26.
603 See, e.g., Case 286/81, Oosthoek’s Uitgeversmaatschappij BV, [1982] ECR 4575; Case 178/84, Commission v. Germany,
[1987] ECR 1227; Case C-313/94, Fratelli Graffione SNC, [1996] ECR I-6039; Case C-368/95, Familiapress, [1997] ECR I-3689;
Case C-210/96, Gut Springenheide GmbH, [1998] ECR I-4657.
604 See, e.g., Case 240/83, Association de Défense des Brûleurs d’Huiles Usagées, [1985] ECR 531; Case 302/86, Commission
v. Denmark, [1988] ECR 4607.
605 Case 53/80, Koninklijke Kaasfabriek Eyssen BV, [1981] ECR 409; Case 97/83, Melkunie BV, [1984] ECR 2367.
606 Case 120/78, Rewe-Zentral AG (“Cassis-de-Dijon”), [1979] ECR 649.
607 Case 58/80, Dansk Supermarked, [1981] ECR 181; Case 16/83, Prantl, [1984] ECR 1299.
608 Case C-251/95, SABEL, [1997] ECR I-6191.
609 Cases C-26791 and C-268/91, Keck, [1993] ECR I-6097.
610 Oliver and Roth, “The Internal Market and the Four Freedoms”, 41 Common Market Law Review (2004), 407, 411 et seq.
611 Case C-401, 402/92, Heukske, [1994] ECR I-2199; Case C-69/93, Punto Casa, [1994] ECR I-2355.
612 Case C-292/92, Hünermund, [1993] ECR I-6787; Case C-412/93, Leclerc-Siplec, [1995] ECR I-179.
613 Case C-63/94, Belgapom, [1995] ECR I-2467.
614 Kaldellis, “Freedom of Establishment versus Freedom to Provide Services: An Evaluation of Case-law Developments in the
Area of Indistinctly Applicable Rules”, 28 Legal Issues of Economic Integration (2001), 23, 27.
615 See, e.g., Case C-416/00, Morellato, [2003] I-9343, paras. 28 et seq.
616 See, in particular, Case C-470/93, Mars, [1995] ECR I-1923; see also the discussion in the Opinion of A.G. Fennelly, 16
September 1999, Case C-190/98, Graf, [2000] ECR I-493, para. 22. On the debate as to the exact scope of the concept of “selling
arrangements,” see Weatherill, “After Keck: Some Thoughts on How to Clarify the Clarification”, 33 Common Market Law Review
(1996), 885 et seq.
617 Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493.
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certain selling arrangements – which are specific to the process of production and distribution of goods. Persons are not
products and the process of migration for the purposes of employment or establishment abroad, including preparation
therefore, cannot be so neatly divided into (mass) production and marketing stages.”
This essential element is market access. Thus, if Keck is reduced to its essential elements, it may offer the
charter for an appropriate application of the four freedoms, having regard to the aims and activities set out in
Art. 3(c) and (g) EC: Creating an Internal Market characterized by the abolition of obstacles to the free movement of goods, persons, services and capital, and ensuring that competition in the Internal Market is not distorted. The decisive perspective for the application of the freedoms is, on the one hand, that of allowing access to
the markets of the Member States by abolishing unjustified obstacles and, on the other hand, of guaranteeing
undistorted competition on the market. Keck reflects this kind of thinking in two ways: Although it is couched in
formal categories (“product rules” and “selling arrangements”), the real motivation behind this distinction lies in
the different effect of these rules on the Internal Market.618 Product regulations tend to hinder or impede access
to the market, whereas selling arrangements typically leave such access unimpeded.619 When and where access
to the market is not hampered, the discrimination standard suffices to guarantee undistorted competition.620 This
underlying idea of market access is also evidenced in the case law on Art. 49 EC621 and, more recently, on
Art. 56(1) EC622, although the (potential) scope of application of Keck is still under discussion.623 Likewise, the
concept of market access is equally applied regardless of whether the measure is of the Member State of origin
or the host Member State. For example, national rules of a home State which limit an economic operator to a
single place of establishment624 are exit barriers, and yet this issue is irrelevant to their appraisal.625 However,
although market access usually seems to be the decisive factor,626 it is nevertheless unclear to what degree market access must be affected in order to trigger the application of the respective freedom.
2. Types of “Non-Discriminatory” Restrictions:
“Double Burdens”, “Formal” and “Material” Barriers
The case law indicates that forbidden obstacles can be created by the interplay of the legal systems of two
countries, whereby the interaction of the legislation of two Member States leads to situations where indistinctibly
applicable rules of one Member State create an unequal impact on domestic and cross-border situations. The
specific importance of this third category lies in the fact that two countries impose rules which subject the taxpayer to a double regime of rules: Double burdens, imposed by the home and the host State, concerning matters
such as social charges, result from parallel regulatory competences of the Member States, and therefore specifically impede the exercise of the freedoms, especially the interstate provision of services627 or, at least, make it
less attractive. Such a specific burden on interstate movement may simply result from the cumulative effect of
regulations.628 From the standpoint of market access, the ECJ appears to be right to subject those regulations and
measures of the importing or host State to an all-encompassing restriction test, where market access is either
totally impeded, or at least burdened, by regulating an issue which has already been regulated by the home State.
In contrast, where such danger is not imminent, the discrimination test may suffice. 629 Such obstacles that result
from a dual regulatory scheme are usually referred to as the “double burden” (or “double hurdle”) problem.630
618 Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493, pars. 19; see also, e.g., Oliver and
Roth, “The Internal Market and the Four Freedoms”, 41 Common Market Law Review (2004), 407, 413; Weatherill, “After Keck:
Some Thoughts on How to Clarify the Clarification”, 33 Common Market Law Review (1996), 885, 889 et seq.
619 See Case C-384/93, Alpine Investments, [1995] ECR I-1141, para. 37, stating that the Keck differentiation between “product
rules” and “selling arrangements” is that the application of the latter “is not such as to prevent access by [products from other Member States] to the market of the Member State of importation or to impede such access more than it impedes access by domestic
products.”
620 Oliver and Roth, “The Internal Market and the Four Freedoms”, 41 Common Market Law Review (2004), 407, 413.
621 See Case C-384/93, Alpine Investments, [1995] ECR I-1141, paras. 33 et seq., and Opinion of A.G. Jacobs, 26 January
1995, Case C-384/93, Alpine Investments, [1995] ECR I-1141, paras. 60 et seq.; see also Cases C-34/95, C-35/95 and C-36/95, De
Agostini, [1997] ECR I-3843. For a detailed analysis see Hatzopoulos, “Recent Developments of the Case Law of the ECJ in the
Field of Services”, 40 Common Market Law Review (2000), 43, 67 et seq.
622 See, e.g., Case C-98/01, Commission v. UK (“Golden Shares”), [2003] ECR I-4641, para. 47.
623 For a distinction between goods and services and the possibly decisive intermediary level see Kaldellis, “Freedom of Establishment versus Freedom to Provide Services: An Evaluation of Case-law Developments in the Area of Indistinctly Applicable
Rules”, 28 Legal Issues of Economic Integration (2001), 23, 30; see for this generally, e.g., Hatzopoulos, “Recent Developments of
the Case Law of the ECJ in the Field of Services”, 40 Common Market Law Review (2000), 43, 67 et seq., and Snell, “NonDiscriminatory Tax Obstacles in Community Law”, 56 International and Comparative Law Quarterly (2007), 339.
624 See for these cases infra II.D.2.
625 See Costello, “Market Access All Areas – The Treatment of Non-discriminatory Barriers to the Free Movement of Workers”, 27 Legal Issues of Economic Integration (2000), 267 et seq.
626 See also the extensive discussion by Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt,
2002), 293 et seq.; Roth, “Die Niederlassungsfreiheit zwischen Beschränkungs- und Diskriminierungsverbot”, in in Schön (Ed.),
Gedächtnisschrift für Knobbe-Keuk (O. Schmidt, 1997), 729, 737 et seq.; Oliver and Roth, “The Internal Market and the Four Freedoms”, 41 Common Market Law Review (2004), 407, 417 et seq.
627 See, e.g., Cases 62/81 and 63/81, Seco, [1982] ECR 223, para. 9.
628 For certain licensing requirements that have to be met in more than one state see, e.g., Case C-232/01, Van Lent, [2003]
ECR I-11525, paras. 16 et seq., with regard to automobile plates (concerning Art. 39 EC).
629 See Oliver and Roth, “The Internal Market and the Four Freedoms”, 41 Common Market Law Review (2004), 407, 415 et
seq.
630 Lyal, “Non-discrimination and direct tax in Community law”, 12 EC Tax Review (2003), 68; Oliver and Roth, “The Internal
Market and the Four Freedoms”, 41 Common Market Law Review (2004), 407, 415; see also Roth, “Die Niederlassungsfreiheit
zwischen Beschränkungs- und Diskriminierungsverbot”, in in Schön (Ed.), Gedächtnisschrift für Knobbe-Keuk (O. Schmidt, 1997),
729, 738.
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In many cases, however, the obstacle to cross-border activities would disappear if all Member States concerned had adopted identical rules, thus implying that mere “disparities” are at issue.631 The Court has overcome
this obvious friction between legislative disparities and prohibited obstacles to the Common Market by adopting
the principle of mutual acceptance.632 First employed in Cassis de Dijon633 concerning the free movement of
goods, this principle requires that “any product imported from another Member State must in principle be admitted to the territory of the importing Member State if it has been lawfully produced […] in the exporting country”.634 In Cassis de Dijon the Court held German rules incompatible with Art. 28 EC that required a minimum
alcohol content of 25% for fruit liquors, which led to the situation that well-known spirits from other Member
States, such as “Cassis de Dijon,” which was freely marketed in France with an alcohol content between 15 and
20%, could not be sold in Germany. Thus the main problem in Cassis de Dijon was that German regulations
prevented the importation of foreign goods that had been designed with their home state regulations in mind: It
was the interaction of the legislation of two Member States that caused the problem.635
Since then “double burden” cases have arisen under Art. 39,636 43,637 and 49 EC.638 The case patterns before
the ECJ, however, suggest that the likelihood of obstacles arising from “double burdens” is quite obvious in the
area of services, where virtually no element of establishment in the host state is required and therefore the necessity of full compliance with the host state’s rules entails the risk of subjecting a market participant to a dual, and
duplicatory, regulatory regime. In this area the ECJ generally holds that Art. 49 EC requires not only the elimination of all discrimination on grounds of nationality against providers of services who are established in another
Member State, but also the abolition of any restriction, even if it applies without distinction to national providers
of services and to those of other Member States, “which is liable to prohibit, impede or render less advantageous
For this rule of thumb see already supra note 145.
See Kapteyn and VerLoren van Themaat, Introduction to the Law of the European Communities (Kluwer, 3rd edition 1998),
579-580. It might be noted that the specific problem at issue in the Cassis case has subsequently been resolved by the Council Regulation (EEC) No 1576/89 of 29 May 1989 laying down general rules on the definition, description and presentation of spirit drinks,
1989 OJ (L 160) 1.
633 See Case 120/78, Rewe-Zentral AG (“Cassis-de-Dijon”), [1979] ECR 649.
634 See the Communication from the Commission concerning the consequences of the judgment given by the Court of Justice
on 20 February 1979 in case 120/78 (“Cassis de Dijon”), 1980 OJ (C 256) 2.
635 See Farmer, “The Court’s case law on taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75, 78.
636 See Case 16/78, Choquet, [1978] ECR 2293 (concerning criminal proceedings by Germany against a French national who
lived in Germany and was employed there for driving without a license, since under the German rules a foreigner who lived in Germany for more than one year was obliged to obtain a German driving license); Case C-234/97, Fernández, [1999] ECR I-4773
(concerning Spanish legislation requiring the validation of the academic qualification in other Member State for the pursuit of a nonregulated profession); Case C-302/98, Sehrer, [2000] ECR I-4585 (concerning the calculation of the sickness insurance contributions
of a retired worker – who was subject to its legislation – on the basis of the amount of the supplementary retirement pension paid by
another Member State, without taking account of the fact that part of the gross amount of that pension had already been deducted by
way of sickness insurance contributions in the latter State).
637 See Case C-340/89, Vlassopoulou, [1991] ECR I-2357 (concerning a Greek lawyer who was a member of the Athens Bar
had obtained a doctorate in law from the University of Tübingen, Germany, and had worked with a firm of German lawyers since
1983, and applied in 1988 for admission as a lawyer in Germany; her application was refused on the ground that she did not fulfill
the conditions required under German law); Case C-55/94, Gebhard, [1995] ECR I-4165 (concerning criminal proceedings against a
German Rechtsanwalt, working in Italy without fulfilling the prerequisites under Italian law); Case C-53/95, Kemmler, [1996] ECR
I-703 (concerning Belgian legislation that required social security contributions from persons already working as self-employed
persons in another Member State where they have their habitual residence and are affiliated to a social security scheme, that obligation affording them no additional social security cover).
638 See Case 279/80, Webb, [1981] ECR 3305 (concerning Dutch legislation that made the provision of manpower within the
Netherlands subject to possession of a license in the case of an undertaking established in another Member State, even if that undertaking holds a license issued by the latter state); Cases 62/81 and 63/81, Seco, [1982] ECR 223 (concerning Luxembourg legislation
that required an employer from another Member State who temporarily carries out work in Luxembourg, using workers who are
nationals of non-Member States, to pay the employer’s share of social security contributions in respect of those workers when that
employer is already liable under the legislation of the state in which he is established for similar contributions in respect of the same
workers and for the same periods of employment); Case C-288/89, Stichting Collectieve Antennevoorziening Gouda, [1991] ECR I4007 (concerning conditions imposed on the transmission by operators of cable networks of radio or television programmes broadcast from the territory of other Member States); Case C-76/90, Säger, [1991] ECR I-4221 (requirement for a foreign “patent monitor” to qualify as a member of a particular profession, such as German patent agents, to provide these services for undertakings
established in Germany); Case C-43/93, Vander Elst, [1994] ECR I-3803 (concerning French legislation that required undertakings
from other Member States entering France in order to provide services, and which lawfully and habitually employ nationals of nonMember States, to obtain work permits for those workers from a national immigration authority and to pay the attendant costs); Case
C-272/94, Guiot, [1996] ECR I-1905 (concerning Belgian legislation that required an undertaking established in another Member
State and temporarily carrying out works in Belgium to pay employer’s social security contributions for employees assigned to those
works, where that undertaking is already liable for comparable employer’s contributions with respect to the same employees and for
the same period of work in the State where it is estabished); Case C-3/95, Reisebüro Broede, [1996] ECR I-6511 (concerning German legislation that prohibits an undertaking established in another Member State from securing judicial recovery of debts owed to
others); Case C-222/95, Parodi, [1997] ECR I-3899 (national legislation requiring authorization in order to supply banking services
where the bank concerned is established in another Member State where it has been authorized); Cases C-34/95, C-35/95 and C36/95, De Agostini, [1997] ECR I-3843 (Swedish rules that prohibited certain advertising by Swedish companies and which were
also applied to such advertising via a foreign satellite television broadcaster for Swedish customers); Cases C-369/96 and C-376/96,
Arblade, [1999] ECR I-8453 (concerning Belgian rules which require an employer, as a provider of services, to pay employer’s
contributions to the host Member State’s fund, in addition to those which he already has already paid to his Member State of establishment); Case C-58/98, Corsten, [2000] ECR I-7919 (concerning German legislation which makes the performance on its territory
of skilled trade activities by providers of services established in other Member States subject to the condition that those providers be
entered on that Member State’s trades register); see also Case C-294/00, Gräbner, [2002] ECR I-6515 (concerning Austrian legislation that prohibits the exercise of the activity of a Heilpraktiker, i.e., a lay health practitioner, by persons other than those with a
doctor’s qualification).
631
632
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the activities of a provider of services established in another Member State where he lawfully provides similar
services.”639 The pivot of this holding lies in the fact that the service provider already has “to satisfy the requirements of that State’s legislation,”640 and thus the host State is, in principle, not allowed to subject such service
provider to its own (additional) regulatory regime: A “Member State may not make the provision of services in
its territory subject to compliance with all the conditions required for establishment and thereby deprive of all
practical effectiveness the provisions of the Treaty whose object is, precisely, to guarantee the freedom to provide services.”641 On the level of justification the ECJ also puts a focus that overriding requirements relating to
the public interest are only relevant “in so far as that interest is not safeguarded by the rules to which the provider of such a service is subject in the Member State where he is established.”642 Thus the host Member State
has to take into account requirements already fulfilled by the service provider in the Member State of origin.643
In the area of Art. 39 and Art. 43 EC the ECJ has frequently dealt with “double burdens” arising from rules
of the host state regarding qualifications for posts or professional activities,644 as well as those concerning recognition of qualifications that are not formally required for a specific economic activity.645 The common thread of
this line of case law, as especially the Vlassopoulou,646 Gebhard,647 and Fernández648 cases illustrate, is that the
host country may require compliance with its rules, if any, but is precluded from taking “no account of the knowledge and qualifications already acquired by the person concerned in another Member State.”649 Already in its
early case law, the ECJ stated, for example in the Choquet case,650 that “insistence on a driving test which clearly
duplicates a test taken in another Member State for the classes of vehicle which the person concerned wishes to
drive” would be a prohibited hindrance of the exercise of the fundamental freedom concerned. As regards those
issues, an analogy may be drawn with the application in the field of goods of indistinctly applicable national
product rules or of duplicated checks on compliance with common product standards regarding health and safety, which in both cases subject the market access of imported goods to a dual regulatory regime and whose place
within the scope of application of Art. 28 EC remains, accordingly, assured after the decision in Keck.651
Similar considerations apply to the freedom of establishment under Art. 43 EC. An example for such “double burden” can be found in the Futura case,652 dealing, inter alia, with tax compliance issues:653 Under Luxembourg law losses which were economically related to income received locally could be carried forward and set
off e.g., against profits of a Luxembourg branch, provided that proper accounts during the financial year in
which the losses were incurred have been kept. This means, as the ECJ summarized the issue, that if a nonresident company or firm wishes to carry forward any losses incurred by its branch, “it must keep, in addition to
its own accounts which must comply with the tax accounting rules applicable in the Member State in which it
has its seat, separate accounts for its branch’s activities complying with the tax accounting rules applicable in the
State in which its branch is established.” The Court held that “the imposition of such a condition, which specifically affects companies or firms having their seat in another Member State, is in principle prohibited by Article 52 of the Treaty [Art. 43 EC],” unless justified under the rule of reason.654 The reference to the fact that such
639 See, e.g., Case C-272/94, Guiot, [1996] ECR I-1905, para. 10; Case C-3/95, Reisebüro Broede, [1996] ECR I-6511, para. 25; Case C-222/95, Parodi, [1997] ECR I-3899, para. 18; Cases C-369/96 and C-376/96, Arblade, [1999] ECR I-8453, para. 33;
Case C-58/98, Corsten, [2000] ECR I-7919, para. 33; similar Case C-76/90, Säger, [1991] ECR I-4221, para. 12; Case C-43/93,
Vander Elst, [1994] ECR I-3803, para. 14.
640 Case C-288/89, Stichting Collectieve Antennevoorziening Gouda, [1991] ECR I-4007, para. 12; Cases C-34/95, C-35/95
and C-36/95, De Agostini, [1997] ECR I-3843, para. 51.
641 Case C-76/90, Säger, [1991] ECR I-4221, para. 13; Case C-43/93, Vander Elst, [1994] ECR I-3803, para. 17.
642 See, e.g., Case C-76/90, Säger, [1991] ECR I-4221, para. 15; Case C-272/94, Guiot, [1996] ECR I-1905, para. 11; Cases C369/96 and C-376/96, Arblade, [1999] ECR I-8453, para. 34; Case C-58/98, Corsten, [2000] ECR I-7919, para. 35.
643 See, e.g., Case 279/80, Webb, [1981] ECR 3305, para. 20.
644 See, e.g., Case 71/76, Thieffry, [1977] ECR 765 (concerning refusal admission of a Belgian lawyer to the Paris Bar on the
ground that he did not have a French diploma, although his Belgian diploma was recognized as equivalent and he also passed an
examination, in accordance with the French regulations, by means of which he had obtained a qualifying certificate for the profession of advocate); Case C-379/87, Groener, [1989] ECR 3967 (concerning a provision that for lectureships at public vocational
training establishments in Ireland an adequate knowledge of Irish was required); see also Case C-340/89, Vlassopoulou, [1991] ECR
I-2357; Case C-55/94, Gebhard, [1995] ECR I-4165, and Case C-234/97, Fernández, [1999] ECR I-4773.
645 Case 16/78, Choquet, [1978] ECR 2293; see also Case C-19/92, Kraus, [1993] ECR I-1663 (use of a foreign academic degree in Germany was dependent on authorization by an agency).
646 Case C-340/89, Vlassopoulou, [1991] ECR I-2357.
647 Case C-55/94, Gebhard, [1995] ECR I-4165.
648 Case C-234/97, Fernández, [1999] ECR I-4773.
649 See, e.g., Case C-340/89, Vlassopoulou, [1991] ECR I-2357, para. 15.
650 Case 16/78, Choquet, [1978] ECR 2293.
651 This is the accepted reason for the application of Art. 28 EC to such rules, rather than the argument that imported products
are covertly discriminated against by any national product rules because they are inherently less likely to comply with them; see,
e.g., Case C-470/93, Mars, [1995] ECR I-1923, para. 13; see for this Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98,
Graf, [2000] ECR I-493, para. 26.
652 Case C-250/95, Futura, [1997] ECR I-2471.
653 For such qualification of the Futura case see, e.g., British Court of Appeal (Civil Division), 21 December 2001, R v. Commissioners of Inland Revenue ex parte Professional Contractor’s Group, [2001] EWCA Civ 1945, EuLR 2002, 329, paras. 61 et
seq.; Gammie, “The Role of the European Court of Justice in the Development of Direct Taxation in the European Union”, 57 Bulletin for International Fiscal Documentation (2003), 86, 91. For a different position see, e.g., M. Lang, “Die Rechtsprechung des
EuGH zu den direkten Steuern – Planungssicherheit für die nationalen Gesetzgeber?”, in Wagner and Wedl (Eds.), Bilanz und Perspektiven zum europäischen Recht (ÖGB Verlag, 2007), 113, 120 (discrimination because of similar treatment of different situations), and possibly also in this direction Snell, “Non-Discriminatory Tax Obstacles in Community Law”, 56 International and
Comparative Law Quarterly (2007), 339, 350.
654 Case C-250/95, Futura, [1997] ECR I-2471, para. 26.
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rule “specifically affects companies or firms having their seat in another Member State” seems to be due to the
status of the case in between a classical “discrimination,” that is, the application of different rules based on a
forbidden criterion, and genuinely “even handed” rules. However, the ECJ did not follow its Advocate General,
who constructed this rule at issue in the Futura case as a covert discrimination,655 but rather employed the liberty
component of Art. 43 EC: It ruled that the Luxembourg requirement for foreign-owned permanent establishments to maintain accounts in Luxembourg and in accordance with Luxembourg law constituted a nondiscriminatory access restriction.656
Some very instructive examples of “double burdens” relate to social security legislation and have arisen under Art. 39, Art. 43, as well as under Art. 49 EC.657 These cases generally concerned situations where the host
Member State did not take into due account social security obligations already fulfilled in the Member State of
origin.658 Leaving Seco659 aside for the moment, the first case in this line was Kemmler,660 decided in 1996,
which dealt with Belgian legislation that required social security contributions from persons already working as
self-employed persons in another Member State where they have their habitual residence and are affiliated to a
social security scheme, that obligation affording them no additional social security cover. The ECJ found that the
freedom of establishment is intended to facilitate the pursuit of occupational activities throughout the Community and precludes national legislation that might inhibit the extension of such activities beyond the territory of a
single Member State. Since Mr Kemmler was already affiliated to the social security scheme in his Member State
of origin and the Belgian social security system did not provide any additional social protection, the Court concluded that Art. 43 EC precludes such legislation. The ECJ continued this line of case law, for example, in
Guiot,661 Arblade662 and Sehrer.663
Obstacles can, however, also arise in situations where a person is subjected (only) to a certain set of relevant rules of the legal system of one country, which applies such rules without any discrimination but thereby
nevertheless creates obstacles. This group of provisions may be categorized as “non-discriminatory restrictions,”
or “even handed”664 or “neutral”665 rules, and they constitute one aspect of the whole range of potential “nondiscriminatory restrictions.” The ECJ usually describes such restrictions by stating that a measure “hindering,”666
“prohibiting,” “impeding,” “rendering less attractive” or “less advantageous”667 the exercise of a freedom or
Opinion of A.G. Lenz, 5 November 1996, Case C-250/95, Futura, [1997] ECR I-2471, paras. 30 et seq.
Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 632 et seq.; see also Hatzopoulos, “Case C-250/95, Futura Participations SA & Singer v. Administration des Contributions”, 38 Common Market Law Review
(1998), 493, 500 et seq.
657 Cases 62/81 and 63/81, Seco, [1982] ECR 223 (Art. 49 EC); Case C-53/95, Kemmler, [1996] ECR I-703 (Art. 43 EC); Case
C-272/94, Guiot, [1996] ECR I-1905 (Art. 49 EC); Cases C-369/96 and C-376/96, Arblade, [1999] ECR I-8453 (Art. 49 EC); Case
C-302/98, Sehrer, [2000] ECR I-4585 (Art. 39 EC); see also Case C-43/93, Vander Elst, [1994] ECR I-3803 (Art. 49 EC).
658 However, these “double burdens” seem to involve an element of covert discrimination. For example, in Case 279/80, Webb,
[1981] ECR 3305, the ECJ applied a discrimination analysis to a “double burden” problem. In Webb, an employment agency established in the United Kingdom was engaged in the supply of temporary staff in the Netherlands. The staff supplied was employed by
the agency, which was remunerated directly by the company for which the staff worked. Although the agency held a license under
British law it was, in addition, required to possess a license under Dutch law. The Court founds that the application of a Dutch licensing requirement to a British undertaking that already held a British license, although applied to all undertakings providing the
service in question in the Netherlands, would have been discriminatory if no account had been taken of the guarantees furnished by
the undertaking in its State of origin. The British undertaking would have had to surmount two obstacles, whereas the Dutch undertaking had to surmount only one. Similarly, the ECJ solved the Seco case (Cases 62/81 and 63/81, Seco, [1982] ECR 223) based on
covert discrimination. Seco concerned Luxembourg legislation that required an employer from another Member State who temporarily carries out work in Luxembourg, using workers who are nationals of non-Member States, to pay the employer’s share of social
security contributions in respect of those workers when that employer is already liable under the legislation of the State in which he
is established for similar contributions in respect of the same workers and for the same periods of employment and the contributions
in Luxembourg do not entitle the workers to any social security benefits. The ECJ referred to Webb and concluded that such legislation is discriminatory since it “proves in economic terms to be more onerous for employers established in another Member State,
who in fact have to bear a heavier burden than those established within national territory.” (Cases 62/81 and 63/81, Seco, [1982]
ECR 223, para. 9). However, the “double burden” cases clearly involve the liberty component (“freiheitsrechtliche Komponente”) of
the fundamental freedoms: The restricted taxpayer does not strive for equal treatment with, for example, a resident of the host country or a service provider established there, but rather wants to be relieved from the (additional) burden imposed by the host state.
Based on the more recent case law, this third category is clearly to be categorized as a subset of the “non-discriminatory restrictions,” although it would – as the Webb and Seco cases may imply – not be unthinkable to approach such rules as a species of discrimination, since, from the perspective of the host state, different situations are treated equally. See for this discussion, e.g., Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 271; see also Roth, “Die Niederlassungsfreiheit zwischen Beschränkungs- und Diskriminierungsverbot”, in Schön (Ed.), Gedächtnisschrift für Knobbe-Keuk (O. Schmidt,
1997), 729, 733.
659 See Cases 62/81 and 63/81, Seco, [1982] ECR 223, and immediately supra note 642.
660 Case C-53/95, Kemmler, [1996] ECR I-703.
661 Case C-272/94, Guiot, [1996] ECR I-1905. It should be noted that this case law explains the need felt by the EC legislature
to rationalize and extend the solutions by the ECJ in Directive 96/71/EC ([1997] OJ (L 18) 1) on the temporal detachment of workers
for the provision of services, essentially dealing with problems akin to those of the Guiot-type of decisions. See also Hatzopoulos,
“Recent Developments of the Case Law of the ECJ in the Field of Services”, 40 Common Market Law Review (2000), 43, 49 et seq.
662 Cases C-369/96 and C-376/96, Arblade, [1999] ECR I-8453,
663 Case C-302/98, Sehrer, [2000] ECR I-4585.
664 Farmer, “The Court’s case law on taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75, 79.
665 For this terminology see, e.g., Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493, para. 31; British Court of Appeal (Civil Division), 21 December 2001, R v. Commissioners of Inland Revenue ex parte Professional
Contractor’s Group, [2001] EWCA Civ 1945, EuLR 2002, 329, para. 28.
666 Case C-55/94, Gebhard, [1995] ECR I-4165, para. 37 (Art. 39, 43).
667 Case C-76/90, Säger, [1991] ECR I-4221, para. 12 (Art. 49); Case C-43/93, Vander Elst, [1994] ECR I-3803, para. 14
(Art. 49); Case C-272/94, Guiot, [1996] ECR I-1905, para. 10 (Art. 49); Case C-3/95, Reisebüro Broede, [1996] ECR I-6511, pa655
656
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“precluding” or “deterring”668 a national from exercising such a freedom constitutes a relevant obstacle. However, in order to be capable of constituting such a non-discriminatory obstacle, a certain threshold must be met,
for example, in respect to Art. 39 EC, a measure “must affect access of workers to the labour market.”669 Bringing such legislation within the scope of the fundamental freedoms acknowledges the fact that, although the principle of non-discrimination is certainly a conditio sine qua non of market liberalization, the equality component
is not per se sufficient to overcome all relevant limits to the Internal Market, especially access to the markets of
other Member States: Thus, the liberty component (“freiheitsrechtliche Komponente”) of the fundamental freedoms may require to remove access barriers, even if the same rules apply to nationals or residents of the target
country. This said, the course of this concept becomes clear: Not equal treatment is striven for, but rather the
removal of barriers.
The examples of cases that dealt with such “even handed” rules are many and diverse. In Bosman670 the
ECJ invalidated rules which created a non-discriminatory barrier to workers (professional football players) taking up new employment by requiring that the prospective employer pay a transfer fee to the worker’s former
employer. Likewise, in Syndesmos,671 the Court found that a non-discriminatory Greek law that required licensed
tourist guides working with certain tourist agencies to be treated as employees and so subject to Greek employment legislation as regards their working relationship, infringed on Art. 49 EC because it was a direct and insuperable barrier to tourist guides from other member states providing services as self-employed persons. In Alpine
Investments672 the ECJ reached a similar conclusion in relation to Dutch legislation prohibiting “cold calling” by
telephone by brokers in commodities futures.673 Furthermore, a series of “gambling” cases under Art. 49 EC
demonstrate the breath of this approach.674 Likewise, certain establishment requirements have been scrutinized
as non-discriminatory, which can either take the form that the host country requires an establishment in order to
pursue certain economic activities,675 or, in addition, forbid economic actors to pursue economic activity through
more than one establishment (so-called “single practice rules”).676 While the first group of establishment requirements may be viewed as covertly discriminatory, as they constitute the ultimate decision of national legislation in favor of domestic, and against the cross-border, provision of services,677 the second group concerned nondiscriminatory obstacles whereby the fact that freedom of establishment within the Member State in question
was similarly restricted was not, apparently, viewed as being relevant.678
The decisive element of assessing a prohibited non-discriminatory restriction is market access. As to what
constitutes a relevant restriction of market access, much uncertainty exists. Advocate General Fennelly in the
Graf case679 basically urged that this criterion is met only where the measure has actual effects akin to exclusion
from the market. An alternative approach is that of Advocate General Jacobs in Leclerc-Siplec,680 suggesting
that “a substantial degree of restriction” is all that is required. The two-folded evaluation of the case law on nondiscriminatory restrictions – “double burdens” on the one hand and “neutral” rules on the other – indicates a
differentiated approach. In “double burden” cases the effect on market access is clear: The market participant is
effectively subjected a “double burden,” for example, to duplicate requirements – a fact that seems to indicate
affection of market access. Thus, from the standpoint of market access, the ECJ appears to be right to subject
those regulations and measures of the importing or host Member State to an all-encompassing restriction test,
ra. 25 (Art. 49); Case C-398/95, Syndesmos, [1997] ECR I-3091, para. 16; Case C-222/95, Parodi, [1997] ECR I-3899, para. 18
(Art. 49 EC); Cases C-369/96 and C-376/96, Arblade, [1999] ECR I-8453, para. 33 (Art. 49); Case C-58/98, Corsten, [2000] ECR I7919, para. 33 (Art. 49); Case C-294/00, Gräbner, [2002] ECR I-6515, para. 38 (Art. 43 and 49).
668 Case C-415/93, Bosman, [1995] ECR I-4921, paras. 96 and 99 (Art. 39); Case C-302/98, Sehrer, [2000] ECR I-4585, para. 33 (Art. 39 EC); Case C-190/98, Graf, [2000] ECR I-493, para. 23 (Art. 39 EC).
669 Case C-190/98, Graf, [2000] ECR I-493, para. 23 (Art. 39 EC).
670 Case C-415/93, Bosman, [1995] ECR I-4921; similar Case C-176/96, Lehtonen, [2000] ECR I-2549 (concerning rules of the
Belgian Basketball Federation for the inscription of players by a basketball club for their participation in matches in the national
championship); see for this, e.g., Oliveira, “Workers and Other Persons: Step-by-step from Movement to Citizenship”, 39 Common
Market Law Review (2002), 77, 87 et seq.
671 Case C-398/95, Syndesmos, [1997] ECR I-3091.
672 Case C-384/93, Alpine Investments, [1995] ECR I-1141.
673 See Costello, “Market Access All Areas – The Treatment of Non-discriminatory Barriers to the Free Movement of Workers”, 27 Legal Issues of Economic Integration (2000), 267, 274.
674 Case C-275/92, Schindler, [1994] ECR I-1039 (concerning legislation which prohibits, subject to specified exceptions, the
holding of lotteries in a Member State and thus also precludes lottery operators from other Member States from promoting their
lotteries and selling their tickets); Case C-124/97, Läärä, [1999] ECR I-6067 (concerning a rule that grants to a single public body
exclusive rights to exploit the operation of slot machines); Case C-67/98, Zenatti, [1999] ECR I-7289, and Case C-243/01, Gambelli,
[2003] ECR I-13031 (concerning Italian legislation that prohibits the taking of bets other than by licensed persons or bodies, without
distinction whether established in Italy or in another Member State); Case C-6/01, Anomar, [2003] ECR I-8621 (concerning legislation under which the operation of and engagement in games of chance or gambling is authorized only in casinos in permanent or
temporary gaming areas created by decree-law).
675 See Case 33/74, Van Binsbergen, [1974] ECR 1299; Case 205/84, Commission v. Germany, [1986] ECR 3755; Case C111/91, Commission v. Luxembourg, [1993] ECR I-817; see also Case C-496/01, Commission v. France, [2004] ECR I-2351, and, in
the area of Art. 28 EC, Case C-254/98, TK-Heimdienst, [2000] ECR I-151.
676 See Case 107/83, Klopp, [1984] ECR 2971; Case 96/85, Commission v. France, [1986] ECR 1475; Case C-106/91, Ramrath, [1992] ECR I-3351; Case C-351/90, Commission v. Luxembourg, [1992] ECR I-3945.
677 See also Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 210 et seq.
678 The same seems to hold true with respect also to Art. 39 EC if, for example, a national rule confines workers to a single
post, without the possibility of additional part-time work either in that state or elsewhere. See Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493, para. 25.
679 Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493.
680 Opinion of A.G. Jacobs, 24 November 1994, Case C-412/93, Leclerc-Siplec, [1995] ECR I-179.
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where market access is either totally impeded or at least burdened by regulating an issue which has already been
regulated by the home Member State. In the area of “neutral” rules, however, the case law of the ECJ seems to
suggest differentiating further between formal and material barriers. Clear cases of barriers to access to the market of the host state by neutral formal requirements concerned the complete preclusion of foreign market participants to enter the market of another Member State, as, for example, in the “gambling” cases, in cases concerning
“single practice rules”681 or national rules which require payment of a fee in order to exercise a Treaty right.682 In
those cases, the resulting prejudice to the exercise of Treaty rights is evident. All the aforementioned conditions
were prescribed by law or regulation non-compliance with which constituted an absolute bar to taking up the
activity in question. Such rules clearly impede, deter, preclude or render less attractive the exercise of a fundamental freedom. The imposition of conditions regarding entry to the market or the taking up of economic activity
is itself sufficient to establish the existence of a restriction, even if the condition can be relatively easily satisfied.
Apart from such seemingly “neutral” rules, also “double burdens” could, in many cases, be viewed as formal
barriers, even though they constitute handicaps rather than absolute bars to access to certain economic activities.
Here, the ECJ suggests the same result as regards formal conditions imposed regarding matters that are intimately connected with successful access to the market, such as those governing recognition of a qualification
which is necessary or beneficial to the exercise of many professional activities.683
On the other hand, restrictions by neutral national rules which raise material barriers (e.g., by establishing
commercial and regulatory conditions in the market in question which are less enticing than in other Member
States, or by offering benefits which would be lost in the event that a worker changed employment) require a
different assessment. Prejudice to the exercise of the freedom of movement of workers or self-employed persons
cannot be automatically presumed in all cases where an apparently burdensome national regulation of economic
activity, or the loss of a benefit in the case of a change in economic activity, is at issue. Graf may serve as an
example.684 Where an alleged obstacle to freedom of movement does not result from a formal condition of market participation, but is instead alleged to arise from some neutral material barrier or disincentive deriving from
national regulations, the prejudice to the exercise of Community-law rights must be established. Thus, neutral
national rules can only be deemed to constitute prohibited material barriers to market access, if it were established that they have actual effects on market actors akin to exclusion from the market. As in the case of rules
regarding “selling arrangements” in the case of goods, there can be no presumption that neutral national commercial regulations, those governing pay scales, social protection, maximum working time, direct or indirect
taxation, holidays, prohibition of Sunday trading, regulations as to which services may be offered, and other
matters of concern to market participants, have this effect.685 Hence, an economic actor must in principle take the
national market as he finds it – conditions of exercise of the relevant economic activity therefore usually do not
constitute a material barrier to market access. The same holds true for neutral national rules that are alleged to
affect an economic actor’s decision as to whether or not to leave a Member State in order to take up an economic
activity in another.686
681 Case 107/83, Klopp, [1984] ECR 2971 (concerning a German lawyer who wished to open chambers in Paris and to retain
his chambers in Germany; this application was rejected by reference to the French provisions that a lawyer can have chambers in one
place only); Case 96/85, Commission v. France, [1986] ECR 1475 (concerning French provisions which required doctors and dentists established in another Member State to cancel their registration in that state if they wished to practice in France as an employee,
locum or principal in a practice); Case C-106/91, Ramrath, [1992] ECR I-3351 (concerning the regulation of the profession of auditors in Luxembourg, which required an auditor, inter alia, to have a professional establishment in Luxembourg and not to carry on
any activity likely to impair his professional independence); Case C-351/90, Commission v. Luxembourg, [1992] ECR I-3945 (concerning a “single practice rule”).
682 Case C-415/93, Bosman, [1995] ECR I-4921 (concerning UEFA-based rules of the Belgian football association imposing
fees on the transfer of football players between clubs, whether domestic or foreign).
683 In Case C-19/92, Kraus, [1993] ECR I-1663, the German degree-recognition rules at issue did not themselves make access
to any activity contingent on securing such recognition, but the Court pointed out that possession of a postgraduate academic title
could be a prerequisite for access to certain professions and could facilitate access to a profession or economic activity in other
contexts. In Case 16/78, Choquet, [1978] ECR 2293, the Court observed that rules regarding recognition of driving licenses exerted
an influence, both direct and indirect, on the exercise of rights relating to free movement and, in particular, that possession of a
driving license duly recognized by the host State could affect the actual pursuit of a large number of occupations for employed or
self-employed persons. See for this Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493,
pars. 28.
684 Case C-190/98, Graf, [2000] ECR I-493 (Austrian employment legislation under which the right to a compensation ceases
when the employee terminates the employment).
685 Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493, pars. 32; see also Opinion of A.G.
Mischo, 16 March 2000, Case C-108/96, MacQuen, [2001] ECR I-837, para. 44.
686 The Court in Case C-190/98, Graf, [2000] ECR I-493, para. 25, considered that such was not the case with the legislation in
question, because the compensation was conditional on a future and hypothetical event, namely the termination of the worker’s
contract independently of his own initiative. “Such an event is too uncertain and indirect a possibility for legislation to be capable of
being regarded as liable to hinder freedom of movement for workers where it does not attach to termination of a contract of employment by the worker himself the same consequence as it attaches to termination which was not at his initiative or is not attributable to him.” The basis for the Court’s decision is principally that the benefit conferred by the measure is not one which the worker
can be considered to be foregoing as a result of exercising his right to free movement, because that benefit depends not on any act of
the worker, but rather on “a future and hypothetical event, namely the subsequent termination of his contract without such termination being at his own initiative or attributable to him.” The Court cites two goods cases in support, Case C-69/88, Krantz, [1990]
ECR I-583, para. 11, and Case C-44/98, BASF, [1999] ECR I-6269, para. 21. Krantz concerned a Dutch provision whereby tax
collectors could seize goods of a taxpayer on his premises, even if those goods were property of a supplier established in another
Member State. The Court rejected the argument that such a provision would deter the supply of goods on installment terms, as ‘too
uncertain and indirect’ a possibility. In BASF, the national rule at issue required that a European patent be translated into the official
language of the Member State in question in order to be valid there. The plaintiff argued that this would result in patent-holders
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3. Double Taxation as a Forbidden “Double Burden”?
While the (real) “non-restriction” jurisprudence has gained remarkable importance in the ECJ’s non-tax
case law, the same can not be said about the area of direct taxation. This might be due to several reasons: First,
most tax cases are clearly based on the classical pattern of a distinction between cross-border and domestic situations and thus may easily be solved under the principle of non-discrimination. Second, the scope of a restrictionbased approach seems to be very narrow in the area of direct taxation, since one “must not arrive at a situation
where Member States are required to justify as ‘imperative requirements’ all kinds of provisions of their legislation, for instance rates of corporate taxation or their rates of VAT, which are higher than elsewhere,” whenever
someone claims that such a provision makes the exercise of a fundamental freedom less attractive.687 Such a
situation is a mere “disparity.”688 Third, the mutual recognition principle that informs the ECJ’s non-tax case law
might not be be as easily transposed into the direct tax area.689 However, it should nevertheless be noted that the
Court already applied a “double burden” analysis to compliance issues, such as accounting records required of a
branch to substantiate losses at issue in Futura.690 And more recently the ECJ’s decision in Deutsche Shell691
concerning the deductibility of currency losses also pointed into the direction of a broader approach.692
There is, however, the issue of “double burdens” that would persist even if the respective Member States
had identical tax systems, and one clear example for this is juridical double taxation. In fact, the question whether unresolved double taxation constitutes a violation of the fundamental freedoms is nearly as old as the EC
Treaty itself. 693 Public international law hardly imposes any limits to the taxation power of sovereign States,
once either a personal or a material nexus of the taxable event to the taxing jurisdiction exists.694 Hence, lacking
a general international law prohibition of double taxation,695 cross-border economic activities or transactions
may be exposed to multiple income taxation by at least two jurisdictions. Unsurprisingly, however, it has been
asked whether in a highly integrated market such as the European Union with its fundamental freedoms, juridical
double taxation is a problem to be resolved by Community law. 696 Without doubt the abolition of double taxation
is an aim of the EC Treaty697 as the overlap of taxing jurisdictions leads to a distortion of the Internal Market.698
In that respect the Internal Market and Double Taxation Conventions (DTC) follow the same goal of avoiding
double taxation, so that „[d]ouble tax conventions and the EC Treaty are natural friends, because they pursue
mutual objectives“. 699 Conversely, it may be argued that DTCs merely supplement the EC Treaty in achieving
this goal within the Community.700 The network of (bilateral) DTCs is also the backbone of international taxafiling translations selectively, thereby causing divisions in the internal market. The Court found that such an effect was again “too
uncertain and too indirect” to warrant scrutiny under Art. 28 EC. Furthermore, the Advocate General cited several cases concerning
rules whose effects are too remote and uncertain to warrant scrutiny. For example, Case C-379/92, Peralta, [1994] ECR I-3453,
concerned an Italian rule prohibiting the discharge of certain materials from ships. The plaintiff argued that this prohibition made
goods transport more costly, and consequently would result in higher prices and a diminution of imports. Again, the Court rejected
this possible effect as “too uncertain and tenuous” to be regarded as hindering trade between Member States. All of these judgments
are framed in fact-specific terms, which does not readily facilitate drawing a general proposition in relation to rules that are insufficiently connected with free movement to warrant scrutiny. The underlying concern is clearly informed by a concern not to allow the
internal market jurisprudence to intrude too far into Member States’ general regulatory competence. See for this Costello, “Market
Access All Areas – The Treatment of Non-discriminatory Barriers to the Free Movement of Workers”, 27 Legal Issues of Economic
Integration (2000), 267, 270 et seq.
687 Opinion of A.G. Mischo, 7 July 1998, C-255/97, Pfeiffer, [1999]ECR I-2835, para. 91.
688 See supra II.A.2.
689 Rejecting such approach for lack of a natural priority of one of the taxing jurisdications Terra and Wattel, European Tax
Law (Kluwer, 4th edition 2005), 604; see also Dennis Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the
Freedom of Movement Within the EC”, 34 Intertax (2006), 582, 590.
690 See Case C-250/95, Futura, [1997] ECR I-2471; see also L. Hinnekens, “The search for the framework conditions of the
fundamental EC Treaty principles as applied by the European Court to Member States’ direct taxation”, 11 EC Tax Review (2002),
112, 115 et seq.; Lyal, “Non-discrimination and direct tax in Community law”, 12 EC Tax Review (2003), 68, 70; Farmer, “The
Court’s case law on taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75, 78-79; Weber, “In Search of a (New)
Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax (2006), 582, 586-587.
691 Case C-293/06, Deutsche Shell GmbH, [2008] ECR ___.
692 Haslehner, “EuGH-Urteil Deutsche Shell GmbH (Rs. C-293/06): Das gemeinschaftsrechtliche Ende der Symmetriethese?”,
18 Steuer & Wirtschaft International (2008), 161, 165.
693 See already Rädler, “Entspricht unser Außensteuerrecht der Neuordnung unserer Außenwirtschaft im Gemeinsamen
Markt?”, 37 Steuer und Wirtschaft (1960), 729, 731.
694 See Douma, “The Three Ds of Direct Tax Jurisdiction: Disparity, Discrimination and Double Taxation”, 46 European Taxation (2006), 522, 523.
695 See, in a broader context, Lehner, “Das Territorialitätsprinzip im Licht des Europarechts”, in Gocke, Gosch and M. Lang
(Eds.), Körperschaftsteuer – Internationales Steuerrecht – Doppelbesteuerung, Festschrift Wassermeyer (Beck, 2005), 241, 242 et
seq.
696 See extensively Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 154-264.
697 Case C-336/96, Gilly, [1998] ECR I-2793, para. 16; Case C-265/04, Bouanich, [2006] ECR I-923, para. 49; see also Opinion of A.G. Colomer, 26 October 2004, Case C-376/03, D, [2005] ECR I-5821, para. 78.
698 See the Discussion paper for the Informal Meeting of ECOFIN Ministers “Taxation in the European Union,” SEC(96)487,
7, and J. Malherbe, Ph. Malherbe, Richelle and Traversa, The Impact of the Rulings of the European Court of Justice in the Area of
Direct Taxation (Policy Department of the European Parliament, March 2008), para. 7; see also Fibbe and de Graaf, “Is double
taxation arising from autonomous tax classification of foreign entities incompatible with EC law?“ in van Arendonk, Engelen and
Jansen (Eds.), A Tax Globalist, Essays in honour of Maarten J. Ellis (IBFD, 2005), 237, 238.
699 Kemmeren, Principle of Origin in Tax Conventions (Pijnenburg, 2001), 246.
700 Heydt, “Der Einfluss der Grundfreiheiten des EG-Vertrags auf das nationale Steuerrecht der Mitgliedstaaten und ihre Doppelbesteuerungsabkommen”, in Lehner (Ed.), Grundfreiheiten im Steuerrecht der EU-Staaten (Beck, 2000), 25, 37; Heydt, “Einfluss
des Gemeinschaftsrechts auf die Doppelbesteuerung”, in Haarmann (Ed.), Auslegung und Anwendung von Doppelbesteuerungsabkommen (O. Schmidt, 2004), 32, 34.
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tion in the Community, although due to its bilateral character it might not eliminate all distortions of the Single
Market.701 It should, however, be mentioned that although the network of treaties between Member States is
close to completion702 and many countries grant relief unilaterally, juridical double taxation may still occur in the
Community, e.g., because of diverging application of a treaty by the Member States concerned and in tri- and
multiangular situations.703
As the risk of unrelieved double taxation of cross-border economic activities in the Community poses a
hindrance to competition and hampers the effectiveness of the Internal Market,704 the Commission has been
active in pointing at the importance of elimination of double taxation705 and the Economic and Social Committee
has even proposed to alter Art. 293 EC (then Art. 220) and insert a provision into the EC Treaty to the effect that
“[d]ouble taxation or the absence of taxation is incompatible with the internal market.”706 Against this background, the ECJ unsurprisingly views the abolition of double taxation as a Community goal.707 However, double
taxation would occur even if all the Member States concerned had perfectly discrimination-free tax systems, and
double taxation would still prevail even if all Member States (hypothetically) had the same tax system, as source
and residence based taxation would still remain in place in both jurisdictions and would continue to overlap.708
But being neither a discrimination (or, more precisely, a discriminatory restriction), nor a mere disparity, the
position of the issue of double taxation in the dogmatic framework created by the ECJ in more than 20 years of
judicial activity in the direct tax area remains unclear. Yet it is evident that double taxation leads to a higher
burden specifically on cross-border transactions709 and hence to an eminent disadvantage for those taxpayers
who exercise their freedoms under the EC Treaty, which could also be viewed as a de facto-discrimination.710
It raises, however, the specific problem that the disadvantage seems to be created by two taxing jurisdictions, 711 but with the particularity that both might be to blame, because both seek to maximise revenue from the
outset by means of what could be considered an extra-territorial definition of tax jurisdiction that necessarily
causes double taxation. This said, the issue remains if Community law offers a directly applicable tool to taxpayers to be entitled to a resolution of double taxation. Doubtless, this is one of the “today’s trickiest issues concerning the scope of the prohibition of national tax practices based on the fundamental freedoms, specifically of the
See the Commission’s Communication on “Guidelines on company taxation,” SEC(90)601 final, para. 10.
In the mid-1970s already 32 of the then possible 36 bilateral relations in respect of income taxation were covered by DTC
(see the Answer by Mr Delmotte to Written Question 599/73 [1974] OJ (C 29) 25). Subsequent enlargements were accompanied by
further extensions of the treaty network: In the early 1990s only 9 bilateral relations between the then 12 Member States remained
uncovered by DTCs. See the Communication on “Guidelines on company taxation,” SEC(90)601 final, Appendix 1, Thömmes, “The
European dimension in international tax law”, 18 Intertax (1990), 464, 464, and Harris, “The European Community’s ParentSubsidiary Directive”, 9 Florida Journal of International Law (1994), 111, 141). The treaty network between the “old” Member
States was recently completed so that 102 bilateral treaties and the multilateral Nordic treaty cover all 105 bilateral relations between
the 15 “old” Member States. See Heydt, “Einfluss des Gemeinschaftsrechts auf die Doppelbesteuerung”, in Haarmann (Ed.), Auslegung und Anwendung von Doppelbesteuerungsabkommen (O. Schmidt, 2004), 32, 34. After the accession of 10 Member States in
mid-2004, further holes in the network were opened, but by mid-2005 277 out of 298 possible agreements existed between the then
25 Member States. See Appendix B to the Commission Working Paper “EC Law and Tax Treaties,” DOC(05) 2306/B. As of January 1, 2007, and after the accession of Bulgaria and Romania, 336 of 351 possible bilateral relations were covered by treaties in
force: There are 103 out of 103 possible treaties between the “old” Member States, 169 out of 180 possible treaties between the 15
“old” Member States and the 12 “new” Member States, and 62 out of 66 possible treaties between the 12 “new” Member States;
however, as of 1 January 2007, out of the 15 “missing” treaties 4 had already been concluded but not entered into force. See Kofler,
Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 132 with note 13. While there has been some
progress towards completion of the network in the meantime, one might also encounter steps backward in the future. See, e.g.,
Bjørnholm and Riis, “Denmark: Act Enacted Authorizing Termination of Tax Treaties with France and Spain”, 48 European Taxation (2008), 205.
703 One may also think about classification conflicts and conflicts in the attribution of income, but those are generally instances
of economic double taxation and are not further examined here; for a recent analysis see Fibbe and de Graaf, “Is double taxation
arising from autonomous tax classification of foreign entities incompatible with EC law?“ in van Arendonk, Engelen and Jansen
(Eds.), A Tax Globalist, Essays in honour of Maarten J. Ellis (IBFD, 2005), 237 et seq.
704 Lehner, “Beseitigt die neue Verfassung für Europa die Verpflichtung der Mitgliedstaaten zur Vermeidung der Doppelbesteuerung?”, 14 Internationales Steuerrecht (2005), 397, 398; Lehner, “A Significant Omission in the Constitution of Europe”, 52
British Tax Review (2005), 337, 338.
705 See the comprehensive analysis in Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde,
2007), 134-150.
706 Opinion of the Economic and Social Committee on “Taxation in the European Union – Report on the development of tax
systems”, [1997] OJ (C 296), 37, Appendix II.
707 Case C-336/96, Gilly [1998] ECR I-2793, para. 16; Case C-265/04, Bouanich [2006] ECR I-923, para. 49; see also Opinion
of A.G. Ruiz-Jarabo Colomer, 26 October 2004, Case C-376/03, D, [2005] ECR I-5821, para. 78.
708 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 48.
709 See Schön, “Freie Wahl zwischen Zweigniederlassung und Tochtergesellschaft – ein Grundsatz des Europäischen Unternehmensrechts”, 11 Europäisches Wirtschafts- und Steuerrecht (2000), 281, 290; Schön, “The Free Choice between the Right to
Establish a Branch and to Set-up a Subsidiary – a Principle of European Business Law”, 2 European Business Organization Law
Review (2001), 339, 362 et seq.; Englisch, Dividendenbesteuerung (O. Schmidt, 2005), 254; Englisch, “The European Treaties’
Implications for Direct Taxes”, 33 Intertax (2005), 310, 323 et seq; Lehner, “Avoidance of Double Taxation within the European
Union: Is There an Obligation under EC Law?”, in M. Lang, Schuch and Staringer (Eds.), Tax Treaty Law and EC Law (Linde,
2007), 11, 16.
710 Englisch, “The European Treaties’ Implications for Direct Taxes”, 33 Intertax (2005), 310, 324; J. Lang and Englisch, “A
European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International Tax Law (Kluwer, 2006), 251, 282.
711 See Schönfeld in Flick, Wassermeyer and Baumhoff (Eds.), Außensteuerrecht (O. Schmidt, 6th edition 2005), Vor § 34c
EStG Para. 2; Schönfeld, “Doppelbesteuerung und EG-Recht”, 83 Steuer und Wirtschaft (2006), 79, 80; see also the Opinion of A.G.
Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 48.
701
702
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measures.”712
freedom of establishment and free movement of persons by home State tax
Already at first glance
it becomes obvious that Art. 293 EC which, at least for the time being,713 urges Member States, so far as is necessary, to enter into negotiations with each other to avoid double taxation to the benefit of their nationals, was
neither directly applicable nor did it grant rights to individual taxpayers. The ECJ made this clear in the
Mutsch,714 Mund & Fester,715 and Gilly716 decisions, and quite correctly no serious objections to this conclusion
have been raised in legal scholarship.717 This is, however, not to say that Art. 293 EC takes the issue of double
taxation completely out of the Community law “line of fire”.718 Quite to the contrary, it has been argued that the
fundamental freedoms may serve as a tool for taxpayers to claim relief from double taxation based on Community law where no such right exists under treaty law or domestic law, as
“the fact that a taxable event might be taxed twice is the most serious obstacle there can be to people and their capital
crossing internal borders”.719
The ECJ has already given some guidance on this issue in cases concerning compulsory levies. While, until
the recent decision in Kerckhaert-Morres,720 the ECJ’s case-law in the direct tax area did not explicitly deal with
this issue and has also not given any negative indication in the Gilly721 or van Hilten722 cases,723 the Court has
already recognized in other fields of law that even non-discriminatory restrictions may be prohibited under the
fundamental freedoms if they hamper market access or market exit.724 This is especially true for “dual burden”
situations where the disadvantage is created by the uncoordinated application of two or more national legal systems,725 as a long line of case law in the area of social security law suggests.726 But even in the indirect tax field
the Court recognized that certain effects of double taxation have to be avoided:727 In the early stages of Value
Added Tax harmonization, for example, cross-border private-to-private dealings could lead to a double taxation
insofar as the exporter could not utilize input VAT and the importer had to pay VAT upon the import. However,
Schul I728 made it clear that the Member State of destination had to grant a (limited) credit for the input VAT
levied in the state of exportation to avoid such double taxation. However, a transposition of this case law to juridical double taxation seems to overstretch its scope, as the ECJ has limited this approach to areas where the
contours of the tax (e.g., taxable event, tax liability, and tax base) are likened throughout the Community.729
712 L. Hinnekens, “AMID: The Wrong Bridge or a Bridge Too Far? An Analysis of a Recent Decision of the European Court of
Justice”, 41 European Taxation (2001), 206, 208.
713 This provision has been repealed by Point 280 of the Treaty of Lisbon amending the Treaty on European Union and the
Treaty establishing the European Community [2007] OJ (C 306), 1, 130.
714 Case 137/84, Mutsch, [1985] ECR 2681, para. 11 (concerning Art. 293 1st indent EC).
715 Case C-398/92, Mund & Fester, [1994] ECR I-467, para. 11 (concerning Art. 293 4th indent EC).
716 Case C-336/96, Gilly, [1998] ECR I-2793, para. 15 (concerning Art. 293 2nd indent EC).
717 See, e.g., Lechner, “European Court of Justice Finds Germany-France Tax Treaty Not Incompatible with EC Law”, 17 Tax
Notes Int’l 692 et seq. (Sept. 7, 1998); Vogel, “Some observations regarding ‘Gilly’”, 7 EC Tax Review (1998), 150; de Graaf,
Avoidance of international double taxation: Community or joint policy?”, 7 EC Tax Review (1998), 258, 272; Lehner, “Deutschfranzösisches DBA: Berechnung der Einkommensteuer aufgrund des Abkommens bei Grenzgängern und ihre Vereinbarkeit mit der
Freizügigkeit”, 7 Internationales Steuerrecht (1998), 336, 341; Eicker, “Tax Treaties and EC Law: Comment on the Gilly Case”, 52
Bulletin for International Fiscal Documentation (1998), 322, 324; Hughes, “Gilly and the Big Picture”, 52 Bulletin for International
Fiscal Documentation (1998), 329, 330; Lehner, “Annotations on the Judgment of the European Court of Justice, Case 336/96 – The
Gilly Case – of 12 May 1988”, 52 Bulletin For International Fiscal Documentation (1998), 334; Hedemann-Robinson, “Doubly
taxing for the European Community: Gilly and Another v. Directeur des Services Fiscaux du Bas-Rhin”, 44 British Tax Review
(1999), 128, 131 et seq.; Vanistendael, “Case C-336/96, Mr and Mrs Robert Gilly,” 37 Common Market Law Review (2000), 167,
170 (“as expected”); see also van Thiel, Free movement of Persons and Income Tax Law: the European Court in search of principles
(IBFD, 2002), 133.
718 For a different position see Gammie, “Double taxation, bilateral treaties and the fundamental freedoms of the EC Treaty”, in
van Arendonk, Engelen and Jansen (Eds.), A Tax Globalist, Essays in honour of Maarten J. Ellis (IBFD, 2005), 266, 278.
719 Opinion of A.G. Ruiz-Jarabo Colomer, 26 October 2004, Case C-376/03, D, [2005] ECR I-5821, para. 85.
720 Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967.
721 ECJ, 12 May 1998,Case C-336/96, Gilly [1998] ECR I-2793.
722 Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957.
723 For an analysis, also of the case law concerning economic double taxation, see Kofler, Doppelbesteuerungsabkommen und
Europäisches Gemeinschaftsrecht (Linde, 2007), 180-193.
724 For a detailed analysis of the prohibition of non-discriminatory restrictions see, e.g., Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 249 et seq., and Cordewener, “The prohibitions of discrimination and restriction within the framework of the fully integrated market”, in Vanistendael (Ed.), EU Freedoms and Taxation (IBFD, 2006), 7 et seq.
725 See, e.g., Englisch, “The European Treaties’ Implications for Direct Taxes”, 33 Intertax (2005), 310, 324 (“twofold or even
multifold ‘regulation’”); see also Opinion of A.G. Fennelly, 16 September 1999, Case C-190/98, Graf, [2000] ECR I-493, para. 26.
726 E.g., Case 62/81 and 63/81, Seco, [1982] ECR 223; Case C-53/95, Kemmler, [1996] ECR I-703; Case C-272/94, Guiot,
[1996] ECR I-1905; Cases C-369/96 and C-376/96, Arblade, [1999] ECR I-8453; Case C-302/98, Sehrer, [2000] ECR I-4585; see
also Case C-43/93, Vander Elst, [1994] ECR I-3803; for an analysis of this line of case-law in the light of secondary Community law
and for further discussion of cases on the principle of mutual recognition see Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Vienna: Linde, 2007), 193-206.
727 Case 15/81, Schul I, [1982] ECR 1409; subsequently also Case 299/86, Drexl, [1988] ECR 1213, paras. 9 et seq; compare
further Case 47/84, Schul II, [1985] ECR 1491, paras. 12 et seq; Case 39/85, Bergeres-Becque, [1986] ECR 259, paras. 10 et seq.
See also the recent analyses by van Thiel, “Why the European Court of Justice should Interpret Directly Applicable Community Law
as a Right to Most-Favored Nation Treatment and a Prohibition of Double Taxation”, in Weber (Ed.), The Influence of European
Law on Direct Taxation: Recent and Future Developments (Kluwer, 2007), 75, 115-118, and Vanistendael, “Does the ECJ have the
power of interpretation to build a tax system compatible with the fundamental freedoms?”, 17 EC Tax Review (2008), 52, 58, and the
comprehensive survey by Snell, “Non-Discriminatory Tax Obstacles in Community Law”, 56 International and Comparative Law
Quarterly (2007), 339, 340-348 and 365.
728 See Case 15/81, Schul I, [1982] ECR 1409.
729 Case 165/88, Oro Amsterdam Beheer, [1989] ECR 4081, para. 18; Case C-72/92, Scharbatke, [1993] ECR I-5509; see already in this sense Case 142/77, Statens Kontrol, [1978] ECR 1543, paras. 33 et seq; see also Cordewener, Europäische Grundfrei-
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Nevertheless, it should be stressed that in Lindfors730 the ECJ has extended this position beyond areas harmonized by secondary Community law. Although the principle of mutual recognition may have no or limited scope
of application in the direct tax area,731 the Lindfors case and some cases on social security seem to suggest that
“duals burdens”, i.e. double taxation, might be an issue under the fundamental freedoms also in the (largely nonharmonized) area of direct taxation.
Even though the relevance of non-discriminatory restrictions for the field of direct taxation is not yet fully
explored,732 the specific and real disadvantage for cross-border activities and transactions created by multiple
taxation is arguably within the broad scope of the fundamental freedoms, interpreted in the light of Art. 14 EC
which foresees an Internal Market that comprises an area without internal frontiers in which the free movement
of goods, persons, services and capital is ensured. It is against this background, and in the light of the developing
case-law in the area of non-discriminatory restrictions created by “double burdens”, that a shift in prevailing
opinion has gradually taken place: While in the early years legal scholarship regarded juridical double taxation
as being outside the scope of the fundamental freedoms,733 it has been argued commonly – and quite correctly –
in recent years that such “double burdens” are indeed prohibited by the fundamental freedoms.734 This position
was also favored by the Commission, which argued that
heiten und nationales Steuerrecht (O. Schmidt, 2002), 867 and 881; Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax (2006), 582, 589; Kofler, Doppelbesteuerungsabkommen und
Europäisches Gemeinschaftsrecht (Linde, 2007), 202-203; Snell, “Non-Discriminatory Tax Obstacles in Community Law”, 56
International and Comparative Law Quarterly (2007), 339, 365.
730 Case C-365/02, Lindfors [2004] ECR I-7183 (concerning car registration taxation).
731 See Terra and Wattel, European Tax Law (Kluwer, 4th edition 2005), 603-605, Weber, “In Search of a (New) Equilibrium
Between Tax Sovereignty and the Freedom of Movement Within the EC”, 34 Intertax (2006), 582, 588-589, and Snell, “NonDiscriminatory Tax Obstacles in Community Law”, 56 International and Comparative Law Quarterly (2007), 339, 365-366; for a
broader approach see Vanistendael, “Does the ECJ have the power of interpretation to build a tax system compatible with the fundamental freedoms?”, 17 EC Tax Review (2008), 52, 62-63 (arguing for a transposition of the case law on non-tax trade obstacles to
the problem of juridical double taxation), and similarly Farmer and Zalinski, “General Report” in Xenopoulos (Ed.), Direct tax rules
and the EU fundamental freedoms: origin and scope of the problem; National and Community responses and solutions (FIDE Congress, 2006), 399, 402-403.
732 For the breath of the fundamental freedoms and their prohibition of discriminatory restrictions (in in- and outbound situations) and non-discriminatory restrictions and the relevance of these concepts for direct taxation see supra II.B. and II.D.2.
733 So, e.g., Rädler, “Entspricht unser Außensteuerrecht der Neuordnung unserer Außenwirtschaft im Gemeinsamen Markt?”,
37 Steuer und Wirtschaft (1960), 729, 731; Wessel, Doppelbesteuerung und EWG-Vertrag (Münster, 1988), 146-159; Eyles, Das
Niederlassungsrecht der Kapitalgesellschaften in der Europäischen Gemeinschaft (Nomos, 1990), 377-378; Farmer, “Article 48 EC
and the Taxation of Frontier Workers”, 20 European Law Review (1995), 310, 315; Mössner and Kellersmann, “Grenzenlose
Steuern – Fiktion oder Wirklichkeit?”, 110 Deutsches Verwaltungsblatt (1995), 968, 970; Schaumburg, Internationales Steuerrecht
(O. Schmidt, 2nd edition 1998), Para. 14.5; Farmer, “EC law and national rules on direct taxation: a phoney war?”, 7 EC Tax Review
(1998), 13, 14; Hahn, “Grenzüberschreitende Berücksichtigung von Betriebsstättenverlusten? – Bemerkungen zu einer neu entfachten Diskussion –“, 11 Internationales Steuerrecht (2002), 681, 686; Wattel, “Corporate tax jurisdiction in the EU with respect to
branches and subsidiaries; dislocation distinguished from discrimination and disparity; a plea for territoriality”, 12 EC Tax Review
(2003), 194, 199; Gammie, “Double taxation, bilateral treaties and the fundamental freedoms of the EC Treaty”, in van Arendonk,
Engelen and Jansen (Eds.), A Tax Globalist, Essays in honour of Maarten J. Ellis (IBFD, 2005), 266, 276; see also Reimer, “Die
Auswirkungen der Grundfreiheiten auf das Ertragsteuerrecht der Bundesrepublik Deutschland”, in Lehner (Ed.), Grundfreiheiten im
Steuerrecht der EU-Staaten (C.H.Beck, 2000), 39, 58-59; compare further Finanzgericht Rheinland-Pfalz, 16 June 2005,
4 K 1951/04, Entscheidungen der Finanzgerichte (2005), 1446.
734 So, e.g., Schön, “Europäische Kapitalverkehrsfreiheit und nationales Steuerrecht”, in Schön (Ed.), Gedächtnisschrift für B.
Knobbe-Keuk (O. Schmidt, 1997), 743, 761-762 and 773; Dautzenberg, Unternehmensbesteuerung im EG-Binnenmarkt (Eul, 1997),
687-692; Beul, “Beschränkung europäischer Niederlassungsfreiheit und Art. 220 EGV – Doppelbesteuerung und Meistbegünstigung
–“, 6 Internationales Steuerrecht (1997), 1, 2; Schön, “Freie Wahl zwischen Zweigniederlassung und Tochtergesellschaft – ein
Grundsatz des Europäischen Unternehmensrechts”, 11 Europäisches Wirtschafts- und Steuerrecht (2000), 281, 290; Schön, “The
Free Choice between the Right to Establish a Branch and to Set-up a Subsidiary – a Principle of European Business Law”, 2 European Business Organization Law Review (2001), 339, 362 et seq.; Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 876-887; van Thiel, Free movement of Persons and Income Tax Law: the European Court in search of
principles (IBFD, 2002), 41 and 313-315; van Thiel, “Removal of income tax barriers to market integration in the European Union:
litigation by the Community citizen instead of harmonization by the Community legislature?”, 12 EC Tax Review (2003), 4, 10; van
Thiel and Achilles, “Die Beseitigung ertragsteuerlicher Hindernisse im Binnenmarkt: Eine Darstellung der Einflüsse der Rechtsprechung des EuGH auf die Ertragsbesteuerung in der Europäischen Union”, 12 Internationales Steuerrecht (2003), 530, 534; de Hosson, “The Slow and Lonesome Death of the Arbitration Convention”, 31 Intertax (2003), 482, 483; Englisch, “Zur Dogmatik der
Grundfreiheiten des EGV und ihren ertragsteuerlichen Implikationen”, 80 Steuer und Wirtschaft (2003), 88, 93; Heydt, “Einfluss des
Gemeinschaftsrechts auf die Doppelbesteuerung”, in Haarmann (Ed.), Auslegung und Anwendung von Doppelbesteuerungsabkommen (O. Schmidt, 2004), 32, 48 and 53; Schnitger, “Die Kapitalverkehrsfreiheit im Verhältnis zu Drittstaaten – Vorabentscheidungsersuchen in den Rs. van Hilten, Fidium Finanz AG und Lasertec”, 14 Internationales Steuerrecht (2005), 493, 500;
Schönfeld, “Hinzurechnungsbesteuerung zwischen Steuerwettbewerb und Europäischen Grundfreiheiten”, 82 Steuer und Wirtschaft
(2005), 158-170; Obser, “§ 8a KStG im Inbound-Sachverhalt – eine EG-rechtliche Beurteilung”, 14 Internationales Steuerrecht
(2005), 799, 800-801; Englisch, Dividendenbesteuerung (O. Schmidt, 2005), 252-262; Englisch, “The European Treaties’ Implications for Direct Taxes”, 33 Intertax (2005), 310, 323; Schönfeld in Flick, Wassermeyer and Baumhoff (Eds.), Außensteuerrecht (O.
Schmidt, 6th edition 2005), Vor § 34c EStG Para. 2; Schönfeld, “Doppelbesteuerung und EG-Recht”, 83 Steuer und Wirtschaft
(2006), 79, 80; J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International Tax
Law (Kluwer, 2006), 251, 281-285; Enchelmaier, “Meistbegünstigung im EG-Recht – Allgemeine Grundsätze“, in Cordewener,
Enchelmaier and Schindler (Eds.), Meistbegünstigung im Steuerrecht der EU-Staaten (C.H.Beck, 2006), 93, 100; Englisch, “Meistbegünstigung im EG-Steuerrecht: Der Weg ins Chaos”, in Cordewener, Enchelmaier and Schindler (Eds.), Meistbegünstigung im
Steuerrecht der EU-Staaten (C.H.Beck, 2006), 163, 175-184; Kofler, “Treaty Override, juristische Doppelbesteuerung und Gemeinschaftsrecht”, 16 Steuer & Wirtschaft International (2006), 62-69; H. Loukota, “Gebietet EU-Recht einen DBAAnrechnungsvortrag?”, 16 Steuer & Wirtschaft International (2006), 250-253; Vanistendael, “The ECJ at the Crossroads: Balancing
Tax Sovereignty against the Imperatives of the Single Market”, 46 European Taxation (2006), 413, 418-419; Schnitger, Die Grenzen
der Einwirkungen der Grundfreiheiten des EG-Vertrages auf das Ertragsteuerrecht (IDW, 2006), 258-267; Farmer and Zalinski,
“General Report”, in Xenopoulos (Ed.), Direct tax rules and the EU fundamental freedoms: origin and scope of the problem; Na-
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“Member States are bound by the EC Treaty principle of free movement within the Community to avoid and eliminate
double taxation, at least by imputing a tax paid in the other Member State on their own charge to tax.”735
The late Advocate General Geelhoed, however, identified such restrictions resulting from the division of tax
jurisdiction between two tax systems as unsuspicious “quasi-restrictions”,736 and by finding in KerckhaertMorres737 that the “double burden” created by a juridical double taxation of foreign-source dividends did not
infringe on the freedoms, and the ECJ seems to have endorsed such approach.738 Despite extensive discussion in
legal scholarship and the Commission’s position in its Communication on “Dividend taxation of individuals in
the Internal Market”,739 Geelhoed argued in his opinions in ACT Group Litigation740 and Kerckhaert-Morres741
that double taxation was a mere “quasi-restriction.” As such it is, in Geelhoed’s view, not prohibited by the fundamental freedoms, as it simply flows from the mere co-existence of tax systems and the division of tax jurisdiction.742 Even though disadvantages caused by the co-existence of two separate tax jurisdictions, unlike disparities, would continue to exist even if national tax systems were exactly the same in design and content, Geelhoed
argued that the possibility of juridical double taxation, in the absence of priority rules between the relevant
States, is an inevitable consequence of dividing tax jurisdiction between States.743 Such disadvantage to the taxpayer may, in Geelhoed’s opinion, not be challenged under the fundamental freedoms, as first Member States
still have the power to choose criteria of, and allocate, tax jurisdiction, and secondly no alternative criteria for the
distribution of taxing rights can be derived from Community law.744
The Court’s judgment in Kerckhaert-Morres followed along the lines set by Advocate General Geelhoed.
The ECJ acknowledged that the disadvantage at issue results from the parallel exercise of fiscal sovereignty by
two Member States, noted the importance of DTC to eliminate or mitigate the negative effects on the functioning
of the Internal Market resulting from the co-existence of national tax systems, but then moved on to state that –
outside the Parent-Subsidiary-Directive, the Arbitration Convention, and the Savings-Directive745 – no uniform
tional and Community responses and solutions (FIDE Congress, 2006), 399, 401; van Thiel, “Why the European Court of Justice
should Interpret Directly Applicable Community Law as a Right to Most-Favored Nation Treatment and a Prohibition of Double
Taxation”, in Weber (Ed.), The Influence of European Law on Direct Taxation: Recent and Future Developments (Kluwer, 2007),
75, 115-118. Some have argued that double taxation, although not an issue for the fundamental freedoms, might be an issue under
the Francovich-principles of State liability; for references and a critical position see Kofler, Doppelbesteuerungsabkommen und
Europäisches Gemeinschaftsrecht (Vienna: Linde, 2007), 165-167; Beiser, “Die Einmalerfassung im Gemeinschaftsrecht”, Steuer &
Wirtschaft International (2008), 59 et seq.
735 Answer given by Mr Bolkestein on behalf of the Commission to Written Question E-2287/99 by Karin Riis-Jørgensen
(ELDR) concerning “Right to freedom of movement and Danish tax rules”, [2000] OJ (C 225 E), 87. See also the position taken by
the Commission concerning Petition 626/2000 by Mr Klaus Schuler (German), concerning the dual taxation of an inheritance (Jan.
25, 2007), infra note 776.
736 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 41 et
seq., especially para. 48: A “restrictive consequence of the fact that direct tax systems are national is the necessity to divide tax
jurisdiction over the income of cross-border economic operators (dislocation of tax base). As with disparities, these restrictions
should be distinguished from discrimination, as they result not from the rules of just one tax jurisdiction, but from the co-existence of
two separate tax jurisdictions (i.e., no one tax jurisdiction is to blame for the tax disadvantage). However, unlike disparities, they
would continue to exist even if national tax systems were exactly the same in design and content.”
737 Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967. See on this case already Quaghebeur, “ECJ to Examine Belgian Treatment of Inbound Dividends”, 37 Tax Notes Int’l 739 (Feb. 28, 2005); Smet and Laloo, “ECJ to Rule on Taxation of Inbound Dividends in Belgium”, 45 European Taxation (2005), 158; Liebman and Rouselle, “Discriminatory Treatment of Dividends
in the European Union: Is the End Near?”, 39 Tax Notes Int’l 143, 145 (July 11, 2005); J. Malherbe and Wathelet, “Pending Cases
Filed by Belgian Courts: The Kerckhaert-Morres Case”, in M. Lang, Schuch and Staringer (Eds.), ECJ Recent Developments in
Direct Taxation (Linde, 2006), 29; Kofler and Schindler, “Belgium Can Disregard French Withholding Tax on Dividends, ECJ
Advocate General Says”, 43 Tax Notes Int'l 459 (Aug. 7, 2006); Rainer, “ECJ decides on withholding taxes on cross-border income”, 35 Intertax (2007), 63; Kofler, “Treaty Override, juristische Doppelbesteuerung und Gemeinschaftsrecht”, 16 Steuer &
Wirtschaft International (2006), 62-69; Quaghebeur, “Kerckhaert-Morres v Belgian State: The Wrong Battle”, 54 British Tax Review (2007), 121; Isenbaert, “The ECJ condones Belgian personal income taxation of dividends. A temporary state of affairs?”, 16
EC Tax Review (2007), 236; Snell, “Non-Discriminatory Tax Obstacles in Community Law”, 56 International and Comparative
Law Quarterly (2007), 339, 358-359; Kofler and Mason, “Double Taxation: A European ‘Switch in Time’?”, 14 Columbia Journal
of European Law (2007), 63, 74-79; Garabedian and J. Malherbe, “Cross-Border Dividend Taxation: Testing the Belgian Rules
against the ECJ Case law (or Testing the ECJ Case Law against the Belgian Rules)”, in L. Hinnekens and Ph. Hinnekens (Eds.), A
Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 397, 416-420.
738 Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967.
739 COM(2003)810 final, 18.
740 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673.
741 Opinion of A.G. Geelhoed, 6 April 2006, Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967.
742 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 48 et
seq; Opinion of A.G. Geelhoed, 29 June 2006, Case C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107, para. 53.
743 Opinion of A.G. Geelhoed, 6 April 2006, Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, paras. 31 et seq;
see also Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 51 et seq.
744 See again Opinion of A.G. Geelhoed, 6 April 2006, Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, paras. 31
et seq; Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 51 et seq;
see in this direction also Forsthoff, “Treaty Override und Europarecht”, 15 Internationales Steuerrecht (2006), 509, 512 (arguing
lack of direct applicability), and M. Lang, “Tax Treaty Policy”, in Andersson, Eberhartinger and Oxelheim (Eds.), National Tax
Policy in Europe – To Be or Not to Be? (Springer, 2007), 191, 194 (arguing that there is “no logical reason to make either the source
state or the residence state responsible” for double taxation).
745 Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, para. 22, refers to the 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
[1990] OJ (L 225), 6, the Convention of 23 July 1990 on the elimination of double taxation in connection with the adjustment of
profits of associated enterprises [1990] OJ (L 225), 10, and the Council Directive 2003/48/EC of 3 June 2003 on taxation of savings
income in the form of interest payments [2003] OJ (L 157), 38. That the Court makes reference to the Savings Directive as a measure designed to eliminate double taxation is striking insofar as the sole aim of this Directive is to ensure effective taxation of savings
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or harmonization measure designed to eliminate double taxation has as yet been adopted at Community law level
and that
“Community law, in its current state and in a situation such as that in the main proceedings, 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 within the Community.”746 Hence, “it is for the Member States to take the measures necessary to prevent
situations such as that at issue in the main proceedings by applying, in particular, the apportionment criteria followed in
international tax practice.”747
Likewise, the EFTA Court in Seabrokers noted that
“[t]he EEA Agreement does not oblige the Contracting Parties to give relief for double taxation within the European
Economic Area, nor does it lay down any criteria for the attribution of areas of competence between the Contracting
Parties in relation to the elimination of double taxation. Consequently, the Contracting Parties have retained their competence to determine the connecting factors for the allocation of their fiscal jurisdiction, inter alia by concluding bilateral agreements.”748
The ECJ’s decision in Kerckhaert-Morres and the EFTA Court’s dictum in Seabrokers are not only disappointing from a Common Market perspective but also subject to criticism on multiple levels. Although some
scholars have already supported this approach,749 (wrongly) invoking Nygård as a possible precedent for this
position,750 the European Commission,751 strong voices from within the Court752 and legal scholarship753 do not
regard this decision as the final word on the issue of double taxation, as, inter alia, the facts and legal peculiarities in Kerckhaert-Morres might have blurred the legal issues raised.754 In this respect, the German Bundesfinanincome; it is, on the other hand, not clear why the Court did not also refer to the Interest-Royalty-Directive, [2003] OJ (L 157), 49, in
this respect, although this Directive, according to its preamble, explicitly aims at ensuring that “double taxation is eliminated” and
“that interest and royalty payments are subject to tax once in a Member State.”
746 Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, para. 22; see also Case C-298/05, Columbus Container Services, [2007] ECR ___, paras. 44-45.
747 Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, para. 23.
748 Case E-7/07, Seabrokers AS, [2008] EFTA Court Report ___, para. 48.
749 See Douma, “The Three Ds of Direct Tax Jurisdiction: Disparity, Discrimination and Double Taxation”, 46 European Taxation (2006), 522, 532; Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within
the EC”, 34 Intertax (2006), 582, 591; see also Quaghebeur, “Kerckhaert-Morres v Belgian State: The Wrong Battle”, 54 British Tax
Review (2007), 121, 128-129.
750 With regard to Case C-234/99, Nygård [2002] ECR I-3657, it suffices to state that this case concerned not only two different taxes but moreover two separate taxable events (export of living animals on the one hand and slaughtering abroad on the other
hand), which makes this case easily distinguishable from juridical double taxation in the direct tax area. See like here Enchelmaier,
“Meistbegünstigung im EG-Recht – Allgemeine Grundsätze”, in Cordewener, Enchelmaier and Schindler (Eds.), Meistbegünstigung
im Steuerrecht der EU-Staaten (Beck, 2006), 93, 100 with note 48.
751 Hence, the Commission will bring the Belgian legislation at issue in Kerckhaert and Morres before the ECJ again, stating
that in drafting the application to the Court, “the Commission will take into account the ruling by the European Court of Justice in
Kerckhaert-Morres, case C-513/04”; see the Press Release “Direct taxation: The Commission decides to refer Belgium to the Court
over discriminatory taxation of inbound dividends,” IP/07/67 (22 January 2007). For an analysis of this proceeding see Quaghebeur,
“Kerckhaert-Morres v Belgian State: The Wrong Battle”, 54 British Tax Review (2007), 121, 125-132, and Isenbaert, “The ECJ
condones Belgian personal income taxation of dividends. A temporary state of affairs?”, 16 EC Tax Review (2007), 236, 243-244.
Further, Commissioner Kovács reportedly noted that in Kerckhaert and Morres the Court failed “to take into account the internal
market issue.” See Parker and Houlder, “Investors hit as court backs Belgian double taxation”, Financial Times UK (Nov 15, 2006),
available at www.ft.com.
752 See Opinion of A.G. Kokott, 15 February 2007, Case C-464/05, Geurts and Vogten, [2007] ECR I-9325, para. 60 with
note 37, stating for the case of dual unlimited inheritance tax liability that it “remains to be seen” “[w]hether the Court of Justice, in
accordance with the findings in Kerckhaert and Morres, would actually accept this consequence, even in the case of a very high
burden of inheritance tax”. But see also the comments by Judge Koen Lenaerts (“’United in Diversity’ – also In Fiscalibus?”, in L.
Hinnekens and Ph. Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 617, 628-629), who notes in his acquiescent discussion of Kerckhaert and Morres that “Community law
does not question the parallel existence of tax competence of the Member States concerned”.
753 Rainer, “ECJ decides on withholding taxes on cross-border income”, 35 Intertax (2007), 63, 64; Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 154-264; Kofler and Mason, “Double Taxation: A
European ‘Switch in Time’?”, 14 Columbia Journal of European Law (2007), 63, 67-98; H. Loukota and Jirousek, “Doppelbesteuerung und Gemeinschaftsrecht”, 17 Steuer & Wirtschaft International (2007), 295, 297-301; van Thiel, “Why the European
Court of Justice should Interpret Directly Applicable Community Law as a Right to Most-Favored Nation Treatment and a Prohibition of Double Taxation”, in Weber (Ed.), The Influence of European Law on Direct Taxation: Recent and Future Developments
(Kluwer, 2007), 75, 118-129 and 136-137; Beiser, “Die Einmalerfassung im Gemeinschaftsrecht”, 18 Steuer & Wirtschaft International (2008), 59, and in Quantschnigg, Wiesner and Mayr (Eds), Steuern im Gemeinschaftsrecht, Festschrift Nolz (LexisNexis,
2008), 3, 4-5.; Vanistendael, “In Defence of the European Court of Justice”, 62 Bulletin for International Fiscal Documentation
(2008), 90, 96-98; Vanistendael, “Does the ECJ have the power of interpretation to build a tax system compatible with the fundamental freedoms?”, 17 EC Tax Review (2008), 52, 61-63; Heydt, “Double taxation not compatible with EU internal market”, 3519
Europolitics 24 f (Apr. 28, 2008). See in this direction also Ghosh, Principles of the Internal Market and Direct Taxation (Oxford
Key Haven Publications, 2007), 242-243 with note 177 (arguing that the power to conclude DTCs is “in fact an obligation on all
Member States to remove the obstacle on the establishment of the internal market constituted by such double taxation”); Jirousek,
“Die Zukunft der Doppelbesteuerungsabkommen”, in Quantschnigg, Wiesner and Mayr (Eds), Steuern im Gemeinschaftsrecht,
Festschrift Nolz (LexisNexis, 2008), 43, 47-48; Wathelet, “Tax Sovereignty of the Member States and the European Court of Justice: New Trends or Confirmation?”, in L. Hinnekens and Ph. Hinnekens (Eds.), A Vision of Taxes within and outside European
Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 905, 916; J. Malherbe, Ph. Malherbe, Richelle and Traversa,
The Impact of the Rulings of the European Court of Justice in the Area of Direct Taxation (Policy Department of the European
Parliament, March 2008), 67.
754 Commentators have noted that due to the French grant of an imputation credit to foreign shareholders, Mr. Kerckhaert and
Mrs. Morres were in fact better off than in the case of a dividend received from a company resident in Belgium. Following this line
of argumentation, Advocate General Geelhoed in his Opinion, 6 April 2006, Case C-513/04, Kerckhaert and Morres, [2007] ECR I10967, concluded that “the actual effect of the operation of the French system was that Belgian-resident shareholders received a
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zhof has already made a request for a preliminary ruling in a case concerning double inheritance taxation called
Block,755 and the Belgian Tribunal de première instance the Liège has asked the Court to consider again the issue
of double taxation of French-source dividends under Belgian law in Damseaux,756 the very situation already at
issue in Kerckhaert-Morres. It remains to be seen how the Court will deal with cases of double taxation in the
future. Strong arguments speak in favor of a rethinking:757
First, in other areas of law the ECJ has already found that “double burdens” infringe on the fundamental
freedoms even where such cases were not based on the principle of mutual recognition.758 Second, it might be
true that if the ECJ had decided that double taxation infringes on the fundamental freedoms it would have to
make political decisions as to which Member State has to refrain from taxation and that such decisions would
limit the political sovereignty of Member States;759 however, in the Community there is no reason why double
taxation should prevail, as Member States are free – and even called upon by Art. 293 EC760– to enter into
agreements for the avoidance for double taxation, which restore such sovereignty and are accepted by the ECJ:
The Member States are competent to determine – by means, inter alia, of international agreements – the criteria
for taxation on income and wealth “with a view to eliminating double taxation.”761 Third, in denying direct applicability of the fundamental freedoms because of the lack of Community law criteria to divide taxing jurisdiction between the Member States, the Court fails to take notice of the fact that in the discrimination area it frequently creates implicit priority rules based only on Community law, for example when it comes to personal
benefits,762 the danger of double-dips of losses763 or double utilization of a depreciation in value of assets.764 The
same holds true for the field of indirect taxation765 or social security; 766 so that “[a]llocation of tax competences
would be politically more contentious, but not a fundamentally different exercise.”767 Fourth, until now the ECJ
failed to consider if criteria for dividing taxing powers under Community law can be derived from other areas of
law, such as an “overridden” tax treaty between the Member States involved in the double taxation. Fifth, the
ECJ in Kerckhaert-Morres effectively rewards the inactivity of Member States, which – contrary to the obligation formerly implied by Art. 293 EC – have not even attempted768 to achieve abolition of double taxation in the
Community by means of a multilateral tax treaty.769 Sixth, denying the relevance of juridical double taxation
higher amount in the case of French-source dividends than in the case of exactly the same amount of dividends distributed from a
Belgian company” (para. 25). The Advocate General therefore found that “Belgian residents receiving French-source dividends are
not worse off in comparison to those receiving Belgian-source dividends; on the contrary, the combined effect of the French and
Belgian tax systems means that overall they are better off” (para. 26). Accordingly, Geelhoed denied the existence of a discrimination or restriction within the meaning of Art. 56 EC. For a different view see Smet and Laloo, “ECJ to Rule on Taxation of Inbound
Dividends in Belgium”, 45 European Taxation (2005), 158, 159; see also Malherbe and Wathelet, “Pending Cases Filed by Belgian
Courts: The Kerckhaert-Morres Case”, in M. Lang, Schuch and Staringer (Eds.), ECJ Recent Developments in Direct Taxation
(Vienna: Linde, 2006), 29, 58 with further references. Following the question submitted by the national court, the ECJ did not consider the effects of the avoir fiscal but rather focused on the unrelieved double taxation but might have been impressed by the peculiarities of the case. For an in-depth analysis see Isenbaert, “The ECJ condones Belgian personal income taxation of dividends. A
temporary state of affairs?”, 16 EC Tax Review (2007), 236.
755 Pending as Case C-67/08, Block; for the request see Bundesfinanzhof, 16 January 2008, II R 45/05, 17 Internationales
Steuerrecht (2008), 227 et seq.
756 Pending as Case C-128/08, Damseaux. Here the referring Belgian court inquires whether Art 56 EC prohibits a restriction
arising form “France-Belgium Convention seeking to avoid double taxation and to establish mutual administrative and legal rules of
assistance in the field of income tax, which allows partial double taxation of dividends from shares of companies established in
France to subsist and which renders the taxation of those dividends more onerous than Belgian withholding tax alone applied to
dividends distributed by a Belgian company to a Belgian resident shareholder.”
757 See also the criticism voiced by Snell, “Non-Discriminatory Tax Obstacles in Community Law”, 56 International and
Comparative Law Quarterly (2007), 339, 361-364, and Kofler and Mason, “Double Taxation: A European ‘Switch in Time’?”, 14
Columbia Journal of European Law (2007), 63, 79-81.
758 See supra II.A.3. and II.D.2. with further references; for a broader perspective see Vanistendael, “Does the ECJ have the
power of interpretation to build a tax system compatible with the fundamental freedoms?”, 17 EC Tax Review (2008), 52, 62-63
(arguing for a transposition of the case law on non-tax trade obstacles to the problem of juridical double taxation). See also Snell,
“Non-Discriminatory Tax Obstacles in Community Law”, 56 International and Comparative Law Quarterly (2007), 339, 360, stating that in Kerckhaert-Morres “the Court totally departs from its case law on double regulation”.
759 See Weber, “In Search of a (New) Equilibrium Between Tax Sovereignty and the Freedom of Movement Within the EC”,
34 Intertax (2006), 582, 590.
760 See supra note 697.
761 Case C-336/96, Gilly, [1998] ECR I-2793, para. 24.
762 See, e.g., Case C-279/93, Schumacker, [1995] ECR I-225; Case C-80/94, Wielockx, [1995] ECR I-2493.
763 See Case C-446/03, Marks & Spencer [2005] ECR I-10837, paras. 47 et seq., and instructively Vanistendael, “The ECJ at
the Crossroads: Balancing Tax Sovereignty against the Imperatives of the Single Market”, 46 European Taxation (2006), 413, 416.
764 See, e.g., Case C-470/04, N, [2006] ECR I-7409, para. 54.
765 It must not be overlooked that the early Case 15/81, Schul I, [1982] ECR 1409, created an obligation of the state of destination to credit the input VAT of the private exporter on the VAT liability of a private importer, which was contrary to the destination
principle already enshrined at the early state of VAT harmonization at issue in Schul I; for a closer analysis see Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 193-206; see also Vanistendael, “Does the ECJ have
the power of interpretation to build a tax system compatible with the fundamental freedoms?”, 17 EC Tax Review (2008), 52, 61-62.
766 See supra II.D.2.
767 Snell, “Non-Discriminatory Tax Obstacles in Community Law”, 56 International and Comparative Law Quarterly (2007),
339, 364; see also Cordewener, “Personal Income Taxation of Non-Residents and the Increasing Impact of the EC Treaty Freedoms”, in Weber (Ed.), The Influence of European Law on Direct Taxation: Recent and Future Developments (Kluwer, 2007), 35,
66-69, for a comparison with the Schumacker case law.
768 See, however, infra note 777 (concerning a 1968 preliminary draft).
769 It should furthermore be noted that Art. 293 EC cannot be viewed as excluding double taxation from scrutiny under the fundamental freedoms. In other contexts, the Court has made it clear that protection under the fundamental freedoms is not dependent
on agreements based on Art. 293 EC (see, e.g, Case C-208/00, Überseering, [2002] ECR I-9919, paras. 52 et seq., and also Vanis-
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under the fundamental freedoms is especially striking as the Court creates an obvious asymmetry: Why should
the Court protect Member States from taxpayers’ double use of losses, but not protect taxpayers from Member
States’ double taxation of their profits?770 In a true Internal Market, arguably neither is acceptable.771 Seventh,
and even if the decision in Kerckhaert-Morres might be seen as a political judgment, judicial self-restraint seems
inappropriate where “the fact that a taxable event might be taxed twice is the most serious obstacle there can be
to people and their capital crossing internal borders;”772 the experiences in the United States and Switzerland
impressively demonstrate that double taxation can be an issue to be resolved by the judiciary.773
The better arguments, therefore, are in favor of a prohibition of double taxation in the Community based on
the fundament freedoms, interpreted in the light of Art. 14 EC. However, the impact of such holding would be
clearly limited to a right of the taxpayer not to be taxed any higher than according to the taxation level of the less
advantageous jurisdiction.774 However, if the ECJ were to conclude that double taxation violates the EC Treaty,
it would then face a new dilemma: How to determine which State is obliged to relieve double tax? One possibility is that Member States would be jointly and severally liable to avoid double taxation. Such solution would
imply that each Member State has an independent and complete obligation to grant relief, such that the taxpayer
could file suit in the source State or the residence State, and recover from either, and Member States would be
free to settle resulting revenue issues among themselves. 775 This is probably what the Commission had in mind
in its 2003 analysis of a case concerning double inheritance taxation in France and Germany when it took
“the view that the two States are jointly responsible for arriving at an arrangement regarding taxation which respects the
petitioner’s rights. It is true that if tax had not been levied in France, this being contrary to the principles widely recognised under international tax law and embodied in the OECD model convention, the level of tax payable in Germany
would not have been reduced to zero. The Commission recognises that this is unsatisfactory as far as the German exchequer is concerned. However, a solution should not be sought at the expense of the individual citizen by requiring
cumulative payment of two sets of estate tax but must be achieved through agreement between the two States concerned.”776
The other option would be to try to determine which State is more responsible for the unrelieved double tax,
and to make only that State liable to relieve the disadvantage.777 Outside the area of harmonized law, such
framework would have to rely on international practice, and especially on the OECD MC.778 The OECD MC is
frequently relied upon by the ECJ779 and seems to have become a European standard;780 nevertheless, and even
though Art. 304 EC calls upon co-operation with the OECD, the OECD MC is not binding.781 And even if the
OECD MC were to be accepted as a first guideline, serious procedural issues would remain.782
tendael, “The ECJ at the Crossroads: Balancing Tax Sovereignty against the Imperatives of the Single Market”, 46 European Taxation (2006), 413, 419), whereas A.G. Geelhoed’s opinion could be understood as suggesting otherwise (see Opinion Advocate General Geelhoed, Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, paras. 34 et seq). See also Snell, “Non-Discriminatory
Tax Obstacles in Community Law”, 56 International and Comparative Law Quarterly (2007), 339, 363-364.
770 See also Vanistendael, “The ECJ at the Crossroads: Balancing Tax Sovereignty against the Imperatives of the Single Market”, 46 European Taxation (2006), 413, 416.
771 See also Opinion of the Economic and Social Committee on “Taxation in the European Union – Report on the development
of tax systems”, [1997] OJ (C 296), 37, Appendix II: “Double taxation or the absence of taxation is incompatible with the internal
market.”
772 Opinion of A.G. Ruiz-Jarabo Colomer, Case C-376/03, D, [2005] ECR I-5821, para. 85.
773 For this see Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 221-231; Snell,
“Non-Discriminatory Tax Obstacles in Community Law”, 56 International and Comparative Law Quarterly (2007), 339, 360-361
and 364.
774 See Englisch, “The European Treaties’ Implications for Direct Taxes”, 33 Intertax (2005), 310, 325; Schönfeld in Flick,
Wassermeyer and Baumhoff (Eds.), Außensteuerrecht (O. Schmidt, 6th edition 2005), Vor § 34c EStG Para. 2; Schönfeld, “Doppelbesteuerung und EG-Recht”, 83 Steuer und Wirtschaft (2006), 79, 80-81; Kofler, Doppelbesteuerungsabkommen und Europäisches
Gemeinschaftsrecht (Linde, 2007), 234-235.
775 See Farmer and Zalinski, “General Report”, in Xenopoulos (Ed.), Direct tax rules and the EU fundamental freedoms: origin
and scope of the problem; National and Community responses and solutions (FIDE Congress, 2006), 399, 403, and Kofler and
Mason, “Double Taxation: A European ‘Switch in Time’?”, 14 Columbia Journal of European Law (2007), 63, 81.
776 See the Commission’s analysis concerning Petition 626/2000 by Mr Klaus Schuler (German), concerning the dual taxation of an inheritance (Jan. 25, 2007).
777 See, e.g., Vanistendael, “Does the ECJ have the power of interpretation to build a tax system compatible with the fundamental freedoms?”, 17 EC Tax Review (2008), 52, 63.
778 See Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 887; Schnitger, Die Grenzen
der Einwirkungen der Grundfreiheiten des EG-Vertrages auf das Ertragsteuerrecht (IDW, 2006), 266; also in this direction Fibbe
and de Graaf, “Is double taxation arising from autonomous tax classification of foreign entities incompatible with EC law?“, in van
Arendonk, Engelen and Jansen (Eds.), A Tax Globalist, Essays in honour of Maarten J. Ellis (IBFD, 2005), 237, 258; Hey, “Perspektiven der Unternehmensbesteuerung in Europa”, 81 Steuer und Wirtschaft (2004), 193, 201; Vanistendael, “The ECJ at the Crossroads: Balancing Tax Sovereignty against the Imperatives of the Single Market”, 46 European Taxation (2006), 413, 419.
779 See, e.g., Case C-336/96, Gilly [1998] ECR I-2793, para. 31; see also the Opinion of A.G. Ruiz-Jarabo Colomer, 26 October 2004, Case C-376/03, D, [2005] ECR I-5821, para. 59 with note 41, and Opinion of A.G. Kokott, 14 July 2005, Case C-265/04,
Bouanich, [2006] ECR I-923, para. 16. For an extensive discussion and further references see Kofler, Doppelbesteuerungsabkommen
und Europäisches Gemeinschaftsrecht (Linde, 2007), 235-264.
780 Lehner, “The Influence of EU Law on Tax Treaties from a German Perspective”, 54 Bulletin For International Fiscal Documentation (2000), 461, 465; Vanistendael, “The ECJ at the Crossroads: Balancing Tax Sovereignty against the Imperatives of the
Single Market”, 46 European Taxation (2006), 413, 419.
781 For a recent discussion of possible approaches – provisions of the OECD MC as unwritten international law, as general
principles of Community law or as “better law” – see, however, Wouters and Vidal, “An International Lawyer’s Perspective on the
ECJ’s Case Law Concerning the OECD Model Tax Convention and its Commentaries”, in L. Hinnekens and Ph. Hinnekens (Eds.),
A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 989 et seq.
782 See Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 235-264.
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Still, imposing the obligation to relieve double taxation on only one of the Member States concerned is most
compelling where the two States have a bilateral tax treaty, but one Member State disregards its obligations
under the treaty (e.g., a treaty override or a treaty underride). In this situation, the tax treaty itself could provide
the guidelines needed to allocate responsibility.783 If the defendant Member State obliged itself in a legally binding tax treaty to waive its taxing rights in favor of the taxing rights of the other Member State, EC law should
defer to that allocation.784 Kerckhaert-Morres might have been a good test case for such solution, as Belgium
had accepted France’s right to levy a withholding tax in a DTC, so that responsibility to avoid double taxation
would have been allocable to Belgium.785 Of course, also this approach has limits insofar as a treaty override is
not necessarily always immediately visible, but rather a Member State, by way of treaty interpretation, either
extends its taxing rights or narrows its obligations contrary to the DTC. As the ECJ is not competent to interpret
DTC,786 it would be for the referring national court and the parties in the proceedings to demonstrate the responsibilities of a Member State under a DTC. In any event, it might be stated that arguably any attempt to justify
double taxation is doomed to fail, as this would mean reliance on behavior that was contrary to – recently repealed – obligation of Member States to enter into negotiation to avoid double taxation under Art. 293 EC.787 In
this respect, it will also be interesting to see the ECJ’s reaction on the question referred to it in Damseaux788
concerning the Belgian denial of a credit for foreign withholding tax in case of French-source dividends, if “Article 293 of the EC Treaty be interpreted as meaning that it renders wrongful Belgium’s inaction in not renegotiating with France a new way of abolishing double taxation of dividends from shares of companies established
in France.”
4. Conclusions: “Double Burdens” in Direct Taxation
Despite the criticism and the unsatisfactory, meager reasoning of the Court, Kerckhaert-Morres789 at least
implies that juridical double taxation as such does not infringe on the freedoms. This holding stands in a strained
relationship with the Court’s extensive Internal Market case law on “double burdens”, especially in the areas of
goods, social security and VAT, that prevented host Member States from applying unnecessary regulatory burdens on inbound economic activity, in particular if the activity already complied with the regulatory standards in
the home Member State. It remains, however, to be seen how the Court will deal with cases of double taxation in
the future, especially in the pending cases concerning, on the one hand, double inheritance taxation790 and, on the
other hand, the denial of a tax credit for foreign withholding tax.791 Strong arguments speak in favor of a rethinking. In any event, the Commission seems to be prepared to take some positive action in the field of double taxation.792 Possible solutions range from a harmonization by way of a Directive,793 the conclusion of a multilateral
tax treaty, 794 the creation of an EU Model Convention, either as a recommendation795 or a binding framework
783 Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 882 et seq; Englisch, Dividendenbesteuerung (O. Schmidt, 2005), 257 et seq; Englisch, “The European Treaties’ Implications for Direct Taxes”, 33 Intertax
(2005), 310, 324; Kofler, “Treaty Override, juristische Doppelbesteuerung und Gemeinschaftsrecht”, 16 Steuer & Wirtschaft International (2006), 62, 69-74; J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International Tax Law (Kluwer, 2006), 251, 283; Schnitger, Die Grenzen der Einwirkungen der Grundfreiheiten des EG-Vertrages auf
das Ertragsteuerrecht (IDW, 2006), 263 et seq; Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht
(Linde, 2007), 235-264; see also Schön, “Europäische Kapitalverkehrsfreiheit und nationales Steuerrecht”, in Schön (Ed.), Gedächtnisschrift für B. Knobbe-Keuk (O. Schmidt, 1997), 743, 772 et seq.
784
This position is also implied by Case C-400/02, Merida, [2004] ECR I-8471, in which the ECJ relied on the allocation of
taxing powers under a tax treaty to determine responsibility.
785 Kofler, “Treaty Override, juristische Doppelbesteuerung und Gemeinschaftsrecht”, 16 Steuer & Wirtschaft International
(2006), 62, 69-74; see in this direction also the Commission’s Communication on “Dividend taxation of individuals in the Internal
Market,” COM(2003)810 final, 18.
786 See, e.g., Case C-141/99, AMID, [2000] ECR I-11619, para. 18; see also Opionion of A.G. Kokott, 14 July 2005, Case C265/04, Bouanich, [2006] ECR I-923, para. 53 with note 47; Opinion of A.G. Geelhoed, 6 April 2006, Case C-513/04, Kerckhaert
and Morres, [2007] ECR I-10967, para. 37.
787 See also Beul, “Beschränkung europäischer Niederlassungsfreiheit und Art. 220 EGV – Doppelbesteuerung und Meistbegünstigung“, 6 Internationales Steuerrecht (1997), 1, 3-4.
788 Pending as Case C-128/08, Damseaux.
789 Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967; see also Case E-7/07, Seabrokers AS, [2008] EFTA Court
Report ___, para. 48.
790 Pending as Case C-67/08, Block; for the request see Bundesfinanzhof, 16 January 2008, II R 45/05, 17 Internationales
Steuerrecht (2008), 227 et seq.
791 Pending as Case C-128/08, Damseaux.
792 This might be implied by the attempted repeal of Art. 293 EC by Point 280 of the Treaty of Lisbon amending the Treaty on
European Union and the Treaty establishing the European Community [2007] OJ (C 306), 1, 130 (see supra note 697), as this provision could be viewed as granting Member States prior-ranking compentence in this field. See for a detailed analysis Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 366-421, especially 416-420.
793 See the Commission Working Paper “EC Law and Tax Treaties,” DOC(05) 2306, paras. 32 et seq.
794 See the Commission’s Communication “Towards an Internal Market without tax obstacles,” COM(2001)582 final, Para. 62
at p. 43; for a concrete proposal see M. Lang, H. Loukota, Rädler, Schuch, Toifl, Urtz, Wassermeyer and Züger (Eds.), Multilateral
Tax Treaties (Linde, 1997), and the analysis by Schindler, “Ist ein Multilaterales Doppelbesteuerungsabkommen eine sinnvolle
Lösung für Europa?”, in Cordewener, Enchelmaier and Schindler (Eds.), Meistbegünstigung im Steuerrecht der EU-Staaten (Beck,
2006), 201 et seq; for an analysis of the 1968 draft of a multilateral tax treaty see, e.g., Anschütz, “Harmonization of Direct Taxes in
the European Economic Community”, 13 Harvard International Law Journal (1972), 1, 45 et seq, and Schuch, “Europa auf dem
Weg zum multilateralen Doppelbesteuerungsabkommen”, in Gassner, Gröhs and M. Lang (Eds.), Zukunftsaufgaben der Wirtschaftsprüfung, Festschrift Deloitte & Touche (Orac, 1997), 327 et seq. It should, however, be noted that in 1968 the Commission
drew up a preliminary draft multilateral treaty (Doc.11.414/XIV/68 of 1.7.1968, reprinted in German in Regul, Steuern und Zölle im
Gemeinsamen Markt VIII (Nomos, 1969), V B/2), which was abandoned due to the major legal discrepancies between tax systems at
that time. See also Lehner, Möglichkeiten zur Verbesserung des Verständigungsverfahrens auf der Grundlage des EWG-Vertrages –
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treaty796, to specific recommendations based on Arts 211 and 249 EC that address the most important issues for
the avoidance of double taxation.797 Although the way into the future is unclear, one can only support the efforts
of the Commission, which consistently stresses that “double taxation is a major obstacle to cross-border activity
and investment within the EU” and that “[i]ts elimination is […] a basic objective and principle of any coordinated solution.”798
E. Conclusions
While one part of the, especially older, case law clearly identified discriminatory measures as such by explicitly referring to a “discrimination,”799 “manifestly discriminatory character,”800 “fiscal disadvantage,”801
“difference in treatment,”802 or “unequal treatment,”803 another part of the case law tends to be satisfied by stating that a – clearly discriminatory – measure “makes it less attractive” to exercise a freedom,804 a terminology
initially used in the area of non-discriminatory restrictions. This change in terminology, and partly in concepts,
usually leads to a classification of the ECJ’s case law on direct taxation in two generations:805 In the “first generation” of judgments the ECJ based its case law on the – however broad – concept of “discrimination”, while in
the “second generation,” starting in the mid-1990s, the Court considered it appropriate to engage in a two-track
approach involving also the prohibition of “non-discriminatory restrictions.” This may, inter alia, be based on
the examination that until the mid-1990s the ECJ had the fundamental freedoms require “evidence of overt or
covert discrimination. It may however be noted in passing that measures applicable without distinction may have
an equally restrictive effect on freedom of movement for persons or freedom of establishment as discrimination.”806 Nevertheless, the inconsistent terminology of the Court does not only hide underlying concepts, but still
makes it difficult to identify the applicable breadth of possible grounds of justification; however, this problem is
of declining relevance, since the trend seems to indicate that discriminatory restrictions, as long as they are not
overtly discriminatory,807 as well as every non-discriminatory restrictions may be justified under the broad “rule
of reason.”808 Although this “analytical untidiness” may not matter with regard to the specific outcome of the
cases before the ECJ, it may nevertheless endanger the uniform application of EC Law in the Member States by
national courts and authorities lacking such instincts and experience in EC Law issues.809
Nevertheless, and although not undisputed in detail, the basis on which the ECJ builds its case law on direct
taxation is the unequal treatment of cross-border as compared to domestic settings.810 Even in cases where the
ECJ did not explicitly referring to a discrimination, the comparisons the ECJ undertook in each of this cases
make it clear that it evokes the principle of non-discrimination and does indeed not base the decision on provisions “applicable without distinction,” since – unlike the former – the latter do clearly not require such comparison. However, by hiding behind the broad concept of a “restriction,” which covers “discriminatory” as well as
“non-discriminatory” obstacles, the Court leaves it open which concept it applies in a particular case. However,
the ECJ’s case law on direct taxation involved until now – with the exception of Futura811 and Deutsche Shell812
– is undisputedly based on the broadly understood principle of “non discrimination,” that is, the equalityDargestellt anhand eines Richtlinienvorschlages der EG-Kommission zur Vermeidung der Doppelbesteuerung im Fall der Gewinnberichtigung zwischen verbundenen Unternehmen (C.H. Beck, 1982), and European Commission, EC Law and Tax Treaties,
DOC(05)2306 (9 June 2005), para. 32 with note 44.
795 See in this direction the Commission Communication “Towards an Internal Market without tax obstacles,” COM(2001)582
final, Para. 62 at p. 43.
796 For in-depth analysis and a concrete proposal see Pistone, The Impact of Community Law on Tax Treaties (Kluwer, 2002);
see also Pistone, “An EU Model Tax Convention”, 11 EC Tax Review (2002), 129 et seq, and Pistone, “Ein EU-Modell als Lösung
für die Koordinierung der Doppelbesteuerungsabkommen zwischen den EU-Mitgliedstaaten”, in Cordewener, Enchelmaier and Ph.
Schindler (Eds.), Meistbegünstigung im Steuerrecht der EU-Staaten (Beck, 2006), 193 et seq.
797 For this see the the Commission Working Paper “EC Law and Tax Treaties,” DOC(05) 2306, Paras. 38 to 54.
798 See the Communication on “Co-ordinating Member States’ direct tax systems in the Internal Market,” COM(2006)823 final, 5-6.
799 Instructive, e.g., in Case C-330/91, Commerzbank, [1993] ECR I-4017; Case C-107/94, Asscher, [1996] ECR I-3089, para. 49; see also Case C-234/01, Gerritse, [2003] ECR I-5933, paras. 28 and 53.
800 Case C-42/02, Lindman, [2003] ECR I-13519, para. 22.
801 See, e.g., Case C-80/94, Wielockx, [1995] ECR I-2493, para. 23.
802 See, e.g., Case C-254/97, Société Baxter, [1999] ECR I-4809, para. 15; Case C-55/98, Vestergaard, [1999] ECR I-7641, para. 23; Case C-200/98, X AB and Y AB, [1999] ECR I-8261, para. 28; Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst,
[2001] ECR I-1727, para. 43.
803 See Case C-264/96, ICI, [1998] ECR I-4695, para. 24; Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 50; Case C141/99, AMID, [2000] ECR I-11619, para. 27; Case C-436/00, X and Y, [2002] ECR I-10829, para. 37.
804 See, e.g., Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 42; Case C-324/00, Lankhorst-Hohorst, [2002] ECR I11779, para. 32.
805 See, e.g., L. Hinnekens, “The search for the framework conditions of the fundamental EC Treaty principles as applied by
the European Court to Member States’ direct taxation”, 11 EC Tax Review (2002), 112, 113 et seq.
806 Opinion of A.G. Léger, 31 May 1995, Case C-80/94, Wielockx, [1995] ECR I-2493, para. 17.
807 But see Opinion of A.G. Jacobs, 21 March 2002, Case C-136/00, Danner, [2002] ECR I-8147, paras. 34 et seq., 40 et seq.,
for a discussion of the unclear case law and a suggestion in favour of moving away from the distinction between the grounds justifying overt discriminatory measures, covert discriminatory measures, and measures that apply without distinction.
808 See infra III.A.
809 See Farmer, “The Court’s case law on taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75, 81.
810 See, e.g., Farmer, “The Court’s case law on taxation: a castle built on shifting sands?”, 12 EC Tax Review (2003), 75, 75 et
seq.
811 Case C-250/95, Futura, [1997] ECR I-2471.
812 Case C-293/06, Deutsche Shell GmbH, [2008] ECR ___.
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component (“gleichheitsrechtliche Komponente”) of the fundamental freedoms.813 Under this approach all measures are to be regarded as “discriminatory” if they give less favorable treatment to trans-frontier situations than
to purely domestic situations,814 whether that relates to incoming or outgoing movement of workers, capital,
services, or establishment of businesses – an understanding that extends well beyond the narrow language of the
umbrella-provision of Art. 12 EC which merely forbids “any discrimination on grounds of nationality,” but finds
strong support in the spirit of the EC Treaty and its aim to create an Internal Market without obstacles.815
However, apart from this overriding importance of the principle of non-discrimination for the ECJ’s case
law on direct taxation, the judicature moved on to identify (real) “non-discriminatory restrictions,” which, if a
certain threshold of impact on the access to the market of another Member State has been passed, have to be
justified to prevail in the light of the fundamental freedoms.816 Although non-discriminatory restrictions have not
yet gained much importance for the area of direct taxation, a promising approach, which could be operationalized for and extended also to the area of direct taxation, concerns the prohibition of “double burdens” and a
potential extension of this case law to issues of juridical double taxation. Although the Court in KerckhaertMorres817 has implied that juridical double taxation as such does not infringe on the freedoms, the future developments in this field remain to be seen.818
III. Justifications and the “Rule of Reason” in Direct Taxation:
Protection of Revenue versus Protection of Taxpayer Rights
A. The “Rule of Reason” in Direct Taxation
Apart from providing the private sector with directly applicable rights to free movement and non discrimination, Community law also provides the public sector with the possibility to exceptionally maintain ECincompatible exit or access restrictions if these are justified by a legitimate public interest reason and proportional. Hence, once the existence of a restriction has been established, the second step brings the analysis to the
issue of a possible justification. Generally, the Court finds that a discriminatory measure can be justified only on
the basis of derogating provisions expressly provided for in the Treaty.819 Interestingly, the justifications that are
explicitly provided for by the EC Treaty (Art. 39, 45, 46, 55, 58) are of little use in the income tax area, because
they traditionally allow market access restrictions (but not post market-access discrimination),820 and they have a
very limited scope not normally covering tax measures.821 The justified refusal to allow access to public sector
jobs, for instance, only covers very few sensitive positions that involve the exercise of public power.822 Likewise,
public security only covers defence related issues, and public health only covers situations that involve persons
that carry highly contagious diseases.823 And also the public policy justification only applies if someone’s personal conduct constitutes “a perturbation of the social order”, as well as a “genuine and sufficiently serious threat
to public policy affecting one of the fundamental interests of the society”.824
Unsurprisingly, therefore, in its income tax case law, the Court abandoned its own rule that discriminatory
measures could be justified only on grounds explicitly mentioned in the Treaty. In fact, the Court investigates
practically all public interest justifications that are argued by Member States. Therefore, in the area of taxation,
the Court has frequently accepted that “discriminatory national rules may be justified for imperative public interest requirements other than those set out in the Treaty and in particular in the name of the cohesion of the tax
system.”825 Under this approach, a (covertly discriminatory) restriction can be justified if such provision pursues
a legitimate aim compatible with the EC Treaty and is justified by pressing reasons of public interest, that is,
objective factors other than nationality. Although the ECJ has not offered a dogmatic foundation for this approach toward justifications outside those explicitly mentioned in the EC Treaty, it seems sensible insofar as the
See also, e.g., Lyal, “Non-discrimination and direct tax in Community law”, 12 EC Tax Review (2003), 68, 74.
See, e.g., Case C-385/00, De Groot, [2002] ECR I-11819, para. 83.
815 See for this also the Commission’s Communication on “An Internal Market without company tax obstacles – achievements,
ongoing initiatives and remaining challenges”, COM(2003)726 final.
816 Infra III.
817 Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967.
818 See supra II.D.3.
819 For a recent discussion see the Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005]
ECR I-10837, para. 33.
820 See, for instance, Case 152/73, Sotgiu, [1974] ECR 153, para. 4, and Joined Cases 389/87 and 390/87, G.B.C. Echternach and
A. Moritz, [1989] ECR 723, para. 14.
821 Surprising perhaps, but even the explicit tax justifications included in the Maastricht Treaty articles on the free movement
of capital (Art 58 EC) were restrictively interpreted by the Court as only allowing different treatment of different situations, or different treatment of similar situations if justified by an overriding public interest; see immediately infra and, e.g., Cordewener, Kofler
and Schindler, “Free Movement of Capital, Third Country Relationships and National Tax Law: An Emerging Issue before the ECJ”,
47 European Taxation (2007), 107, 114-117.
822 See, for instance, Case 149/79 Commission v. Belgium, [1980] ECR 3881, paras. 10 and 12, and Case 307/84, Commission v.
France, [1986] ECR 1725.
823 Citation still to be added!
824 See, for instance, Case 36/75, Rutili, [1975] ECR 1219, para. 28; ECJ, 27 October 1977, Case 30/77, Régina v. Pierre
Bouchereau, [1977] ECR 1999, and Joined Cases 115/81 and 116/81, Rezguia Adoui and Dominique Cornuaille, [1982] ECR 1665,
para. 8.
825 Opinion of A.G. Léger, 31 May 1995, Case C-80/94, Wielockx, [1995] ECR I-2493, para. 31; see also Opinion of A.G. Tesauro,16 September 1997, Case C-120/95, Decker, [1998] ECR I-1831, para. 49.
813
814
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economic freedom enshrined in the EC Treaty is not the only goal and activity of the Community, but rather has
to be put in the broader picture of Art. 2 EC, which also lays out the task to promote a high level of social protection, the protection of the environment and social cohesion; the economic freedoms therefore have to be balanced with the non-economic aims of the Treaty.826 However, even if a valid justification can be found, such
measure has, in a third step, to fulfill a three-prong proportionality test: It must be suitable, i.e. be of such a nature as to ensure achievement of the aim in question. Further, it must not go beyond what is necessary for that
purpose,827 in the sense that no other less restrictive means to protect the public interest in question is available.828 Finally, a measure must be adequate, that is proportional stricto sensu, asking whether a national measure, even though there is no other effective means, has an excessive impact on the addressee’s own interests.829
Both lines of case law can be reconciled by distinguishing between overt discrimination and other forms of
“restrictions”.830 The possible grounds of justification as regards overt discrimination are basically limited to the
very narrow circumstances explicitly described in the EC Treaty (i.e., public policy, public security or public
health).831 All other forms of discrimination, as well as “non-discriminatory restrictions”, may be justified based
on a much broader, open-ended “rule of reason,”832 which has been developed by the ECJ in the non-fiscal Cassis de Dijon case833 and famously been summarized in Gebhard:
“[N]ational measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the
Treaty must fulfil four conditions: they must be applied in a non-discriminatory manner; they must be justified by imperative requirements in the general interest; they must be suitable for securing the attainment of the objective which
they pursue; and they must not go beyond what is necessary in order to attain it.” 834
Hence, unlike the first level of restrictions, which is determined by the legislature, on this second level it is
not only unavoidable but also the genuin task of the judicature to carefully consider the arguments of justification, and to evaluate their weight based on value judgments. It is, however, clear from the case law that, when it
comes to actually accepting a justification, the Court is much more cautious. As briefly illustrated below, the
Court has, for instance, been very reluctant to accept arguments related to revenue loss or administrative difficulties (Chapter III.B.). Only recently has it opened the door to at least two “overriding public interest” justifications which it had once rejected, i.e. the possibility to justify national anti-avoidance and anti-abuse measures
(Chapter III.C.) and the need to preserve the balanced allocation of tax jurisdiction (Chapter III.D.).
It should be noted in passing that a particularly delicate area is the interpretation of the free movement of
capital and payments as guaranteed by Art. 56 and 58 EC, as the latter makes an express reference to permissible
non-discriminatory restrictions, whilst at the same time it prohibits arbitrary discrimination and disguised restrictions: Under Art. 58(1)(a) EC, the Member States keep the right “to apply the relevant provisions of their tax law
which distinguish between taxpayers who are not in the same situation with regard to their place of residence or
with regard to the place where their capital is invested.” Moreover, Art. 58(1)(b) EC allows the Member States to
826 See also J. Lang and Englisch, “A European Legal Tax Order Based on Ability to Pay”, in Amatucci (Ed.), International
Tax Law (Kluwer, 2006), 251, 288-289.
827 Case C-250/95, Futura, [1997] ECR I-2471, para. 26; Case C-35/98, Verkooijen, [2000] ECR I-4071, para. 43; Case C436/00, X and Y, [2002] ECR I-10829, para. 49; Case C-324/00, Lankhorst-Hohorst, [2002] ECR I-11779, para. 33.
828 See for an extensive discussion Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002),
70 et seq., 926 et seq.; see also O’Leary and Fernández-Martin, “Judicially-created Exceptions to the Free Provision of Services”, 11
European Business Law Review (2000), 347 et seq.
829 See for this also Cordewener, Dahlberg, Pistone, Reimer and Romano, “The Tax Treatment of Foreign Losses: Ritter,
M & S, and the Way Ahead”, 44 European Taxation (2004), 218, 223.
830 Opinion of A.G. Alber, 24 September 2002, Case C-168/01, Bosal, [2003] ECR I-9409, para. 41; see also Opinion of A.G.
Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 33 with note 36. See also Kingston, “A
Light in the Darkness: Recent Developments in the ECJ’s Direct Tax Jurisprudence”, 44 Common Market Law Review (2007), 1321,
1328-1329, and Van Crombrugge, “The Concept, History and Significance of European Tax Law (Private)”, in L. Hinnekens and
Ph. Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer,
2008), 239, 251.
831 See Arts 39(3), 46(1) and 55 EC. However, the ECJ’s case law is not entirely clear on this point: While the majority of decisions support this view, some decisions seem to open the “rule of reason” even for “overt” discriminations (compare, e.g., Case C311/97, Royal Bank of Scotland, [1999] ECR I-2651, paras. 32 et seq., with Case C-484/93, Svensson and Gustavsson, [1995] ECR
I-3955, para. 15). For a discussion of these issues see Opinion of A.G. Jacobs, 21 March 2002, Case C-136/00, Danner, [2002] ECR
I-8147, paras. 36-41, Opinion of A.G. Stix-Hackl, 10 April 2003, Case C-42/02, Lindman, [2003] ECR I-13519, paras. 63-83, Opinion of A.G. Stix-Hackl, 1 June 2006, Case C-150/04, Commission v. Denmark, [2007] ECR I-1163, paras. 42-47, and Opinion of
A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 33; see also Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 150 et seq.
832 See, e.g., Case C-237/94, O’Flynn, [1996] ECR I-2617, paras. 17 et seq.; Case C-107/94, Asscher, [1996] ECR I-3089,
paras. 49 et seq.; explicitly Case C-388/01, Commission v. Italy, [2003] ECR I-721, paras. 21 et seq.; further Case 175/88, Biehl,
[1990] ECR I-1779, paras. 14 et seq.; Case C-484/93, Svensson and Gustavsson, [1995] ECR I-3955, paras. 15 et seq.; but see also
Case C-224/97, Ciola, [1999] ECR I-2517, para. 16. See for these questions the extensive discussion by Cordewener, Europäische
Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002), 143 et seq.; see also Roth, “Die Niederlassungsfreiheit zwischen
Beschränkungs- und Diskriminierungsverbot”, in Schön (Ed.), Gedächtnisschrift für Knobbe-Keuk (O. Schmidt, 1997), 729, 730 et
seq.; Lyal, “Non-discrimination and direct tax in Community law”, 12 EC Tax Review (2003), 68, 74.
833 Case 120/78, Rewe-Zentral AG (“Cassis de Dijon”), [1979] ECR 649; see also L. Hinnekens, “The search for the framework conditions of the fundamental EC Treaty principles as applied by the European Court to Member States’ direct taxation”, 11
EC Tax Review (2002), 112, 114.
834 See Case C-55/94, Gebhard, [1995] ECR I-4165, para. 37, and also, e.g., Case C-3/95, Reisebüro Broede, [1996] ECR I6511, para. 28; Case C-19/92, Kraus, [1993] ECR I-1663, para. 32; Case C-108/96, MacQuen, [2001] ECR I-837, para. 26. It should
be added that the first prong of this test is rather vague, but might also imply that a national measure which is neutral (or “even
handed”) on its face must not be applied in a discriminatory way by national authorities in daily practice. For an example of such a
situation see Case C-185/96, Commission v. Greece, [1998] ECR I-6601, paras. 22 et seq.
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“take all requisite measures to prevent infringements of national law and regulations, in particular in the field of
taxation”. Art 58(3) EC, on the other side, states specifically that the national provisions referred to by Art 58(1)
EC are not to constitute a means of arbitrary discrimination or a disguised restriction on the free movement of
capital and payments, as defined in Art 56 EC.835
For a number of years the interpretation of these clauses was unclear.836 However, the prevailing opinion in
legal writing had already suggested that they their character is merely clarifying,837 and the ECJ basically confirmed this view. In Verkooijen838 and subsequent case law,839 Art 58(1)(a) EC was qualified as a codification of
the Court´s prior case law: The ECJ stated that according to that case law national tax provisions of the kind to
which Art 58(1)(a) EC refers, in so far as they establish certain distinctions based, in particular, on the residence
of taxpayers, could be compatible with EC Law provided that they applied to situations which were not objectively comparable or could be justified by overriding reasons in the general interest, in particular in relation to
the cohesion of the tax system.840 And only a few months later, the Court decided in a similar way with respect
to Art. 58(1)(b) EC, which was considered to allow “measures intended to ensure effective fiscal supervision and
to combat illegal activities such as tax evasion”, as long as any relevant measure complies “with the principle of
proportionality.”841
B. Unacceptable Grounds of Justification: Loss of Revenue and Administrative Difficulties
In many income tax cases Member States argued that they should be allowed to apply a restrictive tax
measure, because the normal application of Community law would result in a loss of tax revenue or an erosion of
the tax base. In its general Internal Market case law,842 the Court routinely rejected such arguments, and it confirmed this line in its income tax case law.843, 844 For example, the reduction in tax revenue can not be regarded as
a matter of overriding general interest which can be relied upon in order to justify discrimination;845 neither can
the host State justify a different tax treatment on the basis that the non-resident taxpayer or its subsidiary receives more favorable treatment under other rules of the host State’s tax system.846 Also, the Court has been very
reluctant to accept justifications put forward on the basis of the administrative difficulties involved in ensuring
efficient fiscal supervision.847 It has taken the view that Member States should, if need be, provide each other
with mutual assistance to overcome such difficulties,848 and this approach was recently extended to the recovery
of tax claims,849 as the respective directive has been extended to cover also direct taxes.850 On the other hand, the
Art 73d(1)(a), (b) and Art 73d(3) of the Treaty version of Maastricht (before the Treaty of Amsterdam).
See for an overview, e.g., Sedlaczek, “Der Begriff der Diskriminierung und der Beschränkung – die Kapitalverkehrsfreiheit
als konvergente Grundfreiheit des EG-Vertrages”, in Lechner, Staringer, and Tumpel (Eds.), Kapitalverkehrsfreiheit und Steuerrecht
(Linde, 2000), 27, 51 et seq.
837 See, e.g., Dautzenberg, “Die Kapitalverkehrsfreiheit des EG-Vertrages, der Steuervorbehalt des Art 73d EGV und die Folgen für die Besteuerung”, 44 Recht der Internationalen Wirtschaft (1998), 537, 541; Ruppe, “Die Bedeutung der Kapitalverkehrsfreiheit für das Steuerrecht”, in Lechner, Staringer, and Tumpel (Eds.), Kapitalverkehrsfreiheit und Steuerrecht (Linde, 2000) 9, 21
et seq.; Staringer, “Dividendenbesteuerung und Kapitalverkehrsfreiheit”, in Lechner, Staringer, and Tumpel (Eds.), Kapitalverkehrsfreiheit und Steuerrecht (Linde, 2000), 93, 106 et seq.; Saß, “Zum Schutz von Kapitalbewegungen in der EU gegen steuerliche
Diskriminierung”, 82 Finanz-Rundschau (2000), 1270, 1272; Staringer, “Auslandsdividenden und Kapitalverkehrsfreiheit”, Österreichische Steuer-Zeitung (2000), 26, 28 et seq.
838 See Case C-35/98, Verkooijen, [2000], ECR I-4071, paras. 42 et seq. Cf. Opinion of A.G. Kokott, 12 February 2004, Case
C-242/03, Weidert and Paulus, [2004] ECR I-7379, paras. 27 et seq.
839 For example, Case C-315/02, Lenz, [2004] ECR I-7063, paras. 26 et seq.; Case C-319/02, Manninen, [2004] ECR I-7477,
paras. 28 et seq.
840 Cf. Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (O. Schmidt, 2002) 747 et seq.; Flynn, “Coming
of Age: The Free Movement of Capital Case Law 1993-2002”, 39 Common Market Law Review (2002), 773, 793 et seq.
841 See Case C-478/98, Commission v. Belgium, [2000] ECR I-7587, paras. 37 et seq.
842 Case C-484/93, Svensson and Gustavsson, [1995] ECR I-3955, paras. 13 et seq.
843 See for instance Case C-264/96, ICI, [1998] ECR I-4695; Case C-307/97, Saint-Gobain, [1999] ECR I-6161; Case C-35/98,
Verkooijen, [2000] ECR I-4071; Joined Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] I-1727; Case C136/00, Danner, [2002] ECR I-8147; Case C-422/01, Skandia and Ramstedt, [2003] ECR I-6817; Case C-436/00, X and Y, [2002]
ECR I-10829; Case C-385/00, De Groot, [2002] ECR I-11819; Case C-9/02, de Lasteyrie du Saillant, [2004] ECR I-2409; Case C315/02, Lenz, [2004] ECR I-7063; Case C-319/02, Manninen, [2004] ECR I-7477; Case C-196/04, Cadbury Schweppes, [2006] ECR
I-7995.
844 Nevertheless, the Court may exceptionally be willing to accommodate the budgetary concerns of Member States, in particular by limiting the temporal scope of its decision to the future (ex nunc); see supra I. and infra IV.D.
845 Case C-264/96, ICI, [1998] ECR I-4695, para. 28; Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 51; Case C35/98, Verkooijen, [2000] ECR I-4071, para. 48; Joined Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] I1727, para. 59; Case C-436/00, X and Y, [2002] ECR I-10829, para. 50.
846 See, e.g., Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 21; Case C-330/91, Commerzbank,
[1993] ECR I-4017, paras. 16 et seq.; Case C-307/97, Saint-Gobain, [1999] ECR I-6161, paras. 51 et seq.; Case C-141/99, AMID
[2000] ECR I-11619, para. 27.
847 See, e.g., Case C-254/97, Baxter, [1999] ECR I-4809, paras. 18 et seq.; Case C-55/98, Vestergaard, [1999] ECR I-7641,
paras. 25 et seq.
848 See the Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of
the Member States in the field of direct taxation, [1977] OJ (L 336), 15. For the respective line of case law see, e.g., Case C-279/93,
Schumacker, [1995] ECR I-225, para. 45; Case C-55/98, Vestergaard, [1999] ECR I-7641, para. 26; Case C-136/00, Danner, [2002]
ECR I-8147, paras. 44 et seq.; Case C-334/02, Commission v. France, [2004] ECR I-2229, paras. 31 et seq. Cf., Randelzhofer and
Forsthoff, in Grabitz and Hilf (Eds.), Das Recht der Europäischen Union (C.H. Beck, 2003), Vor Art 39–55 para. 240.
849 See Case C-470/04, N, [2006] ECR I-7409, para. 53; Case C-520/04, Turpeinen, [2006] ECR I-10685, para. 37.
850 See Council Directive 76/308/EEC of 15 March 1976 on mutual assistance for the recovery of claims relating to certain levies, duties and other measures, [1976] OJ (L 73), 18, amended, inter alia, by Council Directive 2001/44/EC of 15 June 2001, [2001]
OJ (L 175), 17.
835
836
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need to safeguard the cohesion of a tax system,851 the prevention of tax evasion or tax avoidance,852 or the effectiveness of fiscal supervision853 can constitute overriding requirements of general interest capable of justifying a
restriction on the exercise of fundamental freedoms guaranteed by the EC Treaty.854 In general, the Court has
enforced the principle of non-discrimination very strictly. In line with general principles developed outside the
tax field, the Court has rejected a number of justifications for discriminatory measures advanced by Member
States and many of them repeatedly. These include for example the lack of harmonization of direct taxation;855
the fact that a non-resident could have avoided the discrimination, for example, by setting up a subsidiary company rather than a branch,856 economic aims or the protection of (future) tax revenue,857 the absence of reciprocity,858 the existence of discretionary or equitable procedures to ensure appropriate fiscal treatment,859 or the lower
taxation, for example, of a service provider in its country of residence as a justification for higher, compensatory
taxation of the recipient of the services.860
In the 1992 decisions in Bachmann861 and Commission v. Belgium,862 however, the Court accepted a revenue related argument, when it allowed Belgium to apply an EC incompatible tax measure in order to maintain
the coherence of the tax system. In fact the Court assumed that, under Belgian law, there was a link between
deductibility of premiums and taxability of subsequent income, which meant that the revenue loss of the deduction was offset by the taxation of subsequent income. The idea behind the coherence justification was that,
within the tax system of a particular Member State, there may be a close relationship between, on the one hand a
tax advantage granted to a particular tax payer in the framework of a particular tax and at a certain point in time,
and, on the other hand, a tax burden imposed on the same taxpayer and in the framework of the same tax at a
later point in time. From a revenue point of view, therefore, a particular Member State initially forgoes (the collection of) a revenue claim, but only on the clear understanding that the claim can be realized at a later stage.
Such a coherent system encounters the problem in an Internal Market that a cross border taxpayer may enjoy the
advantage and subsequently use his right to free movement and make it more difficult for the Member State that
granted the advantage to realize the revenue claim that it had temporarily forgone. In these circumstances, that
Member State typically seeks to deny the tax advantage to the cross-border situation, as in Bachmann, or link the
realization of the revenue claim to the point of exit of the taxpayer, as in Daily Mail.863 In both cases, the resulting discrimination could, in international tax law, be justified by the need for the Member State concerned to
prevent revenue leaks from affecting its budgetary position.
But such a revenue related coherence argument necessarily has a very limited scope in Community law, because it cannot serve as an alternative for the “loss of revenue” justifications, which the Court has consistently
rejected. Hence, Bachmann and Commission v. Belgium, have been widely criticized, not least because they were
851 Cases C-204/90, Bachmann, [1992] ECR I-249, paras. 21 et seq., and C-300/90, Commission v. Belgium, [1992] ECR 305,
paras. 14 et seq. However, in all subsequent decisions the ECJ has denied a justification on the ground of the cohesion of the tax
system.
852 Case C-264/96, ICI, [1998] ECR I-4695, para. 26; Joined Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst,
[2001] I-1727, para. 57; Case C-436/00, X and Y, [2002] ECR I-10829, para. 61; Case C-324/00, Lankhorst-Hohorst, [2002] ECR I11779, para. 37.
853 Case C-250/95, Futura Participations, [1997] ECR I-2471, para. 31; Case C-254/97, Baxter, [1999] ECR I-4809, para. 18;
Case C-55/98, Vestergaard, [1999] ECR I-7641, para. 25; Case C-136/00, Danner, [2002] ECR I-8147, paras. 51 et seq.
854 See, in particular, as regards such justifications in the context of restrictions concerning a difference in income tax treatment, Case C-55/98, Vestergaard, [1999] ECR I-7641, para. 23.
855 See, e.g., Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 24; Case C-204/90, Bachmann,
[1992] ECR I-249, paras. 10 et seq. Cf. Knobbe-Keuk, B., “Restrictions on the Fundamental Freedoms Enshrined in the EC Treaty
by Discriminatory Tax Provisions – Ban and Justification”, 3 EC Tax Review (1994), 74, 78 et seq.; Thömmes, “Tatbestandsmäßigkeit und Rechtfertigung steuerlicher Diskriminierungen nach EG-Recht”, in Schön (Ed.), Gedächtnisschrift für Knobbe-Keuk (O.
Schmidt, 1997), 795, 821; Randelzhofer and Forsthoff in Grabitz and Hilf (Eds.), Das Recht der Europäischen Union (Beck, 2003),
Vor Art 39–55 para. 249.
856 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 22; Case C-307/97, Saint-Gobain, [1999]
ECR I-6161, para. 42.
857 Case C-264/96, ICI, [1998] ECR I-4695, para. 28; Case C-307/97, Saint-Gobain, [1999] ECR I-6161, para. 50; Case C35/98, Verkooijen, [2000] ECR I-4071, para. 48; Joined Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] I1727, paras. 59; Case C-136/00, Danner, [2002] ECR I-8147, para. 56; Case C-436/00, X and Y, [2002] ECR I-10829, para. 50; Case
C-324/00, Lankhorst-Hohorst, [2002] ECR I-11779, para. 36. Cf. Randelzhofer and Forsthoff in Grabitz and Hilf (Eds.), Das Recht
der Europäischen Union (C.H. Beck, 2003), Vor Art 39–55 para. 247.
858 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 26. Cf., Thömmes, “Tatbestandsmäßigkeit
und Rechtfertigung steuerlicher Diskriminierungen nach EG-Recht”, in Schön (Ed.), Gedächtnisschrift für Knobbe-Keuk (O.
Schmidt, 1997), 795, 821 et seq.
859 See Case 168/85, Commission v. Italy, [1986] ECR, 2945, para. 11; Case C-307/89, Commission v. France, [1991] ECR I2903, para. 13; Case C-58/90, Commission v. Italy, [1991] ECR I-4193, paras. 12 et seq.; Case C-236/91, Commission v. Ireland,
[1992] ECR I-5933, para. 6; Case C-381/92, Commission v. Ireland, [1994] ECR I-215, para. 7; Case C-80/92, Commission v.
Belgium, [1994] ECR I-1019, para. 20; Case, C-151/94, Commission v. Luxembourg (“Biehl II”), [1995] ECR I-3685, para. 18; Case
C-185/96, Commission v. Greece, [1998] ECR I-6601, para. 32; Case C-162/99, Commission v. Italy, [2001] ECR I-541, para. 33;
Case C-160/99, Commission v. France, [2000] ECR I-6137, para. 23. Cf. Case C-279/93, Schumacker, [1995], ECR I-225, paras. 53
et seq.
860 See, e.g., Case C-294/97, Eurowings, [1999] ECR I-7447, paras. 43 et seq.; Case C-136/00, Danner, [2002] ECR I-8147,
para. 56.
861 Case C-204/90, Bachmann, [1992] ECR I-249, paras. 21 et seq.
862 Case C-300/90, Commission v. Belgium, [1992] ECR 305, paras. 14 et seq.
863 Case 81/87, Daily Mail, [1988] ECR 5483.
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decided upon a wrong factual and legal determination of the facts,864 and the ECJ has subsequently shown great
reluctance to accept the fiscal coherence type of justification and ever since denied a justification on the ground
of the cohesion of the tax system.865 In Community law, therefore, the need to maintain coherence may exceptionally justify a restrictive measure that seeks to ensure system coherence (“direct link requirement”), but not a
measure that seeks to ensure revenue coherence, as in Bachmann. Moreover, the restriction may not be disproportional. The refusal of the deduction in Bachmann was disproportional because less restrictive arrangements
were in place in case of premium payments to insurers in the Netherlands and France by means of additional
reporting obligations for those foreign insurance companies.866 Under the tightened prerequisites for such justification, the applicability of the coherence defense is limited to situations where a discriminatory rule refusing a
deduction for a payment is justified by inability to tax the recipient of the payment. Hence, a justification of a
discriminatory measure on the grounds of “fiscal coherence” requires the existence of a direct link between deduction and taxation within the same tax system: The ECJ has repeatedly held that the aim of ensuring coherency
of taxation is not sufficient to justify a difference in treatment between residents and non-residents unless the tax
disadvantage resulting for a national of a Member State is compensated for by a corresponding tax advantage for
the same person.867 Therefore, the existence of a merely indirect link between the tax advantage accorded to one
taxable person and the unfavorable tax treatment of another cannot justify discrimination.868
As the case law of the ECJ indicates, in national rules there is rarely a strict correlation between deductions
and benefits. This is even less so if one takes account of bilateral conventions.869 In Bachmann, for example, a
tax treaty was in place between Belgium and Germany that allocated tax jurisdiction on the basis of residence
irrespective of where the premiums had been deducted and irrespective of where the insurance company is resident, so that revenue coherence was realised at the overall tax treaty level, even if not in every individual case.
Acknowledging this, and implicitly overruling Bachmann, the Court in Wielockx noted that “the effect of doubletaxation conventions which follow the OECD model is that the State taxes all pensions received by residents in
its territory, whatever the State in which the contributions were paid, but, conversely, waives the right to tax
pensions received abroad even if they derive from contributions paid in its territory which it treated as deductible.”870 Thus, fiscal cohesion may be secured by a bilateral convention concluded with another Member State,
and may therefore not be invoked on the level of domestic tax law. Hence, the existence of a bilateral tax treaty
shifts the question to another level, “that of the reciprocity of the rules applicable in the Contracting States.”871
While this case law opens a variety of new questions, especially with regard to the relationship between a “micro
coherence” on the domestic level and a “macro coherence” on the treaty level,872 it can nevertheless be inferred
that justification under the coherence argument will only be available in situations where a Member State has not
given up a taxing right in any873 treaty with another country. Unsurprisingly, the Court consistently rejected the
coherence defence in all subsequent cases, in particular if revenue coherence was secured at macro level,874 or if
there was no direct link between the tax advantage given and the subsequent tax burden,875 i.e. whenever the
advantage and disadvantage were provided in the framework of two different taxes or affected two different
864 See for this, e.g., Knobbe-Keuk, “Restrictions on the Fundamental Freedoms Enshrined in the EC Treaty by Discriminatory
Tax Provisions – Ban and Justification”, 3 EC Tax Review (1994), 74, 79 et seq.; Thömmes, “Tatbestandsmäßigkeit und
Rechtfertigung steuerlicher Diskriminierungen nach EG-Recht”, in Schön (Ed.), Gedächtnisschrift für Knobbe-Keuk (O. Schmidt,
1997), 795, 826 et seq.; Kofler, “Ramstedt: Benachteiligung von Beitragszahlungen an ausländische Rentenversicherer ist nicht mit
der Dienstleistungsfreiheit vereinbar!”, Österreichische Steuer-Zeitung 2003/874, 404, 406 et seq.
865 See, e.g., Case C-279/93, Schumacker, [1995] ECR, I-225, paras. 40 et seq.; Case C-80/94, Wielockx, [1995] ECR I-2493,
paras. 13 et seq.; Case C-484/93, Svensson and Gustavsson, [1995] ECR I-3955, paras. 15 et seq.; Case C-55/98, Vestergaard,
[1999] ECR I-7641, para. 24; Case C-264/96, ICI, [1998] ECR I-4695, para. 29; Case C-294/97, Eurowings, [1999] ECR I-7447,
paras. 41 et seq.; Case C-251/98, Baars, [2000] ECR I-2787, paras. 37 et seq.; Case C-35/98, Verkooijen, [2000] ECR I-4071,
paras. 49 et seq.; Joined Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] I-1727, paras. 67 et seq.; Case C136/00, Danner, [2002] ECR I-8147, paras. 33 et seq.; Case C-324/00, Lankhorst-Hohorst, [2002] ECR I-11779, paras. 40 et seq.;
Case C-422/01, Ramstedt, [2003] ECR I-6817, paras. 30 et seq. Cf., e.g., Thömmes, “Tatbestandsmäßigkeit und Rechtfertigung
steuerlicher Diskriminierungen nach EG-Recht”, in Schön (Ed.), Gedächtnisschrift für Knobbe-Keuk (O. Schmidt, 1997), 795, 826 et
seq.
866 Even A.G. Léger, in his Opinion of 31 May 1995 in Case C-80/94, Wielockx, [1995] ECR I-2493, para. 37, agreed with the
literature that the same result could have been reached with less restrictive rules (proportionality test). See for instance Hinnekens and
Schelpe, “Bachmann v. Belgium (C-204/90) and Commission v. Belgium, 28 January 1992 (C-300/90)”, 1 EC Tax Review (1992), 58 et
seq.; Farmer and Lyal, EC Tax Law (Clarendon Press, 1994), 333; see also Wattel, “The EC Court’s Attempts to Reconcile the Treaty
Freedoms with International Tax Law”, 33 Common Market Law Review (1996), 223, 239-243. For a critical discussion of Bachmann,
including a summary of the literature, see van Thiel, EU case law on income tax, Part I (IBFD, 2001), ___.
867 See, e.g., Case C-484/93, Svensson and Gustavsson, [1995] ECR I-3955, paras. 13 et seq.; Case C-294/97, Eurowings,
[1999] ECR I-7447, paras. 20; Case C-422/01, Ramstedt, [2003] ECR I-6817, paras. 30 et seq.
868 See, e.g., Case C-294/97, Eurowings, [1999] ECR I-7447, para. 20.
869 For an initial discussion of this point see Hinnekens and Schelpe, “Bachmann v. Belgium (C-204/90) and Commission v. Belgium, 28 January 1992 (C-300/90)”, 1 EC Tax Review (1992), 58, 61, and for a recent analysis see Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 712-758, and the references therein.
870 Case C-80/94, Wielockx, [1995] ECR I-2493, para. 24.
871 Case C-80/94, Wielockx, [1995] ECR I-2493, para. 24.
872 See, e.g., Cordewener, “Company Taxation, Cross-Border Financing and Thin Capitalization in the EU Internal Market:
Some Comments on Lankhorst-Hohorst GmbH”, 43 European Taxation (2003), 102, 110 et seq.
873 See in this direction A.G. Jacobs, Opinion of 21 March 2002, Case C-136/00, Danner, [2002], I-8147, para. 56.
874 See the explicit reversal of Bachmann in Case C-80/94, Wielockx, [1995] ECR I-2493, paras. 24-26; see also Case C-136/00,
Danner, [2002] ECR I-8147, para. 41; Case C-436/00, X and Y, [2002] ECR I-10829, para. 53-55; Case C-242/03, Weidert and
Paulus, [2004] ECR I-7379, paras. 25-26.
875 In Case C-484/93, Svensson and Gustavsson, [1995] ECR I-3955, para. 18, the Court clarified the requirement for a direct link
between tax advantage and disadvantage.
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taxpayers.876 That means that the coherence justification is, in practical terms, as good as useless in cases that
concern discriminatory income tax measures.877 It is, however, puzzling that the Court refrained from using this
kind of argument in the field of exit taxation. In seeming deviation from X and Y,878 the Court in du Saillant879
and N880 accepted that the exit State may tax an appreciation in value that occurred while the taxpayer was a
resident, if and insofar such taxation is deferred until the eventual sale, although generally tax treaties grant the
right to taxation to the the new residence State of the taxpayer (Art. 13(5) OECD MC) and hence might be considered to establish “coherence” on a “macro level” that implies a free movement of hidden reserves.881
Interestingly, recent scholarship882 has suggested that the Court has revived coherence, but in the disguise of
fiscal territoriality and the need for a balanced allocation of tax jurisdiction. We disagree. Coherence, as argued
by Member States, is fundamentally flawed as a possible justification because it assesses restrictive measures
from a public sector revenue perspective, which is Internal Market irrelevant, rather than a private sector ability
to pay (and “freedom to move around in the Internal Market”) perspective, which is what the European Union is
all about. Territoriality and balanced allocation of tax jurisdiction, on the other hand, concern system coherence
that goes beyond the mere revenue concern. Both are concepts that suggest a need to respect agreed rules and
understandings on the allocation of jurisdiction and the avoidance of double taxation. This is, for instance, why
the Court correctly referred to territoriality in Futura,883 because, since Luxembourg only taxed the domestic
source income of the permanent establishment (PE) on the basis of the tax treaty with France, it should be allowed to limit the deductibility of losses to those losses that were related to the activities of the PE. And again,
the Court correctly rejected the territoriality claim in Bosal,884 because, on the basis of domestic law, the Netherlands allowed the deduction in the hands of the parent of financing costs of setting up a domestic (but not a foreign) subsidiary, whereas it did not tax in the hands of the parent, the profits of either the domestic or the foreign
subsidiary. 885
Member States also often argued that a continued application of national measures incompatible with EC
law requirements would be justified on administrative grounds, as for instance relevant information was not
readily available in cross-border situations, or that it would be administratively more convenient to deny a certain tax benefit to cross border situations.886 From the point of view of a national tax administration, there may
be good reasons not to grant the same tax treatment automatically to cross-border situations and to domestic
situations, because tax collection and enforcement mechanisms, in principle, stop at the border, and information
cannot be as easily obtained in cross-border situations (mutual assistance clauses are notoriously cumbersome to
use in practice). In international tax law, the argument that administrative difficulties necessitate a different substantive treatment of domestic and cross-border situations is, therefore, perfectly understandable. In the framework of a deep multilateral economic integration process based on the rule of law, however, this is an unconvincing reasoning, because, if adopted, it would allow Member States to rely on internal administrative problems
to unilaterally escape their Treaty obligations and endanger the uniform application of Community law. Unsurprisingly, the Court has consistently rejected the “administrative difficulties” argument.887 The Court did recognize, as an overriding public interest, the need to maintain the effectiveness of fiscal controls,888 in the sense that
876 See for instance, Case C-107/94, Asscher, [1996] ECR I-3089; Case C-264/96, ICI, [1998] ECR I-4695; Case C-294/97,
Eurowings, [1999] ECR I-7447; Case C-55/98, Vestergaard, [1999] ECR I-7641; Case C-251/98, Baars, [2000] ECR I-2787; Case
C-35/98, Verkooijen, [2000] ECR I-4071; Case C-319/02, Manninen, [2004] ECR I-7477.
877 For an interesting recent analysis see, however, Opinion of A.G. Poiares Maduro, 7 April 2005, Case C-446/03, Marks &
Spencer, [2005] ECR I-10837, paras. 65 et seq.
878 See Case C-436/00, X and Y, [2002] ECR I-10829, para. 53-55.
879 Case C-9/02, de Lasteyrie du Saillant, [2004] ECR I-2409.
880 Case C-470/04, N, [2006] ECR I-7409.
881 For a detailed analysis, including the effects of “trailing provisions”, see Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 735-748. See also the Opinion of A.G. Mischo, 13 March 2003, Case C-9/02, de
Lasteyrie du Saillant, [2004] ECR I-2409, para. 78, who noted that in so far as the French exit tax provisions “impose capital gains
tax on taxpayers who are no longer resident, those provisions conflict with the requirement of cohesion of the tax system because the
system recognises the principle of taxation of capital gains by the taxpayer’s State of residence, which is applied in particular in the
Franco-Belgian double taxation convention.” For a quite different perspective see, however, Opinion of A.G. Kokott, 30 March
2006, C-470/04, N, [2006] ECR I-7409, para. 102-108, who noted that “a coherent tax system would not be guaranteed if emigration
made it impossible to levy tax on the profits on the shares which arose during the period of residence in the home State.”
882 See, for instance, Wattel, “Fiscal cohesion, fiscal territoriality and preservation of the (balanced) allocation of taxing power:
what is the difference?”, in van Thiel (Ed.), The internal market and direct taxation: Is the European Court of Justice taking a new
approach? (CFE Brochure on European Taxation, 2007), ___.
883 Case C-250/95, Futura, [1997] ECR I-2471.
884 Case C-168/01, Bosal, [2003] ECR I-9409.
885 In Case C-471/04, Keller Holding GmbH, [2006] ECR I-2107, that question was nuanced, because, in accordance with the
principle of territoriality, the dividends received from a foreign subsidiary were not taxable in Germany (whereas those of a domestic
subsidiary were taxable), and the costs of setting up that foreign subsidiary were not deductible in Germany (whereas the costs of
financing a domestic subsidiary were deductible). The territoriality argument nevertheless was, correctly, rejected by the Court in
that case, because in reality the domestic-source dividends, though taxable, were never actually taxed (because of German measures
to avoid economic double taxation of dividends).
886 Case C-87/99, Zurstrassen, [2000] ECR I-3337, para. 24.
887 Case C-279/93, Schumacker, [1995], ECR I-225, paras. 43 et seq.; Case C-87/99, Zurstrassen, [2000] ECR I-3337, para. 24
et seq.; Case C-118/96, Safir, [1998] ECR I-1897, paras. 32 et seq.; Case C-18/95, Terhoeve, [1999] ECR I-345, para. 45. Compare
for the area of indirect taxes also Case 15/81, Schul, [1982] ECR 1409, para. 39, and Case C-213/96, Outokumpu Oy, [1998] ECR I1777, para. 38.
888 See already Case 120/78, Rewe-Zentral AG (“Cassis-de-Dijon”), [1979] ECR 649, para. 8.
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Member States are entitled to obtain any information that will enable the correct application of their tax laws,889
but it has stopped short of accepting discriminatory tax measures on the ground that information on the cross
border situation was hard to get by. 890 Quite to the contrary, the Court has taken the view that Member States
should obtain information directly from the taxpayer or, if need be, provide each other with mutual assistance
under the 1977 Mutual Assistance Directive891 to overcome such difficulties. It should be noted that this approach has recently been extended to the recovery of tax claims,892 as the respective directive has been extended
to cover also direct taxes.893
C. National Anti-Avoidance Measures
In their quest to minimize their overall tax burden, economic operators pro-actively consider the tax aspects
of their intended business choices (tax planning). Sometimes they stay within the letter of the law, but stretch the
limits by using loopholes or manipulating the law for a purpose for which it was obviously not intended (tax
avoidance). Alternatively, they may seek to reduce tax liability by illegal means, such as under-reporting of
income items and over-reporting of expenses (tax evasion). Though tax avoidance is not illegal, the tax implications of certain legal constructions may not be recognized under national law, if they are artificial or “empty of
substance”. There should be no doubt at all that the fight against tax avoidance is a legitimate objective in international tax law, and States are free to apply their national anti-avoidance measures, including general “substance over form”-clauses, and more specific anti-avoidance rules dealing with phenomena like, e.g., controlled
foreign corporations (CFCs) and thin capitalization.894 In addition, States have designed international instruments
to exchange information, and they sometimes engage in more advanced forms of cooperation, such as joint audits. Moreover, tax avoidance also is a major Community law concern, due to its adverse effects on revenue and
taxpayer equity, but also because it may cause distortions to the Internal Market. This explains why EC tax legislation as well as the EC Treaty articles on the free movement of capital, explicitly allow Member States to apply
anti avoidance rules.895
Nevertheless, within the Community national anti-avoidance rules must in principle be applied with full respect of the fundamental EC law principles of free movement and non-discrimination. The ECJ clearly rejected
arguments of Member States that their national anti-avoidance measures would remain outside the scope of
Community law. There is no a priori exclusion of national anti-avoidance clauses from the scope of directly
applicable Community law, and thus no sovereignty exception.896 Nor can Member States deny tax avoiders
protection under the EC fundamental freedoms on the ground that they would be abusing Community law. The
Court has taken the clear line that tax avoidance activities should, in principle, not be denied access to Community law,897 and that exercising the right to free movement, with the aim of enjoying a more favourable tax regime applied in another Member State, cannot be considered to constitute an abuse of the freedom of establishment.898 The Court has already identified several factors that do not of themselves suffice to find abuse, such as
the mere fact that a subsidiary is established in another Member State,899 the fact that the activities carried out by
a secondary establishment in another Member State could just as well be pursued by the taxpayer from within
the territory of its home state,900 or that tax considerations play a role in the decision on where to establish a
subsidiary. 901
889 See, e.g., Case C-250/95, Futura, [1997] ECR I-2471; Case C-55/98, Vestergaard, [1999] ECR I-7641; Case C-347/04,
Rewe Zentralfinanz, [2007] ECR I-2647.
890 See, e.g, Case C-254/97, Société Baxter, [1999] ECR I-4809, paras. 18 et seq.; Case C-55/98, Vestergaard, [1999] ECR I7641, paras. 25 et seq.; Case C-436/00, X and Y, [2002] ECR I-10829; Case C-319/02, Manninen, [2004] ECR I-7477; Case C39/04, Laboratoires Fournier, [2005] ECR I-2057.
891 See the Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of
the Member States in the field of direct taxation, [1997] OJ (L 336) 15. For the respective line of case law see, e.g., Case C-279/93,
Schumacker, [1995] ECR I-225, para. 45; Case C-55/98, Vestergaard, [1999] ECR I-7641, para. 26; Case C-136/00, Danner, [2002]
ECR I-8147, paras. 44 et seq.; Case C-334/02, Commission v. France, [2004] ECR I-2229, paras. 31 et seq. Cf., Randelzhofer and
Forsthoff, in Grabitz and Hilf (Eds.), Das Recht der Europäischen Union (C.H. Beck, 2003), Vor Art 39–55 para. 240.
892 See Case C-470/04, N, [2006] ECR I-7409, para. 53; Case C-520/04, Turpeinen, [2006] ECR I-10685, para. 37.
893 See Council Directive 76/308/EEC of 15 March 1976 on mutual assistance for the recovery of claims relating to certain levies, duties and other measures, [1976] OJ (L 73), 18, amended, inter alia, by Council Directive 2001/44/EC of 15 June 2001, [2001]
OJ (L 175), 17..
894 Martha, The Jurisdiction to Tax in International Law: Theory and Practice of Legislative Fiscal Jurisdiction (Kluwer, 1989).
895 As already shown above (supra III.A), Art. 58 EC allows Member States to take all requisite measures to prevent infringements
of national laws and regulations, in particular, in the field of taxation. See also Art. 8(1) of the Transfer Pricing Arbitration Convention,
Art. 4 of the Mutual Assistance Directive, Art. 1(2) of the EC Parent-Subsidiary Directive and Art. 11(1a) of the EC Merger Directive.
896 In Case C-175/88, Biehl, [1990] ECR I-1779, paras. 15 et seq., the Court rejected the Luxembourg “sovereignty exception”
argument that the procedural rule to refuse a refund of overpaid tax to non-permanent residents, which (allegedly) served to prevent
them from obtaining an unjust progression advantage, should remain outside the scope of Community law. It simply recalled that the
EC Treaty, as confirmed by Art. 7 of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for
workers within the Community, [1968] OJ (L 257), 2, prohibits any discrimination, and that allowing tax discrimination would be
tantamount to turning free movement into an illusion.
897 In Case C-212/97, Centros Ltd., [1999] ECR I-1459, the Court allowed Danish residents to create a company in the UK because it applied less restrictive capital requirements than Denmark, even though the company only deployed activities in Denmark
and not in the UK. Such an exercise of the right to secondary establishment does not constitute an abuse of the right of establishment
(paras. 27-29). See also Case C-167/01, Inspire Art Ltd., [2003] ECR I-10155.
898 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995.
899 ECJ 12 September 2006, C-196/04, Cadbury Schweppes [2006] ECR I-7995, para. 50.
900 ECJ 12 September 2006, C-196/04, Cadbury Schweppes [2006] ECR I-7995, para. 69.
901 ECJ 12 September 2006, C-196/04, Cadbury Schweppes [2006] ECR I-7995, para. 65.
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In short, the Court confirmed that shopping for the lower regulatory and tax burden – or the principle of
regulatory competition and tax competition between Member States – is accepted under Community law, which
is understandable in view of the completion of the Internal Market in 1993, and the fact that most “tax planning
and avoidance” transactions will in fact have economic substance.902 In the Court’s view, Community law does
not allow the use of broad national anti-avoidance clauses that a priori exclude all cross-border activities from a
certain tax advantage, simply because some of the taxpayers engaging in cross-border activities might strive for
tax avoidance. Even the broad clauses in the Maastricht Treaty Articles on free movement of capital, which
explicitly allow Member States to apply restrictive measures to prevent avoidance and evasion, are interpreted
restrictively by the Court in this respect: National anti-avoidance provisions are only allowed if either they constitute different treatment of dissimilar domestic and cross-border situations, or if they serve an overriding public
interest and satisfy the condition of proportionality.903
The application of EC primary law to national anti-avoidance clauses implies that there is a Community law
concept of tax avoidance.904 In that respect, legal scholarship had suggested that the avoidance concept in most
Member States and, therefore, also the European concept, concerns the use of a legal construction that lacks
economic motives but is undertaken only or mostly to avoid taxes.905 Thus, it had already been anticipated that
EC Treaty benefits could exceptionally be denied by Member States to cross-border tax avoidance schemes that
lack economic substance. But it took the European Court some time to get there. In fact, in Avoir Fiscal the
Court held that the Treaty Articles on establishment did not permit any derogation from the fundamental principle of freedom of establishment because of the need to prevent tax avoidance.906 This flat rejection of the tax
avoidance justification was cleverly used in Daily Mail when the company proposed to transfer its residence for
the sole purpose of avoiding UK capital gains tax,907 but the Court did not rule on the issue. In Biehl, however,
the Court decided that the risk of avoiding income tax progression could not justify the total refusal of a refund
of overpaid wages tax to non-residents, because that would also cover cases in which the non-resident no longer
had any income at all.908 Thus, the ECJ softened the strict Avoir Fiscal approach, and ruled that measures that
seek to prevent tax avoidance may not be so widely formulated as to cover situations in which there is clearly no
tax avoidance at stake. This suggested that Member States could be allowed to maintain well-formulated rules
against tax avoidance, to the extent these rules really targeted avoidance situations and not also situations that
were perfectly reasonable from an economic point of view. This idea was in fact further nuanced in ICI, where
the Court noted that the establishment of a company outside the UK does not necessarily entail tax avoidance,
and that the contested UK legislation did not “have the specific purpose of preventing wholly artificial arrangements, set up to circumvent UK tax legislation”.909 Moreover, it was questionable whether a total exclusion from
loss compensation of groups that have a majority of foreign subsidiaries, was a measure that satisfied the proportionality test.
These different elements were further developed in cases such as Lankhorst,910 X and Y,911 and Commission
v. France912, and they were drawn together in Cadbury Schweppes:913 In this judgment the Court recalled that a
low-tax advantage enjoyed by a foreign subsidiary cannot by itself authorize the Member State of the parent to
offset that advantage by treating the parent less favourably under CFC rules, and that the mere fact that a resident
company establishes a subsidiary in another Member State cannot justify a general presumption of tax evasion
and a national measure compromising the exercise of a fundamental freedom guaranteed by the Treaty.914 At the
same time, however, the Court repeated that a national measure restricting freedom of establishment may be
justified on the ground of prevention of abusive practices, as long as it specifically relates to wholly artificial
902 In Cadbury Schweppes the UK argued the non-applicability of Community law to a UK parent which had set up an Irish
subsidiary so as to benefit from the lower Irish corporate income tax rate. The question of economic substance returned to the Court's
considerations, but not in the framework of the question of the applicability of Community law to the case, but rather as part of the
question of whether or not the restrictive effect of the national anti-avoidance measure could be justified (see below).
903 In Bachmann, Advocate General Mischo was tempted to allow a tax evasion exception, but he considered the contested measure
disproportionate because it was possible to “devise administrative machinery which is able to obviate the risk of tax evasion” and to find a
solution in respect of countries that retain the tax at source. See the Opinion of A.G. Mischo, 17 September 1991, Case 204/90, Bachmann,
[1992] ECR I-204, paras. 27 et seq.
904 See Weber, “De materiële fusie eis in Europees perspectief”, Weekblad voor fiscaal recht 1995/6172, 1660.
905 Schön, “Gestaltungsmißbrauch im europäischen Steuerrecht”, 5 Internationales Steuerrecht (Beihefter 2/1996), 1, 11.
906 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 25.
907 See Case 81/87, Daily Mail, [1988] ECR 5483, para. 7.
908 In Case C-175/88, Biehl, [1990] ECR I-1779, paras. 15 et seq., the Court rejected the Luxembourg authorities’ argument that
the rule was justified to protect the system of progressive taxation, because the contested provision would discriminate against taxpayers
who would earn no income after leaving Luxembourg.
909 Case C-264/96, ICI, [1998] ECR I-4695, paras. 26 et seq.
910 In Case C-324/00, Lankhorst-Hohorst, [2002] ECR I-11779, para. 37, the Court rejected the justification for the application
of thin capitalization rules because they applied generally to any cross-border situation, thus not having the specific purpose of
preventing wholly artificial arrangements designed to circumvent German legislation, from attracting a tax benefit.
911 In Case C-436/00, X and Y, [2002] ECR I-10829, the Court held that the national provision excluded categorically any similar share transfer from the tax deferral, not allowing national courts to make a case-by-case analysis taking account of the particular
features of each case (para. 43) and that the contested provision was not specifically designed to exclude from the tax advantage
purely artificial schemes designed to circumvent Swedish tax law, but concerned any transfer of shares to Swedish companies with
foreign parents (para. 61). The Court further held that tax evasion or tax fraud could not be inferred generally from the fact that the
transferee company or its parent company is established in another Member State (para. 62).
912 In Case C-334/02, Commission v. France, [2004] ECR I-2229, para. 27, the Court held that a general presumption of tax
avoidance or fraud is not sufficient to justify a fiscal measure, which compromises the objectives of the Treaty.
913 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995.
914 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, paras. 49 et seq.
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arrangements aimed at circumventing the application of the legislation of the Member State concerned. In other
words, the contested national provision must be applied to prevent conduct involving the creation of wholly
artificial arrangements, which do not reflect economic reality and seek to escape the tax normally due on the
profits generated by activities carried out on national territory.915 This includes a fictitious CFC that does not
carry out any genuine economic activity in the territory of the foreign host Member State (“letterbox” or “front”
subsidiary916), but it does not include a CFC that reflects “economic reality”, in the sense that it physically exists
in that host Member State “in terms of premises, staff and equipment”.917
As the Commission has noted in its 2007 Communication on the application of anti-abuse measures in the
area of direct taxation,918 that the “need to prevent tax avoidance or abuse can constitute an overriding reason in
the public interest capable of justifying a restriction on fundamental freedoms”. However, the “notion of tax
avoidance is […] limited to ‘wholly artificial arrangements aimed at circumventing the application of the legislation of the MS concerned’. In order to be lawful national tax rules must be proportionate and serve the specific
purpose of preventing wholly artificial arrangements.”919 Operationalizing such approach, however, will not
always be an easy task, as
“[t]he detection of a wholly artificial arrangement […] amounts in effect to a substance-overform analysis. Application
of the relevant tests in the context of EC Treaty freedoms and corporate tax directives necessitates an evaluation of
their objectives and purposes against those underlying the arrangements entered into by their prospective beneficiaries
(taxpayers). In the context of corporate establishment there are inevitably difficulties in determining the level of economic presence and commerciality of arrangements. Objective factors for determining whether there is adequate substance include such verifiable criteria as the effective place of management and tangible presence of the establishment
as well as the real commercial risk assumed by it. However, it is not altogether certain how those criteria may apply in
respect of, for example, intra-group financial services and holding companies, whose activities generally do not require
significant physical presence.”920
D. Inter-Jurisdictional Equity versus Taxpayer Equity
Realizing “inter-jurisdictional equity”, or obtaining a “fair” or “right” share of the international revenue
cake, has typically motivated States to tax residents on their worldwide income and non-residents on their domestic source income. As this automatically results in double taxation of cross-border income flows, States will
subsequently enter into negotiations on tax treaties that allocate tax jurisdiction and, in case tax jurisdiction is
shared, the residence State is required to apply the exemption or credit method to avoid double taxation. Tax
treaties can, thus, be seen as an agreed “fair” distribution of revenue between the states concerned and, of course,
as a reflection of the actual negotiating power of the parties. They establish a perceived balance of mutually
agreed concessions under which certain taxing rights with regard to specific kinds of income are wholly or partly
waived by one State, in exchange for comparable concessions by the other State.
Against this background, it is understandable that Member States, which are required to extend tax benefits
to Community citizens on the basis of directly applicable Community law rather than on the basis of a bilateral
tax treaty, argue that such an interpretation of Community law would be incompatible with the objective of interjurisdictional equity. Or, in other words, that such an interpretation would disturb the carefully crafted balance
realized through bilateral tax treaties. Indeed, also Advocate General Van Gerven insisted that a bilateral agreement generally
915 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, paras. 51, 55. Interestingly, the Court specified in Cadbury
Schweppes that it is for the national court to determine whether the contested legislation is restricted to wholly artificial arrangements or whether, on the contrary, the contested national legislation may apply to parent companies, despite the absence of objective
evidence of the existence of a wholly artificial arrangement (Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, para. 72)..In
doing so, the ECJ abandoned the Biehl rule that a national measure must be amended if it may lead to discrimination in certain
situations (but not in others). See also Case C-379/05, Amurta, [2007] ECR ___, para. 83, and supra II.B.3., where the ECJ left it to
the national court to establish whether or not to take account of the tax treaty and to what extent that treaty neutralizes the restrictive
effect of the contested measure.
916 The Court had already ruled that an arrangement is wholly artificial if it does not involve the pursuit of an actual economic activity: See Case C-212/97, Centros Ltd., [1999] ECR I-1459, para. 25; Case C-436/00, X and Y, [2002] ECR I-10829, para. 42; Case
2/74, Reyners, [1974] ECR 631, para. 21. See also Case C-221/89, Factortame, [1991] ECR I-3905 paras. 20 et seq.; Case C-55/94,
Gebhard, [1995] ECR I-4165, para. 25. In Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, the Court repeated this (paras.
52, 53 and 54) and added that an arrangement is wholly artificial or does not reflect economic reality, but is set up with a view to escaping the tax normally due (para. 55), such as “letterbox” companies, which are considered to be without economic link with the host country
or without economic substance (para. 68 with reference to Case C-341/04, Eurofood, [2006] ECR I-3813, paras. 34 and 35). On the other
hand the Court noted that the fact that the activities which correspond to the profits of the CFC could just as well have been carried
out by a company established in the territory of the Member State in which the resident company is established does not warrant the
conclusion that there is a wholly artificial arrangement (para. 69).
917 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, paras. 65, 67.
918 See the Commission’s Communication on “The application of anti-abuse measures in the area of direct taxation – within the
EU and in relation to third countries,” COM(2007) 785 final, and for comments see De Broe, “Some observations on the 2007 communication from the Commission: ‘The application of anti-abuse measures in the area of direct taxation within the EU and in relation to third countries’”, 17 EC Tax Review (2008), 142.
919 Commission’s Communication on “The application of anti-abuse measures in the area of direct taxation – within the EU
and in relation to third countries,” COM(2007) 785 final, 3.
920 Commission’s Communication on “The application of anti-abuse measures in the area of direct taxation – within the EU
and in relation to third countries,” COM(2007) 785 final, 4. The Commission, after evaluating the case law, concluded that there
remains scope for exploring the practical application of the principles laid down by the ECJ more generally and urged the Member
States to work with it to promote a better understanding of the implications for Member State’ tax systems and to explore the scope
for specific co-ordinated solutions.
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“is the result of a process of negotiation between both States in which the respective contracting parties’ rights and duties are usually based on the principle of reciprocity. That means that such conventions are based on a well-defined
equilibrium also as regards the financial consequences. There can be no doubt that the striking of such a balance would
be seriously hampered and that the scope for negotiation of Member States and third countries would be severely restricted if the Member State in question were to work on the basis that the rights which it stipulates for its own nationals were also to be granted to all other Community citizens. In saying that I am not thinking solely of the position of social security conventions but also of other bilateral agreements based on a form of (financial) equilibrium of the reciprocal benefits, for example as with double taxation agreements.”921
Although the Court did not reject such arguments a limine,922 it nevertheless straightforwardly found that
(lack of) reciprocity may not be invoked to carve out discriminatory treatment from the scope of the freedoms.
This argument was first presented by France in Avoir Fiscal,923 when it argued that the tax treaty with Germany
was based on reciprocity, and that it not extend the imputation credit to German residents because Germany had
not agreed to provide the required “quid pro quo”. The Court rejected this reference to tax treaties as a possible
justification, because the contested French tax measure went beyond the allocation of jurisdiction (interjurisdictional equity) and caused different tax burdens for competing taxpayers in the Internal Market (taxpayer
equity). The ECJ recalled that the right to equal treatment is unconditional and cannot be made subject to a condition of reciprocity,924 as Community law provides exactly such reciprocity by giving French taxpayers the right
to equal treatment in all other Member States.925 Consequently, inter-jurisdictional equity has, in principle, to
yield before a taxpayer’s right to equal treatment. As Advocate General Colomer eloqently put it, even though
the prohibition of horizontal discrimination in a tax treaty context would imply dangers a “the equilibrium and
reciprocity which prevail in the system of double-taxation treaties”, such “difficulties must not become obstacles
to the establishment of the single market”.926
“First, in setting in those agreements the criteria for allocating competence in taxation matters, the Member States must
act with the utmost care, avoiding any provisions which might hinder that objective. Second, the right to equal treatment stands alone and is independent from the principle of reciprocity and therefore, in the event of a conflict, it takes
precedence over mutual commitments. If the reciprocity of the obligations in such an agreement runs counter to the
fundamental ideas driving the construction of a unified Europe, the Member States in question have a duty to seek other
formulae which, whilst achieving the objective sought, do not, in breach of Community law, prejudice the citizens of
other Member States. The principle of proportionality so demands.”927
Gilly928 was the first case in which the Court ruled on the EC compatibility of tax treaty rules on the allocation of tax jurisdiction and the avoidance of double taxation. The Court essentially recognised that Member
States are competent to determine the connecting factors for allocating tax jurisdiction between them with a view
to eliminating double taxation. Any different tax burden resulting from such allocation rules results from a disparity between the tax laws of the Member States, which remains to be removed by harmonization.929 The Court
also considered that the abolition of double taxation was one of the EC Treaty’s objectives and found that the
credit method of avoiding double taxation was EC compatible.930 The Court ignored that the Gilly couple could
not deduct family expenses in Germany under the Schumacker rule,931 while being able to deduct those expenses
in France only pro rata to the part of the French-source income in the total income. But that problem was solved
in De Groot,932 in which the Court condemned the Netherlands for applying a method for the avoidance of double taxation that limited the deductibility of an alimony payment pro rata to the part of the Netherlands-source
income in the total income.933 Also, different methods for the avoidance of double taxation – credit or exemption
– are in principle acceptable.934
Opinion of A.G. Van Gerven, 28 April 1993, Case C-23/92, Grana Novoa, [1993] ECR I-4505, para. 12.
See, e.g., Case C-55/00, Gottardo, [2002] ECR I-413, para. 36, with reference to Case C-307/97, Saint-Gobain, [1999] ECR
I-6161, para. 60: “Disturbing the balance and reciprocity of a bilateral international convention concluded between a Member State
and a non-member country may, it is true, constitute an objective justification for the refusal by a Member State party to that convention to extend to nationals of other Member States the advantages which its own nationals derive from that convention”.
923 See Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 12.
924 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. 26; see already Case 1/72, Frilli, [1972] ECR
457, para. 19, and instructively Case C-20/92, Hubbard, [1993] ECR I-3777, para. 17.
925 For an in-depth analysis of reciprocity in Community tax law see Kofler, Doppelbesteuerungsabkommen und Europäisches
Gemeinschaftsrecht (Linde, 2007), 697-712, and M. Lang and Dommes, “Tax Treaty Law and EC Law – Reciprocity and the Balance of a Tax Treaty”, in M. Lang, Schuch and Staringer (Eds.), Tax Treaty Law and EC Law (Linde, 2007), 61 et seq.
926 Opinion of A.G. Colomer, 26 October 2004, Case C-376/03, D, [2005] ECR I-5821, para. 101.
927 Opinion of A.G. Colomer, 26 October 2004, Case C-376/03, D, [2005] ECR I-5821, para. 101.
928 Case C-336/96, Gilly, [1998] ECR I-2793.
929 See already supra II.A.2.
930 See also, e.g., Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673,
para. 51; see also Opinion of A.G. Geelhoed, 6 April 2006, Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967, para. 33;
Opinion of A.G. Kokott, 12 September 2006, Case C-231/05, Oy AA, [2007] ECR I-6373, para. 55 with note 33; for further references see already supra II.A.2.
931 See supra II.B.3.a).
932 Case C-385/00, De Groot, [2002] ECR I-11819.
933 For a detailed analysis see Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007),
651-665.
934 See M. Lang, “Double taxation and EC law”, and van Thiel, “The future of the principle of non-discrimination in the EU:
towards a right to most-favoured-nation treatment and a prohibition of double burden”, in Avi-Yonah, Hines and M. Lang (Eds.),
Comparative Fiscal Federalism: Comparing the European Court of Justice and the US Supreme Court’s Tax Jurisprudence (Kluwer, 2007). See also Pistone, The Impact of Community law on Tax Treaties: Issues and Solutions (Kluwer, 2002). For an extensive
discussion, also of potentially discriminatory features of the concrete application of both methods under domestic law, see Kofler,
921
922
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The Gilly line was confirmed in Saint-Gobain,935 in which the Court held that Member States are free to enter into tax treaties with third countries and to determine connecting factors for the purpose of allocating tax
jurisdiction, but that the tax jurisdiction so allocated must be exercised in a way that is compatible with Community law. Member States must, thus, extend those treaty benefits to non-residents in a non-discriminatory fashion,
as such a unilateral extension of tax treaty benefits would in no way disturb the balance and reciprocity of the
treaty between the Member State and the third country.936 Hence, as long as the rights of a third country are not
impeded,937 the Court rightly rejected arguments of reciprocity in its vertical discrimination analysis irrespective
of whether the disputed benefits were granted under domestic law938 or tax treaty law939. Hence, the Court on the
one hand accepts the majority of tax treaty clauses, because Member States are free to shape their understanding
of inter-jurisdictional equity in concrete rules on the allocation of tax jurisdiction and the avoidance of double
taxation, but on the other hand does not accept the reservation of substantive benefits available under national
law or tax treaties to certain, but not all, Community citizens, on the basis of reciprocity, as this would affect
taxpayer equity.940
This rather clear position of the Court was distorted by the 2005 decision in D941 concerning horizontal discrimination, in which the Court accepted that the Belgium-Netherlands tax treaty could lawfully provide for the
Netherlands to grant a substantive benefit to a resident of Belgium, whereas that same benefit was not available
to a German resident, simply because a different tax treaty applied and these mutual benefits were considered an
inherent part of the quid pro quo balance in tax treaties.942 An astonishing decision in an Internal Market without
frontiers, because effectively two Member States now can discriminate together against a resident of a third
Member State, something which they cannot do separately or by themselves. And astonishing also because the
Court assumed that the quid pro quo balance in tax treaties, which it had to respect, was made up not only of
allocation rules (that shape inter-jurisdictional equity), but also of substantive tax treaty rules (that affect private
sector tax burden and thus taxpayer equity).943 An unfortunate mix up indeed, because, under this new approach,
private sector EC Treaty rights no longer have priority over bilateral tax treaty rules, and it is quite amazing that
the Court did not provide any convincing motivation for this dramatic departure from the principles of direct
effect and primacy. The Court merely noted that
“[t]he fact that those reciprocal rights and obligations apply only to persons resident in one of the two Contracting
Member States is an inherent consequence of bilateral double taxation conventions. It follows that a taxable person
resident in Belgium is not in the same situation as a taxable person resident outside Belgium so far as concerns wealth
tax on real property situated in the Netherlands. […] A rule such as that laid down in […] the Belgium-Netherlands
Convention cannot be regarded as a benefit separable from the remainder of the Convention, but is an integral part
thereof and contributes to its overall balance.”944
Indeed, this new approach is a very slippery slope towards the acceptance of a sovereignty exception, or a
“placing above the law”, of tax treaties even if they go far beyond their essential mission of allocating tax jurisdiction and avoiding double taxation. A slippery slope on which a further step was set in ACT Group Litigation,945 in which the Court, considered Limitation-on-Benefits-clauses to contribute to the reciprocal balance of
rights and duties of tax treaties, even though they clearly carve up the Internal Market, thus closing a 15 year
discussion in literature without any further motivation.946 In fact the Court allowed a different treatment of Euro-
Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 631-694. For a specific case on discriminatory
features of a credit limitation due to cost-allocation see Case E-7/07, Seabrokers AS, [2008] EFTA Court Report ___.
935 Case C-307/97, Saint-Gobain, [1999] ECR I-6161.
936 Case C-307/97, Saint-Gobain, [1999] ECR I-6161, paras. 56 et seq.
937 For this criterion see intructively Case C-466/98, Commission v. United Kingdom, [2002] ECR I-9427, para. 54, and Case
C-55/00, Gottardo, [2002] ECR I-413, para. 37. See also de Graaf and Janssen, “The implications of the judgment in the D case: the
perspective of two non-believers”, 14 EC Tax Review (2005), 173, 184.
938 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273.
939 Case C-307/97, Saint-Gobain, [1999] ECR I-6161.
940 See, e.g., Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht (Linde, 2007), 700-703.
941 Case C-376/03, D, [2005] ECR I-5821.
942 See Case C-376/03, D, [2005] ECR I-5821, paras. 61-62, and supra II.C.3.
943 For criticism in the light of previous case law see, e.g., M. Lang, “Das EuGH-Urteil in der Rechtssache D. – Gerät der Motor der Steuerharmonisierung ins Stottern?”, 15 Steuer & Wirtschaft International (2005), 365, 372; Weber, “Most-Favoured-Nation
Treatment under Tax Treaties Rejected in the European Community: Background and Analysis of the D Case – A proposal to include a most-favoured-nation clause in the EC Treaty”, 33 Intertax (2005), 429, 436-437; van Thiel, “A Slip of the European Court
in the D case (C-376/03): Denial of the Most-Favoured-Nation Treatment because of Absence of Similarity?”, 33 Intertax (2005),
454, 455-456; M. Lang, “Eine Wende in der Rechtsprechung des EuGH zu den direkten Steuern?”, in Hebig, Kaiser, Koschmieder
and Oblau (Eds.), Aktuelle Entwicklungsaspekte der Unternehmensbesteuerung, Festschrift Wacker (Erich Schmidt, 2006), 365, 370
et seq.; Cordewener and Reimer, “The Future of Most-Favoured-Nation Treatment in EC Tax Law – Did the ECJ Pull the Emergency Brake without Real Need?”, 46 European Taxation (2006), 291, 296; M. Lang and Dommes, “Tax Treaty Law and EC Law –
Reciprocity and the Balance of a Tax Treaty”, in M. Lang, Schuch and Staringer (Eds.), Tax Treaty Law and EC Law (Linde, 2007),
61, 73 et seq. But see also de Graaf and Janssen, “The implications of the judgment in the D case: the perspective of two nonbelievers”, 14 EC Tax Review (2005), 173, 184, who distinguish Saint-Gobain from D according to the impact on third countries.
944 Case C-376/03, D, [2005] ECR I-5821, paras. 61-62; see also Case C-374/04, ACT Group Litigation, [2006] ECR I-11673,
paras. 84-88.
945 Case C-374/04, ACT Group Litigation, [2006] ECR I-11673.
946 See also infra IV.B. and for further references van Thiel, Free Movement of Persons and Income Tax Law: the European
Court in Search of Principles (IBFD, 2002), 481-482, Kofler, Doppelbesteuerungsabkommen und Europäisches Gemeinschaftsrecht
(Linde, 2007), 500-530, and supra note 116.
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pean companies on the basis of the place of residence of shareholders (control), which is contra legem947 and at
odds with general Internal Market case law.948 It also causes the amazing discrepancy in the Court’s income tax
case law that foreign-owned branches are, under Saint-Gobain, entitled to the host State’s tax treaty benefits,
whereas foreign-owned subsidiaries can be excluded therefrom. Finally, it is unclear why the Court did not follow its own case law on national anti-abuse measures, thus considering the Limitation-on-Benefits-clause justified (only) to the extent it would restrict the use of wholly artificial constructions without economic substance
that are set up with the only objective to avoid tax otherwise due.949
In conclusion, and with all due respect, it seems that the Court will have to take another thorough look at its
case law concerning the relation between fundamental EC Treaty rights and tax treaties concluded by the Member States, if only to provide a convincing motivation for its rather dramatic departure from fundamental Community law principles, explicit provisions in the Treaty and settled prior case law. For the moment certain basic
rules are clear. As explicitly confirmed in Art 293 EC, Member States are competent to conclude tax treaties and
are free to select the connecting factors for allocating jurisdiction between them with a view to abolishing double
taxation for the benefit of their nationals.950 The Court thus fully respects the way Member States shape their
bilaterally agreed understanding of inter-jurisdictional equity. However, as regards the question of how to deal
with tax treaty clauses that provide substantive benefits to taxpayers, rather than allocate jurisdiction between
Member States, the Court will have to make a choice: It can either continue on its recent track set out in D951 and
ACT Group Litigation952 that anything that is agreed in a tax treaty contributes to the bilaterally agreed balance
of that treaty, and is, thus, beyond the reach of directly applicable Community law. This choice, however, gives a
carte blanche to Member States to carve out the Internal Market, it reverses previous income tax case law and
violates Art 294 EC itself, and it seems to go against fundamental principles of Community law, such as direct
effect, primacy and the principle of good faith cooperation, which it has itself upheld in more than 50 years of
case law. It also raises the question whether there are any reasonable grounds to reserve this “above the law
status” to bilateral tax treaties, for the simple fact that all bilateral treaties are based on an assumed balance of
rights and duties. This, for sure, is not “business as usual”. The other option for the Court would be to continue
and revive its case law in Avoir Fiscal,953 Saint-Gobain954 and De Groot955 so that Member States may shape
inter-jurisdictional equity in tax treaties, but not distort taxpayer equity. This would imply that substantive tax
treaty benefits can not be granted on the basis of reciprocity, and that directly applicable private sector rights of
free movement and non-discrimination continue to have priority over the reciprocal balance in rights and obligations of tax treaties. Even under this approach it is quite clear that the bulk of tax treaties remain in the “safe
area” because they allocate tax jurisdiction.956
This leads us to a few remarks that must be made on this last-mentioned issue of allocation of tax jurisdiction. It has not only arisen in relation to tax treaties, but also in cases in which the exercise of tax jurisdiction
could be distorted by applying Community law in such a way that it would allow “double dips” by deducting
costs or losses twice. In Marks & Spencer,957 which basic gist was broadly repeated in Oy AA958 and Lidl Belgium,959 the Court considered the UK’s refusal to extend domestic consolidation provisions to groups with foreign subsidiaries justified because it accepted a combination (“taken together”) of three different grounds of
justification – the aim of preserving the allocation of the power to impose taxes, the danger that losses might be
used twice and the risk of tax avoidance –,960 but also found that such refusal would nevertheless become disproportional in respect of “final” losses of the foreign subsidiary, which could not be offset anywhere else. As the
Court subsequently clarified for situations concerning cross-border group contributions and the utilization of
947 Art. 294 EC explicitly provides that Member States must grant national treatment as regards the participation in the capital
of companies and firms established in accordance with the EC Treaty articles on establishment.
948 In the 2002 “Open skies”-decisions, the Court held that that the nationality clauses in the bilateral agreements between the
Member States and the United States, which restrict international traffic rights to the national flag carriers of the countries concerned, are contrary to the EC Treaty. See Case C-466/98, Commission v. United Kingdom, [2002] ECR I-9427; Case C-467/98,
Commission v. Denmark, [2002] ECR I-9519; Case C-468/98, Commission v. Sweden, [2002] ECR I-9575; Case C-469/98, Commission v. Finland, [2002] ECR I-9627; Case C-471/98 Commission v. Belgium, [2002] ECR I-9681; Case C-472/98 Commission v.
Luxembourg, [2002] ECR I-9741; Case C-475/98 Commission v. Austria, [2002] ECR I-9797; Case C-476/98 Commission v. Germany, [2002] ECR I-9855. For an analysis of this case law, also in the light of the “quota hopping” decisions concerning fishing
quotas, see Kofler, “European Taxation Under an ‘Open Sky’: LoB Clauses in Tax Treaties Between the U.S. and EU Member
States”, 35 Tax Notes Int’l 45 (July 5, 2004).
949 See already supra IV.C. As such, Limitation-on-Benefits clauses might be applied to pure tax treaty shopping constructions
that use conduit companies without economic substance to ensure access to the tax treaties which would not have applied, had the
income not been re-routed. For a detailed analysis of this approach see Kofler, Doppelbesteuerungsabkommen und Europäisches
Gemeinschaftsrecht (Linde, 2007), 516-526.
950 See, e.g., Case C-336/96, Gilly, [1998] ECR I-2793, paras. 24 et seq.; Case C-307/97, Saint-Gobain, [1999] ECR I-6161,
para. 56; Case C-385/00, De Groot, [2002] ECR I-11819, para. 93; Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957,
para. 47; Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 52.
951 Case C-376/03, D, [2005] ECR I-5821.
952 Case C-374/04, ACT Group Litigation, [2006] ECR I-11673.
953 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273, para. ___.
954 Case C-307/97, Saint-Gobain, [1999] ECR I-6161.
955 Case C-385/00, De Groot, [2002] ECR I-11819.
956 See already supra II.C.3.
957 Case C-446/03, Marks & Spencer, [2005] ECR I-10837.
958 Case C-231/05, Oy AA, [2007] ECR I-6373 (concerning group contributions).
959 Case C-414/06, Lidl Belgium, [2008] ECR ___ (concerning losses in treaty exempt permanent estalbishments).
960 Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 51; for a detailed analysis see the Opinion of A.G. Poiares
Maduro, 31 May 2006, Case C-347/04, Rewe Zentralfinanz, [2007] ECR I-2647, paras. 24 et seq.
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treaty-exempt losses of foreign permanent establishments,961 Member States may justify restrictions if the domestic measure is necessary to ensure, first, the balanced allocation of the power to tax and, second, the ability to
exercise that power in respect of income realized on their own territory, which could be jeopardized by tax
avoidance and possibility that the same losses could be deducted in two tax jurisdictions (“double dip”), even if
tax avoidance is not an issue.962 Indeed, from a policy perspective, there is no need for Community tax law to
provide undue benefits to the private sector, such as double dips or possibilities of “loss trafficking”.963 However, it remains to be seen how and to what extent the ECJ will consider these grounds of justifications in their
combination, and which weight will be given to each,964 and inhowfar the acceptance of a “balanced allocation”
is indeed the “insidious impact of numerous statements made by the Member states’ governments, which complained about the significant budget repercussions of the ECJ’s ruling related to direct taxation”, as former Judge
Melchior Wathelet speculates.965 This position of the Court is nevertheless surprising, as it takes into account the
immediate effects of a negative judgment on Member States’ tax systems instead of requiring them to find less
restrictive means (e.g., by foreseeing a recapture of losses once they have been utilized in the foreign jurisdiction),966 while in other lines of case law the ECJ leaves it to the Member States to overcome negative decisions.967
However, it remains to be seen how the Court will continue to develop the concept of the balanced allocation of the power to tax as a ground of justification.968 In other cases, for example, in which Member States
sought to rely on similar arguments, such as the “territoriality” of a tax system, the Court was always cautious. In
Bosal969 and Keller Holding,970 for instance, the Court did not accepts arguments of “territoriality” to justify the
discriminatory denial of deductions for financing costs for an investment in a foreign subsidiary either based on
the taxability of the subsidiary or its profit distributions. Clearly these were unconving attempts to invoke the
territoriality argument, because both in the domestic and the cross-border situation the profits of the subsidiary
were, in effect, not taxed in the hands of the parent, while financing costs were deductible only in the domestic
situation. Likewise, in Rewe Zentralfinanz,971 the German tax authorities refused the deductibility of losses related to a write down to the book value of shares in foreign subsidiaries, whereas it accepted the deductibility of
such losses on shares in domestic subsidiaries. Germany sought to justify this different treatment on gronds of
“symmetry” of its tax system i.e. no deduction of losses related to a foreign subsidiary, if its profits are not taxed.
Unsurprisingly, in the light of Bosal, the Court refused to accept: It noted that the profits of both the domestic
and the foreign subsidiary were not taxable in the hands of the parent, but that only losses suffered on the book
value of domestic shareholdings were deductible. Furthermore, the ECJ also noted that there was no risk of a
double dip (losses of the parent could only be deducted in the state of residence of the parent), and that even
though fraud may be rampant in a certain sector, this is not enough to assume the existence of purely artificial
arrangements.972 And again in Amurta, the UK defended the Dutch withholding tax on outbound dividends with
the argument that otherwise the Netherlands could not tax those dividends at all, which would be contrary to the
Case C-231/05, Oy AA, [2007] ECR I-6373, para. 60, and Case C-414/06, Lidl Belgium, [2008] ECR ___, paras. 39-42.
See also the Opinion of A.G. Sharpston, 14 February 2008, Case C-414/06, Lidl Belgium, [2008] ECR ___, para. 18.
963 Broadly, the Court has already used similar arguments in Case C-250/95, Futura, [1997] ECR I-2471 (where it accepted the
Luxembourg rule that the PE of a French company could, in Luxembourg, only offset those losses that were related to the economic
activity carried out in Luxembourg), Case C-279/93, Schumacker, [1995] ECR I-225 (where it accepted, on the level of comparability, that the host State is not obliged to immediately and unreservedly allow frontier workers the deduction of their family related
expenses, unleass the frontier worker cannot deduct these expenses in the residence State for lack of income there), and again in
Case C-374/04, ACT Group Litigation, [2006] ECR I-11673 (where it held that the UK should, as a general rule, not be obliged to
extend its domestic imputation credit to foreign shareholders that are not taxed by the UK on their dividends, because otherwise the
UK could effectively no longer tax domestic source profits of domestic companies).
964 For recent analyses of this question see the Opinion of Opinion of A.G. Poiares Maduro, 31 May 2006, Case C-347/04,
Rewe Zentralfinanz, [2007] ECR I-2647, paras. 24 et seq., and the Opinion of A.G. Sharpston, 14 February 2008, Case C-414/06,
Lidl Belgium, [2008] ECR ___, paras. 8 et seq.; see also Wathelet, “Marks & Spencer plc v Halsey: Lessons to be Drawn”, 53 British
Tax Review (2006), 128, 131-132; M. Lang, “Direct Taxation: Is the ECJ Heading in a New Direction?”, European Taxation (2006),
421, 426-427.
965 See Wathelet, “Marks & Spencer plc v Halsey: Lessons to be Drawn”, British Tax Review (2006), 128, 131
966 See specifically Case C-446/03, Marks & Spencer, [2005] ECR I-10837, para. 58, where the ECJ noted that “in so far as it
may be possible to identify other, less restrictive measures, such measures in any event require harmonisation rules adopted by the
Community legislature”. See in this respect also the Commission’s Proposal for a Council directive concerning arrangements for the
taking into account by enterprises of the losses of their permanent establishments and subsidiaries situated in other Member States,
COM(90)595 final, reprinted in [1991] OJ (C 53), 30, in Bulletin Supplement 4/1991, 55, and in 18 Intertax (1991), 34. This proposal was withdrawn in 2001 (see [2004] OJ (C 5), 20) and the Commission has recently suggested an approach of co-ordination in
its Communication on “Tax Treatment of Losses in Cross-Border Situations”, COM(2006)824 final. See, however, also the Opinion
of A.G. Sharpston, 14 February 2008, Case C-414/06, Lidl Belgium, [2008] ECR ___, paras. 22 et seq., who was strongly in favor of
a “deduction-and-recapture rule” in the case of treaty-exempt losses of foreign permanent establishments as the least restrictive
measure.
967 See, e.g., Case C-9/02, de Lasteyrie du Saillant, [2004] ECR I-2409, where the ECJ struck down a French exit tax provision
without taking into account whether France was able to tax, on a subsequent sale of the asset, the appreciation in value that occurred
while the taxpayer was a resident.
968 See, e.g., Case C-470/04, N, [2006] ECR I-7409, para. 42, and the analysis in the Opinion of A.G. Sharpston, 14 February
2008, Case C-414/06, Lidl Belgium, [2008] ECR ___, para. 18. For arguments of “symmetry” on the level of comparability and the
concept of “tax base fragmentations” see already supra II.B.3.b).
969 Case C-168/01, Bosal, [2003] ECR I-9409
970 Case C-471/04, Keller Holding, [2006] ECR I-2107
971 Case C-347/04, Rewe Zentralfinanz, [2007] ECR I-2647.
972 Case C-347/04, Rewe Zentralfinanz, [2007] ECR I-2647, paras. 34, 43 and 51.
961
962
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balanced allocation of tax jurisdiction, hence presuming that the State of source can impose a withholding tax.973
It is true that the Court recognized that the need to safeguard the balanced allocation of the power to tax between
the Member States may be accepted, in particular where the system in question is designed to prevent conduct
capable of jeopardizing the right of Member States to exercise their taxing powers in relation to activities carried
on in their territory.974 However, in that particular case the ECJ denied that justification and pointed out that,
once a Member State has chosen not to tax domestic corporate shareholders on the dividends received, it cannot
rely on this argument to justify a withholding tax on dividends received by corporate shareholders established in
other Member States.975
E. Conclusions
From the preceding analysis it is clear that the Court, though readily assessing the broader public interest
justifications argued by the Member States, will be very cautious in actually allowing discriminatory tax measures on such grounds. It is settled case law, for instance, that these wider overriding public interests cannot be of
an economic nature (e.g., loss of revenue, erosion of the tax base, revenue coherence of the tax system). Nor
does the Court accept the argument that a restrictive measure is necessary to avoid administrative difficulties.
Tax authorities do have the right to ensure effective fiscal supervision and control but that means that they are
fully entitled to seek all information necessary to correctly apply their tax laws, from the taxpayer or the other
Member States. They cannot for that reason exclude cross border situations from a tax advantage that is available
to similar domestic situations.
Likewise, Member States can not rely on (the risk of) tax avoidance to a-priori exclude a cross-border situation from a tax benefit that would be available to similar domestic situations, because such a general a priori
exclusion, without a case-by-case investigation, would constitute an unacceptable restriction to free movement.
Tax planners and tax avoiders cannot be denied access to Community law, but restrictive anti-avoidance measures can exceptionally be allowed if they are specifically targeted at wholly artificial constructions without economic substance that seek to avoid the tax burden that would otherwise apply.976 This typically concerns “letterbox” companies,977 but excludes any companies that physically exist in the host state “in terms of premises, staff
and equipment”.978 It is a welcome development that the Court allows Member States, under the control of national courts, to apply their national anti-avoidance clauses to wholly artificial constructions without economic
substance aimed at avoiding tax. It is, however, unclear why the Court chose not to apply this approach to antiavoidance clause in tax treaties, and, in particular, the limitation-of-benefit clauses. These clauses should not be
allowed in general and on the ground that they contribute to the balance of a tax treaty (as the Court did in ACT
Group Litigation), but rather to the extent they actually affect only wholly artificial constructions, such as empty
conduit companies, that were set up only to have access to benefits provided in tax treaties that would otherwise
not apply to the beneficial owner.
As regards tax treaties, which constitute an agreed balanced allocation of tax jurisdiction, the Court clearly
accepts all conflict rules, i.e. rules that allocate tax jurisdiction and abolish double taxation, because they merely
affect inter-jurisdictional equity, i.e., the division of revenue between Member States, without distorting taxpayer
equity. The Court in Denkavit Internationaal979 and Amurta980 even recognised that the discriminatory nature of
a source State (withholding tax) can be neutralised by an agreed credit applied by the residence State.981 However, substantive tax benefits that are available on the basis of domestic law to domestic situations can not be
granted to similar cross border situations on the basis of reciprocity, i.e. only if provided for by a tax treaty.982
Also, methods to avoid double taxation cannot be applied in such a way that cross border situations are worse off
than similar domestic situations.983
It is not so clear what to think about the new line of case law developed by the Court since 2005 in cases
such as D and ACT Group Litigation,984 in which it held that substantive benefits can be granted on the basis of
reciprocity because they form part and parcel of the balance of the tax treaty. Perhaps this exception to the rule
only applies to allow differentiation between two cross border situations and not between a cross border and a
domestic situation. Even so the question remains, however, whether this is a sustainable line in the Court’s case
law. We believe it is not because these substantive benefits go beyond shaping inter-jurisdictional equity (which
is about the allocation of revenue) and they do affect taxpayer equity (which is about the actual tax burden on
and thus ability to pay of the taxpayer). Therefore the new line of case law allows a differentiation between Internal Market participants on the basis of tax treaties contrary to the prohibition of discrimination. In view of the
Case C-379/05, Amurta, [2007] ECR ___, para. 53.
Case C-379/05, Amurta, [2007] ECR ___, para. 58, with reference to Case C-347/04, Rewe Zentralfinanz, [2007] ECR I2647, para. 42, and Case C-231/05, Oy AA, [2007] ECR I-6373, para. 54.
975 Case C-379/05, Amurta, [2007] ECR ___, para. 59.
976 Case C-264/96, ICI, [1998] ECR I-4695; Case C-446/03, Marks & Spencer, [2005] ECR I-10837; Case C-196/04, Cadbury
Schweppes, [2006] ECR I-7995; Case C-231/05, Oy AA, [2007] ECR I-6373.
977 Case C-341/04, Eurofood, [2006] ECR I-3813, and Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995.
978 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995.
979 Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949, paras. 45-55.
980 Case C-379/05, Amurta, [2007] ECR ___, paras. 79-83.
981 Supra II.B.3.
982 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273; Case C-307/97, Saint-Gobain, [1999] ECR I-6161.
983 Case C-385/00, De Groot, [2002] ECR I-11819.
984 Case C-376/03, D, [2005] ECR I-5821, and Case C-374/04, ACT Group Litigation, [2006] ECR I-11673.
973
974
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poor motivation for this dramatic change in course and the rather substantial inconsistency it creates in the
Court's case law, we believe that the Court will re-think this line in the future.
IV. Summary and Conclusions
A. Main Findings
The objective of this paper was to place the dogmatic approaches underlying the vast body of direct tax case
law of the ECJ in their systemic and “constitutional” context, including the broader body of case law of the ECJ
as well as widely recognised principles of international taxation. The focus was on the substantive questions of
when a tax measure of a Member State constitutes an Internal Market incompatible restriction (Chapter II), and
on what grounds the continued application of such a restrictive tax measure by the Member State concerned can
nevertheless be justified (Chapter III). Before embarking on those substantive questions, the paper outlined the
starting point of European direct tax jurisprudence, that even though Member States remain competent to design
their tax systems in accordance with domestic economic, social and political priorities, they nevertheless must
impose their taxes in a way that does not hinder the European integration process and more in particular the
functioning of the Internal Market. In other words, there simply is, in Community law, no “carve out” or “sovereignty exception” for direct taxation, so that the broad Community law principles of free movement and non
discrimination have their direct effect and their primacy character also in the area of direct taxation. Direct tax
measures of the Member States can therefore not be applied if they hinder the exercise by qualifying private
sector economic operators of their right to exercise demand and supply on the entire Internal Market, or in legal
terms, their directly applicable Community rights to free movement and non-discrimination.
This starting point, clarified by the ECJ in its 1986 Avoir Fiscal decision,985 has given rise to an ever growing number of direct tax cases before the Court, which were mostly lost by the Member States concerned.986 This
again has resulted in a mounting criticism by many Member States and academia, essentially, that the ECJ
would, in its direct tax case law, be unpredictable and inconsistent, overstepping its constitutional role, unnecessarily restrictive and non-respective of the tax sovereignty of the Member States. But on the other side of the
spectrum, others have pointed out that the political choices underlying the European integration process, including the clear division of roles between the legislator (“positive integration” through harmonisation) and the judiciary (“negative integration” and the direct effect and primacy of Internal Market rights to free movement and
non discrimination) over any domestic rules, have always formed part of the Treaties, and that these political
choices have, by now, been reiterated multiple times by the highest political bodies in the EU Member States, in
the full knowledge of the broader European case law principles and their application in the tax area.987 They, for
their part, note that the Court has, in particular in its more recent decisions, be rather cautious and reluctant to
fully apply all the Internal Market principles which it routinely applies in its broader non-tax jurisprudence (prohibition of horizontal discrimination and double burdens, restrictive interpretation of justifications). They criticise the Court for this reluctance, which created conceptual confusion and inconsistency, and also legal uncertainty on the part of the economic operators who in their cross border economic activities constitute the very
fabric of the Internal Market.
The starting point of Chapter II of this paper was the traditional distinction between legislative disparities
and discriminatory measures. Legislative disparities or differences between the tax systems of the Member
States, in principle fall outside the scope of directly applicable Community law. They result from the basic freedom of all Member States to design their tax systems in accordance with domestic policy priorities, and they can
be harmonised away by the Community legislator only with unanimity, so that a sovereignty lock on Community
legislation exists in the tax area. Discriminatory measures, on the other hand, are applied by one Member State to
similar situations, and if they disadvantage cross border activities, thus hindering the functioning of the Internal
Market, their application is, in principle, blocked by overriding directly applicable Community law. Analysing
the Court’s direct tax case law and the literature, this paper found that this fundamental distinction between discrimination and disparities has been fine tuned in a number of approaches, which the Court has developed over
many years in its broader Internal Market case law, and which can be summarised in the following way.
First, a host Member State – or, in tax terminology, the source State – may not impose any higher tax burden on an incoming economic activity as compared to the tax burden it imposes on a similar domestic economic
activity, as this would constitute an “unconstitutional” market access or market participation restriction. In other
words any different tax treatment (irrespective of whether it results from the definition of taxable income items,
exemptions, deductions, rates, credits or procedural rules), by the host Member State of a similar inward and
domestic activity, on the basis of any differentiation criteria (overt and covert nationality discrimination), the use
of which works to the disadvantage of the cross border situation. Important for the tax area is that the “residence” criterion, which is the basis in international tax law for different tax treatment of domestic and cross
border situations, is suspect from an Internal Market point of view because non-residents are most often also
non-nationals and because international tax law often allows disadvantageous tax treatment of non-residents.
Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273.
See supra Graph 1 and Graph 2.
987 See the Treaty establishing the European Economic Community (1957), and subsequently the Single European Act, [1987]
OJ (L 169), 10, the Treaty of Maastricht (Treaty on European Union), [1992] OJ (C 224), 2, the Treaty of Amsterdam, [1997] OJ
(C 340), 1, the Treaty of Nice, [2001] OJ (C 80), 1, and most recently the Treaty of Lisbon, [2007] OJ (C 306), 1.
985
986
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Therefore, international tax law differentiation between residents and non-residents often constitutes an Internal
Market incompatible discrimination. Rock solid lines of case law concern the different host state tax treatment of
foreign-owned permanent establishments,988 of foreign owned subsidiaries,989 and of foreign workers or professionals,990 working or providing services on the host State market, while residing in another Member State.
However, residence based differentiation is neither automatically nor always Internal Market inconsistent. For
instance, an entire category of key international tax rules that are based on the concept of residence, but nevertheless fall outside the scope of directly applicable Community law, is the category of rules concerning the allocation of tax jurisdiction and the abolition of double taxation. Since these rules determine which tax system applies (and if both apply which tax system must avoid double taxation), they determine where an activity may be
taxed thus primarily affecting inter-jurisdictional equity. To the extent they also affect taxpayer equity on the
Internal Market, the disadvantage caused by these allocation rules for one category of taxpayers as compared to
the other, really results from the disparities between the tax systems of the Member States, which ramain fully
applicable unless harmonised away by the Community legislator.991
Second, a home Member State – or, in tax terminology, the residence State – may not impose any higher
burden on an outbound economic activity as compared with a similar domestic economic activity, as this would
constitute an “unconstitutional” exit restriction. Though such higher tax burdens clearly are in the realm of prohibited discrimination, they are not at all “nationality” or “residence” based, but rather concern the much broader
categories of domestic and cross-border activities. Wheras this is no doubt an extensive interpretation of the
letter of the Treaty, it is perfectly logical in the light of the scheme and the objective of the Treaty that seeks
economic integration by means of an Internal Market, because any economic operator who wishes to exercise
demand and supply in another (host) Member State, needs to be able to exit his own (home) Member State without any discriminatory burdens, before he can start playing on the market of the host Member State. In other
words even though the Treaty focuses the right of market access, free movement in an Internal Market and the
right of access to the host State market, require the right of exit from the home State market.
Third, comparability or similarity is an important constituent element of a prohibited discrimination. A preliminary point to make is that in a deep economic integration process comparability primarily depends on objective economic factors that determine whether domestic and cross-border activities are substitutable or in competition with each other. If so, they should in principle be taxed in the same way, so as not to distort the free circulation of demand and supply factors from one part of the Internal Market (the home Member State) to the other
part of the Internal Market (the host Member State). Taking these underlying basic principles into account,
“comparability” can be assumed on a hypothetical basis in most tax cases, simply by comparing the relevant
cross-border activity with a hypothetically similar domestic activity and its (different) tax treatment. This helps
to explain, as a first point, why the ECJ could, in an inbound situation, conclude similarity between foreign- and
domestic-owned enterprises without detailed motivation, because these clearly compete with each other and the
place of domicile of the owners is irrelevant in an Internal Market perspective, although the same might not be
true from an international tax perspective). A second point that was made was that only when incoming frontier
workers seek to deduct personal and family expenses in the host Member State, did the Court elaborate an more
sophisticated simlilarity test essentially to take account of the fact that such an incoming worker may not, from
the perspective of his subjective ability to pay, be in a similar situation as his host State colleague, if he also
earns income in his home State and can deduct personal and family-related expenses there. The third point of this
contribution was that in outbound situations the European concept of comparability between domestic and cross
border activities has overturned traditional international tax principles of tax jurisdiction and symmetry, because
home Member States must allow the deduction of expenses and the offset of liquidation losses incurred in another Member State, if they allow that in a domestic situation. Nevertheless, these decisions are perfectly understandable from the perspective of an Internal Market which should function as a domestic market; they follow
from the principle of primacy of Community law and do not constitute an example of judicial activism that
would breach the tax sovereignty of the Member States. A final point was that in a traditional discrimination
analysis the ECJ generally applies a narrow similarity test and normally takes a single copuntry approach, thus
not investigating whether the disadvantageous tax treatment in one Member State is compensated by an advan988 See, e.g., Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273 (denial of imputation credit); Case C311/97, Royal Bank of Scotland, [1999] ECR I-2651, and Case C-253/03, CLT-UFA, [2006] ECR I-1831 (higher tax rates on permanent establishments); Case C-307/97, Saint-Gobain, [1999] ECR I-6161 (denial of participation exemption and foreign tax credits);
see also Case C-330/91, Commerzbank, [1993] ECR I-4017 (no interest on the refund of overpaid taxes of a branch).
989 See, e.g., Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] ECR I-1727 (no relief from obligation to
pay advance corporate tax); Case C-324/00, Lankhorst-Hohorst, [2002] ECR I-11779, and Case C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107 (thin capitalization rules); see also Case C-231/05, Oy AA, [2007] ECR I-6373 (non-deductibility of group
contributions).
990 See, e.g., Case C-107/94, Asscher, [1996] ECR I-3089 (higher tax rate for non-residents); Case C-234/01, Gerritse, [2003]
ECR I-5933 (gross withholding taxation); Case C-152/03, Ritter-Coulaus, [2006] ECR I-1711 (negative progressivity); Case C265/04, Bouanich, [2006] ECR I-923 (gross taxation of redemption proceeds); Case C-346/04, Conijn, [2006] ECR I-6137 (disallowance of deductions for tax compliance costs); Case C-386/04, Stauffer, [2006] ECR I-8203 (no tax exemption for foreign nonprofit organizations); Case C-290/04, Scorpio, [2006] ECR I-9461 (gross withholding taxation); Case C-345/04, Centro Equestre,
[2007] ECR I-1425 (gross taxation and limited possibility of business expense deductions); Case C-433/04, Commission v. Belgium,
[2006] ECR I-10653 (gross withholding taxation); Case C-520/04, Turpeinen, [2006] ECR I-10685 (higher tax rate on pension
payments for non-residents); Case C-383/05, Talotta, [2007] ECR I-2555 (minimum tax base); Case C-451/05, ELISA, [2007] ECR
I-8251 (exemption from wealth tax on real estate only available for resident corporations and corporations in certain treaty partner
States); Case C-443/06, Hollmann, [2007] ECR I-8491 (no reduction of tax base for capital gains of non-residents).
991 See supra II.A.2.
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tage obtained in another Member State. Exceptionally, however, the Court does take a “two-country-approach”.
In Schumacker992 this was done by importing into the comparability test of the discrimination analysis the question whether the frontier worker earned income and could potentially deduct personal and family-related expenses in his home Member State, which was considered to made him dissimilar to domestic workers from the
perspective of his subjective ability to pay. In some other cases, including Marks and Spencer,993 however, the
discrimination analysis took a traditional “single-country-approach”, and only on the level of justification and
proportionality did the Court also take account of the treatment in another other tax jurisdiction. Interestingly, in
particular, if two Member States agree, in their bilateral shaping of tax jurisdiction equity, to effectively allocating the burden of complying with Community law to one or the other Member State, the Court in Denkavit Internationaal994 and Amurta995 has accepted that, in the framework of a balanced allocation of tax jurisdiction, the
discriminatory effects on a contested tax measure may be neutralised by the tax measure which the discriminating Member State has agreed with another Member State. This approach is not only consistent with Gilly996 and
De Groot,997 but also prevents undue distortions of bilateral agreements on allocating tax jurisdiction and undue
advantages for the private sector.
Fourth, this paper analysed the case law of the Court on the question of different treatment by a single
Member State of two similar cross-border situations (“horizontal discrimination”), as opposed to the traditional
different treatment a similar domestic and cross-border situation (“vertical discrimination”). The paper mentioned the van Hilten decision998 as a case of nationality-based reverse discrimination of cross border activities
and touched on the question of a horizontal free choice concept between different types of establishment (permanent establishment or subsidiary) from the perspective of the home State. More important, however, is that the
Court in D,999 ACT Group Litigation1000 and Orange European Smallcap Fund1001 has now clearly taken the
position that Member States are not obliged under Community law to grant their taxpayers what might be called
“most favoured nation treatment” under tax treaties. In fact, the Court was criticised for it over-simplistic position that any different tax treatment under different tax treaties is acceptable from a Community law point of
view because taxpayers covered by different bilateral tax treaties are not in a comparable situation. That position
mixes tax treaty rules that allocate tax jurisdiction and thus affect inter-jurisdictional equity, which are acceptable under Gilly,1002 with tax treaty rules that differentiate effective tax treatment of different taxpayers on the
basis of their domicile or origin, which affects taxpayer equity on the Internal Market, which is, in principle, not
acceptable under the body of case law following Avoir Fiscal.1003 It also contravenes the idea of an Internal Market and offends logic, which learns that if a Member State must grant national treatment to two incoming economic activities from different home Member States, it must treat those two incoming activities in the same way.
While this paper failed to see why Member States should be allowed to apply such a discrimination when acting
together (by means of a tax treaty), it defended the position that Member States should in any case, not be allowed to apply such a discrimination between similar cross-border situations on the basis of national law, although the ECJ seems to be reluctant to accept even this approach.1004
Finally, the paper discussed the question of “double burdens” and (juridical) double taxation. It recalled the
Court’s extensive Internal Market case law on “double burdens”, especially in the areas of goods, social security
and VAT, that prevented host Member States from applying unnecessary regulatory burdens on inbound economic activity, in particular if the activity already complied with the regulatory standards in the home Member
State. Against this background and the fact that double taxation clearly hinders free movement and distorts competition, questions were raised on the position of the Court in Kerckhaert and Morres1005 that double taxation
resulted from the mere parallel exercise of fiscal sovereignty by the Member States, and that it is for the Member
States (by means of tax treaties) or the Community legislator (as for instance in the Parent-Subsidiary-Directive)
to solve that issue. No clear answer to a clear question, and unsurprisingly the question has been put back to the
Court by the German Bundesfinanzhof in the case of Block1006 and the Belgian Tribunal de première instance the
Liège in the case of Damseaux,1007 and this paper recalled that the better arguments speak for the European Court
to read a directy applicable prohibition of juridical double taxation into the Treaty articles on free movement.
Case C-279/93, Schumacker, [1995] ECR I-225.
Case C-446/03, Marks & Spencer, [2005] ECR I-10837; see also Case C-414/06, Lidl Belgium, [2008] ECR ___ (no utilization of losses incurred by a tax treaty “exempt” foreign permanent establishment).
994 Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949.
995 Case C-379/05, Amurta, [2007] ECR ___.
996 Case C-336/96, Gilly, [1998] ECR I-2793.
997 Case C-385/00, De Groot, [2002] ECR I-11819.
998 Case C-513/03, van Hilten-van der Heijden, [2006] ECR I-1957.
999 Case C-376/03, D, [2005] ECR I-5821, paras. 59-63.
1000 Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, paras. 88-93.
1001 Case C-194/06, Orange European Smallcap Fund, [2008] ECR ___, paras. 50-51
1002 Case C-336/96, Gilly, [1998] ECR I-2793.
1003 Case 270/83, Commission v. France (“Avoir Fiscal”), [1986] ECR 273.
1004 See Case C-298/05, Columbus Container Services, [2007] ECR ___, and Case C-194/06, Orange European Smallcap
Fund, [2008] ECR ___, and the discussion supra II.C.
1005 Case C-513/04, Kerckhaert and Morres, [2007] ECR I-10967.
1006 Pending as Case C-67/08, Block; for the request see Bundesfinanzhof, 16 January 2008, II R 45/05, 17 Internationales
Steuerrecht (2008), 227 et seq.
1007 Pending as Case C-128/08, Damseaux.
992
993
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B. The Cyclical Pattern: Balancing Domestic Tax Sovereignty and
Taxpayers’ Rights Under the Fundamental Freedoms
In spite of the clear orientation points in the case law, a broad cyclical pattern can be seen in the body of income tax case law that developed over the last 20 years. After an initial hesitant phase,1008 the Court arrived at a
long intermediate period, lasting from the early 1990s until 2005, in which it has routinely applied Internal Market principles in the income tax area. Since 2005, however, the Court seems to have returned to a more prudent
phase,1009 rearranging the relationship between the Internal Market and Member States’ tax sovereignty and
becoming more cautious again in all the main questions that arise in each income tax case: Whether Community
law is applicable,1010 whether the contested tax measure constitutes discrimination, and whether the continued
application of that measure can nevertheless be justified by overriding public interest grounds. Though applauded by Member States and part of academia as a correct rebalancing by the Court of “Internal Market interests” against the “tax sovereignty interests” of the Member States, a thorough analysis of the recent case law
shows that this new caution has in most cases been unnecessary, while resulting in conceptual confusion and
potential distortions of the Internal Market.1011
Conceptional confusion as to the verdict of discrimination results mainly from the basic policy choice of the
Court, when investigating the EC compatibility of a direct tax measure, to focus exclusively on national
treatment, while ignoring Member States’ Internal Market obligations in cases of “horizontal discrimination”1012
or “double burdens”.1013 Distortions of the Internal Market resulting from tax (treaty) measures that discriminate
between similar economic activities originating from or bound for different States, or that hinder market access
by causing an unnecessary double burden are unacceptable. Especially the recent trend to consider all tax treaty
clauses outside the scope of the prohibition of discrimination, which seems to amount to a hidden “sovereignty
exception” for tax treaties,1014 on the ground that a taxpayer covered by a tax treaty is never in a similar situation
as a taxpayer not covered by that particular tax treaty seems unsustainable. The Court should return to its more
traditional understanding that Member States may freely conclude tax treaties and decide on the criteria for allocating
tax jurisdiction (inter-jurisdictional equity), but that tax treaties may not distort taxpayer equity in the sense that
substantive tax benefits are granted or denied on the basis of reciprocity, but rather must, on the basis of Community
law, be “horizontally” extended to all factually comparable cross-border in- and outbound activities. This return to a
more traditional Internal Market logic will not mean the end to tax treaties, as the the bulk of tax treaty provisions
provides for an allocation of taxing rights that would be excluded from the verdict of “horizontal” discrimination
under the principles established in Gilly,1015 and only provisions that confer a “unilateral” or a substantive tax
treaty benefit (beyond allocation of tax jurisdiction and avoidance of double taxation) could result in horizontal
discrimination and require most-favoured-nation treatment.1016 In fact, the majority of the tax treaty provisions will
qualify under the Gilly rule, including the agreed combined application by the source state of withholding taxes and
by the residence state of a credit to avoid double taxation because the essential effect of these rules is to share
1008 See, e.g., Case 81/87, Daily Mail, [1988] ECR 5483; Case C-204/90, Bachmann, [1992] ECR I-249; Case C-112/91,
Werner, [1993] ECR I-429.
1009 See, e.g., Case C-376/03, D, [2005] ECR I-5821; Case C-446/03, Marks & Spencer, [2005] ECR I-10837; Case C-374/04,
ACT Group Litigation, [2006] ECR I-11673; Case C-446/04, FII Group Litigation, [2006] ECR I-11753; Case C-524/04, Thin Cap
Group Litigation, [2007] ECR I-2107.
1010 It should be mentioned in passing that this is particularily true for the more dubious line of recent case law on taxpayer access
to Community law, which broadened the exclusion of third country operators from the benefits of Community law, not only if they sought
to have access directly from the third country to the Community market in the form of, e.g., inbound services or establishment (Case C290/04, Scorpio, [2006] ECR I-9461, paras. 62 et seq.), but also as regards the intra Community transactions between two group members who themselves were qualifying companies. In fact the Court has gone so far as to qualify an intra Community cross border capital
movement between two qualifying persons as an inward establishment into the Community by their common third country parent (Case
C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107, para. 93-102). This new line is unsustainable in that it uses the control
criterion, whereby qualifying persons who are engaged in an intra Community loan and corresponding interest payment, risk to be excluded from the scope of Community law if they are both controlled by a third country parent (for the prohibition of discriminatory rules
that rely on the residence of the shareholders see, e.g., Case C-299/02, Commission v. The Netherlands, [2004] ECR I9761, paras. 16-21).
Moreover, the legal basis and reasoning for re-qualifying an interest payment between two Community companies as an inward establishment into the Community by their common third country parent is at least surprising. One can only hope that the Court will return to a
more traditional approach towards third country persons (see, e.g., Case C-1/93, Halliburton, [1994] ECR I-1137). This should, however, not affect the conclusion that neither inward establishment or supply of services from a third country into the EU, nor outbound
establishment or supply of services from the EU towards a third country are eligible for EC Treaty benefits (until so provided for in the EU
GATS schedule of commitments or bilateral treaties), which the Court also confirmed in recent income tax cases (see for a third country
service provider, e.g., Case C-290/04, Scorpio, [2006] ECR I-9461, paras. 62 et seq., and for a third country permanent establishment
Case C-415/06, Stahlwerk Ergste Westig GmbH, [2007] ECR ___). For an analysis of the “erga omes” effects of Art. 56 EC and its
relation to the freedom of establishment under Art. 43 EC see the references in supra note 116.
1011 See already supra I.
1012 Supra II.C.
1013 Supra II.D.
1014 See, e.g., Case C-376/03, D, [2005] ECR I-5821, and Case C-374/04, ACT Group Litigation, [2006] ECR I-11673.
1015 See Case C-336/96, Gilly, [1998] ECR I-2793, and for the discussion of mere disparities already supra II.A.2.
1016 See already supra II.C.3. and, e.g., van Thiel, Free Movement of Persons and Income Tax Law: the European Court in
Search of Principles (Amsterdam: IBFD, 2002), 486 et seq; Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht
(O. Schmidt, 2002), 836 et seq.; Weggenmann, “EG-rechtliche Aspekte steuerlicher Meistbegünstigung im Abkommensrecht”, 12
Internationales Steuerrecht 19 (2003), 677, 681 et seq.; van der Linde, “Some thoughts on most-favoured-nation treatment within
the European Community legal order in pursuance of the D case”, 13 EC Tax Review (2004), 10, 14 et seq; Kofler, “Most-FavouredNation Treatment in Direct Taxation: Does EC Law Provide for Community MFN in Bilateral Double Taxation Treaties?”, 5 Houston Business and Tax Law Journal 1, 68 et seq. (2005); van Thiel, “Why the ECJ should interpret directly applicable European law
as a right to intra Community most favoured nation treatment”, 47 European Taxation (2007), 263-279 and 314-328.
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revenue between tax jurisdictions (inter-jurisdictional equity) rather than differentiate the tax burden of the crossborder as compared to the domestic taxpayer (taxpayer equity).
Conversely, some recent developments in the area of justifications are welcome. For instance, recent case
law on the tax avoidance justification is positive to the extent it permits restrictive national anti-avoidance measures that are specifically aimed at preventing the use of wholly artificial arrangements without economic substance with a view to circumventing national tax law.1017 The Court is developing there a useful and balanced
approach which will allow Member States to distinguish between genuine cross border economic activities,
including those that seek to benefit from a better tax climate abroad, and tax avoidance and evasion constructions
that would not exist if it were not for the objective of escaping home country taxes. Here, on the one hand, the
ECJ in Cadbury Schweppes,1018 Thin Cap Group Litgation1019 and Oy AA,1020 and also the Commission in its
recent communication on the application of anti-abuse measures in the area of direct taxation,1021 have made it
clear that national anti-avoidance rules have to be “targeted at wholly artificial arrangements only,” while above
all, it is crucial that taxpayers are given the opportunity to demonstrate, under judicial review, that their transactions served bona fide business purposes.1022 On the other hand, the ECJ has identified several factors that do not
of themselves suffice to constitute abusive arrangements; among those factors are the mere fact that a subsidiary
is established in another Member State,1023 the fact that the activities carried out by a secondary establishment in
another Member State could just as well be pursued by the taxpayer from within the territory of its home
state,1024 or that tax considerations play a role in the decision on where to establish a subsidiary.1025 Also, no
formal guidelines on the concept “genuine substance” were laid down in Cadbury Schweppes, but the Court
referred to a physical existence in terms of “premises, staff and equipment”1026 and, by way of example, mentioned “letterbox” or “front” subsidiaries.1027 Against this background of putting much emphasis on the freedom
of taxpayers and an unhindered competition between the Member States’ tax systems,1028 it remains to be seen
how the requirement that national anti-avoidance measures are targeted at wholly artificial arrangements only
can be applied in practice, and inhowfar, if at all, this standard adds to the “normal” principles of attribution of
income employed by the Member States.1029
However, an odd combination of the ECJ’s case law on “horizontal” discrimination and anti-avoidance
arose with regard to Limitation-on-Benefits (“LoB”) clauses. Such clauses deny tax treaty benefits, inter alia, to
a corporation resident in one of the treaty partner States if it is directly or indirectly owned by a company established in a State with which a DTC has been concluded that does not provide the tax benefit at issue. While such
nationality or ownership requirements have been found discriminatory in the general Internal Market case
law,1030 the Court, when confronted with an LoB clause in the UK-Netherlands DTC in ACT Group Litigation,1031 noted somewhat en passant that LoB clauses were part of the balance of the tax treaty, and that it was
not contrary to the Treaty Freedoms if the UK denied a treaty benefit (a tax credit) foreseen in the UKNetherlands DTC to a Dutch recipient, if that Dutch company was indeed owned by a German company and the
UK-Germany DTC does not foresee such benefit. To reach this result, the Court obviously took the perspective
of the respective parent companies, relied on its rejection of “most-favoured-nation treatment” in D,1032 and
argued that “a company resident in a Member State [i.e., Germany] which has concluded a DTC with the United
Kingdom which does not provide for such a tax credit is not in the same situation as a company resident in a
1017 For recent analyses see M. Lang and Heidenbauer, “Wholly Artificial Arrangements”, in L. Hinnekens and Ph. Hinnekens
(Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer, 2008), 597,
and Schön, “Rechtsmissbrauch und Europäisches Steuerrecht”, in Kirchhof and Nieskens (Eds.), Festschrift für Wolfram Reiß (O.
Schmidt, 2008), 571. See also the “Opinion Statement of the CFE ECJ Task Force on the Concept of Abuse in European Law”, 48
European Taxation (2008), 33.
1018 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, paras. 51 et seq.
1019 Case C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107, paras. 72 et seq.
1020 Case C-231/05, Oy AA, [2007] ECR I-6373, para. 62.
1021 See the Commission’s Communication on “The application of anti-abuse measures in the area of direct taxation – within
the EU and in relation to third countries,” COM(2007) 785 final, and for comments De Broe, “Some observations on the 2007 communication from the Commission: ‘The application of anti-abuse measures in the area of direct taxation within the EU and in relation to third countries’”, 17 EC Tax Review (2008), 142.
1022 Commission’s Communication on “The application of anti-abuse measures in the area of direct taxation – within the EU
and in relation to third countries,” COM(2007) 785 final, p. 7.
1023 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, para. 50.
1024 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, para. 69.
1025 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, para. 65.
1026 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, para. 67.
1027 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, para. 58; see also C-341/04, Eurofood, [2006] ECR I-3813,
paras. 34 and 35. For a discussion see, e.g., Meussen, “Cadbury Schweppes: The ECJ Significantly Limits the Application of CFC
Rules in the Member States”, 47 European Taxation (2007), 13, 16 et seq.
1028 Case C-196/04, Cadbury Schweppes, [2006] ECR I-7995, para. 49
1029 See also Whitehead, “Practical implications arising from the European Court’s recent decisions concerning CFC legislation
and dividend taxation”, 16 EC Tax Review (2007), 176, 180 (“sham”).
1030 See, e.g., Case C-299/02, Commission v. The Netherlands, [2004] ECR I9761, paras. 16-21, and for an analysis of the Open
Skies-cases (supra note 908) see Craig, “Open Your Eyes: What the ’Open Skies’ Cases Could Mean for the US Tax Treaties with the
EU Member States”, 57 Bulletin For International Fiscal Documentation (2003), 63; Panayi, “Open Skies for European Tax?”, 50
British Tax Review (2003), 189; Kofler, “European Taxation Under an ‘Open Sky’: LoB Clauses in Tax Treaties Between the U.S.
and EU Member States”, 35 Tax Notes Int’l 45 (July 5, 2004).
1031 Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 89-92.
1032 Case C-376/03, D, [2005] ECR I-5821, para. 61.
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Member State [i.e., the Netherlands] which has concluded a DTC which does provide for one.”1033 This analysis
not only stands in a strained relationship to, for instance, Saint-Gobain,1034 but moreover seems to be a step too
far and inherently flawed. Quite to the contrary, LoB clauses clearly are in conflict with the Internal Market as
they discriminate between two resident companies on the basis of the seat of their respective parent company, a
discrimination routinely condemned by the Court itself.1035 After all, LoB clauses are tax treaty-based antiavoidance measures, and although they may be regarded as measures to counter taxpayers’ attempts to achieve
“most-favoured-nation treatment” by shopping tax treaties, there are grave structural and dogmatic differences
between issues of “most-favoured-nation treatment” and issues of ownership requirements.1036 Ownership requirements, such as the ownership tests in LoB provisions, should therefore, like all anti-avoidance measures,
pass the (proportionality) test of whether they target only wholly artificial arrangements without economic substance. Indeed, it would be quite a stretch to argue that all foreign-owned holding companies lack economic
substance, but the Court nevertheless accepts that they be excluded from treaty benefits under tax treaty based
LoB clauses. Surely there are less restrictive ways to prevent tax treaty shopping.
Likewise, the introduction of a concept of “a balanced allocation of tax jurisdiction” is an interesting development in the area of justifications. It has, however, multiple and diverse facetts.1037 The ECJ not only employed
this approach as regards the utilization of losses1038 or exit taxation,1039 but it also recognized that Member States
can lift domestic measures up into the sphere of an agreed coordination of their tax systems, with the result that
those tax measures are no longer EC incompatible. For instance, the imposition of withholding taxes is oftentimes a potentially discriminatory exercise, but if lifted up into a balanced allocation of tax jurisdiction under a
tax treaty and matched with a credit in the State of the recipient of the income, it looses its discriminatory character.1040 If one were to accept an obligation to grant “most-favoured-nation treatment”, the same would hold
true for different withholding taxes applied in different bilateral situations: If not matched with credits, these
would constitute discriminatory measures that distort free movement on the Internal Market, but if part of a balanced allocation of tax jurisdiction, the discrimination would be neutralized. Again, however, this justification
does (and indeed should) have it limits, and the Court goes too far in accepting practically anything that Member
States foresee in a tax treaty.1041
We doubt, however, that the new concept of a balanced allocation of tax jurisdiction (which matches two
tax systems) is essentially the same as the “coherence” principle (which considers only one tax system) and the
principle of territoriality underlying a national tax system (which is based on the OECD assumption that a State
is free to tax almost everything it may see fit).1042 The Court should, therefore, not allow the Member States to
fence off their tax systems and return to the good old days of unlimited sovereignty when States were free to act
as they liked, which used to include definitions of tax jurisdiction that necessarily lead to double taxation necessarily, and which used to include distinctions between incoming economic activities on the basis of their place or
origin and a more favourable treatment of domestic situations than cross-border situations. The Commentary to
the OECD Model Convention is filled with this kind of “only mind your own business” rules, and while this is
perfectly understandable in an international context, it is perfectly incompatible with a deep economic integration process such as the one set up by our political masters in Europe.
C. In Defence of the Court
The Court’s case law in the direct tax area has gradually evolved in different generations, some of them
turning their backs on lessons learned from the previous ones. This ongoing balancing act between the Member
States’ tax sovereignty and taxpayers’ rights under the fundamental freedoms has shifted the ECJ’s jurisprudence
in a wedge of two different levels of criticism:1043 On the one hand, the Court is accused of operating as a policy
Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 91.
Case C-307/97, Saint-Gobain, [1999] ECR I-6161.
1035 See, e.g., Cases C-397/98 and C-410/98, Metallgesellschaft and Hoechst, [2001] ECR I-1727.
1036 See, e.g., Plansky and Schneeweiss, “Limitation on benefits: From the US Model 2006 to the ACT Group Litigation”, 35
Intertax (2007), 484, 492-493; and Schneeweiss, “Mr. D. Meets LOB: Comment on the ECJ’s Decision in the ACT Group Litigation”, IV Diritto E Pratica Tributaria Internazionale (2007), 365, 375; for a critical position see also Adamczyk, “Keep Your Hands
Off Tax Treaties – a Comment on the ECJ Decision in the Case C-374/04, Test Claimants in Class IV of the ACT Group Litigation”,
17 Steuer & Wirtschaft International (2007), 124, 132-133.
1037 See also Englisch, “Grundfreiheitsbeschränkungen zwecks Wahrung der Aufteilung der Besteuerungsbefugnis”, 17 Steuer
& Wirtschaft International (2007), 399 et seq.
1038 See, e.g., Case C-446/03, Marks & Spencer, [2005] ECR I-10837, paras. 43-46; Case C-414/06, Lidl Belgium, [2008] ECR
___, paras. 30-33; see also Case C-231/05, Oy AA, [2007] ECR I-6373, paras. 54 et seq. and 62 et seq.
1039 See Case C-470/04, N, [2006] ECR I-7409, paras. 41-46.
1040 See already supra II.B.3.c) and Case C-170/05, Denkavit Internationaal, [2006] ECR I-11949, paras. 43-47, as well as
Case C-379/05, Amurta, [2007] ECR ___, para. 79-83; see also Case C-374/04, ACT Group Litigation, [2006] ECR I-11673,
para. 71
1041 See, e.g., Case C-376/03, D, [2005] ECR I-5821, and Case C-374/04, ACT Group Litigation, [2006] ECR I-11673. In this
respect the overall balance of the tax treaty depends on the allocation of tax jurisdiction between the contracting parties (the bilateral
shaping of inter-jurisdictional equity which is neutral from an Internal Market point of view) but this should not be confused with tax
treaty clauses which reserve substantive tax advantages for bilateral relationships and which discriminate against all other potential
market participants (distorting tax payer equity). See already supra II.C.3.
1042 Compare in this respect Wattel, “Fiscal Cohesion, Fiscal Territoriality and Preservation of the (Balanced) Allocation of
Taxing Power; What is the Difference?”, in Weber (Ed.), The Influence of European Law on Direct Taxation: Recent and Future
Developments (Kluwer, 2007), 139 et seq.
1043 For a brief outline of the current state of affairs see already supra I.
1033
1034
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maker based on a deficient discrimination analysis, thereby intruding into the Member States’ retained fiscal
autonomy and traditional tax policy choices. On the other hand, the Court’s recent attempts of a re-balancing
have warranted criticism from the perspective of legal certainty due to the potential disregard of legal precedent
and the concern that the Court will deviate from Internal Market principles in this area. Based on our analysis in
the previous chapters, the following sections try to constructively address this criticism.
1. Does the ECJ Go Beyond its Constitutional Role?
It is frequently argued in academic and political discussions that the ECJ goes beyond its constitutional role,
but this criticism appears unjustified. It often refers to “judicial activism” in a negative way as if European
judges were initiating an entire re-organization of the tax systems of the Member States, and is largely based on
the assumption that the ECJ, in one way or another, takes away the taxing powers of the Member States. Both
aspects, however, do not properly reflect reality. European judges become active only if requested to do so –
either by private persons who consider that their constitutional rights guaranteed by the EC Teaty are violated, or
by the Commission when it believes that a Member State is acting contrary to its obligations under Community
law. And also the reproach that ECJ would take away taxing powers is incorrect, as it fails to distinguish between the power to tax (which rests only with the Member States), the power to regulate in the area of taxation (a
competence shared between Community and national legislator), and the power to test the constitutionality of the
way in which these powers of taxation and regulation are exercised (ECJ and domestic courts). The ECJ is only
entrusted with the latter power, and only this is in fact the power it exercises: Very much like any domestic constitutional court, the ECJ tests the way in which the Member States exercise their taxing rights against the constitutional margins of EC law which coincide in particular, with the rights of individuals and enterprises to enjoy
free movement and non-discrimination in the Internal Market.
In the light of its general Internal Market case law, there is no indication that the Court would have lost all
its senses and exceed its constraints. Rather on the contrary, it appears that the Court is even much more cautious
in the field of direct taxes than it is in other areas. Moreover, assigning the tasks of interpreting legal rules and
deciding cases to a judge inevitably implies that this judge will have to make choices. Undeniably it is true that
in sensitive areas like taxation, such choices can have important consequences, but this does not mean that the
judges do not have the obligation to decide, in one way or another. And as the European judge has been placed
into the position to decide within the constitutional framework of a treaty which sets up a deep integration process between European States, it is not the role of that European judge to “balance the Internal Market“ against
the “fiscal sovereignty“ of the Member States or their “budgetary concerns“. Expecting a European Judge to do
that would mean to turn the world upside down, because in the EC´s constitutional set up it is for the Member
States, including their Ministries of Finance, to act within the self-imposed framework of Community law, and
consequently to pay the price if their acts are illegal. Within that framework it is the ECJ´s core task to protect
individual market participants and their private sector rights against the illegal collection of taxes by Member
States. This constitutional reality can not be changed by a single Member State, nor by groups of disgruntled
Member States. It can only be changed by all Member States acting together as the European Constitutional
legislator, and it is an undeniable fact that this Constitutional legislator has chosen up to 6 times, between 1957
and 2007, not to change the constitutional set up of the Communities and create a special status for direct taxes.
On the other hand, however, it must also be pointed out that the criticism on the Court, for being too cautious by allowing a “two country approach” instead of applying the EC fundamental freedoms by way of a rigid
non-discrimination analysis focusing on one Member State only, ignores the Member States´ need to prevent
taxpayers from deriving undue “double dip” tax advantages from the mere exercise of their Community law
rights. In this respect, the (initial) question of whether a contested national measure constitutes discriminatory
treatment of similar domestic and cross-border situations should be distinguished from the (subsequent) question
of whether the discriminatory effect of that measure could perhaps be taken away by the effects of the tax system
applicable in the other Member State involved in that cross-border situation, so that the measure may thus be
justified, notably as a result of a bilaterally negotiated balanced allocation of tax jurisdiction (normally reflected
in a tax treaty). In other words, whereas in establishing whether a contested measure is, in principle, incompatible with EC, the Court looks at the legal system of the Member State which has taken that measure, the ECJ will
then, in establishing whether in the end that contested measure may be acceptable from a Community law (i.e.,
Internal Market) perspective, also look at the cumulative impact which the two national tax systems concerned
by that cross-border situation at issue have on the taxpayer´s position. This possibility of a “post discrimination
analysis correction” clearly shows balanced features and strongly works to the advantage of the Member States
because, unlike in most other areas of law to which the Community law prohibition of discrimination applies, it
provides the Member States with an additional defence to justify measures that otherwise would have to be considered discriminatory and this be prohibited. In different forms, this approach was introduced by the Court starting in 1995 with Schumacker1044 and continued on recent cases such as Marks and Spencer,1045 and Denkavit
Internationaal.1046
1044 Under a pure discrimination analysis, a frontier worker would always be entitled to deductions in the State of employment,
because he finds himself in a similar or competitive relation there with his fellow workers.
1045 Under a pure discrimination analysis, Marks & Spencer should have been allowed to compensate losses of foreign subsidiaries, because UK law allowed this for domestic subsidiaries.
1046 If domestic dividends remain untaxed (no withholding tax and exemption in the hands of the shareholder), the imposition
of a withholding tax on outbound dividends is discriminatory if the non-resident shareholder also enjoys an exemption, but not if he
enjoys a credit.
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And in fact, there are quite a number of reasons why Member States should be more prudent in criticizing the
ECJ for being too hard on their direct tax systems. To start with, it cannot be denied that the Court has gone far out of
its ordinary way in order to be flexible and forthcoming to Member States in particular the income tax area, and
during the twenty years of direct tax case law many traditional Internal Market case law rules have been bended.
Already as regards access to fundamental freedoms protection, the Court has been ready to invoke safety valves and
emergency brakes, which caused quite some conceptual confusion and inconsistency with previous case law.1047 It
may be added that, in a more recent line, the ECJ has even gone far beyond sound legal reasoning in order to limit
access by third country multinationals to Community law benefits.1048 With respect to the practical application of the
Treaty freedoms and their scope of protection, the Court has limited itself to investigating whether national tax measures constitute (“vertical”) discrimination between cross-border and purely domestic activities,1049 and it has consistently avoided to apply a “most-favoured-nation” principle or even a “restriction-based” reading of the fundamental
Treaty freedoms in direct tax cases. In addition, it should not be ignored that the Court allows for a closer investigation of practically all public interest justifications argued by Member States in direct tax cases, in spite of the fact that
most cases concern discrimination, which under the rules of traditional Internal Market case law may only be justified on grounds explicitly mentioned in the Treaty. The ECJ’s flexibility in favour of the Member States even went
so far to accept, not to say invent, completely new grounds for justification, such as the need to maintain the “coherence” of a tax system which, unsurprisingly perhaps, had to be abandoned upon closer scrutiny afterwards. Furthermore, the Court has gone a long way in trying to accommodate Member States’ traditional approaches toward tax
avoidance and towards their own preferences as to how to shape inter-jurisdictional equity. It developed an antiavoidance doctrine allowing Member States, on a case by case basis, to deny Community benefits to taxpayers who
try to use wholly artificial constructions without economic substance to obtain undue tax advantages, an approach
that is broadly parallel to the basic anti-avoidance rules in all Member States. In doing so the Court deserted its own
more principled decision that there is no such ground of justification mentioned in the Treaty and, in a step by step
approach, it developed a European anti-avoidance concept that should be a reliable and effective tool in the hands of
Member States to be used under the supervision of their own courts, without unduly burdening the Internal Market.
Last but not least, the ECJ has also not only fully respected the way in which Member States allocate tax jurisdiction
between them by means of tax treaties, but it seems to have immunized tax treaties from the full impact or the Treaty
freedoms altogether.1050
In fact, and with all due respect, it might be added that the Court should be careful not to go too far in its attempts to protect national tax systems from the full force of Community law. In particular in situations involving
tax treaties there are now a number of decisions in which the ECJ, without any sound motivation, seems to be
replacing its traditional individual rights based perspective (taxpayer equity) with an almost blind acceptance of
what Member States may wish to agree bilaterally (inter-jurisdictional equity). And especially in these cases the
price to be paid, in terms of conceptual confusion, disrespect for the basics of Community law, and potential
distortions to the Internal Market, is simply too high. Many tax experts in Europe nowadays in fact seem to agree
that future developments in the area of European taxation can be expected to arise mostly from “negative integration”, i.e., in the areas where the Community executive and judiciary are active, and not so much from “positive integration” created by harmonisation measures under EC secondary law. Perhaps this will prove to be true.
But one cannot say that this is the fault of an over-active judiciary which is eager to take tax policy decisions and
usurp the competencies of the Community and the national legislators. It is rather an unavoidable consequence of
the politically motivated constitutional set up of the Community, and the fact that the private sector necessarily
has a key role in any process of integration of mixed economies, while both the Community legislator and its
national counterparts have, in the direct tax area, failed to carry out the tasks which they have constitutionally
been allotted. As noted above, if Member States want to, they can constructively re-take the initiative, either by
pro-actively screening their own tax systems to ensure that they no longer apply tax measures that discriminate
against cross-border situations, or by engaging in active discussions on the possibilities of tax co-ordination or of
harmonizing income tax rules. If they choose not to do so, they should not complain when their own taxpayers
ask them to pay the price for that choice.
2. Does the Court Cause Unacceptable Budgetary Burdens for the Member States?
This leads us to another criticism, namely that the ECJ’s decisions are very expensive and may even carry
the more fundamental risk of affecting the powers of the Member States to decide their own socio-economic
model, appears exaggerated. Starting with the second part, the underlying suggestion is that the ECJ’s case law,
by significantly limiting the capacity of the Member States to generate revenue, could ultimately affect the freedom of their democratically elected political governance structures to decide on expenditure levels and possibly
even on budget allocations. Of course, the ECJ’s case law has gone a long way to test national tax measures
against constitutional margins the Member States have imposed upon themselves in the EC Treaty, and this has
significantly affected the way in which Member States are allowed to exercise their sovereign powers of deciding how to tax income (or, e.g., property). This may indeed be annoying for national governments at times. But
1047 See, e.g., Case 81/87, Daily Mail, [1988] ECR 5483 (for the odd consequences of that decision and a recent discussion see
the Opinion of A.G. Poiares Maduro, 22 May 2008, C-210/03, [2008] ECR ___), and Case C-112/91, Werner, [1993] ECR I-429.
1048 See Case C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107, para. 93-102, and supra note 951.
1049 An exception may be the “horizontal” non-discrimination analysis when it comes to distinctions between different types of
secondary establishments. However, as could be shown (supra II.C.2), this approach has only been accepted in certain inbound
constellations, and its function as an independent legal principle still remains unclear.
1050 See Case C-376/03, D, [2005] ECR I-5821, and Case C-374/04, ACT Group Litigation, [2006] ECR I-11673.
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to suggest that the potential budgetary effect of the ECJ’s case law is of such a magnitude that it could erode
national tax bases to such an extent that Member States would have to change their fundamental choices with
regard to the preferred socio-economic model, is disproportionate and unreal. To the authors’ knowledge, not
even the Member States themselves have claimed this, although they have increasingly shown their concern over
the potential budgetary effect of the ECJ’s rulings in tax cases.1051
Turning now to the aspect that the ECJ’s direct tax case law is “expensive” for the Member States, it is necessary to demystify certain arguments. First, it should be accepted that nobody, including the tax administration
concerned, can indicate with any degree of reliability what the exact revenue consequences of a decision of the
Court will be,1052 and it should not be ignored that there is a tendency on the side of national governments to
overstate the potential revenue losses caused by decisions of the ECJ. And once again it should be rmembered
that the ECJ does not prevent the Member States from imposing income taxes, but merely tests the margins of
the way in which those taxes are imposed (on cross-border income flows within the Internal Market), very much
as any domestic constitutional court would marginally test the constitutionality of any government action at the
domestic level (without preventing the government from taking action). When exercising its function as the
Community Court, the ECJ therefore neither interferes with the level of taxation (or expenditure) in each Member State, nor with the basic domestic choice of a particular socio-economic model. Second, it may also be
worthwhile to consider the fact that the cost of complying with a specific decision of the ECJ, even if it were
sometimes running into several millions in a particular case,1053 is still “small” compared to the amounts of State
aid that Member States choose to hand out annually.1054 Accordingly, on balance, the strict compliance of a domestic income tax system with the constitutional principles of EC law (i.e., the rules on free movement on the
one hand, and those on State aid, on the other) is likely to increase rather than decrease the funds that are available for government expenditure.
However, it has to be acknowledged that taxation is “an area where predictability and legal certainty are
crucially important, so that Member States can plan their budget and design their […] tax systems on the basis of
relatively reliable revenue predictions.”1055 Since the ECJ’s case law is evolving, complex tax issues might be
highly disputed and Member States’ might need time to adjust their tax systems to the Court’s interpretation. It
might therefore be a sensible approach for the ECJ to re-think its approach towards the temporal scope of its
judgments, which generally have ex tunc effects and therefore apply to legal relationships arising and established
before the respective ECJ’s judgment,1056 and restrict the application of its interpretation to future taxable periods.1057 However, the suggestion in political discussions that the ECJ, when adjudicating income tax cases,
should balance the interests of the Internal Market against the revenue interests of the Member States is not defendable. Unconstitutional behavior can never be justified by the argument that complying with the law would be
too expensive. Therefore advocating a more cautious approach towards the temporal effects of the ECJ’s case
law is not to say that a general exception should be made for cases “costly” to the Member States,1058 but rather
that legal uncertainty in an evolving field should be taken into account,1059 especially when a Member State has
shown satisfactory efforts to ensure that income tax legislation and tax treaties comply with EC law.
Indeed, an evolving body of case law, although the basic principles of the non-discrimination approach and
some lines of “rock solid” case law clearly provide reliable guidelines in many instances, always leaves room for
uncertainty. The Commission’s attempt to co-ordinate Member State’s responses to the ECJ case law are therefore a valuable input to help identify the major challenges to national tax systems under the fundamental free1051 One of the most prominent examples, even though not concerning direct taxation but the compatability of local indirect tax
with the 6th VAT Directive, is Case C-475/03, Banca popolare di Cremona, [2006] ECR I-9373.
1052 In Case C-292/04, Meilicke, [2007] ECR I-1835, a second hearing before the Court was conducted in order to identfy the
exact amount of the potential loss of revenue, and still even no rough estimation appeared possible. Moreover, it is not clear in how
far a specific amendment of the domestic German rules on tax procedure, which served to block the possibility of retroactive refund
claims, was taken into consideration when the relevant figures were calculated.
1053 For estimations of the potential revenue impact of recent cases see, e.g., Gumbel, “Taking The Taxman To Court”, Time
(Apr. 10, 2005), available at www.time.com.
1054 Currently, around EUR 70 billion a year, of which approximately EUR 15 billion concern tax advantages; citation to be
added!
1055 Opinion of A.G. Geelhoed, 23 February 2006, Case C-374/04, ACT Group Litigation, [2006] ECR I-11673, para. 3.
1056 See, e.g., Case 24/86, Blaizot, [1988] ECR 379, paras. 28 and 30; Case C-209/03, Bidar, [2005] ECR I-2119, paras. 66 et
seq.
1057 See also in this direction García Prats, “Is It Possible to Set a Coherent System of Rules on Direct Taxation under EC Law
Requirements?”, in L. Hinnekens and Ph. Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in
honor of Frans Vanistendael (Kluwer, 2008), 429, 436.
1058 See for such proposal, however, the Memorandum of the United Kingdom of July 1996 concerning “The European Court
of Justice”. The United Kingdom proposed three amendments to the Treaty in order to limit the financial consequences of certain
judgments interpreting Community provisions in an unexpected way, one of which proposed to introduce an article explicitly conferring on the Court power to exclude retroactive effect of a judgment interpreting a Community provision, thereby adding to the
Court’s case law the taking into account of serious consequences for the public finances of any Member State and the possible reliance of a Member State on the conduct of a Community institution or, in the case of persons, reliance on the conduct of a Member
State.
1059 For recent analysis of these issues see Kokott and Henze, “Die Beschränkung der zeitlichen Wirkung von EuGH-Urteilen
in Steuersachen”, 59 Neue Juristische Wochenschrift (2006), 177 et seq.; Seer, “The Jurisprudence of the European Court of Justice:
Limitation of the Legal Consequences?”, 46 European Taxation (2006), 470; Schnitger, Die Grenzen der Einwirkungen der Grundfreiheiten des EG-Vertrages auf das Ertragsteuerrecht (IDW, 2006), 139 et seq.; M. Lang, “Limitation of the Temporal Effects of
Judgments of the ECJ”, in Weber (Ed.), The Influence of European Law on Direct Taxation – Recent and Future Developments
(Kluwer, 2007), 157; Lüdicke, “European Tax Law, quo vadis?”, 62 Bulletin For International Fiscal Documentation (2008), 8, 12.
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doms,1060 especially in the areas of dividend taxation, cross-border loss utilization, exit taxation, and anti-abuse
provisions.1061 As the Commission noted,
“[r]emoving fiscal discrimination is a basic requirement of Community law. A Member State may treat cross-border
situations differently from domestic situations only if this is justified by a difference in the taxpayer’s circumstances.
Over the years it has become apparent that there are numerous aspects of Member States’ rules that conflict with the
Treaty, including rules on taxation of gains (e.g. exit taxes), dividend taxation (e.g. withholding taxes), group taxation
(e.g. lack of cross-border loss relief), taxation of branches and anti-avoidance rules. Yet, despite a substantial body of
case law of the European Court of Justice (ECJ), it is not always easy to understand how the broadly expressed Treaty
freedoms apply in the complex area of tax law. Much of the case law is recent, it continues to evolve and it generally
concerns particular tax provisions of individual Member States. It is not always easy for taxpayers, tax administrations
and national courts to understand the full implications of rulings or place them in a broader framework.”1062
3. Is the Court’s Direct Tax Case Law Inconsistent?
Finally, another major criticism of the ECJ’s approach is that the Court´s case law is inconsistent beyond
mere frictions between its various decisions, and that it constitutes an inherently inconsistent attempt to assure an
Internal Market in which capital import neutrality (CIN) and capital export neutrality (CEN) are supposed to be
realized simultaneously by obliging the source State and the residence State to act in a non-discriminatory way,
especially concerning the taxation of cross-border profit distributions from companies to their shareholdders.1063
We respectfully disagree, as such perspective focuses on international tax policy without realizing that European
law is not informed by tax principles and favors what might be called “capital movement neutrality”.1064 In fact,
a strict application of the non-discrimination principle does not entail any preference for, e.g., import or export
neutrality, nor does the ECJ arbitrarily give priority to one or the other taxing jurisdiction.
When it comes to the question of discrimination, the ECJ is therefore quite correct in taking the different
Member States’ tax systems – whether they try to achieve CIN or CEN – as given, but demanding that they be
applied consistently and fairly to achieve an Internal Market. It is ultimately the Member State that is free to
define the conditions of application of national tax legislation, to make policy choices and to specify their content; EC law merely requires the nondiscriminatory extension of such choices to comparable cross-border situations when taxing competence is exercised.1065 The Court merely prohibits the tax system of one single Member
State from discriminating against cross-border compared to domestic economic activity, thereby enforcing tax
neutrality within one tax system between domestic and cross-border activity.1066 Conversely, Member States are,
in principle, not only free to allocate tax jurisdiction between them and to match two tax systems by either applying the credit or exemption method to avoid juridical double taxation,1067 but they may also employ the exemption method for domestic situations while granting a credit in cross-border situations.1068 Hence, especially the
much criticized1069 line of case law on in- and outbound dividends is broadly consistent and follows the policy
choices made by the Member States,1070 although the ECJ seems to be too hesitant in that it refrains from interfering with the source State’s right to tax the distributing company’s profits.1071
It might also be noted that the ECJ does not interfere with policy choices concerning CIN or CEN that
Member States have made in a non-discriminatory fashion. Quite to the contrary, the ECJ has explicitly clarified
1060 For a likewise positive assessment see Farmer, “Tax Law and Policy in an Adolescent European Union”, 61 Bulletin For
International Fiscal Documentation (2007), 42, 44.
1061 See for the different Communications supra note 74.
1062 See the Commission’s Communication on “Co-ordinating Member States’ direct tax systems in the Internal Market”,
COM(2006)826 final, 5.
1063 See, in particular, the position taken by Graetz and Warren: “Income Tax Discrimination and the Political and Economic
Integration of Europe”, 115 Yale Law Journal (2006), 1185 et seq.; “Dividend Taxation in Europe: When the ECJ Makes Tax Policy”, 44 Common Market Law Review (2007), 1577 et seq.; and “Income tax discrimination and the political and economic integration of Europe”, in Avi-Yonah, Hines and M. Lang (Eds.), Comparative Fiscal Federalism: Comparing the European Court of
Justice and the US Supreme Court‘s Tax Jurisprudence (Kluwer, 2007), 263-320.
1064 See also J. Malherbe, Ph. Malherbe, Richelle and Traversa, The Impact of the Rulings of the European Court of Justice in
the Area of Direct Taxation (Policy Department of the European Parliament, March 2008), 70-73.
1065 See also García Prats, “Is It Possible to Set a Coherent System of Rules on Direct Taxation under EC Law Requirements?”,
in L. Hinnekens and Ph. Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans
Vanistendael (Kluwer, 2008), 429, 438-439, and Lenaerts, “’United in Diversity’ – also In Fiscalibus?”, in L. Hinnekens and Ph.
Hinnekens (Eds.), A Vision of Taxes within and outside European Borders – Festschrift in honor of Frans Vanistendael (Kluwer,
2008), 617, 618.
1066 See Van Thiel, “Why the ECJ Should Interpret Directly Applicable European Law as a Right to Intra-Community MostFavoured-Nation Treatment”, 47 European Taxation (2007), 263, 268-269; van Thiel, “European Taxation: past trends and future
developments”, 61 Tax Law Review (2008), ___; see also de Hosson, “On the controversial role of the European Court in corporate
tax cases”, 34 Intertax (2006), 294, 300 with note 37; Vanistendael, “Does the ECJ have the power of interpretation to build a tax
system compatible with the fundamental freedoms?”, 17 EC Tax Review (2008), 52, 63-65.
1067 See van Thiel, “The future of the principle of non-discrimination in the EU: towards a right to most favoured nation treatment and a prohibition of double burdens?”, in Avi-Yonah, Hines and M. Lang (Eds.), Comparative Fiscal Federalism: Comparing
the European Court of Justice and the US Supreme Court‘s Tax Jurisprudence (Kluwer, 2007), 331-401.
1068 See Case C-446/04, FII Group Litigation, [2006] ECR I-11753, and supra II.A.2.
1069 See, e.g., Graetz and Warren, “Dividend Taxation in Europe: When the ECJ Makes Tax Policy”, 44 Common Market Law
Review (2007), 1577 et seq.
1070 See Hellerstein, Kofler and Mason, “Constitutional Restraints on Corporate Tax Integration in the EU and the U.S.”, 61
Tax Law Review (2008), ___.
1071 For a critical position see, e.g., Farmer and Zalinski, “General Report”, in Xenopoulos (Ed.), Direct tax rules and the EU
fundamental freedoms: origin and scope of the problem; National and Community responses and solutions (FIDE Congress, 2006),
399, 406.
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that the Member States are free to allocate tax jurisdiction between them and to match two tax systems by either
applying the credit or exemption method to avoid juridical double taxation.1072 Even if the ECJ would go one
step further and declare the continued existence of double taxation unconstitutional,1073 this would not affect the
freedom of the Member States to choose between the credit or exemption method.1074 In fact the question of how
to address discrimination, i.e. neutrality within one tax system as regards domestic and cross-border activities,
must be distinguished from the question of how to address disparities between two tax systems, including double
taxation, i.e. import neutrality (exemption) and export neutrality (credit).1075
All in all we think that the Court’s case law cannot be considered unintelligibly complex” or even unclear.
Of course, individual decisions are not always easy to read, and clusters of decisions may not always be immediately reconcilable. But in general terms one can not possibly defend that the broad lines in the Court´s judicature
are unclear. On the contrary, as illustrated in this paper, there are, after 20 years of case law, a number of rock
solid lines of case law, both on the general questions of the applicability of Community law to tax cases, the
prohibition of discriminatory exit restrictions imposed by the home State as well as discriminatory access restrictions imposed by the host State, and the possibility to justify national restrictive measures because of an overriding public interest. It is only when the ECJ, in a tax case, seeks to escape from the consequences of a “normal”
application of Internal Market principles which were developed in its broader case law, that the Court´s decisions
become complex and difficult to understand. This is why decisions that exclude certain tax situations from the
scope of application of Community law – as in Daily Mail,1076 Werner,1077 D,1078 and Thin Cap Group Litigation1079 – can only be qualified as “emergency brakes” that were pulled by a Court feeling uneasy about intervening in politically sensitive discussions that take place at the level of the Member States. But emergency brakes
are what they are, temporary interruptions of the train moving forward, and inevitably these decisions are corrected so as to ensure that the direct tax case law is consistent with the broader Internal Market case law.
About the authors:
Axel Cordewener, Dr. jur., LL.M., is a lawyer with Flick Gocke Schaumburg in Bonn and Professor of Tax Law
at the Katholieke Universiteit Leuven;
Georg Kofler, Dr. jur., Dr. rer. soc. oec., LL.M. (NYU), is Privatdozent at the University of Linz;
Servaas van Thiel, Dr. jur., is Head of the Tax Policy Division of the EU Council of Ministers and Professor at
the Free University of Brussels.
1072 See already supra II.B.2. with further references. In fact, CIN and CEN concern matching the tax systems of the host and
home State of a cross-border economic activity (and the related income flow) and avoiding double taxation, whether by means of a
credit (CEN) or an exemption (CIN). Unless tax rates and tax bases are identical in the respective States, the resendence State cannot
by itself realize CIN and CEN simultaneously. See, with further references, Graetz, “Taxing International Income: Inadequate Principles, Outdated Concepts, and Unsatisfactory Policies”, 54 Tax Law Review 261 et seq. (2000-2001), reprinted in The Tillinghast
Lecture 1996-2005 (NYU School of Law, 2007), 157 et seq.
1073 See for this discussion supra II.D.3.
1074 See van Thiel, “The future of the principle of non-discrimination in the EU: towards a right to most favoured nation treatment and a prohibition of double burdens?”, in Avi-Yonah, Hines and M. Lang (Eds.), Comparative Fiscal Federalism: Comparing
the European Court of Justice and the US Supreme Court’s Tax Jurisprudence (Kluwer, 2007), 331-401.
1075 In fact, CIN and CEN concern matching the tax systems of the host and home State of a cross-border economic activity
(and the related income flow) and avoiding double taxation, whether by means of a credit (CEN) or an exemption (CIN). Unless tax
rates and tax bases are identical in the respective States, the residence State cannot by itself realize CIN and CEN simultaneously.
See, with further references, Graetz, “Taxing International Income: Inadequate Principles, Outdated Concepts, and Unsatisfactory
Policies”, 54 Tax Law Review 261 et seq. (2000-2001), reprinted in The Tillinghast Lecture 1996-2005 (NYU School of Law, 2007),
157 et seq.
1076 Case 81/87, Daily Mail, [1988] ECR 5483.
1077 Case C-112/91, Werner, [1993] ECR I-429.
1078 Case C-376/03, D, [2005] ECR I-5821.
1079 Case C-524/04, Thin Cap Group Litigation, [2007] ECR I-2107, para. 93-102, and supra note 951.
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106 ÖStZ 15. März / Nr. 6 Artikel-Nr. 218
Steuerrecht aktuell
n ÖStZ 2006/218, 106
Wer hat das Sagen im Steuerrecht –
EuGH (Teil 1)
Univ.-Ass. DDr. Georg Kofler, LL.M. (NYU)
Universität Linz
Die Rechtsprechung des Europäischen Gerichtshofs zum direkten Steuerrecht hat nicht nur die österreichische
Rechtsprechung und Verwaltungspraxis, sondern auch und gerade den Gesetzgeber vor neue Herausforderungen
gestellt. Ausgehend von den gemeinschaftsrechtlichen Grundlagen soll der folgende Beitrag diesen Einfluss des
Gemeinschaftsrechts auf das österreichische Steuerrecht kurz skizzieren.
Teil 1
I. Einleitung
1.
2.
Steuersouveränität der Mitgliedstaaten und Gemeinschaftsrecht
Die Wirkung der Grundfreiheiten im Steuerrecht
2.1 Der steuerliche Binnenmarkt als Leitmotiv
2.2 Der Schutzgehalt der Grundfreiheiten auf der Tatbestandsebene:
Marktgleichheit und Marktfreiheit
2.2.1 Das Verbot offener und verdeckter Staatsangehörigkeits­diskriminierung
2.2.2 Ausdehnung des Diskriminierungsschutzes auf „Exportsituationen“: Verbot der Diskriminierung durch den Herkunfts- bzw Ansässigkeitsmitgliedstaat
2.2.3 Der Schutzbereich der Grundfreiheiten in ihrer freiheitsrechtlichen Ausprägung: Das „echte“ Beschränkungsverbot
2.2.4 Zwischenergebnis
2.3 Rechtfertigung und Verhältnismäßigkeit beschränkender Steuernormen
II. Wirkung von EuGH-Urteilen und Rückforderung gemeinschaftsrechtswidrig erhobener Abgaben
Teil 2
III. Einflüsse der EuGH-Rechtsprechung auf das österreichische Steuerrecht
1.
2.
„Inbound“-Situationen
1.1Beschränkte Steuerpflicht natürlicher Personen
1.1.1 Persönliche Steuerbegünstigungen für beschränkt Steuerpflichtige: Schumacker und § 1 Abs 4 EStG
1.1.2 Geltung des objektiven Nettoprinzips auch für Steuerausländer: Gerritse und die Reform der beschränkten Steuerpflicht durch das AbgÄG 2004
1.1.3 Das Ende des Steuerabzuges durch Scorpio?
1.1.4 Verbleibende Problembereiche: Besteuerungsnachweis und Betriebsstättenverlustvortrag
1.2Beschränkte Steuerpflicht juristischer Personen
1.2.2 Schachtelprivileg auch für Betriebsstätten: Avoir Fiscal und § 21 Abs 1 Z 2 lit a KStG
1.2.3 Saint-Gobain und abkommensrechtliche Diskriminierungsverbote
1.3Meistbegünstigung im Abkommensrecht?
„Outbound“-Situationen
2.1Besteuerung ausländischer Kapitalerträge
2.1.1 Schmid, Lenz und das BudgetbegleitG 2003
2.1.2 Besteuerung ausländischer Investmentfonds
2.1.3 Erstattung ausländischer Quellensteuern?
2.2„Wegzugsbesteuerung“: X und Y, Hughes de Lasteyrie du Saillant und das AbgÄG 2004
2.3Verwertung ausländischer Verluste im Inland
2.3.1 „Befreite“ ausländische Betriebsstättenverluste und § 2 Abs 8 EStG
2.3.2 Marks & Spencer und die österreichische Gruppenbesteuerung
2.5Ausländische Schachteldividenden: § 10 Abs 1 versus § 10 Abs 2 KStG
2.6Ein kurzer Blick auf verbleibende Problembereiche
IV. Ausblick
Steuerrecht aktuell
I. Einleitung
1. Steuersouveränität der Mitgliedstaaten und
Gemeinschaftsrecht
„Die Steuersouveränität ist eines der wesentlichen Elemente der
nationalen Souveränität, und die Mitgliedstaaten halten derzeit
alle an der Respektierung dieser Souveränität fest“1). Ohne Übertreibung kann aber dennoch behauptet werden, dass das europäische Gemeinschaftsrecht die nationalen Steuerrechtssysteme
der Mitgliedstaaten revolutioniert hat. Damit ist nicht nur die
weitgehende Harmonisierung des indirekten Steuerrechts angesprochen2), sondern auch der massive Einfluss auf das direkte
Steuerrecht der Mitgliedstaaten3). Dass das Gemeinschaftsrecht
aber überhaupt das nationale direkte Steuerrecht berühren kann,
ist nicht von vornherein klar: Anders als für den mittlerweile
weitgehend harmonisierten Bereich der indirekten Steuern enthält der EG-Vertrag nämlich keinen expliziten Harmonisierungsauftrag für den Bereich der direkten Besteuerung4), in dem
die Mitgliedstaaten somit ihre Regelungskompetenz behalten
haben. Aus der parallelen Existenz des Harmonisierungsauftrages des Art 93 EG für den Bereich der indirekten Steuern und
dem gleichzeitigen Fehlen von expliziten Harmonisierungsvorgaben für direkte Steuern könnte nach dem allgemeinen Rechtstheorem expressio unis est exclusio alterius sogar vermeint werden,
dass die direkte Besteuerung gänzlich in der Souveränität der
Mitgliedstaaten verblieben ist. Eine solch enge Sichtweise war
aber vor dem Hintergrund der historischen Entwicklung der
Gemeinschaft kontraindiziert5). Sie würde nämlich die Gemeinschaft jeder Kompetenz im Bereich des direkten Steuerrechts
berauben und damit unzweifelhaft das Ziel des Gemeinsamen
Marktes und seit der Einheitlichen Europäischen Akte6) auch
jenes des Binnenmarktes gefährden, die beide auf eine Gewährleistung des freien Verkehrs von Waren, Personen, Dienstleistungen und Kapital abzielen7). In Ermangelung expliziter Vorschriften zur Erreichung dieser Zielvorgaben auch im Bereich
des direkten Steuerrechts wird die Harmonisierungskompetenz
freilich durch die allgemeinen Bestimmungen zur Verwirklichung des Gemeinsamen Marktes insbesondere in Art 94 im1) Bericht der Kommission an den Rat über die Aussichten für eine Angleichung der Steuersysteme in der Gemeinschaft, Bulletin der EG,
Beilage 1/80 – Tz 5.
2) Für einen Überblick siehe zB Terra/Wattel, European Tax Law4 (2005)
199 ff.
3) Ausgeblendet bleiben hier die steuerlichen Aspekte, die sich aus anderen Rechtsmassen des Europarechts (iwS) ergeben: Dazu gehören
zunächst die Grundfreiheiten des EWR-Abkommens, die eine ähnliche
Wirkung wie die Grundfreiheiten des EG-Vertrags entfalten und für
Österreich seit 1. 1. 1994 anwendbar sind; vgl dazu bereits Tumpel,
ecolex 1992, 583 (583 ff) und 655 (655 ff); ausführlich zur Bedeutung
des EWR-Abkommens für das direkte Steuerrecht zuletzt Cordewener,
FR 2005, 236 (236 ff); Gudmundsson, Intertax 2006, 58 (58 ff); siehe
auch das steuerliche Urteil des EFTA-Gerichtshofes 23. 11. 2004, E-1/04,
Fokus Bank ASA, und dazu G. Kofler, ÖStZ 2005/279, 143 (143 ff); G.
Kofler, ÖStZ 2005/357, 169 (169 ff); Cordewener, FR 2005, 345 (345 ff).
Überdies erlangt die Europäische Menschenrechtskonvention zunehmende steuerliche Relevanz: Siehe Art 14 („Diskriminierungsverbot“)
iVm Art 1 des 1. Zusatzprotokolls und dazu insbesondere EGMR
23. 10. 1990, 17/1989, 13 EHRR 774 (1990), Darby v. Sweden; ausführlich zu den steuerlichen Aspekten der EMRK Baker, BTR 2000, 211
(211 ff).
4) Abgesehen von Art 175 Abs 2 EG, der eine Ermächtigung des Rates zum
Erlass steuerlicher Lenkungsnormen auf dem Gebiet des Umweltrechts
vorsieht.
5) Dazu etwa Wunderlich/Albath, DStZ 2005, 547 (549 mwN).
6) ABl L 169/1 ff (29. 6. 1987).
7) Zum detaillierten Inhalt dieser Begriffe siehe etwa Zorn in Pelka (Hrsg),
Europa- und verfassungsrechtliche Grenzen der Unternehmensbesteuerung, DStJG 23 (2000) 227 (230 f mwN).
ÖStZ 15. März / Nr. 6 Artikel-Nr. 218 107
pliziert8). Auf dieser Basis ist auch eine Harmonisierung des
materiellen Steuerrechts der Mitgliedstaaten in den Bereichen
der grenzüberschreitenden Umgründungen9), der konzern-
internen Gewinnausschüttungen10) sowie Zins- und Lizenzgebührenzahlungen11) erfolgt.
Die Bedeutung des Gemeinschaftsrechts liegt freilich auch
auf einer anderen Ebene: Gerade im internationalen Steuerrecht
der Mitgliedstaaten, in dem die Ungleichbehandlung von unbeschränkt und beschränkt Steuerpflichtigen einen jahrzehntelang akzeptierten Eckpfeiler darstellte, eröffneten die Grundfreiheiten den grenzüberschreitend tätigen Steuerpflichtigen
einen rechtlichen Schutz, der in seiner Effektivität nicht nur
über die Wirkungen bilateraler Doppelbesteuerungsabkommen,
sondern auch über jene des Verfassungsrechts weit hinausreicht.
Denn schon relativ frühzeitig hat der EuGH den Überlegungen
der Mitgliedstaaten, dass das direkte Steuerrecht vom Anwendungsbereich der Grundfreiheiten ausgenommen sei, eine klare Absage erteilt12). Vielmehr entspricht es mittlerweile ständiger Rechtsprechung, dass „die direkten Steuern zwar in die
Zuständigkeit der Mitgliedstaaten fallen, dass diese ihre Befugnisse jedoch unter Wahrung des Gemeinschaftsrechts ausüben müssen“
und insbesondere jede offene oder verdeckte Diskriminierung
aufgrund der Staatsangehörigkeit zu unterlassen haben13). Der
durch diese harmlos scheinende Formulierung geweckte Eindruck, die Steuersouveränität der EU-Staaten werde durch das
Gemeinschaftsrecht weitestgehend geschont und nur in Randbereichen tangiert, täuscht14): Das gesamte nationale direkte
Steuerrecht ist damit keine domaine réservé der Mitgliedstaaten,
sondern wird von der mit Anwendungsvorrang ausgestatteten
Gemeinschaftsrechtsordnung überlagert und jede einzelne
Kompetenzausübung im Bereich der Besteuerung muss sich
innerhalb des gemeinschaftsrechtlich zugestandenen Rahmens
bewegen. Zu diesem Rahmen gehören vor allem die gemeinschaftsrechtlichen Grundfreiheiten.
8) Siehe zum status quo und möglichen Zukunftsperspektiven Beiser/Pülzl,
SWI 2004, 596 (596 ff).
9) Richtlinie 90/434/EWG des Rates vom 23. Juli 1990 über das gemeinsame
Steuersystem für Fusionen, Spaltungen, die Einbringung von Unternehmensteilen und den Austausch von Anteilen, die Gesellschaften
verschiedener Mitgliedstaaten betreffen, ABl L 225/01 (20. 8. 1990) idF
Richtlinie 2005/19/EG des Rates vom 17. Februar 2005, ABl L 58/19 ff
(4. 3. 2005) (FusionsRL, in Österreich insbesondere im UmgrStG umgesetzt).
10) Richtlinie des Rates vom 23. Juli 1990 über das gemeinsame Steuersystem der Mutter- und Tochtergesellschaften verschiedener Mitgliedstaaten (90/435/EWG), ABl L 225/6 ff (20. 8. 1990), idF Richtlinie
2003/123/EG des Rates vom 22. Dezember 2003, ABl L 7/41 ff (13. 1.
2004) (Mutter-Tochter-RL, in Österreich umgesetzt durch § 10 Abs 2
KStG und § 94a EStG).
11) Richtlinie 2003/49/EG des Rates vom 3. Juni 2003 über eine gemeinsame Steuerregelung für Zahlungen von Zinsen und Lizenzgebühren
zwischen verbundenen Unternehmen verschiedener Mitgliedstaaten,
ABl L 157/49 ff (26. 6. 2003) (Zinsen-Lizenzgebühren-RL, in Österreich
umgesetzt durch § 99a EStG).
12) Sog strict oder moderate sovereignty exception, wonach die direkte
Besteuerung vom Anwendungsbereich der gemeinschaftsrechtlichen
Grundfreiheiten ausgenommen sei oder deren Einfluss auf das direkte Steuerrecht zumindest einen gewissen Grad der Harmonisierung
voraussetze; siehe dazu zB van Thiel, Free movement of Persons and
Income Tax Law (2002) 21 ff und 153 ff mwN; Birk, FR 2005, 121 (121 ff);
dieser Ansatz wird auch in der Vorlagefrage des BFH im Schumacker-Fall
(BFH 14. 4. 1993, I R 29/92, BFHE 170, 454, BStBl 1994 II 27) deutlich.
13) Siehe statt vieler EuGH 14. 2. 1995, C-279/93, Slg 1995, I-225, Schumacker – Tz 21.
14) Siehe zB Tumpel in Pelka (Hrsg), Europa- und verfassungsrechtliche
Grenzen der Unternehmensbesteuerung, DStJG 23 (2000) 321 (321 ff);
Birk, FR 2005, 121 (124); treffend auch Drüen/Kahler, StuW 2005, 171
(171 f).
108 ÖStZ 15. März / Nr. 6 Artikel-Nr. 218
2. Die Wirkung der Grundfreiheiten im Steuerrecht
2.1 Der steuerliche Binnenmarkt als Leitmotiv
Die überragende Bedeutung der gemeinschaftsrechtlichen
Grundfreiheiten („Marktfreiheiten“) auch für den Bereich der
direkten Besteuerung wurde erstmals 1986 sichtbar, als der
EuGH die Rechtsprechung zum Diskriminierungsverbot der
Grundfreiheiten im berühmten Avoir Fiscal-Urteil15) auf das
Steuerrecht ausdehnte. In diesem – von der Kommission dem
Vernehmen nach wegen des zurückhaltenden Harmonisierungswillens der Mitgliedstaaten angestrengten – Verfahren gelangte
der EuGH zu dem Ergebnis, dass die Nichterstreckung einer
für französische Gesellschaften vorgesehenen Steuergutschrift
(avoir fiscal) auf französische Betriebsstätten beschränkt steuerpflichtiger Auslandsgesellschaften dem Gemeinschaftsrecht
widerspricht. Seit dieser Entscheidung in Avoir Fiscal hat sich
die Rechtsprechung des EuGH mit unglaublicher Geschwindigkeit entwickelt und in den mittlerweile weit über 70 Urteilen16) zum direkten Steuerrecht durch so genannte „negative
Integration“ nicht nur zahlreiche Pfeiler des tradierten Systems
grenzüberschreitender Besteuerung in Frage gestellt, sondern
sich als der bislang effizienteste „Motor“ zur Überwindung von
steuerlichen Hindernissen grenzüberschreitender wirtschaftlicher Aktivitäten in der Gemeinschaft erwiesen. Die Rechtsprechung des EuGH zum direkten Steuerrecht ist auch an
Österreich nicht spurlos vorüber gegangen. Während der potenzielle Einfluss des Gemeinschaftsrechts zu Beginn der 1990er
Jahre allgemein noch skeptisch betrachtet und erheblich unterschätzt wurde, hat sich durch das 1995 ergangene SchumackerUrteil17) diese Sichtweise innerhalb kurzer Zeit erheblich geändert, indem es den nationalen Staatsgewalten, aber auch den
Steuerpflichtigen die Bedeutung des Europarechts bewusst gemacht hat. Österreichs Beitritt zur Gemeinschaft am 1. 1. 1995
ist exakt in diese Phase der wachsenden Bedeutung des Gemeinschaftsrechts gefallen. Schon vor dem Beitritt hat Österreich
daher Bemühungen gezeigt, das direkte Steuerrecht gemeinschaftskonform auszurichten18), der Einfluss der Rechtsprechung
des EuGH zu den Grundfreiheiten ist aber wohl dennoch unterbewertet worden.
Die durch den EuGH operationalisierten Grundfreiheits-
garantien des EG-Vertrages formen die tragenden Säulen der
europäischen Wirtschaftsintegration im Binnenmarkt und verwirklichen damit in ihrem jeweiligen Anwendungsbereich das
in Art 3 Abs 1 lit c und Art 14 Abs 2 EG angelegte Binnenmarktkonzept19), welches insbesondere die Beseitigung der
Hindernisse für den freien Waren-, Personen-, Dienstleistungsund Kapitalverkehr zwischen den Mitgliedstaaten umfasst.
Dabei ist den Grundfreiheiten aufgrund ihrer Fundierung durch
die (klassisch-)neoklassische Vorstellung einer Wirtschaftsordnung daran gelegen, für eine optimale Allokation der Produk15) EuGH 28. 1. 1986, 270/83, Slg 1986, 273, Kommission/Frankreich („avoir
fiscal“).
16) Siehe dazu jüngst die Übersicht bei G. Kofler, taxlex 2006, 13 (13 ff)
(Teil I) und taxlex 2006, 63 (63 ff) (Teil II).
17) EuGH 14. 2. 1995, C-279/93, Slg 1995, I-225, Schumacker.
18) So wurde beispielsweise die gemeinschaftsrechtliche FusionsRL bereits
vor dem EU-Beitritt Österreichs in der Stammfassung des UmgrStG
weitgehend berücksichtigt; siehe nur Staringer in Gassner/Gröhs/Lang
(Hrsg), Zukunftsaufgaben der Wirtschaftsprüfung, FS Deloitte & Touche
(1997) 219 (221). Ähnliches gilt für die rasche Implementation der Mutter-Tochter-Richtlinie durch das EU-AnpG (BGBl 681/1994); siehe dazu
etwa Quantschnigg, RdW 1994, 221 (221 ff).
19) Dazu zB Cordewener, DStR 2004, 6 (6 f).
Steuerrecht aktuell
tionsfaktoren im Gemeinschaftsraum zu sorgen20); sie richten
sich daher in ihrer wohlfahrtsmaximierenden Zielsetzung gegen
nationale Maßnahmen, die eine grenzüberschreitende Wertschöpfung behindern oder eine nicht auf ökonomischen Daten
beruhende Verzerrung der Investitionsentscheidung bewirken.
Für wirtschaftliche Betätigungen mit grenzüberschreitendem
Charakter wird damit aus ökonomischer Sicht die vollständige
Beseitigung von Beschränkungen des zwischenstaatlichen Wirtschaftsverkehrs postuliert21). Dabei schützen Art 28, 29 EG den
freien Warenverkehr, die Personenverkehrsfreiheit garantiert in
ihren beiden Ausprägungen die Freizügigkeit von Arbeitnehmern innerhalb der Gemeinschaft (Art 39 EG) und die freie
Niederlassung im Gebiet eines anderen Mitgliedstaates (Art 43
EG), Art 49 EG verhindert Beschränkungen des freien Dienstleistungsverkehrs und Art 56 EG steht Beschränkungen des
freien Kapital- und Zahlungsverkehrs entgegen22).
2.2 Der Schutzgehalt der Grundfreiheiten auf der Tat­
bestandsebene: Marktgleichheit und Marktfreiheit
Die Grundfreiheiten zeichnen sich nach dem derzeitigen Stand
der Rechtsprechung durch eine zweischneidige Struktur aus,
die sich in einer gleichheitsrechtlichen Komponente und einer
freiheitsrechtliche Komponente ausdrückt und damit sowohl diskriminierende wie auch nicht diskriminierende Beschränkungen23)
in den Wirkungsbereich des Gemeinschaftsrechts einbezieht24):
20) Vgl aus dem steuerlichen Schrifttum etwa Schön in Pelka (Hrsg), Europa- und verfassungsrechtliche Grenzen der Unternehmensbesteuerung
DStJG 23 (2000) 191 (191 ff); Schönfeld, Hinzurechnungsbesteuerung
und Europäisches Gemeinschaftsrecht (2005) 16 ff mwN; Rödder/Schönfeld, IStR 2005, 523 (525).
21) Zu den theoretischen Grundlagen ausführlich Schönfeld, Hinzurechnungsbesteuerung und Europäisches Gemeinschaftsrecht (2005) 17.
22) Zum – zumeist intuitiven – Anwendungsbereich der Grundfreiheiten
siehe zB Terra/Wattel, European Tax Law4 (2005) 38 ff; jüngst auch
noch Hahn, DStZ 2005, 469 (469 ff).
23) Selbstverständlich enthält jede Diskriminierung automatisch auch eine
Beschränkung (siehe zB Schlussanträge GA La Pergola 24. 6. 1999,
C-35/98, Slg 2000, I-4071, Verkooijen – Tz 18; vgl weiters Eilmansberger,
JBl 1999, 345 (347); Jarass, EuR 2000, 705 [709]; Bergström/Bruzelius,
Intertax 2001, 233 [235]), umgekehrt aber natürlich nicht jede Beschränkung zugleich eine Diskriminierung (siehe nur Cordewener,
Europäische Grundfreiheiten und nationales Steuerrecht (2002) 286
mwN).
24) Dazu insbesondere Roth in Schön (Hrsg), GedS Knobbe-Keuk (1997) 729
(740 f); Reimer in Lehner (Hrsg), Grundfreiheiten im Steuerrecht der
EU-Staaten (2000) 39 (55 ff); Cordewener, Europäische Grundfreiheiten
und nationales Steuerrecht (2002) 249 ff, 322 ff mwN; Cordewener,
DStR 2004, 6 (8); tendenziell ebenso Lehner in Pelka (Hrsg), Europaund verfassungsrechtliche Grenzen der Unternehmensbesteuerung,
DStJG 23 (2000) 263 (266); aA aber jüngst Englisch, StuW 2003, 88
(89 f), sowie Englisch, Dividendenbesteuerung (2005) 247 ff, der den
freiheitsrechtlichen Charakter der Grundfreiheiten im Grunde verneint und hier auf eine faktische Schlechterstellung trotz rechtlicher
Gleichstellung abstellt und damit eine spezifische Benachteiligung der
grenzüberschreitenden Tätigkeit zB durch Mehrbelastungen als Eingriffsvoraussetzung eines gleichheitsrechtlich orientierten Beschränkungsverbots fordert. In eine ähnliche Richtung auch Lang in Lechner/
Staringer/Tumpel (Hrsg), Kapitalverkehrsfreiheit und Steuerrecht (2000)
181 (189 ff), wonach das Beschränkungsverbot lediglich eine argumentative Verkürzung einer Vergleichbarkeitsprüfung darstelle und es
damit stets um eine Vergleichpaarbildung – uU sogar um den Vergleich
zur gesamten Rechtsordnung – gehe. Auch wenn diesem Ansatz, der
im Ergebnis auf die Betrachtung einer den grenzüberschreitenden
Wirtschaftsverkehr benachteiligenden Mehrbelastung hinausläuft,
argumentativ sicherlich Meriten hat, ist dennoch zu bemerken, dass
der EuGH – beispielsweise in Bosman (EuGH 15. 12. 1995, C-415/93, Slg
1995, I-4921, Bosman – Tz 99 ff) oder im Golden Shares-Urteil (EuGH
13. 5. 2003, C-98/01, Slg 2003, I-4641, Kommission/Vereinigtes Königreich – Tz 47) – einen anderen Weg beschreitet. Der befürchteten
„Überdehnung“ des Beschränkungsbegriffes kann mE wirkungsvoll
über eine entsprechende Fallgruppenbildung und eine nähere Analyse von bloßen, grundfreiheitsrechtlich unbedenklichen Disparitäten
zwischen den nationalen Steuersystemen begegnet werden; dazu
zusammenfassend auch Schlussanträge GA Poiares Maduro 7. 4. 2005,
C-446/03, Slg 2006, I-0000, Marks & Spencer – Tz 23 mwN.
Steuerrecht aktuell
2.2.1 Das Verbot offener und verdeckter Staatsangehörigkeitsdiskriminierung
Historisch wurden die Grundfreiheiten bloß als spezielle Ausformungen des Staatsangehörigendiskriminierungsverbotes des
Art 12 EG betrachtet25). Der prädominante steuerliche Konfliktbereich zwischen den gemeinschaftsrechtlichen Grundfreiheiten und nationalen Steuersystemen liegt nämlich traditionell
in jenen Fallgestaltungen, die sich aus der Sicht des Bestimmungs- oder Gastmitgliedstaats als „Inbound“- bzw Import­
situation aus einem anderen EG-Mitgliedstaat darstellen26).
Dieses Verbot der Staatsangehörigkeitsdiskriminierung – und
damit vice versa das Gebot zur „Inländergleichbehandlung“27) –
findet nicht nur in Art 12 EG, sondern explizit auch im Rahmen
der Arbeitnehmerfreizügigkeit (Art 39 Abs 2, 3 EG) sowie der
Niederlassungs- (Art 43 Abs 2 EG) und Dienstleistungsfreiheit
(Art 50 Abs 3 EG) Ausdruck und ergibt sich auch für den Bereich der Kapitalverkehrs, für den Art 56 EG „alle Beschränkungen“ verbietet, deutlich durch die ergänzende Heranziehung der
Vorgängerregelung des Art 67 Abs 1 EWG-Vertrag28). Das Diskriminierungsverbot ist damit ein essentieller Bestandteil sämtlicher Grundfreiheiten. Würden nämlich die spezielleren
Grundfreiheiten hinter diesen Diskriminierungsstandard zurückfallen, wäre überdies die vom EuGH angenommene Subsidiarität des allgemeinen Diskriminierungsverbotes nach Art 12
EG29) nicht tragfähig. Die Grundfreiheiten gebieten somit, dass
„vergleichbare Sachverhalte nicht unterschiedlich behandelt werden“ dürfen30), es sei denn, „dass eine Differenzierung objektiv
gerechtfertigt wäre“31).
Gemeinschaftsrechtlich ruht der Fokus in diesen Fällen regelmäßig auf der Prüfung von Regelungen des Quellenstaats
über die dort bestehende beschränkte Steuerpflicht von nichtansässigen natürlichen oder juristischen Personen. Ausgangspunkt der steuerlichen Rechtsprechung des EuGH in diesem
Bereich ist eine strenge Handhabung des Gebots der Inländergleichbehandlung, welches die Kehrseite des mehrfach im EGVertrag angelegten Verbots darstellt, die Staatsangehörigen
anderer Mitgliedstaaten schlechter zu behandeln als die eigenen
Angehörigen; die Feststellung der Schlechterstellung fordert
freilich eine relative Beurteilung durch die Bildung eines Vergleichspaares und die Identifikation des einschlägigen Vergleichskriteriums, des tertium comparationis. Vor diesem Hintergrund
wurde die „Einbruchsschleuse“ der Grundfreiheiten auf nationale Steuersysteme insbesondere durch das vom EuGH ent25) Deutlich etwa EuGH 29. 4. 1999, C-311/97, Slg 1999, I-2651, Royal
Bank of Scotland – Tz 21; für eine Übersicht zur außersteuerlichen
Rechtsprechung siehe zB Wouters, EC Tax Rev. 1999, 98 (102 ff); Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht
(2002) 104 ff.
26) Zur historischen Entwicklung siehe auch jüngst Englisch, Dividendenbesteuerung (2005) 230 ff.
27) Verstanden als ein durch Bildung einer Präpositionalkonstruktion
aufgelöstes Composition im Sinne einer Gleichbehandlung von „Ausländern“ mit „Inländern“; siehe auch Reimer in Lehner (Hrsg), Grundfreiheiten im Steuerrecht der EU-Staaten (2000) 39 (46 m FN 45).
28) Siehe nur Schaumburg in Ebling (Hrsg), Besteuerung von Einkommen,
DStJG 24 (2001) 225 (229); Cordewener, Europäische Grundfreiheiten
und nationales Steuerrecht (2002) 222 ff, 245 f; Englisch, Dividendenbesteuerung (2005) 236 mwN; siehe auch Englisch, Intertax 2005, 310
(313).
29) Siehe zu dieser Subsidiarität zB EuGH 8. 3. 2001, C-397/98, C-410/98, Slg
2001, I-1727, Metallgesellschaft and Hoechst – Tz 38; weiters Kingreen/
Störmer, EuR 1998, 263 (265 f).
30) Das Diskriminierungsverbot („Gleiches soll nicht ungleich, Ungleiches
nicht gleich behandelt werden“) ist somit lediglich eine negative Formulierung des Gleichheitsgrundsatzes („Gleiches soll gleich, Ungleiches
ungleich behandelt werden“).
31) EuGH 19. 10. 1977, 117/76 und 16/77, Slg 1977, 1753, Ruckdeschel
– Tz 7.
ÖStZ 15. März / Nr. 6 Artikel-Nr. 218 109
wickelte Konzept der verdeckten – bzw verschleierten oder indirekten32) – Diskriminierung geöffnet. Demnach verbieten die
grundfreiheitlichen Diskriminierungsverbote – ebenso wie das
Diskriminierungsverbot des Art 12 EG33) – nicht nur die offene
Diskriminierung auf Basis der Staatsangehörigkeit, sondern auch
alle Formen verdeckter Diskriminierung, die zwar auf anderen
Kriterien als jener der Staatsangehörigkeit basieren, faktisch aber
zum selben Ergebnis führen34), womit für den hier interessierenden Bereich insbesondere Unterscheidungen nach der
steuerlichen Ansässigkeit35) oder die Anknüpfung an die Veranlagung zur inländischen Steuer36) angesprochen sind. Das Konzept der verdeckten Diskriminierung findet sich erstmals im
Sotgiu-Fall37) und wurde durch die Biehl- und Bachmann-Fälle38)
auch in die Rechtsprechung zum direkten Steuerrecht übernommen. Zahlreiche nachfolgende Urteile, wie zB Schumacker und
Gerritse39), demonstrieren diesen Ansatz des EuGH.
2.2.2 Ausdehnung des Diskriminierungsschutzes auf
„Exportsituationen“: Verbot der Diskriminierung durch
den Herkunfts- bzw Ansässigkeitsmitgliedstaat
Dieser traditionelle Bereich offener und verdeckter Staatsangehörigkeitsdiskriminierungen wurde vom EuGH zu einem umfassenden, gleichheitsrechtlich orientierten Verbot der Benachteiligung grenzüberschreitender Aktivitäten auch durch den
Herkunfts- bzw Heimatstaat ausgedehnt. In mittlerweile ständiger Rechtsprechung hat der EuGH nämlich auch im Steuerrecht die Anwendbarkeit der Grundfreiheiten auf Sachverhaltsgestaltungen eröffnet, in denen aus der Sicht des Herkunfts- bzw
Ansässigkeitsmitgliedstaats eine „Outbound“- bzw Exportsituation seiner „eigenen“ Steuerpflichtigen vorliegt und es sich
daher nicht um eine offene oder verdeckte Staatsangehörigkeitsdiskriminierung handelt. Wenngleich diese Wirkungsrichtung
im Vertragswortlaut nicht deutlich angelegt ist, wird sie durch
das in Art 43 Abs 1, Art 49 Abs 1 und Art 56 Abs 1 EG enthaltene Verbot der „Beschränkungen“ der freien grenzüberschreitenden Betätigung bzw über die in Art 39 Abs 1 EG bedingungslos gewährleistete „Freizügigkeit“ nicht nur gedeckt,
sondern auch gefordert. Wären nämlich die Freiheitsgarantien
32) Diese Begriffe werden in der Rechtsprechung und Literatur meist synonym verwendet; siehe zB EuGH 23. 5. 1996, C-237/94, Slg 1996, I-2617,
O’Flynn – Tz 17 ff; EuGH 27. 6. 1996, C-107/94, Slg 1996, I-3089, Asscher
– Tz 49; weiters zB Wouters, EC Tax Rev. 1999, 98 (103 f); Oliveira, CML
Rev. 2002, 77 (85); Farmer, EC Tax Rev. 2003, 75 (76); anders Lyal, EC
Tax Rev. 2003, 68 (74).
33) Siehe zB EuGH 7. 7. 1988, 143/87, Slg 1988, 3877, Stanton – Tz 9; EuGH
10. 2. 1994, C-398/92, Slg 1994, I-467, Mund & Fester – Tz 14; EuGH
23. 1. 1997, C-29/95, Slg 1997, I-285, Pastoors – Tz 16.
34) Instruktiv EuGH 23. 5. 1996, C-237/94, Slg 1996, I-2617, O’Flynn
– Tz 17 ff.
35) Nur am Rande sei auf das Problem hingewiesen, dass bei Gesellschaften
die steuerliche Ansässigkeit idR an jene Kriterien anknüpft, die auch
das Gemeinschaftsrecht für die Feststellung der „Staatsangehörigkeit“
heranzieht, wie zB den Sitz einer Gesellschaft. Entsprechend wurde in
der Literatur auch vorgeschlagen, eine Diskriminierung auf Basis der
steuerlichen Ansässigkeit einer Gesellschaft als offene Diskriminierung
aufzufassen (siehe zB Lyons, EC Tax J. 1995/96, 27 [33]), während wohl
die hA und die überwiegende Rsp hier zu Recht von einer verdeckten
Diskriminierung ausgeht (EuGH 13. 7. 1993, C-330/91, Slg 1993, I-4017,
Commerzbank – Tz 15; EuGH 8. 7. 1999, C-254/97, Slg 1999, I-4809,
Société Baxter – Tz 13), was – wie beim Parallelfall der Diskriminierung
nach der steuerlichen Ansässigkeit natürlicher Personen – weitergehende Rechtfertigungsmöglichkeiten eröffnet; dazu unten I.B.3.
36) EuGH 12. 12. 2002, C-324/00, Slg 2002, I-11779, Lankhorst-Hohorst
– Tz 28 f.
37) EuGH 3. 2. 1974, 152/73, Slg 1974, 153, Sotgiu – Tz 11.
38) EuGH 8. 5. 1990, 175/88, Slg 1990, I-1779, Biehl; EuGH 28. 1. 1992,
C-204/90, Slg 1992, I-249, Bachmann.
39) Siehe EuGH 14. 2. 1995, C-279/93, Slg 1995, I-225, Schumacker – Tz 26
und 29 (zu Art 39 EG); EuGH 12. 6. 2003, C-234/01, Slg 2003, I-5933,
Gerritse – Tz 53 (zu Art 43 EG).
110 ÖStZ 15. März / Nr. 6 Artikel-Nr. 218
nur gegen den Gast- bzw Bestimmungsstaat wirksam, blieben
sie bei fehlender Kontrolle des Herkunfts- bzw Ansässigkeitsstaates letztlich doch weitgehend wirkungslos40). In dieser symmetrischen Ausrichtung der Grundfreiheiten gegenüber allen
durch einen transnationalen Wirtschaftsvorgang tangierten
Mitgliedstaaten ist aber systematisch bereits angelegt, dass es
sich ebenso wie in „Inbound“- bzw Importkonstellationen auch
in der „Outbound“- bzw Exportperspektive in struktureller Hinsicht um Diskriminierungsverbote und damit die gleichheitsrechtliche Ausrichtung der Grundfreiheiten handelt41). Regelmäßig geht es in diesen „Outbound“- bzw Exportkonstellationen
um die gemeinschaftsrechtliche Prüfung nationaler Steuernormen, die im Rahmen der unbeschränkten Steuerpflicht
juristischer oder natürlicher Personen in deren Ansässigkeitsstaat
gerade wegen der Ausübung einer Grundfreiheit zur Anwendung gelangen und zwischen Inlands- und Auslandssachverhalt
differenzieren. Diese Stossrichtung der Grundfreiheiten zielt
somit in einen Bereich, dem durch das Konzept der Inländergleichbehandlung nicht beizukommen ist, der aber nichtsdestoweniger eine unakzeptable Behinderung grenzüberschreitender
Wirtschaftsaktivität darstellt. Schöne Beispiele für diesen Ansatz
sind die Urteile in ICI, X AB und Y AB, Baars, Bosal und
Marks & Spencer42) zur so genannten Exportneutralität der Niederlassung, die Urteile in Verkooijen, Lenz und Manninen43) zur
Dividendenbesteuerung sowie das Hughes de Lasteyrie du Saillant-Urteil44) zur Wegzugsbesteuerung.
2.2.3 Der Schutzbereich der Grundfreiheiten in ihrer
freiheitsrechtlichen Ausprägung: Das „echte“ Beschränkungsverbot
Darüber hinaus finden sich in der Rechtsprechung aber auch
deutliche Ansätze, den Grundfreiheitsschutz über das Verbot
einer relativ durch Vergleich zweier Situationen zu beurteilenden
Schlechterstellung grenzüberschreitender Tätigkeiten hinaus zu
einem echten – absolut wirkenden – Beschränkungsverbot (ieS)
auszudehnen. Solcherart fordern nämlich die Grundfreiheiten
nicht nur in ihrer Ausformung als Diskriminierungsverbote die
Beseitigung ungerechtfertigter Benachteiligungen grenzüberschreitender Wirtschaftsaktivitäten durch die Rechtsordnung
eines Mitgliedstaates, sondern in ihrer Ausformung als Beschränkungsverbote auch die Beseitigung von Beschränkungen, die
nicht aus solchen Ungleichbehandlungen erfließen45). Insofern
hat der EuGH auch ungerechtfertigte nichtdiskriminierende
Beschränkungen des Marktzu- oder Marktabganges auf Basis der
freiheitsrechtlichen Ausprägung der Grundfreiheiten als gemeinschaftsrechtswidrig erkannt. Durch das Einbeziehen auch
nichtdiskriminierender, aber marktzu- oder marktabgangshindernder Bestimmungen in den gemeinschaftsrechtlichen
40) Insofern eindrucksvoll EuGH 27. 9. 1988, 81/87, Slg 1988, 5483, Daily
Mail – Tz 16.
41) Dazu ausführlich Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (2002) 825 ff; Cordewener, ET 2003, 294 (299);
Englisch, Dividendenbesteuerung (2005) 232; Englisch, Intertax 2005,
310 (314); Herzig/Englisch/Wagner, Der Konzern 2005, 298 (300).
42) EuGH 16. 7. 1998, C-264/96, Slg 1998, I-4695, ICI; EuGH 18. 11. 1999,
C-200/98, Slg 1999, I-8261, X AB and Y AB; EuGH 13. 4. 2000, C-251/98,
Slg 2000, I-2787, Baars; EuGH 18. 9. 2003, C-168/01, Slg 2003, I-9409, Bosal; EuGH 13. 12. 2005, C-446/03, Slg 2005, I-0000, Marks & Spencer.
43) EuGH 6. 6. 2000, C-35/98, Slg 2000, I-4071, Verkooijen; EuGH 15. 7.
2004, C-315/02, Slg 2004, I-7063, Lenz; EuGH 15. 7. 2004, C-242/03, Slg
2004, I-7379, Weidert und Paulus; EuGH 7. 9. 2004, C-319/02, Slg 2004,
I-7477, Manninen.
44) EuGH 11. 3. 2004, C-9/02, Slg 2004, I-2409, Hughes de Lasteyrie du
Saillant.
45) Grundlegend dazu Cordewener, Europäische Grundfreiheiten und
nationales Steuerrecht (2002) 175 ff mwN; siehe weiters etwa Kingreen/
Störmer, EuR 1998, 263 (268 f); Hey, StuW 2004, 193 (194).
Steuerrecht aktuell
Schutzbereich findet auch der Grundgedanke Anerkennung,
dass das gleichheitsrechtlich orientierte Prinzip der Nichtdiskriminierung zwar sine qua non des Binnenmarktkonzeptes ist,
aber nicht per se ausreicht, alle relevanten Behinderungen grenzüberschreitender Wirtschaftsaktivität, insbesondere des Zugangs
zu fremden Märkten, zu verhindern46). Diese Entwicklung nahm
ihren Ausgang in den die Warenverkehrsfreiheit betreffenden
berühmten Dassonville-47) und Cassis-de-Dijon-Fällen48). Nachfolgend hat der Gerichtshof dieses Verbot nichtdiskriminierender Beschränkungen des Marktzuganges ab den 1990er
Jahren in den Säger-49), Gebhard-50) und Bosman-Urteilen51) auch
auf die übrigen Grundfreiheiten ausgedehnt, wenngleich – wie
etwa das Keck-Urteil52) impliziert – die Weite dieses Ansatzes
nach wie vor unklar ist. Klar ist aber, dass die Stoßrichtung der
Grundfreiheiten in ihrer freiheitsrechtlichen Ausprägung darauf
abzielt, Zu- oder Abgangshemmnisse zu beseitigen, selbst wenn
die betroffene nationale Rechtslage keine diskriminierende Ungleichbehandlung zur Folge hat: Der Marktteilnehmer strebt
gerade nicht eine Gleichbehandlung, sondern vielmehr die Beseitigung von Hemmnissen des Marktzu- oder -abgangs an.
2.2.4 Zwischenergebnis
Zusammenfassend zeigt sich also, dass die in ihrem Schutzbereich
konvergierenden Grundfreiheiten nicht nur offene und verdeckte Staatsangehörigkeitsdiskriminierungen durch den Gast- bzw
Bestimmungsstaat erfassen, sondern generell jede nicht gerechtfertigte benachteiligende Behandlung des grenzüberschreitenden
Wirtschaftsverkehrs gegenüber dem vergleichbaren innerstaatlichen Vorgang, und zwar unabhängig davon, von welchem der
beteiligten Mitgliedstaaten diese diskriminierende Maßnahme
gesetzt wurde53). In ihrer Ausrichtung als „Diskriminierungsverbote“ hat der EuGH die primärrechtlichen Grundfreiheiten
somit schrittweise über ein Verbot der Benachteiligung ausländischer Staatsangehöriger auf Basis eines ad personam-Vergleichs
zu einem weitgefassten Verbot der Benachteiligung von grenzüberschreitenden gegenüber vergleichbaren (hypothetischen)
rein landesinternen Wirtschaftsvorgängen auf Basis eines ad
rem-Vergleichs fortentwickelt: Diskriminierungsverdächtig sind
somit im Grunde alle Schlechterstellungen grenzüberschreitender Betätigungen, die aus Differenzierungen anhand der ausländischen Staatsangehörigkeit oder Ansässigkeit bzw des ausländischen Investitions- oder Tätigkeitsortes resultieren. Dadurch
wird in Form des Verbots verdeckter Staatsangehörigkeitsdiskriminierungen nicht allein der traditionelle Kernbereich eines
Gebotes der Inländergleichbehandlung im Bestimmungsstaat
für „Inbound“-Situationen erweitert, sondern es wird zudem für
„Outbound“-Situationen ein an den Herkunftsstaat adressiertes
Verbot der Benachteiligung von Auslands- gegenüber vergleichbaren Inlandsaktivitäten hinzugefügt.
Die Grundfreiheiten werden dementsprechend im steuerlichen
Kontext sowohl für „Inbound“- wie auch „Outbound“-Situati46) Siehe zu diesem Dualismus von Freiheit des Marktzugangs und Marktgleichheit insbesondere Roth in Schön (Hrsg), GedS Knobbe-Keuk
(1997) 729 (737 ff); Vanistendael in Gocke/Gosch/Lang (Hrsg), Körperschaftsteuer – Internationales Steuerrecht – Doppelbesteuerung, FS
Wassermeyer (2005) 523 (530, 534 ff).
47) EuGH 11. 7. 1974, 8/74, Slg 1974, 837, Dassonville.
48) EuGH 20. 2. 1979, 120/78, Slg 1979, 649, Rewe-Zentral GA („Cassis-deDijon“).
49) EuGH 25. 7. 1991, C-76/90, Slg 1991, I-4221, Säger.
50) EuGH 30. 11. 1995, C-55/94, Slg 1995, I-4165, Gebhard – Tz 37.
51) EuGH 15. 12. 1995, C-415/93, Slg 1995, I-4921, Bosman.
52) EuGH 24. 11. 1993, C-26791 and C-268/91, Slg 1993, I-6097, Keck.
53) In diese Richtung auch Farmer, EC Tax Rev. 2003, 75 (77); vgl weiters
Lyal, EC Tax Rev. 2003, 68 (74).
Steuerrecht aktuell
onen vom EuGH in struktureller Hinsicht regelmäßig unter
Vornahme eines vertikalen Vergleichs als Diskriminierungsverbote
gehandhabt54): Entweder wird im „Inbound“-Fall geprüft, ob die
in den Mitgliedstaat hineingehende Wirtschaftstransaktion gegenüber rein inländischen Vergleichstransaktionen benachtei-
ligt wird, oder es wird im „Outbound“-Fall eine entsprechende
Schlechterstellung der aus dem Mitgliedstaat hinausgehenden
Wirtschaftstransaktion gegenüber dem rein internen Vergleichsvorgang untersucht. Offene und verdeckte Diskriminierung
erweisen sich damit als bloße Untergruppen eines weiten gemeinschaftsrechtlichen Diskriminierungskonzepts, wenngleich
die Wirkung der Grundfreiheiten gegen den Herkunfts- bzw
Ansässigkeitsstaat im Schrifttum oftmals auch unter dem Begriff
des „Beschränkungsverbots“ (iwS) firmiert55). Demgegenüber
zielt das echte, freiheitsrechtliche Beschränkungsverbot (ieS) auf
den Schutz des Marktzu- und Marktabgangs ab. Im Steuerrecht
hat der EuGH diesen Beschränkungsansatz (ieS) aber bisher
lediglich auf steuerliche Formalpflichten angewandt56). Es wäre
aber wohl zu weitgehend, dem freiheitsrechtlichen Beschränkungsverbot für den Bereich der direkten Besteuerung a priori
jede Bedeutung abzuerkennen57). Gerade den potenziellen Einfluss auf Fragen der Mehrbelastungen der grenzüberschreitenden
Tätigkeit beispielsweise durch eine Doppelbesteuerung wird
man nämlich nicht generell verneinen können58).
Grundvoraussetzung für das Eingreifen des Grundfreiheitsschutzes ist allerdings stets, dass die zu schützende Tätigkeit in
irgendeiner Weise einen grenzüberschreitenden Charakter aufweist59). Der persönliche Anwendungs- bzw Schutzbereich aller
Grundfreiheiten ist grundsätzlich den Staatsangehörigen der EGMitgliedstaaten eröffnet, also bei natürlichen Personen jedem
„Unionsbürger“ iSd Art 17 EG60), wobei dies auch für Gesellschaften sowie juristische Personen des öffentlichen und privaten
Rechts gilt, wenn sie nach den Rechtsvorschriften eines Mitgliedstaates gegründet wurden und „ihren satzungsmäßigen Sitz, ihre
Hauptverwaltung oder ihre Hauptniederlassung innerhalb der Gemeinschaft haben“. Während die Grundfreiheiten in ihrer Ausrichtung aber nur wirtschaftlichen Aktivitäten Schutz gewähren,
tritt in der jüngeren Rechtsprechung auch der Schutz der allgemeinen Freizügigkeit nach Art 18 EG ergänzend hinzu61).
2.3 Rechtfertigung und Verhältnismäßigkeit beschrän­
kender Steuernormen
Steht fest, dass eine nationale Steuernorm auf Tatbestands­ebene
eine relevante – diskriminierende oder nichtdiskriminierende
– Beschränkung einer Grundfreiheit darstellt, verschiebt sich
der Fokus auf die Frage, ob diese Beschränkung gerechtfertigt
54) Dazu insbesondere Cordewener, Europäische Grundfreiheiten und
nationales Steuerrecht (2002) 822 ff; siehe weiters zB Reimer in Lehner (Hrsg), Grundfreiheiten im Steuerrecht der EU-Staaten (2000) 39
(43 f).
55) ZB jüngst noch Terra/Wattel, European Tax Law3 (2001) 41 ff, und
Terra/Wattel, European Tax Law4 (2005) 53 ff; Dautzenberg, BB-Special
6/2004, 8 (8); siehe auch Hey, StuW 2004, 193 (195).
56) Vgl EuGH 15. 5. 1997, C-250/95, Slg 1997, I-2471, Futura Participations;
vgl weiters Hinnekens, EC Tax Rev. 2002, 112 (115 ff); Lyal, EC Tax Rev.
2003, 68 (70 ff); Farmer, EC Tax Rev. 2003, 75 (78 ff).
57) So aber zB Randelzhofer/Forsthoff in Grabitz/Hilf (Hrsg), Das Recht der
Europäischen Union I (2001) Vor Art 39–55 Tz 216.
58) Dazu ausführlich G. Kofler, SWI 2006, 62 (62 ff mwN).
59) Siehe ausführlich zB Jarass, EuR 2000, 705 (706 f); Englisch, Dividendenbesteuerung (2005) 243; Hahn, DStZ 2005, 433 (438 f); an diesem
grenzüberschreitenden Element mangelte es nach Ansicht des EuGH
im vieldiskutierten Werner-Fall (EuGH 26. 1. 1993, C-112/91, Slg 1993,
I-429, Werner); dazu ausführlich Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (2002) 359 ff mwN.
60) EuGH 12. 7. 2005, C-403/03, Slg 2005, I-0000, Schempp – 15 ff mwN.
61) Siehe zB Cordewener, DStR 2004, 6 (9 mwN).
ÖStZ 15. März / Nr. 6 Artikel-Nr. 218 111
werden kann. Insofern ergibt sich aus der – dogmatisch wenig
überzeugenden und im Fluss befindlichen62) – Rechtsprechung
des EuGH zunächst, dass offene Staatsangehörigkeitsdiskriminierungen nur unter den engen, im EG-Vertrag ausdrücklich
vorgesehenen Gründen der öffentlichen Ordnung, Sicherheit
und Gesundheit gerechtfertigt werden können63). Demgegenüber sind alle anderen Beschränkungen einschließlich verdeckter Staatsangehörigkeitsdiskriminierungen der Rechtfertigung
auch aufgrund ungeschriebener Rechtfertigungsgründe unter
der wesentlich weiteren, im Cassis-de-Dijon-Fall64) entwickelten
„rule of reason“ zugänglich65). Danach müssen – wie der EuGH
im insofern wegweisenden Gebhard-Fall zusammengefasst hat
– nationale Maßnahmen, die die Ausübung der durch den
Vertrag garantierten grundlegenden Freiheiten behindern oder
weniger attraktiv machen können, vier Voraussetzungen erfüllen: „Sie müssen in nichtdiskriminierender Weise angewandt werden66); sie müssen aus zwingenden Gründen des Allgemeininteresses gerechtfertigt sein; sie müssen geeignet sein, die Verwirklichung
des mit ihnen verfolgten Zieles zu gewährleisten, und sie dürfen
nicht über das hinausgehen, was zur Erreichung dieses Zieles erforderlich ist“67). Erst Rechtfertigungsgrund und Verhältnis-
mäßigkeit der Mittel zusammen ergeben die erforderliche
Rechtfertigung für nationale Maßnahmen, die die Ausübung
einer Grundfreiheit beschränken.
Eine Analyse der Rechtsprechung des EuGH zeigt freilich,
dass die Rechtfertigung einer beschränkten Maßnahme nur
schwer möglich ist und die Rechtfertigungsebene generell streng
gehandhabt wird68). So hat der EuGH in seiner steuerrechtlichen
Rechtsprechung betreffend Binnenmarktsituationen a priori
etwa eine Rechfertigung wegen befürchteter (zukünftiger) Steuermindereinnahmen69), der Notwendigkeit der Progressivität des
Steuersystems, der Existenz von mit dem Nachteil nicht unmittelbar zusammenhängenden anderweitigen Vorteilen70), der
Niedrigbesteuerung im Ausland71), der fehlenden Rechtsharmonisierung72), mangelnder Gegenseitigkeit73), der Möglichkeit
einer Diskriminierung durch eine andere Sachverhaltsgestaltung
zu entgehen74), der Existenz von Billigkeits- oder Ermessensmaßnahmen zur Abwendung von Beschränkungen75) oder über62) Für eine diesbezügliche Übersicht siehe etwa G. Kofler, ÖStZ 2003/874,
404 (406 ff); siehe auch Englisch, Dividendenbesteuerung (2005) 274 f
mwN.
63) Art 39 Abs 3, 46 Abs 1 und 55 EG.
64) EuGH 20. 2. 1979, 120/78, Slg 1979, 649, Rewe-Zentral GA („Cassis-deDijon“).
65) Siehe dazu ausführlich Cordewener, Europäische Grundfreiheiten und
nationales Steuerrecht (2002) 143 ff.
66) Verstanden als nicht offen nach der Staatsangehörigkeit diskriminierend; so ausdrücklich Schlussanträge GA Alber 24. 9. 2002, C-168/01,
Slg 2003, I-9409, Bosal – Tz 41.
67) EuGH 30. 11. 1995, C-55/94, Slg 1995, I-4165, Gebhard – Tz 37.
68) Siehe dazu jüngst den umfassenden Überblick bei Englisch, Dividendenbesteuerung (2005) 286 ff.
69) Siehe zB EuGH 21. 11. 2002, C-436/00, Slg 2002, I-10829, X und Y – Tz 50;
EuGH 12. 12. 2002, C-324/00, Slg 2002 I-11779, Lankhorst-Hohorst
– Tz 36.
70) Siehe etwa EuGH 21. 9. 1999, C-307/97, Slg 1999, I-6161, Saint-Gobain – Tz 51 ff; EuGH 14. 12. 2000, C-141/99, Slg 2000, I-11619, AMID
– Tz 27
71) Siehe zu diesem „Kompensationsverbot“ etwa EuGH 26. 10. 1999,
C-294/97, Slg 1999, I-7447, Eurowings – Tz 43 ff; EuGH 3. 10. 2002,
C-136/00, Slg 2002, I-8147, Danner – Tz 56.
72) EuGH 28. 1. 1986, 270/83, Slg 1986, 273, Kommission/Frankreich („avoir
fiscal“) – Tz 24; EuGH 28. 1. 1992, C-204/90, Slg 1992, I-276, Bachmann
– Tz 10 ff.
73) Siehe zB EuGH 28. 1. 1986, 270/83, Slg 1986, 273, Kommission/Frankreich
(„avoir fiscal“) – Tz 26.
74) EuGH 28. 1. 1986, 270/83, Slg 1986, 273, Kommission/Frankreich („avoir
fiscal“) – Tz 22; siehe auch EuGH 21. 9. 1999, C-307/97, Slg 1999, I-6161,
Saint-Gobain – Tz 42.
75) Siehe statt vieler EuGH 15. 10. 1986, 168/85, Slg 1986, 2945, Kommission/Italien – Tz 11.
112 ÖStZ 15. März / Nr. 6 Artikel-Nr. 218
haupt wegen rein wirtschaftlicher Gründe76) abgelehnt. Andererseits hat der EuGH aber bereits mehrfach zugestanden, dass
zB die Vermeidung der Steuerumgehung oder -hinterziehung77)
sowie die Wirksamkeit der Finanzaufsicht78) zwingende Gründe
des Allgemeininteresses darstellen und damit eine Beschränkung
der Grundfreiheitsausübung rechtfertigen können79). Allerdings
hat diese in abstracto Anerkennung der Vermeidung der Steuerumgehung oder -hinterziehung als Rechtfertigungsgrund
aufgrund der strengen Anforderungen des EuGH auf der Verhältnismäßigkeitsebene bisher in concreto noch nie zu einer
Rechtfertigung geführt80). Auch hinsichtlich möglicher Probleme
der steuerlichen Administration agiert der EuGH zurückhaltend
und verweist regelmäßig auf die Möglichkeit der Zusammenarbeit zwischen den mitgliedstaatlichen Finanzverwaltungen auf
Basis des Instrumentariums der AmtshilfeRL81); vor dem Hintergrund dieser Rechtsprechung ist auch zu erwarten, dass der
EuGH eine ähnliche Argumentation für den Bereich der Steuererhebung und -vollstreckung, etwa in Wegzugsbesteuerungsfällen, verfolgen und hier auf das – seit kurzem auch direkte
Steuern umfassende – Instrument der BeitreibungsRL verweisen
wird82). Obwohl zuzugestehen ist, dass es beiden Instrumenten
in der Praxis an Effizienz mangelt83), liegt der Rechtsprechung
hier offensichtlich die Überlegung zurunde, dass diese Schwierigkeiten zu Lasten der Mitgliedstaaten und nicht zum Nachteil
der Steuerpflichtigen gehen sollen.
Einen besonderen Stellenwert auf der Rechtfertigungsebene
hat die Kohärenz des Steuerrechtes eingenommen. Dieser Rechtfertigungsgrund ist vom EuGH in den Bachmann-84) und Kommission/Belgien-Fällen85) anerkannt worden: In diesen beiden
Fällen erblickte der EuGH einen die Diskriminierung rechtfertigenden unmittelbaren Zusammenhang zwischen steuerlichem
Vor- und Nachteil darin, dass die Nichtabzugsfähigkeit von
Versicherungsbeiträgen an ausländische Versicherungen mit der
innerstaatlichen Steuerfreiheit der Versicherungsleistungen einherging. Der EuGH führte damals aber weiter aus, dass die
Kohärenz der Steuerregelung voraussetze, dass Belgien, „wäre
es verpflichtet, den Abzug der in einem anderen Mitgliedstaat gezahlten Lebensversicherungsbeiträge zuzulassen, die von den Versicherern zu zahlenden Beiträge besteuern könnte“86). Da diese
Voraussetzung bei einem im Ausland ansässigen Versicherer
nicht erfüllt sei, rechtfertige die Kohärenz der Steuerregelung
76) EuGH 6. 6. 2000, C-35/98, Slg 2000, I-4071, Verkooijen – Tz 48 mwN.
77) EuGH 16. 7. 1998, C-264/96, Slg 1998, I-4695, ICI – Tz 26; EuGH 8. 3. 2001,
C-397/98, C-410/98, Slg 2001, I-1727, Metallgesellschaft and Hoechst
– Tz 57.
78) EuGH 15. 5. 1997, C-250/95, Slg 1997, I-2471, Futura Participations–
Tz 31; EuGH 8. 7. 1999, C-254/97, Slg 1999, I-4809, Baxter – Tz 18; dazu
jüngst ausführlich Ruiz Almendral, Intertax 2005, 562 (562 ff).
79) EuGH 28. 10. 1999, C-55/98, Slg 1999, I-7641, Bent Vestergaard –
Tz 23.
80) Siehe zB EuGH 16. 7. 1998, C-264/96, Slg 1998, I-4695, ICI – Tz 26; EuGH
12. 12. 2002, C-324/00, Slg 2002 I-11779, Lankhorst-Hohorst – Tz 37.
Eine mögliche Auflockerung dieser strengen Sicht könnte aber durch
das Urteil in der Rechtssache Marks & Spencer eingeläutet sein; siehe
EuGH 13. 12. 2005, C-446/03, Marks & Spencer – Tz 49; kritisch dazu
aber Lang, SWI 2006, 3 (7); Englisch, IStR 2006, 19 (23).
81) Für diese Rechtsprechungslinie siehe zB EuGH 14. 2. 1995, C-279/93, Slg
1995, I-225, Schumacker – Tz 45; EuGH 28. 10. 1999, C-55/98, Slg 1999,
I-7641, Bent Vestergaard – Tz 26; EuGH 3. 10. 2002, C-136/00, Slg 2002,
I-8147, Danner – Tz 44 f; EuGH 4. 3. 2004, C-334/02, Slg 2004, I-2229,
Kommission/Frankreich – Tz 31 ff.
82) Dazu G. Kofler, ÖStZ 2003/503, 262 (265 ff) und ÖStZ 2004/483, 195
(195 ff).
83) Dies betont beispielsweise auch Vermeend, EC Tax Rev. 1996, 54 (55);
siehe jüngst aus der Sicht der Finanzverwaltung auch Steiner, ÖStZ
2005/461, 219 (219), unter Hinweis auf G. Kofler, taxlex 2005, 16
(19).
84) EuGH 28. 1. 1992, C-204/90, Slg 1992, I-249, Bachmann.
85) EuGH 28. 1. 1992, C-300/90, Slg 1992, I-305, Kommission/Belgien.
86) EuGH 28. 1. 1992, C-204/90, Slg 1992, I-249, Bachmann – Tz 23.
Steuerrecht aktuell
eine Versagung der Abzugsfähigkeit der Versicherungsprämien.
Wenngleich diese Argumentation im konkreten Fall wohl wenig
überzeugend war87), lässt sich grundsätzlich die grundfreiheitsrechtliche Beachtlichkeit der Kohärenz eines Steuersystems nicht
bestreiten. Der grundsätzlichen Anerkennung der rechtfertigenden Wirkung der steuerlichen Kohärenz liegt die Erkenntnis zugrunde, dass man bei der Beurteilung einer steuerlichen
Regelung im Hinblick auf ihre Gemeinschaftskonformität nicht
bloß auf einen (diskriminierenden) Einzelaspekt abzustellen
und einen isolierten Vorteil unbesehen auf Auslandsfälle auszudehnen hat – und damit den „free mover“ zum vielbeschworenen „free rider“88) machen würde –, sondern den Regelungskomplex als Ganzes und damit auch in unmittelbarem Zusammenhang stehende, vom legistischen Regelungssystem intendierte Ausgleichswirkungen zu betrachten hat und dadurch auf
substanzielle Gleichbehandlung abzielen muss89). Während also
– plastisch formuliert – die Diskriminierungsprüfung grundsätzlich „bis zum Anschlag“ auf die im grenzüberschreitenden
Sachverhalt erlittene Benachteiligung „hineinzoomt“, erlaubt
das Kohärenzargument eine Anpassung des Fokus auf eine breitere Perspektive, die eine Berücksichtigung der Zusammenhänge im jeweiligen Steuersystem gestattet90). Allerdings sei hier in
Erinnerung gerufen, dass der EuGH – trotz berechtigter Kritik
im Schrifttum91) – in seiner jüngeren Rechtsprechung den Kohärenzgedanken zunehmend restriktiveren Voraussetzungen
unterworfen und seit Bachmann und Kommission/Belgien eine
Rechtfertigung auf Basis der Kohärenz stets verneint hat92). In
mittlerweile ständiger Judikatur wird nämlich grundsätzlich ein
– tendenziell formell verstandener – „unmittelbarer Zusammenhang“ („direct link“) zwischen Steuervorteil und Steuernachteil
gefordert: Stehen einem steuerlichen Nachteil nämlich bloß
irgendwelche, sachlich nicht zusammenhängende Steuervorteile
87) Der EuGH hat sich in Bachmann und Kommission/Belgien offensichtlich stark davon beeindrucken lassen, dass die Versicherungsprämien
an einen ausländischen Versicherer gezahlt worden waren und sah
darin den Grund für die Annahme, dass die spätere Besteuerung der
Versicherungsleistungen nach einem – vom EuGH für wahrscheinlich
gehaltenen – Rückzug des Versicherten von Belgien nach Deutschland
dem belgischen Staat nicht mehr möglich sei. Damit hat der EuGH aber
verkannt, dass dies lediglich eine Folge der dem OECD-MA folgenden
belgischen DBA ist, wonach das Besteuerungsrecht an den Rentenleistungen oder sonstigen Versicherungsleistungen ausschließlich dem
Ansässigkeitsstaat des Rentenempfängers zugewiesen ist (Art 18, 21
OECD-MA), und zwar unabhängig davon, wo die leistende Versicherungsgesellschaft ansässig ist (siehe auch Thömmes in Schön (Hrsg),
GedS Knobbe-Keuk [1997] 795 [826 ff]; Knobbe-Keuk, EC Tax Rev.
1994, 74 [80]); die Besteuerung durch den späteren Wohnsitzstaat ist
wiederum davon unabhängig, ob ein Beitragsabzug in Belgien gewährt
wurde. Durch die abkommensrechtliche Zuweisung ist also der Zusammenhang zwischen Abzugsfähigkeit der Versicherungsprämien und
der späteren Besteuerung der Versicherungsleistungen durchbrochen.
Es scheint aber ohnehin so, dass der EuGH in Wielockx (EuGH 11. 8.
1995, C-80/94, Slg 1995, I-2493, Wielockx) inhaltlich für die Fälle des
Bestehens eines Doppelbesteuerungsabkommens von diesen beiden
Urteilen abgegangen ist; siehe zu diesem Erfordernis der „Makrokohärenz“ auch G. Kofler, ÖStZ 2003/874, 404 (406 f mwN).
88) Siehe auch Schlussanträge GA Poiares Maduro 7. 4. 2005, C-446/03,
Slg 2006, I-0000, Marks & Spencer – Tz 67; siehe zu diesem plakativen
Begriffspaar Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (2002) 567, 963 f, 980 f; jüngst Fischer, FR 2005, 457
(458).
89) Ähnlich etwa Dautzenberg, BB-Special 6/2004, 8 (11); Englisch, ET 2004,
355 (356 f).
90) Siehe zu diesem anschaulichen Bild Reimer in Lehner (Hrsg), Grundfreiheiten im Steuerrecht der EU-Staaten (2000) 39 (50 f); Englisch, ET
2004, 355 (357).
91) Siehe zB Schön, FR 2001, 381 (389).
92) Siehe zB Hughes de Lasteyrie du Saillant – Tz 61 ff; EuGH 1. 7. 2004,
C-169/03, Slg 2004, I-6443, Wallentin – Tz 21; EuGH 15. 7. 2004,
C-242/03, Slg 2004, I-7379, Weidert und Paulus – Tz 22 ff; EuGH 15. 7.
2004, C-315/02, Slg 2004, I-7063, Lenz – Tz 36.
Steuerrecht aktuell
gegenüber, ist ein Rückgriff auf die Kohärenz nicht möglich93).
Die Kohärenz kann nach dieser Rechtsprechung aber auch dann
nicht geltend gemacht werden, wenn es um verschiedene Steuern oder die steuerliche Behandlung verschiedener Steuerpflichtiger (zB Mutter- und Tochtergesellschaften) geht94). Tendenziell zeigt sich darin, dass der EuGH offenbar nicht darauf abstellt,
ob zwischen einem Vor- und einem Nachteil innerhalb eines
Regelungskomplexes materiell ein sachlicher Zusammenhang
besteht, sondern ob eine Regelung isoliert noch sinnvoll angewendet werden könnte95). Eine leichte Tendenz zur „Auflockerung“ dieser engen Sichtweise wurde unlängst aber im Manninen-Fall96) angedeutet97).
II.Wirkung von EuGH-Urteilen und Rückforderung
gemeinschaftsrechtswidrig erhobener Abgaben
Die Bedeutung der Grundfreiheiten für das direkte Steuerrecht
ergibt sich allerdings erst aus dem Umstand, dass jede Grundfreiheit – überwiegend seit dem Ablauf der Übergangszeit am
31. 12. 1969 – unmittelbar anwendbar ist98), dem Einzelnen
Rechte verleiht und als lex superior Vorrang vor dem inferioren
nationalen Recht, aber auch anderen völkerrechtlichen Abkommen im Fall der Inkonsistenz beansprucht99). Die Grundfreiheiten wirken allerdings nicht nur „negativ“, sondern auch
„positiv“ in dem Sinne, dass ein Marktteilnehmer unmittelbar
eine ihm gemeinschaftsrechtswidrig versagte Begünstigung (zB
höhere Abzugsmöglichkeiten oder einen niedrigeren Steuersatz)
für sich beanspruchen kann100). Dem EuGH obliegt dabei nach
Art 234 Abs 1 lit a und lit b EG das Monopol der „Auslegung
dieses Vertrags“ sowie die Entscheidung „über die Gültigkeit und
die Auslegung der Handlungen der Organe der Gemeinschaft“.
Wird also der Gerichtshof von einem nationalen Gericht im
Wege eines Vorabentscheidungsersuchens nach Art 234 EG
angerufen („konkrete Normenkontrolle“) oder von der Kommission im Rahmen eines Vertragsverletzungsverfahrens nach
93) Vgl in diesem Sinne EuGH 28. 1. 1986, Rechtssache 270/83, Slg 1986,
273, Kommission/Frankreich („avoir fiscal“) – Tz 21; EuGH 27. 6. 1996,
C-107/94, Slg 1996, I-3089, Asscher – Tz 53.
94) EuGH 12. 12. 2002, C-324/00, Slg 2002 I-11779, Lankhorst-Hohorst
– Tz 42; EuGH 18. 9. 2003, C-168/01, Slg 2003, I-9409, Bosal – Tz 30;
EuGH 15. 7. 2004, C-315/02, Slg 2004, I-7063, Lenz – Tz 36.
95) Ähnlich Dautzenberg, BB-Special 6/2004, 8 (12).
96) EuGH 7. 9. 2004, C-319/02, Slg 2004, I-7477, Manninen.
97) Ausführlich dazu jüngst Schnitger, FR 2004, 1357 (1360 ff); G. Kofler,
ÖStZ 2005/59, 26 (26 ff); zuletzt Kokott/Henze in Lüdicke (Hrsg), Tendenzen der Europäischen Unternehmensbesteuerung (2005) 67 (89).
98) Art 8 EWG-Vertrag; siehe zB EuGH 25. 7. 1991, C-353/89, Slg 1991,
I-4069, Kommission/Niederlande – Tz 27 mwN (zu Art 49 EG). Während
allerdings die Vorschriften über die Waren-, Dienstleistungs- und Niederlassungsfreiheit und die Arbeitnehmerfreizügigkeit ab dem Ende
der Übergangsperiode am 31. 12. 1969 unmittelbar anwendbar sind,
hat die Kapitalverkehrsfreiheit eine bewegtere Vergangenheit hinter
sich: Art 67 EWGV wurde nicht als unmittelbar anwendbar betrachtet
(EuGH 11. 11. 1981, 203/80, Slg 1981, 2595, Casati – Tz 10 ff; EuGH
14. 11. 1995, C-484/93, Slg 1995, I3955, Svensson and Gustavsson –
Tz 5 ff). Der Richtlinie 88/361/EWG zur Implementierung dieses Artikels
(ABl 1988 L 178/5 ff [8. 7. 1988]) wurde allerdings unmittelbare Wirkung
ab 1. 7. 1990 zuerkannt (vgl EuGH 23. 2. 1995, C-358/93 and 416/93, Slg
1995, I-361, Bordessa – Tz 32 ff; EuGH 14. 11. 1995, C-484/93, Slg 1995,
I3955, Svensson and Gustavsson – Tz 6). Mit Wirkung ab 1. 1. 1994 hat
der Vertrag von Maastricht neue Bestimmungen über den Kapital- und
Zahlungsverkehr in den EG-Vertrag eingeführt, nämlich ua Art 73b, der
inhaltlich Art 1 der genannten Richtlinie übernommen hat. Nach dem
Vertrag von Amsterdam, wurde Art 73b in Art 56 EG umnummeriert.
Erst seit 1. 1. 1994 ist damit die Kapital- und Zahlungsverkehrsfreiheit
ein „gleichberechtigtes Mitglied“ im Konzert der Grundfreiheiten.
99) Dazu zB EuGH 22. 6. 1989, 103/88, Slg 1989, 1839, Fratelli Constanzo
SpA – Tz 28 ff; ausführlich Cordewener, DStR 2004, 6 (9 f); Gammie,
BIFD 2003, 86 (88); Terra/Wattel, European Tax Law4 (2005) 37 f.
100)Siehe etwa EuGH 26. 1. 1999, C-18/95, Slg 1999, I-345, Terhoeve – Tz 57;
EuGH 15. 1. 1998, C-15/96, Slg 1998, I-47, Schöning-Kougebetopoulou
– Tz 33 mwN; dazu auch Cordewener, DStR 2004, 6 (12).
ÖStZ 15. März / Nr. 6 Artikel-Nr. 218 113
Art 226 EG mit einer Frage des Gemeinschaftsrechts befasst
(„abstrakte Normenkontrolle“), so legt er das Gemeinschaftsrecht – also beispielsweise die Grundfreiheiten – verbindlich
aus101). Im steuerlichen Bereich sind aus österreichischer Sicht
sowohl VfGH und VwGH wie auch der UFS vorlageberechtigt102).
Eine durch den EuGH vorgenommene Auslegung einer Vorschrift des Gemeinschaftsrechts entfaltet dabei grundsätzlich
ex-tunc-Wirkung: Der EuGH erläutert und definiert die Bedeutung und Tragweite der betreffenden Vorschrift, so wie
diese von ihrem In-Kraft-Treten an hätte verstanden und angewandt werden sollen. Allerdings kann der EuGH in Anbetracht
des Erfordernisses der Rechtssicherheit ausnahmsweise die Möglichkeit für die Beteiligten einschränken, sich auf die in einem
solchen Urteil vorgenommene Auslegung mit dem Ziel zu berufen, Rechtsverhältnisse in Frage zu stellen, die in der Vergangenheit in gutem Glauben begründet wurden; hiefür werden
nach ständiger Rechtsprechung zwei wesentliche Kriterien geprüft, nämlich, dass die Betroffenen gutgläubig gehandelt haben
und dass Schwierigkeiten von großer Tragweite bestehen103).
Trotz eines gescheiterten Vorstoßes des Vereinigten Königreichs
im Jahr 1996104) zur Sicherung des nationalen Steueraufkommens wird dieser Aspekt der Einschränkung der „Rückwirkung“
angesichts der steigenden Komplexität der Vorlagen zum direkten Steuerrecht in Zukunft vermutlich immer mehr an Bedeutung gewinnen105), 106).
Ein Gemeinschaftsrechtsverstoß kann damit – „rückwirkend“
– auch besondere gemeinschaftsrechtlich fundierte Ansprüche
auslösen, wie etwa einen Anspruch des Steuerpflichtigen auf
(verzinste) Rückerstattung grundfreiheitswidrig erhobener Steuerbeträge107) oder – unter gewissen Voraussetzungen – die staatliche Verantwortlichkeit nach den Francovich-Prinzipien der
101)Der EuGH ist nicht zur Entscheidung über die Vereinbarkeit einer
nationalen Maßnahme mit dem Gemeinschaftsrecht befugt; er kann
jedoch dem vorlegenden Gericht alle Hinweise zur Auslegung des
Gemeinschaftsrechts geben, die es diesem ermöglichen, die Frage der
Vereinbarkeit für die Entscheidung des bei ihm anhängigen Rechtsstreits zu beurteilen; vgl zB EuGH 14. 7. 1994, C-438/92, Slg 1994, I-3519,
Rustica Semences – Tz 10; EuGH 11. 8. 1995, C-63/94, Slg 1995, I-2467,
Belgapom – Tz 7; EuGH 3. 10. 2000, C-58/98, Slg 2000, I-7919, Corsten
– Tz 24.
102)Siehe zur Gerichtseigenschaft des UFS EuGH 24. 6. 2004, C-278/02,
Slg 2004, I-6171, Handlbauer; ausführlich Schlussanträge GA Tizzano
15. 1. 2004, C-278/02, Slg 2004, I-6171, Handlbauer – Tz 24 ff; vgl weiters
EuGH 26. 5. 2005, C-465/03, Kretztechnik. Demgegenüber waren die
„alten“ Berufungssenate mangels Gerichtseigenschaft nicht vorlageberechtigt; dazu EuGH 30. 5. 2002, C-516/99, Slg 2002, I-4573, Schmid.
103)Vgl dazu etwa EuGH 15. 3. 2005, C-209/03, Slg 2005, I-0000, Bidar
– Tz 66 ff; siehe zu den zeitlichen Dimensionen auch den Überblick
bei Drüen/Kahler, StuW 2005, 171 (180 f).
104)Memorandum des Vereinigten Königreichs vom Juli 1996 betreffend
„The European Court of Justice“.
105)In dieser Richtung bereits FG München 14. 2. 2005, 1 V 305/04, EFG
2005, 928; auch in der Rechtssache Meilicke betreffend das frühere
deutsche Anrechnungssystem trat Generalanwalt Tizzano auf Basis
der konkreten Umstände des Falles für eine beschränkte Rückwirkung
ein; vgl Schlussanträge GA Tizzano 10. 11. 2005, C-292/04, Slg 2006,
I-0000, Meilicke – Tz 31 ff. In diese Richtung jüngst Schlussanträge
GA Jacobs 17. 3. 2005, C-475/03, Banca Popolare di Cremona („IRAP“)
– Tz 70 ff mwN, hinsichtlich einer mehrwertsteuerähnlichen italienischen Abgabe (IRAP), deren Summe sich in dem nach italienischem
Recht „aufrollbaren“ Zeitraum auf 120 Milliarden Euro beläuft.
106)Für eine entsprechende Lockerung der Rechtsprechung plädierend
Wunderlich/Albath, DStZ 2005, 547 (552); kritisch aber Vogel, StuW
2005, 373 (375 f).
107)Siehe zu solchen Konstellationen EuGH 8. 3. 2001, C-397/98, C-410/98,
Slg 2001, I-1727, Metallgesellschaft and Hoechst –Tz 86, 89; siehe auch
EuGH 9. 2. 1999, C-343/96, Slg 1999, I-579, Dilexport – Tz 23; EuGH
21. 9. 2000, C-441/98 und C-442/98, Slg 2000, I-7145, Michaïlidis
– Tz 30.
114 ÖStZ 15. März / Nr. 6 Artikel-Nr. 218
Staatshaftung108), 109). Der Einzelne hat somit Anspruch auf
Erstattung von innerstaatlichen Abgaben, die unter Verstoß
gegen das Gemeinschaftsrecht erhoben wurden110), wobei der
nationale Gesetzgeber nicht nach Verkündung eines Urteils des
Gerichtshofes, dem zufolge bestimmte Rechtsvorschriften mit
dem EG-Vertrag unvereinbar sind, eine Verfahrensregel erlassen
kann, die speziell die Möglichkeiten auf Erstattung der unrechtmäßig erhobenen Abgaben einschränkt111). Hinsichtlich der
näheren Ausformung und Durchsetzung derartiger Rückerstattungsansprüche kommt es nämlich zu einer Verzahnung mit
dem nationalen Verfahrensrecht. Zum effektiven Schutz der
gemeinschaftsrechtlichen Ansprüche hat der EuGH die allgemeinen Rahmenbedingungen entwickelt, dass diese Ansprüche
zum einen nicht ungünstiger behandelt werden dürfen als vergleichbare rein nationale Ansprüche („Äquivalenzgrundsatz“)
und dass zum anderen die Ausübung der gemeinschaftsrechtlichen Positionen nicht durch das nationale Recht praktisch
unmöglich oder übermäßig erschwert werden dürfen („Effektivitätsgrundsatz“)112). Kann daher dem Gemeinschaftsrecht nicht
im offenen Verfahren im Rahmen des Anwendungsvorranges
108)EuGH 19. 11. 1991, C-6/90 and C-9/90, Slg 1991, I-5357, Francovich.
109)Siehe dazu im Kontext gemeinschaftsrechtswidriger Abkommensbestimmungen zB G. Kofler, 35 Tax Notes Int’l 45 (79 f mwN) (July 5,
2004); weiters zB Werlauff, ET 1999, 475 (475 ff).
110)Siehe zB EuGH 11. 7. 2002, C-62/00, Slg 2002, I-6325, Marks & Spencer
– Tz 30 mwN; dazu auch jüngst Lindemann/Hackemann, IStR 2005, 786
(786 ff).
111)Siehe zB EuGH 29. 6. 1988, 240/87, Slg 1988, 3513, Deville – Tz 13; EuGH
9. 2. 1999, C-343/96, Slg 1999, I-579, Dilexport – Tz 38 f; EuGH 11. 7.
2002, C-62/00, Slg 2002, I-6325, Marks & Spencer – Tz 36; EuGH 2. 10.
2003, C-147/01, Slg 2003, I-11365, Weber’s Wine World – Tz 86.
112)Siehe dazu EuGH 8. 3. 2001, C-397/98, C-410/98, Slg 2001, I-1727, Metallgesellschaft and Hoechst –Tz 85; EuGH 24. 9. 2002, C-255/00, Slg
Der Autor:
DDr. Georg Kofler, LL.M. (NYU), ist
Universitätsassistent an der Abteilung für
Steuerrecht der Johannes Kepler Universität
Linz und beschäftigt sich schwerpunktmäßig mit Fragen des Internationalen und
Europäischen Steuerrechts.
Steuerrecht aktuell
zur Geltung verholfen werden, da das konkrete Steuerverfahren
bereits rechtskräftig beendet wurde, sind nach österreichischem
Verfahrensrecht dem Gemeinschaftsrecht widersprechende Bescheide grundsätzlich nach § 299 BAO aufzuheben und neue
Sachbescheide zu erlassen113). Solche – seit dem AbgRmRefG
2002114) auch auf Antrag möglichen – Aufhebungen nach § 299
BAO, „die wegen Widerspruches mit zwischenstaatlichen abgabenrechtlichen Vereinbarungen oder mit Gemeinschaftsrecht der
Europäischen Union erfolgen“, sind nach § 302 Abs 2 lit c BAO
„bis zum Ablauf der Verjährungsfrist oder wenn der Antrag auf
Aufhebung innerhalb dieser Frist eingebracht ist, auch nach Ablauf
dieser Frist“, zulässig. Demgegenüber kommt nach zweifelhafter
hA115) eine Wiederaufnahme eines abgeschlossenen Verfahrens
auf Basis des Vorfragentatbestands des § 303 Abs 1 lit c BAO
regelmäßig mangels Parteienidentität nicht in Betracht.
2002, I-8003, Grundig Italiana – Tz 33; EuGH 2. 10. 2003, C-147/01, Slg
2003, I-11365, Weber’s Wine World – Tz 103 ff.
113)Vgl Rz 7377i EStR 2000; weiters BMF, ÖStZ 2004/886, 453, sowie vorgehend BMF, StInfo 2004/104 = ARD 5518/26/2004 (jeweils zu den Folgen
des Lenz-Urteils); zum Ganzen und auch zur gemeinschaftsrechtskonformen Ermessensübung ausführlich Althuber in Althuber/Toifl (Hrsg),
Rückforderung rechtswidrig erhobener Abgaben (2005) 37 (49 ff).
114)BGBl I 2002/97.
115)Rz 7377i EStR 2000; BMF, StInfo 2004/104 = ARD 5518/26/2004 (zu
den Folgen des Lenz-Urteils); siehe auch BMF, ÖStZ 2002, 94; aus dem
Schrifttum ebenso etwa Tumpel/Gaedke, SWK 2002, S 96 (S 96 ff);
Ehrke, ÖStZ 2002/487, 293 (293 ff); Ritz, BAO3 (2005) § 303 Rz 20; Ehrke-Rabel, SWK 2005, S 577 (S 577 ff); Keppert/Bruckner, SWK 2005,
S 583 (S 583 ff); aA aber Schwarz/Fraberger, ecolex 1998, 165 (165 ff);
Fraberger in Holoubek/Lang (Hrsg), Das EuGH-Verfahren in Steuersachen (2000) 151 (170 ff); Beiser, SWK 2005, S 493 (S 493 ff); Beiser,
RFG 2005, 74 (74 ff); Beiser, ÖStZ 2005/851, 394 (394 ff).
Publikationen des Autors:
Regelmäßige Besprechung der
EuGH-Rechtsprechung zu den direkten
Steuern für die ÖStZ.
Herausgeber und Verleger (Medieninhaber): LexisNexis Verlag ARD ORAC GmbH & Co KG, 1030 Wien, Marxergasse 25, Tel. 534 52-0, Telefax: 534 52-140 (Redaktion), 534 52-141 (Vertrieb, Verwaltung). – Geschäftsleitung: Mag. Peter Davies, MBA – Abonnentenservice: Claudia Schaffer (DW 1713) – Anzeigen: Kurt
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schriftliche Genehmigung des Verlages in irgendeiner Form – durch Fotokopie, Mikrofilm, Aufnahme in eine Datenbank oder auf Datenträger oder auf andere Verfahren – reproduziert oder in eine von Maschinen, insbesondere Datenverarbeitungsanlagen, verwendbare Sprache übertragen werden. Das gilt auch für die veröffentlichten Entscheidungen und deren Leitsätze, wenn und soweit sie vom Einsender oder von der Schriftleitung redigiert, erarbeitet oder bearbeitet wurden und daher Urheberrechtsschutz
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Mit der Einreichung seines Manuskriptes räumt der Autor dem Verlag für den Fall der Annahme das übertragbare, zeitlich und örtlich unbeschränkte ausschließliche Werknutzungsrecht (§ 24 UrhG) der Veröffentlichung in dieser Zeitschrift, einschließlich des Rechts der Vervielfältigung in jedem technischen Verfahren (Druck, Mikrofilm etc) und der
Verbreitung (Verlagsrecht) sowie der Verwertung durch Datenbanken oder ähnliche Einrichtungen, einschließlich des Rechts der Vervielfältigung auf Datenträgern jeder Art,
der Speicherung in und der Ausgabe durch Datenbanken, der Verbreitung von Vervielfältigungsstücken an die Benutzer, der Sendung (§ 17 UrhG) und sonstigen öffentlichen
Wiedergabe (§ 18 UrhG) in allen Sprachen ein.
Mit der Einreichung von Beiträgen von Arbeitsgruppen leistet der Einreichende dafür Gewähr, dass die Publikation von allen beteiligten Autoren genehmigt wurde und dass
alle mit der Übertragung sämtlicher Rechte an den Verlag einverstanden sind.
Mit dem vom Verlag geleisteten Honorar ist die Übertragung sämtlicher Rechte abgegolten. Aufgrund der Honorierung erlischt die Ausschließlichkeit des eingeräumten
Verlagsrechts nicht mit Ablauf des dem Jahr des Erscheinen des Beitrags folgenden Kalenderjahres (§ 36 UrhG). Für die Verwertung durch Datenbanken gilt dieser Zeitraum
keinesfalls.
154 ÖStZ 15. April / Nr. 8 Artikel-Nr. 299
Steuerrecht aktuell
■ ÖStZ 2006/299, 154
Wer hat das Sagen im Steuerrecht – EuGH
Basierend auf den dogmatischen Überlegungen zur Wirkung der Grundfreiheiten
im direkten Steuerrecht im ersten Teil dieses Beitrages in ÖStZ 2006/218, 106,
soll im Folgenden – ohne Anspruch auf Vollständigkeit – ein Überblick über
die bisherigen und potenziellen Einflüsse der Rechtsprechung des EuGH auf
das österreichische Ertragsteuerrecht gegeben werden. Fokussiert werden dabei
sowohl die Auswirkungen auf die Tätigkeit von Steuerausländern in Österreich
(Inbound-Situationen) als auch auf die Tätigkeit von Steuerinländern im Ausland
(Outbound-Situationen). Abschließend ist noch ein kurzer Blick auf die Entwicklungstendenzen der Rechtsprechung zu werfen.
III. Einflüsse der EuGH-Rechtsprechung auf das
österreichische Steuerrecht
1. „Inbound“-Situationen
Die in „Inbound“-Situationen typischerweise angesprochenen
verdeckten Diskriminierungen resultieren regelmäßig aus einer
benachteiligenden Ungleichbehandlung beschränkt StPfl durch
den Quellenstaat. Zur Feststellung einer tatbestandlichen Diskriminierung ist die Vergleichbarkeit von Situationen ein Kernbereich der Diskriminierungsrechtsprechung des EuGH1). Sie
verlangt die Bildung eines Vergleichspaares und die Identifikation des einschlägigen Vergleichskriteriums, des tertium comparationis, und resultiert im Wesentlichen in einer Verpflichtung des
Quellenstaates, alle beschränkt StPfl in vergleichbarer Weise wie
unbeschränkt StPfl zu behandeln, soweit sie ihrer Besteuerungskompetenz unterliegen und selbst wenn sie die Staatsangehörigkeit des Quellenstaates haben2). Generell wendet der EuGH einen
engen Vergleichbarkeitstest insofern an, als er gewisse steuerrelevante Aspekte fokussiert und nicht auf die generelle Situation
des StPfl abstellt3). Innerhalb dieses Rahmens ist die bisherige
Rsp aber keineswegs konsistent: Während der EuGH in manchen
Verfahren die rechtliche Situation des StPfl in den Vordergrund
rückt4), fokussiert er in anderen die tatsächliche Situation5) oder
vermengt beide Ansätze in einer Gesamtbetrachtung6).
Jedenfalls folgt aber aus dem vom EuGH verwendeten Vergleichbarkeitstest als Grundregel, dass konzeptionell auf die steuerliche Behandlung in einem Mitgliedstaat abzustellen ist und
daher rechtliche Beurteilungen auszublenden sind, die sich in
1) Siehe zB EuGH 14. 2. 1995, C-279/93, Slg 1995, I-225, Schumacker
– Tz 30; EuGH 11. 8. 1995, C-80/94, Slg 1995, I-2493, Wielockx – Tz 17;
EuGH 27. 6. 1996, C-107/94, Slg 1996, I-3089, Asscher – Tz 40; EuGH
29. 4. 1999, C-311/97, Slg 1999, I-2651, Royal Bank of Scotland – Tz 26 ff;
EuGH 14. 9. 1999, C-391/97, Slg 1999, I-5451, Gschwind – Tz 21; EuGH
12. 9. 2002, C-431/01, Slg 2002, I-7073, Mertens – Tz 32.
2) EuGH 27. 6. 1996, C-107/94, Slg 1996, I-3089, Asscher; EuGH 12. 5.
1998, C-336/96, Slg 1998, I-2793, Gilly.
3) Dazu nur Knobbe-Keuk, EC Tax Rev. 1994, 74 (77 f); für eine breitere
Perspektive jüngst Teixeira, Intertax 2006, 50 (52). Die Vergleichbarkeitsprüfung ist auch kein „Alles-oder-Nichts“-Test: Denn selbst bei
objektiv unterschiedlichen Situationen kann eine Diskriminierung
nicht automatisch verneint werden, wenn das Ausmaß der Ungleichbehandlung im Hinblick auf die tatsächlich existierenden Unterschiede
unverhältnismäßig ist; siehe EuGH 12. 6. 2003, C-234/01, Slg 2003,
I-5933, Gerritse – Tz 47 ff; siehe bereits Lyal, EC Tax Rev. 2003, 68 (68).
4) So etwa EuGH 29. 4. 1999, C-311/97, Slg 1999, I-2651, Royal Bank of
Scotland – Tz 24 ff; deutlich EuGH 5. 7. 2005, C-376/03, D – Tz 58 ff;
siehe dazu Lang, SWI 2005, 365 (370); G. Kofler, ÖStZ 2005/949, 432
(436 f).
5) So etwa EuGH 14. 2. 1995, C-279/93, Slg 1995, I-225, Schumacker.
6) So etwa EuGH 12. 9. 2002, C-431/01, Slg 2002, I-7073, Mertens – Tz 32
mwN.
oestz_8_06.indd 154
Univ.-Ass. DDr. Georg Kofler,
LL.M. (NYU)
Universität Linz
anderen Mitgliedstaaten hinsichtlich derselben grenzüberschreitenden Tätigkeit ergeben7). Insofern lässt sich auch von einer
„Kästchengleichheit“ iS einer Gleichbehandlung in den einzelnen
Teilmärkten des Binnenmarkts sprechen8). Somit trifft zwar jeden
der an einem grenzüberschreitenden Wirtschaftsvorgang beteiligten Mitgliedstaat eine Gleichbehandlungspflicht, dies allerdings unabhängig voneinander und nur innerhalb der jeweils
eigenen Rechtsordnung9). Entgegen dieser Grundregel findet sich
in der Rsp aber in gewissen „Sonderkonstellationen“ auch eine
über das Steuersystem des betroffenen Mitgliedstaates hinausgehende Einbeziehung der ausländischen Besteuerung in die
Vergleichbarkeitsprüfung10). Diesen Ansatz einer staatenübergreifenden Gesamtschau wählte der EuGH etwa in seiner Schumacker-Rsp zu personen- und familienbezogenen Steuerentlastungen, zumal die Feststellung der subjektiven Leistungsfähigkeit
nur in einer über die Besteuerung in einem Mitgliedstaat hinausgehenden Gesamtbetrachtung erfolgen kann und damit auch die
Einbeziehung ausländischer Steuerfaktoren erfordert11).
1.1 Beschränkte Steuerpflicht natürlicher Personen
1.1.1 Persönliche Steuerbegünstigungen für beschränkt
Steuerpflichtige: Schumacker und § 1 Abs 4 EStG
Differenziert ein Steuersystem zwischen beschränkter und unbeschränkter StPfl, ist ein gewisses Spannungsverhältnis zu den
gemeinschaftsrechtlichen Grundfreiheiten vorprogrammiert. Seit
dem Urteil in Schumacker12) hat sich aber der Grundsatz heraus7) Ausführlich Cordewener, Europäische Grundfreiheiten und nationales
Steuerrecht (2002) 828 ff mwN; Englisch, Dividendenbesteuerung
(2005) 240; Lang, IStR 2005, 289 (292).
8) Birk in Lehner (Hrsg), Steuerrecht im Europäischen Binnenmarkt,
DStJG 19 (1996) 63 (65 ff); Reimer in Lehner (Hrsg), Grundfreiheiten im
Steuerrecht der EU-Staaten (2000) 39 (73 f); Cordewener, Europäische
Grundfreiheiten und nationales Steuerrecht (2002) 829; Hey, StuW
2004, 193 (194).
9) Siehe auch Kokott in Lehner (Hrsg), Grundfreiheiten im Steuerrecht
der EU-Staaten (2000) 1 (6). Eine davon streng zu trennende Frage ist
allerdings, ob eine rechtlich vorgegebene Kompensationsverpflichtung eines anderen Mitgliedstaates Einfluss auf die Diskriminierungsprüfung haben kann; dazu bereits G. Kofler, 2005/357, 169 (169 ff);
ebenso nunmehr Schlussanträge GA Geelhoed 23. 2. 2006, C-374/04,
ACT Group Litigation – Tz 71 m FN 83.
10) Siehe dazu die berechtigte Kritik zB bei Englisch, Dividendenbesteuerung (2005) 240 mwN.
11) Dazu sogleich III.1.1.1.
12) EuGH 14. 2. 1995, C-279/93, Slg 1995, I-0225, Schumacker; siehe auch
EuGH 11. 8. 1995, C-80/94, Slg 1995, I-2493, Wielockx; EuGH 27. 6.
1996, C-107/94, Slg 1996, I-3089, Asscher; EuGH 12. 5. 1998, C-336/96,
Slg 1998, I-02739, Gilly; EuGH 14. 9. 1999, C-291/97, Slg 1999, I-05451,
Gschwind; EuGH 16. 5. 2000, C-87/99, Slg 2000, I-03337, Zurstrassen;
EuGH 1. 7. 2004, C-169/03, Slg 2004, I-6443, Wallentin; siehe jüngst
EuGH 5. 7. 2005, C-376/03, D – Tz 26 ff (Ausdehnung auf die Vermögensteuer).
07.04.2006 13:35:10
Steuerrecht aktuell
kristallisiert, dass Gebietsansässige und Gebietsfremde im Hinblick auf ihre subjektive Leistungsfähigkeit idR nicht in einer
vergleichbaren Situation sind und es daher zulässig ist, dass der
Beschäftigungsstaat die persönliche und familiäre Situation13)
eines Gebietsfremden nicht berücksichtigt, zumal dies grundsätzlich die Aufgabe des Wohnsitzstaates ist14). Die Verpflichtung
zur Berücksichtigung dieser Umstände geht allerdings vom
Wohnsitz- auf den Beschäftigungsstaat über, wenn der gebietsfremde StPfl in seinem Wohnsitzstaat keine nennenswerten Einkünfte hat und „sein zu versteuerndes Einkommen im Wesentlichen“15) bzw seine „gesamten oder nahezu seine gesamten Einkünfte“16) aus einer Tätigkeit im Beschäftigungsstaat bezieht17). Mittlerweile hat der EuGH auch mehrfach klargestellt, dass ein
Grundfreibetrag jenen beschränkt StPfl vorenthalten werden
kann, die sich nicht in einer Schumacker-Situation befinden18).
Österreich hat die Vorgaben der Schmumacker-Rechtsprechung
durch das EU-AbgÄG19) in § 1 Abs 4 EStG in Form der fingiert
unbeschränkten StPfl implementiert. Damit wird es unter gewissen Voraussetzungen auch beschränkt StPfl ermöglicht, in den
Genuss der ansonsten bloß unbeschränkt StPfl zustehenden Vergünstigungen (zB Null-Steuerzone, Absetzbeträge, Berücksichtigung außergewöhnlicher Belastungen etc) zu kommen. Nach
§ 1 Abs 4 EStG werden auf Antrag nämlich auch jene Staatsangehörigen von EU- oder EWR-Mitgliedstaaten mit ihren inländischen Einkünften iSd § 98 EStG als unbeschränkt steuerpflichtig behandelt. Dies gilt allerdings nur, wenn ihre gesamten Einkünfte im Kalenderjahr mindestens zu 90 % der österreichischen
Einkommensteuer unterliegen oder wenn die nicht der österreichischen Einkommensteuer unterliegenden Einkünfte nicht mehr
als 10.000 €20) betragen. Diese Rechtslage dürfte dem Gemeinschafsrecht entsprechen, zumal der EuGH in Gschwind das
deutsches Pendant zum österreichischen § 1 Abs 4 EStG als akzeptable Umsetzung dieser Grundsätze betrachtet hat21).
Zahlreiche Fragestellungen rund um die Schumacker-Doktrin
sind aber im Einzelnen noch ungeklärt22):
• Spätestens in De Groot23) hat der EuGH durch seine Forderung der vollen Berücksichtigung der persönlichen und familiären Verhältnisse des StPfl im Wohnsitzstaat eine proratarische Aufteilung der persönlichen Abzüge auf die verschiedenen Staaten der Einkünfteerzielung (sog fractional taxation)24), abgelehnt. Offen ist daher zB die Behandlung von
Konstellationen, in denen der StPfl seine Einkünfte in meh13) Zur inhaltlichen Begrenztheit der Schumacker-Rechtsprechung auf
personen- und familienbezogene Entlastungen siehe nur Schlussanträge GA Léger 9. 3. 2006, C-346/04, Conijn – Tz 33, sowie aus
dem Schrifttum insb Cordewener, Europäische Grundfreiheiten und
nationales Steuerrecht (2002) 888 ff.
14) Ebenso Rz 4 EStR 2000; siehe auch EuGH 14. 2. 1995, C-279/93, Slg
1995, I-0225, Schumacker – Tz 34; EuGH 14. 9. 1999, C-291/97, Slg
1999, I-05451, Gschwind – Tz 23; EuGH 12. 6. 2003, C-234/01, Slg 2003,
I-5933, Gerritse – Tz 44.
15) EuGH 14. 2. 1995, C-279/93, Slg 1995, I-0225, Schumacker – Tz 36.
16) EuGH 11. 8. 1995, C-80/94, Slg 1995, I-2493, Wielockx – Tz 20.
17) Siehe zB EuGH 14. 2. 1995, C-279/93, Slg 1995, I-0225, Schumacker
– Tz 36 ff.
18) EuGH 12. 6. 2003, C-234/01, Slg 2003, I-5933, Gerritse – Tz 48 ff; EuGH
1. 7. 2004, C-169/03, Slg 2004, I-6443, Wallentin – Tz 19; dazu auch G.
Kofler, ÖStZ 2003/613, 307 (308 mwN).
19) BGBl 1996/798.
20) Früher 6.975 €; dazu krit Novacek, RdW 2003/458.
21) EuGH 14. 9. 1999, C-291/97, Slg 1999, I-05451, Gschwind – Tz 28; dazu
Rz 36 EStR 2000.
22) Zur Kritik an Schumacker jüngst ausführlich Lang, RIW 2005, 336
(336 ff); ausf zur Schumacker-Rsp Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (2002) 888 ff.
23) EuGH 12. 12. 2002, C-385/00, Slg 2002, I-11819, De Groot.
24) Siehe für diesen Alternativvorschlag einer „fractional taxation“
nur Wattel, ET 2000, 210 (210 ff); van Raad, 26 Brook. J. Int’l L 1481
(1490 ff) (2000-2001).
oestz_8_06.indd 155
ÖStZ 15. April / Nr. 8 Artikel-Nr. 299 155
reren Mitgliedstaaten erzielt, sich aber in keinem in der
Schumacker-Situation befindet, und auch im Wohnsitzstaat
nicht genügend Steuersubstrat zur vollen Berücksichtigung
der persönlichen Verhältnisse besteht. Wie der EuGH seine
Rsp in solchen Fällen fortzuführen gedenkt und ob er dabei
letztlich zu einem System der fractional taxation oder zu einer
Berücksichtigungspflicht des Staates mit den überwiegenden
Einkünfte gelangen wird, bleibt daher abzuwarten.
• Zu den weiterhin offenen Problemen gehört beispielsweise
auch die Auswirkung von im Ansässigkeitsstaat nicht steuerbaren oder steuerfreien Einkünften auf den – in § 1 Abs 4
EStG implementierten – 90%-Schumacker-Test im Tätigkeitsstaat. In der Rs Wallentin25) hatte der EuGH entschieden,
dass Einnahmen eines StPfl, die in seinem Wohnsitzstaat nicht
steuerbar sind (konkret: Unterhaltsleistungen und Stipendien), bei der Berechnung der 90%-Grenze im Tätigkeitsstaat
außer Betracht zu lassen sind, was freilich eher zu einer entsprechenden Berücksichtigungsverpflichtung des Tätigkeitsstaates führt26). Keine derartige „Ausblendung“ zur Ermittlung
der 90%-Grenze im Tätigkeitsstaat nahm der Gerichtshof
aber in der Rs D hinsichtlich des im Wohnsitzstaat belegenen
und dort mangels existierender Vermögensbesteuerung nicht
stpfl Vermögens vor27). Diese Inkonsistenz zwischen Wallentin und D hat bereits Anlass zu literarischer Kritik gegeben28),
zumal unklar ist, ob der EuGH zukünftig Einkommen oder
Vermögen im Wohnsitzstaat für die Anwendung des Schumacker-Tests im Tätigkeitsstaat „ausblenden“ wird, wenn der
Wohnsitzstaat die Entscheidung zur Nichtbesteuerung des
betreffenden Einkommens oder Vermögens getroffen hat29).
Schließlich sei ein kurzer Exkurs auf eine weitere Konsequenz
für den umgekehrten Fall der Tätigkeit eines unbeschränkt
StPfl im Ausland erlaubt: Diesfalls zeigt nämlich die De GrootRsp, dass der Ansässigkeitsstaat personen- und familienbezogene
Begünstigungen – sowohl im Bereich der Bemessungsgrundlage als auch im Bereich des Tarifs – unbeschränkt StPfl unabhängig von der Gefahr eines salery splitting nur mehr dann und
insoweit verwehren darf, als die Berücksichtigungsverpflichtung
nach der Schumacker-Rsp auf den Tätigkeitsstaat übergegangen
ist oder sie dieser ganz oder teilweise freiwillig übernommen
hat30). Die in De Groot als gemeinschaftswidrig erkannte niederländische Bestimmung findet ihr österreichisches Pendant
in § 33 Abs 10 EStG: Ist nämlich bei der Berechnung des Progressionsvorbehalts bei Auslandseinkünften oder bei der Ermittlung des anrechenbaren Höchstbetrages ausländischer
Steuern ein Durchschnittssteuersatz anzuwenden, so ist dieser
gem § 33 Abs 10 EStG im Wesentlichen nach Berücksichtigung
der personen- und familienbezogenen tariflichen Begünstigungen zu ermitteln31). Entgegen der früheren Rsp des VwGH32)
25) EuGH 1. 7. 2004, C-169/03, Slg 2004, I-6443, Wallentin; dazu etwa G.
Kofler, ÖStZ 2004/829, 423 (423 ff).
26) Dazu einerseits G. Kofler, ÖStZ 2004/829, 423 (425), und andererseits
Lang, SWI 2005, 156 (163).
27) EuGH 5. 7. 2005, C-376/03, D – Tz 39 ff; aA zuvor Schlussanträge GA
Colomer 26. 10. 2004, C-376/03, D – Tz 63 ff, und dazu zust Schnitger,
IStR 2004, 793 (801).
28) Lang, SWI 2005, 365 (367 f); G. Kofler, ÖStZ 2005/949, 432 (434 f).
29) Siehe auch die Kritik bei G. Kofler/Schindler, ET 2005, 530 (534 ff).
30) EuGH 12. 12. 2002, C-385/00, Slg 2002, I-11819, De Groot; siehe zu
dieser Konsequenz des De Groot-Urteils auch Terra/Wattel, European
Tax Law4 (2005) 98; weiters Schnitger, FR 2004, 185 (194 f).
31) Zur diesbezüglichen Anwendung des § 33 Abs 10 EStG siehe etwa
ErlRV 1237 BlgNR 18. GP, 55; Rz 813 LStR 2002; H. J. Aigner/Reinisch,
SWI 2002, 467 (470); VwGH 7. 8. 2001, 97/14/0109, ecolex 2002/55 m
Anm G. Kofler.
32) So zB VwGH 18. 12. 1990, 89/14/0283, ÖStZB 1991, 537; VwGH 11. 3.
1992, 90/13/0131, ÖStZB 1992, 742.
07.04.2006 13:35:11
156 ÖStZ 15. April / Nr. 8 Artikel-Nr. 299
werden also durch § 33 Abs 10 EStG Absetzbeträge im Ergebnis anteilig den in- und ausländischen Einkünften zugeordnet:
Resultat dieser Vorgehensweise ist daher – wie im De GrootFall –, dass persönliche Begünstigungen nur im anteiligen Verhältnis der in Österreich erzielten Einkünfte berücksichtigt
werden33). Diese Reflexwirkungen auf die abkommensrechtlichen Entlastungsmechanismen im Hinblick auf tarifliche personen- und familienbezogene Begünstigungen34) entsprechen
daher offensichtlich nicht dem Gemeinschaftsrecht35).
1.1.2 Geltung des objektiven Nettoprinzips auch
für Steuerausländer: Gerritse und die Reform der
beschränkten Steuerpflicht durch das AbgÄG 2004
In Gerritse36) erblickte der EuGH in der pauschalen Besteuerung
der Bruttoeinkünfte eines beschränkt StPfl ohne Veranlagungsmöglichkeit einen ungerechtfertigten Verstoß gegen die konkret
anwendbare Dienstleistungsfreiheit. Anders als im Falle des in
der Schumacker-Rsp fokussierten subjektiven Nettoprinzips muss
also die für Steuerinländer geltende Besteuerung nach dem
objektiven Nettoprinzip jedenfalls auch auf Steuerausländer
ausgedehnt werden37). Ebenfalls in Gerritse behandelte der
EuGH die Frage des Pauschalsteuersatzes bei beschränkt StPfl
und gelangte hier zu dem Ergebnis, dass ein höherer Steuersatz
für Gebietsfremde eine verbotene Diskriminierung darstellt38).
Der EuGH bestätigte damit die hA im Schrifttum, die aus dem
Asscher-Urteil39) zu Recht ganz allgemein ableitet, dass benachteiligende differenzierte Steuersätze bei beschränkter bzw unbeschränkter Steuerpflicht nur mehr dann haltbar sind, wenn
sie gerechtfertigt werden können40).
Das Urteil in Gerritse hat die schon lange gehegten Bedenken
gegen das frühere österreichische System der – außerhalb des
§ 1 Abs 4 EStG erfolgenden – Besteuerung beschränkt StPfl
bestätigt, zumal etwa bei den Einkünften iSd § 99 Abs 1 Z 3
bis 5 EStG ein 20%iger Bruttosteuerabzug vorzunehmen war,
ohne dass dem beschränkt StPfl eine Veranlagung und damit
eine Berücksichtigung seiner Aufwendungen ermöglicht wurde
(§ 102 Abs 4 EStG). Im Hinblick auf die Rsp des EuGH ist
der österreichische Gesetzgeber im AbgÄG 200441) allerdings
den Vorschlägen des Schrifttums42) weitgehend gefolgt und hat
33) Siehe zur alten Rechtslage auch G. Kofler, ÖStZ 2003/315, 184 (187 m
FN 41).
34) Demgegenüber erscheint die von der hA vertretene Ansicht gemeinschaftsrechtskonform, dass außergewöhnliche Belastungen und Sonderausgaben ausschließlich den inländischen Teil der Bemessungsgrundlage vermindern; siehe Rz 7601 EStR 2000; VwGH 11. 10. 1977,
1830/77, ÖStZB 1978, 90.
35) Ebenso H. J. Aigner/Reinisch, SWI 2002, 467 (471); Mühlehner, SWI
2003, 61 (61 f); G. Kofler, ÖStZ 2003/315, 184 (187); H.J. Aigner/
Reinisch, SWI 2003, 539 (539 ff); aA Loukota, SWI 2003, 488 (488 ff).
36) EuGH 12. 6. 2003, C-234/01, Slg 2003, I-5933, Gerritse; dazu etwa G.
Kofler, ÖStZ 2003/504, 266 (266 ff); G. Kofler, ÖStZ 2003/613, 307
(307 ff); Burgstaller/W. Loukota, SWI 2003, 244 (244 ff); Cordewener,
IStR 2004, 109 (109 ff).
37) Dazu ausführlich Cordewener, IStR 2004, 109 (110).
38) EuGH 12. 6. 2003, Rs C-234/01, Gerritse – Tz 53; EuGH 27. 6. 1996,
C-107/94, Slg 1996, I-3089, Asscher – Tz 49; siehe auch BFH 5. 2. 2001,
I B 140/00, BFHE 195, 156, BStBl 2001 II 598; FG Berlin 28. 5. 2001,
9 K 9312/99, IStR 2001, 443 m Anm Grams/Molenaar.
39) EuGH 27. 6. 1996, C-107/94, Slg 1996, I-3089, Asscher.
40) So zB Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (2002) 896 f, 901 ff.
41) BGBl I 180/2004.
42) Siehe zB G. Kofler, ÖStZ 2003/504, 266 (266 ff); Kofler, ÖStZ 2003/613,
307 (307 ff mwN); siehe zur deutschen Reaktion auf das Gerritse-Urteil
(BMF-Schreiben vom 3. 11. 2003, BStBl 2003 I 553) Cordewener, IStR
2004, 109 (109 ff).
oestz_8_06.indd 156
Steuerrecht aktuell
versucht, das System der Besteuerung beschränkt StPfl an die
gemeinschaftsrechtlichen Vorgaben anzupassen43).
• Durch die Änderung des § 102 Abs 1 Z 3 EStG wurde zunächst die Veranlagungsoption auch auf die Fälle der Abzugssteuer nach § 99 Abs 1 Z 3 bis 5 EStG ausgedehnt und
durch den Entfall des § 102 Abs 4 EStG auch der Ausschluss
von der Veranlagungsoption im Bezug auf die der Steuerabgeltung nach § 97 EStG unterliegenden Einkünften aufgehoben.
• Da aber – außerhalb des § 1 Abs 4 EStG – die Berücksichtigung des Existenzminimums nach der Rsp grundsätzlich
Sache des Wohnsitzstaates ist44), nehmen beschränkt StPfl
nicht mehr zu Gänze an der das Existenzminimum sichernden
Null-Steuerzone von 10.000 € nach § 33 Abs 1 EStG45) teil,
sondern lediglich im Ausmaß von 2.000 €46). Dies wird durch
die Hinzurechnung eines Betrages von 8.000 € zur Bemessungsgrundlage erreicht (§ 102 Abs 3 EStG); entsprechend
wurde der Grenzbetrag für die Steuererklärungspflicht bei
beschränkter Steuerpflicht auf 2.000 € herabgesetzt (§ 42
Abs 2 EStG).
• Beschränkt Lohnsteuerpflichtige mit „inländischem“ Arbeitgeber (§ 70 Abs 2 Z 1 EStG) unterliegen zur Vermeidung
von Differenzierungen in der Lohnverrechnung wie bisher
dem auch für unbeschränkt StPfl geltenden einheitlichen
Lohnsteuertarif, wobei aber Freibeträge aufgrund eines Freibetragsbescheides nicht mehr berücksichtigt werden. Damit
soll der Lohnsteuerabzug nach § 70 Abs 2 Z 1 EStG der
Brutto(lohn)besteuerung im Falle eines „ausländischen“ Arbeitgebers nach § 70 Abs 2 Z 2 EStG angenähert werden47).
In beiden Fällen besteht auch die Möglichkeit einer Antragsveranlagung, bei der allerdings der besondere „Tarif“ nach
§ 102 Abs 3 EStG zur Anwendung kommt.
Schließlich ist mit dem AbgÄG 2004 die Beibringung eines
inländischen Besteuerungsnachweises als Voraussetzung für den
Werbungskostenabzug (bei § 70 Abs 2 Z 2 EStG) bzw den
Betriebsausgabenabzug (bei § 99 Abs 1 Z 1 EStG) entfallen,
sofern der beschränkt steuerpflichtige Zahlungsempfänger in
einem EU- oder EWR-Mitgliedstaat (mit umfassender Amtsund Vollstreckungshilfe)48) ansässig ist (§ 102 Abs 1 Z 3 EStG)49).
Dennoch erscheinen durch dieser partiellen Änderung noch
nicht alle gemeinschaftsrechtlichen Bedenken gegen den Besteuerungsnachweis ausgeräumt50).
43) Dazu G. Kofler, taxlex 2005, 16 (16 ff); Lang, SWI 2005, 156 (156 ff);
G. Kofler, JAP 2005/2005, 174 (174 ff).
44) Siehe zB EuGH 14. 2. 1995, C-279/93, Slg 1995, I-0225, Schumacker;
EuGH 11. 8. 1995, C-80/94, Slg 1995, I-2493, Wielockx; EuGH 27. 6.
1996, C-107/94, Slg 1996, I-3089, Asscher.
45) Zur zulässigen Nichtberücksichtigung jener Absetzbeträge des § 33
EStG, die der Erfassung der familiären oder persönlichen Situation des
StPfl dienen, siehe EuGH 12. 12. 2002, C-385/00, Slg 2002, I-11819, De
Groot – Tz 99 ff; dazu G. Kofler, ÖStZ 2003/315, 186 mwN.
46) Die teilweise Beibehaltung einer Null-Steuerzone für beschränkt
StPfl erklärt sich aus Vereinfachungsüberlegungen; dazu Atzmüller/
Herzog/Mayr, RdW 2004/581, 621 (627).
47) Allerdings begegnet wohl auch diese Differenzierung zwischen beschränkt steuerpflichtigen Arbeitnehmern mit „inländischem“ Arbeitgeber und solchen mit „ausländischem“ Arbeitgeber ebenfalls
gemeinschaftsrechtlichen Bedenken; dazu G. Kofler, taxlex 2005, 16
(18 m FN 28).
48) Derzeit nur im Verhältnis zu Norwegen.
49) Zur europarechtlichen Kritik an der früheren Fassung ausf Lang/
W. Loukota, SWI 2003, 67 (72 ff).
50) Siehe Lang, SWI 2005, 156 (159 f); Ehrke-Rabel, Gemeinschaftsrecht
und österreichisches Abgabenverfahren (2006) 171 ff; weiters Lang/
W. Loukota, SWI 2003, 67 (68 ff und 76 ff).
07.04.2006 13:35:11
Steuerrecht aktuell
1.1.3 Das Ende des Steuerabzuges durch Scorpio?
Als eine verbleibende gemeinschaftsrechtliche „Problemzone“
sticht der Brutto-Steuerabzug nach § 99 EStG ins Auge. Sieht
man hier vom – gleichermaßen für beschränkt wie unbeschränkt
StPfl geltenden – Lohn- und Kapitalertragsteuerabzug ab, stellt
sich trotz der umfassenden Veranlagungsmöglichkeit die europarechtliche Frage, ob der derzeitige – nur für beschränkt StPfl
geltende – Bruttosteuerabzug nach § 99 EStG (und die daran
anknüpfende Haftung des Abzugsverpflichteten nach § 100
Abs 2 EStG) zur Sicherung des österreichischen Besteuerungsrechts beibehalten werden kann51). Aus Gerritse ergibt sich nämlich nicht eindeutig, ob die Steuererhebung im Wege eines sich
nach den Bruttoeinnahmen bemessenden Steuerabzugs und die
sie flankierende Haftungsregelung auch dann gemeinschaftswidrig sind, wenn den Gebietsfremden die Möglichkeit zur
Antragsveranlagung eröffnet wird52).
So könnte bereits eine als Vorauszahlung wirkende Steuererhebung im Wege des Steuerabzugs nach § 99 EStG und die
Haftung des Abzugsverpflichteten (§ 100 Abs 2 EStG) den
Gebietsfremden gegenüber dem Gebietsansässigen benachteiligen und solcherart eine verbotene Diskriminierung darstellen53). Einerseits führt der vorläufige Bruttosteuerabzug nämlich
– gerade auch im Vergleich zu den auf eine Nettogröße bezogenen Einkommensteuervorauszahlungen Gebietsansässiger –
zu Liquiditätsnachteilen des Gebietsfremden oder sogar zu
Situationen, in denen Gebietsfremde Vorauszahlungen auf eine
Steuerschuld leisten müssen, die niemals entstehen wird54). Andererseits können die Abzugsverpflichtung des Vergütungsschuldners und sein Haftungsrisiko in Wettbewerbsnachteilen
der Gebietsfremden resultieren, da beim Engagement Gebietsansässiger vergleichbare Kosten und Risiken nicht entstehen.
Allerdings sind in der Rs Scorpio bereits Vorlagefragen des BFH
zur insofern vergleichbaren deutschen Rechtslage beim EuGH
anhängig55). Diese Rs wird zeigen, ob in Zukunft der nur für
beschränkt StPfl anwendbarer Steuerabzug nach § 99 EStG in
irgendeiner Form – also etwa als Steuerabzug von den Nettoeinkünften – beibehalten werden kann. Im Hinblick auf dieses
Vorabentscheidungsersuchen hat der VwGH auch ein bei ihm
anhängiges Beschwerdeverfahren betreffend die Abzugssteuer
nach § 99 Abs 1 Z 3 EStG ausgesetzt56).
1.1.4 Verbleibende Problembereiche: Betriebsstättenverlustvortrag
Nach § 102 Abs 2 Z 2 letzter Satz EStG steht der Verlustabzug
bei betrieblich tätigen Betriebsstätten nur insoweit zu, als der
Verlust die übrigen Einkünfte im Verlustentstehungsjahr oder
in einem der folgenden Jahre übersteigt57). Obwohl keine unmittelbar einschlägige Rsp zu dieser Frage existiert, hat dieses
Erfordernis eines negativen Welteinkommens nach zutreffender
hA58) eine gemeinschaftsrechtlich verbotene Schlechterstellung
51) Dazu W. Loukota/Hohenwarter, SWI 2004, 539 (539 ff); siehe zB auch
G. Kofler, ÖStZ 2003/613, 307 (309 mwN).
52) Siehe BFH 28. 4. 2004, I R 39/04, BFHE 206, 120, BStBl 2004 II 878;
Cordewener, IStR 2004, 109 (115 f).
53) So zB Haarmann/Fuhrmann, IStR 2003, 558 (559); Cordewener, IStR
2004, 109 (115 f).
54) Dazu EuGH 8. 3. 2001, C-397/98 und C-410/98, Slg 2001, I-1727,
Metallgesellschaft und Hoechst– Tz 54.
55) Siehe BFH 28. 4. 2004, I R 39/04, BFHE 206, 120, BStBl 2004 II 878, beim
EuGH geführt als Rs C-290/04, Scorpio; siehe auch W. Loukota/Hohenwarter, SWI 2004, 539 (539 ff).
56) Beschluss VwGH 17. 11. 2004, 2002/14/0056.
57) Siehe zB Rz 8059 EStR 2000.
58) Siehe aus dem jüngeren Schrifttum zB Tumpel, SWI 2001, 55 (55 ff);
Hruschka/Bendlinger, SWI 2003, 271 (271 ff); Doralt/Ludwig, EStG9
oestz_8_06.indd 157
ÖStZ 15. April / Nr. 8 Artikel-Nr. 299 157
von Steuerausländern zur Folge: Im Rahmen der beschränkten
StPfl entstandene Verluste können wegen § 102 Abs 2 Z 2 letzter Satz EStG oftmals nicht oder nur teilweise geltend gemacht
werden, während unbeschränkt Stpfl den Verlustvortrag unter
den Voraussetzungen des § 18 Abs 6 und 7 EStG stets in voller
Höhe beanspruchen können59). Derzeit ist auf Ebene der Finanzverwaltung und des UFS allerdings lediglich gesichert, dass
§ 102 Abs 2 Z 2 letzter Satz EStG nicht zur Anwendung kommen soll, wenn ein dem Art 24 Abs 3 OECD-MA nachgebildetes abkommensrechtliches Diskriminierungsverbot eingreift60); diesfalls ist bei Nachweis, dass eine Verlustverwertung
im Ansässigkeitsstaat nicht möglich ist, für die inländische Betriebsstätte der Verlustvortrag einzuräumen. Vor dem Hintergrund des in Avoir Fiscal und Saint-Gobain61) operationalisierten gemeinschaftsrechtlichen Betriebsstättendiskriminierungsverbot kann freilich nichts Anderes gelten, wenn (lediglich) die
Grundfreiheiten des EG-Vertrages oder des EWR-Abkommens
anwendbar sind62).
1.2 Beschränkte Steuerpflicht juristischer Personen
1.2.1 Schachtelprivileg auch für Betriebsstätten:
Avoir Fiscal und § 21 Abs 1 Z 2 lit a KStG
Die Betriebsstättenbesteuerung war schon mehrfach Gegenstand der Rsp des EuGH63), zumal Art 43 Abs 2 zweiter Satz
EG ausdrücklich „Beschränkungen der Gründung von Agenturen,
Zweigniederlassungen oder Tochtergesellschaften durch Angehörige
eines Mitgliedstaats“ verbietet, „die im Hoheitsgebiet eines Mitgliedstaats ansässig sind“. Dementsprechend hat der EuGH bereits in Avoir Fiscal64) deutlich gemacht, dass im Falle vergleichbarer Situationen die Gleichbehandlung der als Zweigniederlassung iSd Art 43 Abs 2 zweiter Satz EG anzusehenden Betriebsstätte eines Gebietsfremden mit einem Gebietsansässigen
gemeinschaftsrechtlich geboten ist. Eine solche Vergleichbarkeit
ist dabei trotz der bestehenden zivil- und steuerrechtlichen Unterschiede zwischen Tochtergesellschaften und Betriebsstätten
dann gegeben, wenn im Rahmen der Betriebsstättenbesteuerung
das Besteuerungsrecht über die fraglichen Einkommensteile
beansprucht wird65).
Die Mitgliedstaaten müssen daher nach Avoir Fiscal ihre im
nationalen Steuerrecht vorgesehenen Begünstigungen für ansässige Tochtergesellschaften – wie beispielsweise die Gewährung
(2005) § 102 Tz 37.
59) Zur Regelung im Verhältnis zu Deutschland siehe ausf Loukota, SWI
2001, 163 (164 ff); dazu auch UFS Wien 6. 12. 2004, RV/2450-W/02.
60) Rz 8059 EStR 2000; so unlängst auch UFS Wien 21. 3. 2005, RV/0495W/04 (zum DBA Frankreich); UFS Wien 3. 8. 2005, RV/1266-W/04 (zum
DBA Niederlande); siehe ausf auch Loukota in Achatz/D. Aigner/
G. Kofler/Tumpel (Hrsg), Internationale Umgründungen (2005) 367
(386 ff).
61) EuGH 28. 1. 1986, 270/83, Slg 1986, 273, Kommission/Frankreich („Avoir
fiscal“); EuGH 21. 9. 1999, C-307/97, Slg 1999, I-6161, Saint-Gobain;
dazu sogleich unten III.1.2.1 und III.1.2.2.
62) Dies noch offen gelassen vom VwGH 18. 11. 2003, 99/14/0011, ÖStZB
2004/462.
63) EuGH 28. 1. 1986, 270/83, Slg 1986, 273, Kommission/Frankreich
(„Avoir fiscal“); EuGH 13. 7. 1993, C-330/91, Slg 1993, I-4017, Commerzbank; EuGH 12. 4. 1994, C-1/93, Slg 1994, I-1137, Halliburton; EuGH
15. 5. 1997, C-250/95, Slg 1997, I-2471, Futura Participations and Singer;
EuGH 29. 4. 1999, C-311/97, Slg 1999, I-2651, Royal Bank of Scotland;
EuGH 21. 9. 1999, C-307/97, Slg 1999, I-6161, Saint-Gobain; EuGH
23. 2. 2006, C-253/03, CLT-UFA.
64) EuGH 28. 1. 1986, 270/83, Slg 1986, 273, Kommission/Frankreich („Avoir
fiscal“).
65) Dazu zB EuGH 28. 1. 1986, 270/83, Slg 1986, 273, Kommission/Frankreich („Avoir fiscal“) – Tz 19 f; siehe auch EuGH 29. 4. 1999, C-311/97,
Slg 1999, I-2651, Royal Bank of Scotland – Tz 29 ff; EuGH 21. 9. 1999,
C-307/97, Slg 1999, I-6161, Saint-Gobain – Tz 48 f.
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158 ÖStZ 15. April / Nr. 8 Artikel-Nr. 299
einer Anrechnung ausländischer Quellensteuer oder Körperschaftsteuer oder die Anwendung eines Schachtelprivilegs – auf
Betriebsstätten von gebietsfremden EU-Gesellschaften ausdehnen66). Österreich ist diesen Anforderungen in § 21 Abs 1 Z 2a
KStG grundsätzlich nachgekommen: So ist zwar die Beteiligungsertragsbefreiung des § 10 KStG ist für beschränkt stpfl Körperschaften grundsätzlich nicht anzuwenden. Den Anregungen des
Schrifttums67) folgend wurde allerdings in § 21 Abs 1 Z 2 lit a
KStG68) die Rsp des EuGH zur Niederlassungsfreiheit insofern
berücksichtigt69), als § 10 KStG dann Anwendung findet, wenn
die Beteiligung einer österreichischen Betriebsstätte einer EUGesellschaft zuzurechnen ist. Dieses Ergebnis geht damit auch
über das traditionelle Verständnis des Betriebsstättendiskriminierungsverbots des Art 24 Abs 3 OECD-MA hinaus70).
Im Einzelnen ist allerdings ungeklärt, wie weit die durch Avoir
Fiscal angedeutete „Freiheit der Rechtsformwahl“ im Gaststaat
reicht. Gesichert erscheint aber zunächst, dass ein höherer Steuersatz auf Betriebsstätten ausländischer Gesellschaften als auf
inländische Gesellschaften unzulässig ist71). Nach wie vor offen
ist aber zB der Einfluss des Gemeinschaftsrechts auf die Betriebsstättengewinnermittlung; vor dem Hintergrund der umstrittenen abkommensrechtlichen Ausgangslage des Art 7 Abs 2
OECD-MA72) finden sich hier aber sowohl auf Ebene der Gemeinschaft als auch auf jener der OECD klare Tendenzen in
Richtung einer weitreichenden Unabhängigkeitsfiktion der Betriebsstätte auch bei unternehmensinternen Sachverhalten73).
Umgekehrt dürfte es aber ausgeschlossen sein, dass eine ausländische Muttergesellschaft dadurch mit gemeinschaftsrechtlicher
Relevanz beschwert wird, dass ihre Tochtergesellschaft im Gaststaat weniger vorteilhaft behandelt wird als eine dortige Betriebsstätte74). Überdies können wohl für eine Betriebsstätte
einer natürlichen Person auf der Basis der „Freiheit der Rechtsformwahl“ nicht jene Begünstigungen in Anspruch genommen
66) Siehe nur Kostense, EC Tax Rev. 2000, 220 (220); Offermanns/Romano,
ET 2000, 180 (188); Martín Jiménez/García Prats/Calderón Carrero,
BIFD 2001, 241 (243 f).
67) Tumpel, Harmonisierung der direkten Unternehmensbesteuerung in
der EU (1994) 392 f.
68) Eingefügt durch BGBl 1994/681.
69) So ausdrücklich Rz 1462 KStR 2001; Bauer/Quantschnigg/Schellmann/
Werilly, KStG (1998) § 21 Tz 16. Die Materialen (ErlRV 1701 BlgNR
18. GP) begründen dies mit den Vorgaben der Mutter-Tochter-RL,
deren Anwendung auf Betriebsstätten damals allerdings höchst umstritten war und erst unlängst ausdrücklich geregelt wurde (siehe die
Richtlinie 2003/123/EG, ABl L 007/41 ff [13. 1. 2004]).
70) Obwohl der OECD-MK die Ausdehnung eines nationalen Anrechnungsmechanismus für ausländische Körperschaftsteuer (Art 24 Tz 42 f
OECD-MK) bzw die Gewährung eines nationalen Schachtelprivilegs
(Art 24 Tz 29 ff OECD-MK) tendenziell befürwortend diskutiert, wird
diese Beurteilung letztlich den Mitgliedstaaten überlassen. Österreich
folgt hier aber offenbar der im OECD-MK angedachten progressiven
Sichtweise; siehe etwa EAS 2404 = SWI 2004, 244.
71) Siehe EuGH 23. 2. 2006, C-253/03, CLT-UFA – Tz 11 ff; so bereits bisher
zB Lausterer, 4 EC Tax J. 1999, 45 (53 f); Schön, EWS 2000, 281 (288);
Lausterer, IStR 2001, 212 (212 ff).
72) Zu den zwischen einer absoluten und einer eingeschränkten Selbstständigkeitsfiktion schwankenden Ansätzen vgl nur Hemmelrath in
Vogel/Lehner, DBA4 (2003) Art 7 Rz 77 ff. Aufgrund der Wortgleichheit mit Art 7 Abs 2 OECD-MA pflanzt sich diese Auslegungsunsicherheit auch auf der Ebene der Schiedskonvention fort (siehe Art 4 Abs 2
des Übereinkommens 90/436/EWG, ABl L 225/10 ff [20. 8. 1990]; dazu
auch Terra/Wattel, European Tax Law4 [2005] 589 f).
73) So auf Basis der Niederlassungsfreiheit Hintsanen, ET 2003, 114
(114 ff); ebenso Prokisch in Vogel/Lehner, DBA4 (2003) Art 4 Rz 12;
zumindest rechtspolitisch ebenso Europäische Kommission, Doppelbesteuerungsabkommen und Recht der Europäischen Gemeinschaft,
DOC(05)2306/B (9. 6. 2005) – Anhang A, 6. Auch die Arbeiten auf
OECD-Ebene gehen in Richtung einer weitreichenden „fiction of
independence“; siehe OECD, Discussion Draft on the Attribution of
Profits to Permanent Establishments – Part I (General Considerations)
(2004) (abrufbar unter www.oecd.org); siehe dazu etwa Ditz, IStR
2005, 37 (37 ff); Bennet/Dunahoo, Intertax 2005, 51 (54 ff).
74) Wattel, EC Tax Rev. 2003, 194 (198); Schnitger, IStR 2004, 821 (824).
oestz_8_06.indd 158
Steuerrecht aktuell
werden, für die das nationale Steuerrecht oder Abkommensrecht
des Betriebsstättenstaates den Kapitalgesellschaftscharakter des
Zurechnungssubjekts voraussetzt, wie es insbesondere bei
Schachtelprivilegien der Fall ist75).
1.2.3 Saint-Gobain und die gemeinschaftsrechtskonforme Auslegung abkommensrechtlicher
Betriebsstättendiskriminierungsverbote
In Saint-Gobain76) trafen Prinzipien des Gemeinschaftsrechts
und jene des internationalen Steuerrechts aufeinander: Während
Art 43 Abs 2 zweiter Satz EG die Niederlassung in Form einer
Betriebsstätte jener in Form einer Tochtergesellschaft gleichstellt
wird, wird abkommensrechtlich einer Betriebsstätte prinzipiell
die Inanspruchnahme von Vorteilen verwehrt77). Auf einer Linie
mit seiner außersteuerlichen Rsp78) und in konsequenter Fortsetzung von Avoir Fiscal hat der EuGH das Gebot der Gleichbehandlung von Betriebsstätten in Saint-Gobain explizit auch
auf abkommensrechtliche Begünstigungen ausgedehnt und dabei
auch eine drohende Störung des einem Doppelbesteuerungsabkommen innewohnenden Gleichgewichts als Rechtfertigungsgrund abgelehnt. Einer inländischen Betriebsstätte einer
EU-Gesellschaft iSd Art 48 EG sind daher im Falle objektiver
Vergleichbarkeit auch die für ansässige Gesellschaften vorgesehenen abkommensrechtlichen Begünstigungen zu gewähren79),
und zwar unabhängig davon, ob es sich konkret um ein Abkommen mit einem Mitgliedstaat oder mit einem Drittstaat
handelt80). Die zuvor angedachte und gemeinschaftsrechtlich
wenig überzeugende Unterscheidung danach, ob eine Begünstigung im originär nationalen Recht oder im Völkervertragsrecht
vorgesehen ist81), ist damit jedenfalls überholt.
Solcherart hat Saint-Gobain aber nicht zur Folge, dass das
Abkommen mit dem Quellenstaat auf die Betriebsstätte anwendbar und die Betriebsstätte als ansässige Person im Sinne
des Art 1 iVm Art 4 OECD-MA angesehen wird82). Vielmehr
richtet sich die Niederlassungsfreiheit gegen das nationale Recht
des Betriebsstättenstaates, der gehalten ist, die fraglichen und
auch in zeitlicher Hinsicht anwendbaren Abkommensbegünstigungen zumindest durch unilaterale Maßnahmen auf die
Betriebsstätte der beschränkt steuerpflichtigen, natürlichen Person oder Gesellschaft zu erstrecken83). Diese Verpflichtung wird
man aber nicht nur für die im Saint-Gobain-Fall fraglichen
Dividenden, sondern jedenfalls auch für Zinsen und Lizenz75) So wohl auch EuGH 23. 2. 2006, C-253/03, CLT-UFA – Tz 33; ebenso
Kemmeren, Principle of Origin in Tax Conventions (2001) 188; Lüdicke
in Lang/Schuch/Staringer (Hrsg), ECJ – Recent Developments in Direct
Taxation (2006) 113 (132); zum Problem ausf Schnitger, ET 2004, 522
(524 ff); Schnitger, IStR 2004, 821 (823 ff).
76) EuGH 21. 9. 1999, C-307/97, Slg 1999, I-6161, Saint-Gobain.
77) Siehe zur möglichen Wirkung des Betriebsstättendiskriminierungsverbots aber Art 24 Tz 49 bis 54 OECD-MK
78) EuGH 27. 9. 1988, 235/87, Slg 1988, 5589, Matteucci; EuGH 15. 1. 2002,
C-55/00, Slg 2002, I-413, Gottardo; EuGH 5. 11. 2002, C-467/98, Slg
2002, I-9519, Kommission/Dänemark („Open Skies“).
79) EuGH 21. 9. 1999, C-307/97, Slg 1999, I-6161, Saint-Gobain – Tz 59;
dazu nur Schuch, SWI 1999, 451 (451); Jann/Toifl, SWI 1999, 488 (482);
Kostense, EC Tax Rev. 2000, 220 (222 f); krit Avery Jones, EC Tax Rev.
1998, 95 (103).
80) Siehe einerseits EuGH 21. 9. 1999, C-307/97, Slg 1999, I-6161, SaintGobain – Tz 59, und EuGH 15. 1. 2002, C-55/00, Slg 2002, I-413, Gottardo – Tz 33 f (zu Drittstaatsabkommen), sowie andererseits EuGH 27. 9.
1988, 235/87, Slg 1988, 5589, Matteucci – Tz 16 (zu einem Abkommen
zwischen Mitgliedstaaten).
81) Dazu etwa de Weerth, IStR 1999, 628 (628); Lausterer, 4 EC Tax J. 1999,
45 (52); Oliver, BTR 2000, 174 (179).
82) Ebenso Jann/Toifl, SWI 1999, 488 (492); Jirousek, ÖStZ 1999, 604 (606);
Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht
(2002) 689; Göschl/Kovar/Wahrlich in Lang/Jirousek (Hrsg), Praxis des
Internationalen Steuerrechts, FS Loukota (2005) 111 (128 ff).
83) Pistone, The Impact of Community Law on Tax Treaties (2002) 148.
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Steuerrecht aktuell
gebühren84) und darüber hinaus auch für alle anderen der Betriebsstätte zuzurechnenden Einkünfte bejahen können85). In
diesem weiten Sinne geht auch die österreichische Finanzverwaltung nunmehr davon aus, dass „in einem EU-Mitgliedstaat
ansässigen Steuerpflichtigen [...] dieselben Abkommensvorteile aus
mit dritten Staaten abgeschlossenen DBA, welche unbeschränkt
Steuerpflichtige genießen, einzuräumen“ sind86).
1.3 Abkommensrechtliche Meistbegünstigung?
Vor dem Hintergrund der unterschiedlichen Doppelbesteuerungsabkommen zwischen den Mitgliedstaaten wird im Schrifttum seit gut 15 Jahren heftig diskutiert, ob dem Gemeinschaftsrecht ein Verbot der horizontalen Diskriminierung zwischen
zwei Gebietsfremden inhärent ist: Diese Fragestellung läuft
darauf hinaus, ob das Gemeinschaftsrecht zu einer Form der
„Meistbegünstigung“ im Rahmen von DBA insofern verpflichtet, dass zB der Quellenstaat zwei aus verschiedenen Mitgliedstaaten stammende Investoren gleich behandeln und damit die
jeweils günstigste Abkommenrechtslage (etwa den günstigsten
Quellensteuersatz) gewähren muss. Die Meinungen in der
Literatur rangierten zwischen einer klaren Befürwortung einer
solchen „Inbound-Meistbegünstigung“ und einer vehementen
Ablehnung einer solchen Verpflichtung87), wobei sich die nationalen Gerichte bislang durchwegs auf die Seite der „Gegner“
geschlagen hatten88). In diesem Sinne hat zuletzt auch der UFS
Wien hinsichtlich der österreichischen Quellensteuer auf Lizenzzahlungen nach Holland eine gemeinschaftsrechtliche
Meistbegünstigungsverpflichtung abgelehnt89).
Wohl auch aufgrund der enormen potenziellen Konsequenzen
für die mitgliedstaatlichen Fisci und des drohenden „Chaos“ hat
der EuGH den Befürwortern einer Meistbegünstigungsverpflichtung in den Rs D90) und Bujara91) allerdings unlängst eine deut84) Ebenso de Weerth, IStR 1998, 628 (628); Saß, DB 1999, 2381 (2381 f);
Haunold/Tumpel/Widhalm, SWI 1999, 504 (507); Jirousek, ÖStZ 1999,
604 (606 f); Jann/Toifl, SWI 1999, 488 (493); Kostense, EC Tax Rev.
2000, 220 (223 ff); Wassermeyer in Debatin/Wassermeyer, DBA, Art 10
Rz 178, Art 11 MA Rz 140 und Art 12 Rz 154; Martín Jiménez/García
Prats/Calderón Carrero, BIFD 2001, 241 (241 ff); Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht (2002) 689; Zanotti,
ET 2004, 493 (497); wohl auch Oliver, BTR 2000, 174 (181) (Zinsen).
85) Umfassend auch Europäische Kommission, Doppelbesteuerungsabkommen und Recht der Europäischen Gemeinschaft, DOC(05)2306/B
(9. 6. 2005) – Tz 27; ebenso Kemmeren, Principle of Origin in Tax
Conventions (2001) 192.
86) Rz 7910 EStR 2000. Zur entsprechenden Auslegung der DBA-Diskriminierungsverbote siehe etwa Jirousek, ÖStZ 1999, 604 (604 ff); weiters
EAS 1611 = SWI 2000, 269; EAS 2157 = SWI 2003, 2.
87) Siehe die Übersicht zum Meinungsstand bei G. Kofler/Schindler, ET
2005, 530 (530 ff); umfassend zum Problem G. Kofler, 5 Hous. Bus. &
Tax Law J. 1 (1 ff) (2005).
88) Vgl BFH 31. 10. 1990, II R 176/87, BFHE 162, 374, BStBl 1991 II 161;
BFH 26. 5. 2004, I R 54/03, BFHE 206, 332, BStBl 2004 II 767; siehe für
Holland Betten, ET 1997, 417 (417 ff); de Graaf/Janssen, EC Tax Rev.
2005, 173 (178 f).
89) UFS Wien 23. 6. 2005, RV/1799-W/03; krit Hofbauer, SWI 2005, SWI
2005, 376 (376 ff); siehe auch Stefaner, 39 Tax Notes Int’l 589 (589 f)
(Aug. 15, 2005).
90) EuGH 5. 7. 2005, C-376/03, D; dazu G. Kofler, ÖStZ 2005/949, 432
(432 ff); Lang, SWI 2005, 365 (365 ff); Petritz, ecolex 2005, 642 (642 ff);
Schindler, taxlex 2005, 459 (459 ff); siehe aus dem internationalen
Schrifttum Weber, Intertax 2005, 420 (420 ff); van Thiel, Intertax 2005,
454 (454 ff); G. Kofler/Schindler, ET 2005, 530 (530 ff); de Graaf/Janssen, EC Tax Rev. 2005, 173 (173 ff); O’Shea, EC Tax Rev. 2005, 190
(190 ff); Wattel, BTR 2005, 575 (575 ff).
91) EuGH 27. 10. 2005, C-8/04, Bujara. Der EuGH hat die Rs Bujara aufgrund
des vorangegangenen Urteils in der Rs D im verkürzten Verfahren
nach Art 104 § 3 seiner Verfahrensordnung (Verfahrensordnung des
Gerichtshofes der Europäischen Gemeinschaften vom 19. Juni 1991,
ABl L 176/7 [4. 7. 1991]) am 27. 10. 2005 per Beschluss entschieden.
Am 15. 12. 2005 hat der EuGH allerdings mit Hinweis auf die am
5. 12. 2005 erfolgten Rücknahme der Vorlage durch das nationale
Gericht die Streichung dieser aus dem Register beschlossen. Diese
oestz_8_06.indd 159
liche Absage erteilt92). In diesen Fällen ging es um die Frage, ob
es den Niederlanden gemeinschaftsrechtlich gestattet ist, Deutschen jene personenbezogenen vermögen- bzw einkommensteuerlichen Freibeträge zu verwehren, die die Niederlande auf Basis
des Diskriminierungsverbots im belgisch-niederländischen DBA
einem Belgier in derselben faktischen Situation gewähren würden. Anders als Generalanwalt Colomer93) kam der EuGH hier
zu dem Ergebnis, dass sich zwei in unterschiedlichen Mitgliedstaaten ansässige Gebietsfremde im Hinblick auf die fraglichen
holländischen Freibeträge schon deshalb nicht in einer vergleichbaren Lage befinden, weil eine unterschiedliche Behandlung –
abkommensrechtliche Gewährung der Vergünstigung an einen
Belgier, nicht jedoch an einen Deutschen – im Wesen eines
bilateralen DBA liege. Dies gelte selbst dann, wenn in einem
DBA an Ansässige eines bestimmten DBA-Partnerstaates prima
vista einseitig Vorteile gewährt werden, zumal auch ein solcher
Vorteil im Gesamtkontext des Abkommens gesehen werden
müsse und zu dessen allgemeiner Ausgewogenheit beitrage.
Trotz aller Bedenken gegen die Lösung des EuGH scheint die
Reichweite der Entscheidungen in D und Bujara eine generelle
zu sein und lässt bei genauerer Betrachtung kaum Raum für
einen „Restanwendungsbereich“ einer Inbound-Meistbegünstigung94): Geht man nämlich von einer grundsätzlichen, gemeinschaftsrechtlichen Verpflichtung zu einer Gleichbehandlung von
Gebietsfremden in vergleichbaren Situationen aus, wäre angesichts der differenzierten hA95) gerade die „einseitige“ Begünstigung in D durch einen Freibetrag, der mangels Vermögenssteuer im DBA-Partnerstaat keiner konkreten Reziprozität unterliegt,
ein „Paradefall“ für eine Bejahung der Meistbegünstigung gewesen und hätte durchaus noch Spielraum für diese Frage in den
Kernbereichen der Doppelbesteuerung (zB unterschiedliche
Quellensteuersätze) gelassen. Der EuGH geht aber offensichtlich
davon aus, dass jede Abkommensbestimmung – unabhängig von
ihrem konkret allokativen oder reziproken Charakter – einen
Bestandteil des bilateralen Verhandlungsergebnisses darstellt und
damit letztlich der Abgrenzung der Steuerhoheiten zwischen den
DBA-Partnerstaaten dient96). Die von Generalanwalt Ruiz-Jarabo Colomer angedachte Differenzierung je nachdem, ob eine
Abkommensbestimmung konkret der Teilung der Steuerhoheit
diene97), lehnt der EuGH damit implizit, aber deutlich ab. Vor
diesem Hintergrund wäre es daher eine Überraschung, wenn der
EuGH in der derzeit noch anhängigen Rs ACT Group Litigation
hinsichtlich einseitig gewährter Steuergutschriften durch das
92)
93)
94)
95)
96)
97)
verwirrende Situation beruht offenbar darauf, dass einerseits dem
nationalen Gericht der Beschluss des EuGH noch nicht bekannt war,
und dass andererseits der EuGH seinen eigenen – noch nicht veröffentlichten – Beschluss bei der Streichung übersehen hat. Wenngleich
unklar ist, inwieweit dadurch die Rechtswirkungen des Beschlusses
vom 27. 10. 2005 beeinflusst werden, kommt diesem zweifelsfrei
argumentative Bedeutung zu.
Siehe nur die ausf Judikaturanalyse bei G. Kofler, 5 Hous. Bus. & Tax
Law J. 1 (34 ff) (2005).
Schlussanträge GA Colomer 26. 10. 2004, C-376/03, D; dazu etwa G.
Kofler, ÖStZ 2004/1066, 558 (558 ff); Hofbauer, SWI 2004, 586 (586 ff);
Schnitger, IStR 2004, 793 (801 ff).
In diese Richtung auch die Analyse von de Graaf/Janssen, EC Tax Rev.
2005, 173 (184 ff); deutlich Schuch, EC Tax Rev. 2006, 6 (8) .
Siehe zB Cordewener, Europäische Grundfreiheiten und nationales
Steuerrecht (2002) 836 ff; Jacobs, Internationale Unternehmensbesteuerung5 (2002) 262 ff; Weggenmann, IStR 2003, 677 (681 ff);
van der Linde, EC Tax Review 2004, 10 (14 ff); G. Kofler, 5 Hous. Bus.
& Tax Law J. 1 (68 ff) (2005).
In diese Richtung auch Wattel, BTR 2005, 575 (581 f); O’Shea, EC Tax
Rev. 2005, 190 (196); de Graaf/Janssen, EC Tax Rev. 2005, 173 (183 f,
185); Kemmeren in Lang/Schuch/Staringer (Hrsg), ECJ – Recent Developments in Direct Taxation (2006) 219 (251); in diese Richtung auch
Schnitger, FR 2005, 1079 (1082).
Schlussanträge GA Colomer 26. 10. 2004, C-376/03, D – Tz 82.
07.04.2006 13:35:11
160 ÖStZ 15. April / Nr. 8 Artikel-Nr. 299
Vereinigte Königreich an Ansässige gewisser DBA-Partnerstaaten
(zB an holländische, nicht aber an deutsche Gesellschaften) zu
einem anderen Ergebnis käme. Generalanwalt Geelhoed hat in
seinen diesbezüglichen Schlussanträgen jedenfalls auf das Urteil
in der Rs D rekurriert, dessen Grundsätze auch auf die abkommensrechtliche Gewährung von Steuergutschriften übertragen
und daher eine Meistbegünstigungsverpflichtung abgelehnt98).
Nicht angesprochen hat der EuGH aber bisher einige andere Problemkreise, die im Schrifttum ebenfalls unter dem Schlagwort der „Meistbegünstigung“ diskutiert werden:
• Unklar ist zunächst, ob auf der vorgelagerten und grundsätzlichen Ebene eine Ungleichbehandlung zweier Gebietsfremder in vergleichbaren Situationen im Sinne der horizontalen Diskriminierung im nationalen Recht eines Mitgliedstaates gemeinschaftsrechtlich rechtfertigungsbedürftig ist99).
Die Argumentation des EuGH deutet zumindest in diese
Richtung100). Damit ist die Rsp aber dem Vorwurf ausgesetzt,
dass zwei Mitgliedstaaten gemeinsam Dinge tun dürfen, die
ihnen einzeln verboten sind101).
• Ein weiterer Themenkomplex betrifft die Überlegung, ob es
im direkten Steuerrecht auf Ebene der Doppelbesteuerungsabkommen einen allgemeinen Grundsatz der Gemeinschaftspräferenz gibt, der die Mitgliedstaaten dazu verpflichtet, Angehörige anderer Mitgliedstaaten auf der DBA-Ebene
jedenfalls nicht schlechter zu behandeln als Drittstaatsangehörige102). Abgesehen vom möglichen argumentativen Einfluss der Rs D und Bujara auf diese Konstellation lässt sich
dagegen aber einwenden, dass diese Variante der Meistbegünstigung jedenfalls nicht auf das Idealbild der Wettbewerbsgleichheit im europäischen Binnenmarkt gestützt werden kann und überdies das für eine solche Überlegung herangezogene Prinzip der Gemeinschaftspräferenz insofern
nicht tragfähig erscheint, als dieses den völlig anders gearteten
Gesichtspunkt einer protektionistischen Abschirmung des
Binnenmarktes gegenüber Drittstaaten betrifft103).
• Erst in jüngerer Zeit ist die durch D und Bujara nicht zweifelsfrei geklärte Frage in das gemeinschaftsrechtliche Blickfeld
gerückt, ob sich ein StPfl iS einer Outbound-Meistbegünstigung auf Basis der Grundfreiheiten gegenüber seinem Ansässigkeitsstaat auf das jeweils günstigste DBA, das dieser mit
einem anderen Mitgliedstaat oder gar einem Drittstaat geschlossen hat, berufen kann104). Ein potenzieller Anwendungs98) Schlussanträge GA Geelhoed 23. 2. 2006, C-374/04, ACT Group Litigation – Tz 92 ff; zum Fall bereits Gammie in Lang/Schuch/Staringer
(Hrsg), ECJ – Recent Developments in Direct Taxation (2006) 323
(330 ff).
99) So zuletzt Gudmundsson, Intertax 2006, 58 (81 ff); ähnlich auch Schnitger, FR 2005, 1079 (1082).
100) EuGH 5. 7. 2005, C-376/03, D – Tz 59.
101) Siehe auch Weber, Intertax 2005, 429 (441).
102) Vgl etwa Kokott in Lehner (Hrsg), Grundfreiheiten im Steuerrecht der
EU-Staaten (2000), 1 (8 f); van Thiel, Free Movement of Persons and
Income Tax Law (2002) 346 ff und 520 ff; De Ceulaer, BIFD 2003, 493
(497); Troberg/Tiedje in von der Groeben/Schwarze, EGV/EUV I6 (2004)
Vorb Art 43-48 EG Rz 34; Heydt in Haarmann (Hrsg), Auslegung und
Anwendung von Doppelbesteuerungsabkommen (2004) 32 (50); Lüdicke in Gocke/Gosch/Lang (Hrsg), Körperschaftsteuer – Internationales
Steuerrecht – Doppelbesteuerung, FS Wassermeyer (2005) 473 (483).
103) Siehe auch Schnitger/Papantonopoulos, BB 2005, 407 (414).
104) Derartige Outbound-Situationen wurden im Schrifttum vor allem
andiskutiert bei Wassermeyer in Lang et al (Hrsg), Multilateral Tax
Treaties (1997) 15 (23 f); Wassermeyer, DB 1998, 28 (30 f); Wassermeyer, IStR 2000, 65 (66); van Thiel, Free Movement of Persons and
Income Tax Law (2002) 519 f; Schnitger, FR 2004, 185 (196 f); Haslinger,
SWI 2005, 170 (175 ff); Lang, IStR 2005, 289 (295); Lang, IStR 2005, 289
(295); Lang, SWI 2005, 365 (373); Rödder/Schönfeld, IStR 2005, 523
(523 ff); G. Kofler, ÖStZ 2005/949, 432 (438); Schindler, taxlex 2005,
459 (464); Schnitger, FR 2005, 1079 (1081 ff).
oestz_8_06.indd 160
Steuerrecht aktuell
bereich einer Outbound-Meistbegünstigung scheint aber gerade außerhalb der Abkommenssituationen zu bestehen.
Konkret angesprochen sind hier jene Normen, in denen das
nationale Recht insb zur „Missbrauchverhinderung“ eine Vergünstigung an eine bestimmte ausländische Steuerbelastung knüpft, wie dies beispielsweise § 10 Abs 4 KStG
tut105). Eine entsprechende Vorlagefrage ist in der Rs De Graaf
und Daniels106) bereits beim EuGH anhängig.
2. „Outbound“-Situationen
In ihrer Ausrichtung als „Diskriminierungsverbote“ hat der
EuGH die primärrechtlichen Grundfreiheiten schrittweise über
ein Verbot der Benachteiligung ausländischer Staatsangehöriger
auf Basis eines ad personam-Vergleichs zu einem weitgefassten
Verbot der Benachteiligung von grenzüberschreitenden gegenüber
vergleichbaren (hypothetischen) rein landesinternen Wirtschaftsvorgängen auf Basis eines ad rem-Vergleichs fortent-wickelt: Diskriminierungsverdächtig sind somit im Grunde auch alle Benachteiligungen von Auslands- gegenüber vergleichbaren Inlandsaktivitäten durch den Ansässigkeits- bzw Herkunftsstaat107). Der
konkrete Verpflichtungsinhalt für den Ansässigkeits- bzw Herkunftsstaat ist allerdings Gegenstand einer evolutionären Entwicklung der Rsp. Grundsätzlich besteht die wesentliche Verpflichtung der Ansässigkeitsstaaten darin, Einkünfte von Gebietsansässigen aus ausländischen Quellen folgerichtig nach Maßgabe
dessen zu behandeln, „wie sie ihre Besteuerungsgrundlage aufgeteilt
haben“108). Soweit also Einkünfte aus ausländischen Quellen im
Rahmen der unbeschränkten Steuerpflicht in die Besteuerung
einbezogen werden, ist eine Differenzierung zwischen Einkünften
aus ausländischer Quelle und inländischen Einkünften grundsätzlich rechtfertigungsbedürftig109). Dieser Grundgedanke kommt
etwa in der Rs Marks & Spencer110) deutlich zum Ausdruck: Dort
hat der EuGH entschieden, dass ein Mitgliedstaat, der keine
Besteuerungskompetenz über eine gebietsfremde Tochtergesellschaft einer gebietsansässigen Gesellschaft ausübt, im Grundsatz
die Verluste dieser ausländischen Tochtergesellschaften nicht berücksichtigen muss.
Aus dieser Einkommensverteilung auf mehrere Mitgliedstaaten
resultierende negative Effekte für die grenzüberschreitende Tätigkeit werden im Schrifttum gelegentlich als Tax Base Fragmentations klassifiziert und als außerhalb des grundfreiheitsrechtlichen
Eingriffsbereichs liegend betrachtet111). Der EuGH vertritt freilich
in seiner bisherigen Rsp insofern eine extensive Sichtweise der
Grundfreiheiten, als Abzugsposten in der Gemeinschaft selbst
im Falle einer Einkommensverteilung über mehrere Mitgliedstaaten zumindest einmal berücksichtigt werden sollen. Neben
105) Dazu vor allem Haslinger, SWI 2005, 170 (170 ff); Schnitger, FR 2005,
1079 (1079 ff).
106) Rs C-436/05, De Graaf und Daniels; die Vorlagefragen sind in ABl
C 36/24 (11. 2. 2006) abgedruckt.
107) Cordewener, Europäische Grundfreiheiten und nationales Steuerrecht
(2002) 200 ff und 824 ff.
108) So Schlussanträge GA Geelhoed 23. 2. 2006, C-374/04, ACT Group
Litigation – Tz 58.
109) Siehe beispielsweise EuGH 16. 7. 1998, C-264/96, Slg 1998, I-4695, ICI;
EuGH 6. 6. 2000, C-35/98, Slg 2000, I-4071, Verkooijen; EuGH 14. 12.
2000, C-141/99, Slg 2000, I-11619, AMID; EuGH 12. 9. 2002, C-431/01,
Slg 2002, I-7073, Mertens; EuGH 4. 3. 2004, C-334/02, Slg 2004, I-2229,
Kommission/Frankreich; EuGH 15. 7. 2004, C-315/02, Slg 2004, I-7063,
Lenz; EuGH 7. 9. 2004, C-319/02, Slg 2004, I-7477, Manninen.
110) EuGH 13. 12. 2005, C-446/03, Marks & Spencer.
111) Siehe vor allem Wattel, EC Tax Rev. 2003, 194 (194 ff), Wattel, LIEI 2004,
81 (89 f), und Terra/Wattel, European Tax Law4 (2005) 58 ff; diesen
implizit folgend Schlussanträge GA Geelhoed 23. 2. 2006, C-374/04,
ACT Group Litigation – Tz 58 ff.
07.04.2006 13:35:12
Steuerrecht aktuell
der Schumacker-Rsp geben vor allem Bosal und Marks & Spencer
dafür ein beredtes Zeugnis ab: In Bosal erblickte der EuGH eine
gemeinschaftsrechtliche Verpflichtung des Ansässigkeitsstaates
der Muttergesellschaft, Fremdfinanzierungskosten für den Erwerb
ausländischer Tochtergesellschaften zuzulassen, selbst wenn deren
Gewinne nicht besteuert wurden112). Eine ähnliche Asymmetrie
hat der EuGH letztlich auch in Marks & Spencer hergestellt:
Sofern nämlich Verluste im Staat der Tochtergesellschaft nicht
berücksichtigt worden sind und nicht (mehr) berücksichtigt werden können, muss der Ansässigkeitsstaat unter dem Gesichtspunkt der Verhältnismäßigkeit sein Gruppenbesteuerungsregime
auch auf diese Verluste erstrecken, obwohl er die Gewinne dieser
Tochtergesellschaft nicht besteuert113).
2.1 Besteuerung ausländischer Kapitalerträge
2.1.1 Schmid, Lenz und das BudgetbegleitG 2003
Unstrittig sind steuerliche Beschränkungen grenzüberschreitender Portfoliodividendenflüsse tatbestandlich vom sachlichen
Schutzbereich der Kapitalverkehrsfreiheit nach Art 56 EG erfasst114). Entsprechend der überzeugenden stRsp des EuGH stellt
eine nachteilige Behandlung grenzüberschreitender Dividendenflüsse – im Vergleich zu innerstaatlichen Dividendenflüssen – eine
grundsätzlich verbotene diskriminierende Beschränkung der Kapitalverkehrsfreiheit dar, wenn sie den „aktiven“ Marktteilnehmer
(den Investor) oder dessen „passives“ Gegenstück (die kapitalsuchende Gesellschaft) betrifft115). Sofern also in Schedulensystemen
bei Hereinausschüttungen ausländischer Gesellschaften die wirtschaftliche Doppelbesteuerung nicht ebenso wie im Fall einer
rein inländischen Ausschüttung gemildert wird, bestanden bereits
bisher im Schrifttum116) und auch bei der Kommission117) wenig
Zweifel, dass dies den freien Kapitalverkehr verletzt. Nach der
gescheiterten Vorlage in Schmid118) hat der EuGH diese Ansicht
in der vom VwGH vorgelegten Rs Lenz119) eindrucksvoll bestätigt:
Demnach verstieß das damalige österreichische Regime der Besteuerung „inländischer“ Dividenden nach § 37 Abs 4 (Hälftesteuersatz) bzw § 93 iVm § 97 Abs 1 EStG (25%ige Abgeltungssteuer) im Vergleich zur vollen Tarifbesteuerung „ausländischer“
Dividenden unabhängig von der ausländischen Körperschaftsteuervorbelastung gegen die Kapitalverkehrsfreiheit.
Der österreichische Gesetzgeber ist dieser Entscheidung bereits
im BudgetbegleitG 2003120) zuvorgekommen und hat eine umfassende Neukonzeption nicht nur der Dividenden-, sondern
der gesamten Kapitalertragbesteuerung vorgenommen121): Soweit
technisch und rechtlich möglich, werden zunächst auch „ausländische“ Kapitalerträge in das Kapitalertragsteuerabzugssystem
112) EuGH 18. 9. 2003, C-168/01, Slg 2003, I-9409, Bosal.
113) Siehe vor allem EuGH 13. 12. 2005, C-446/03, Marks & Spencer; dazu
krit etwa die Schlussanträge GA Geelhoed 23. 2. 2006, C-374/04, ACT
Group Litigation – Tz 65.
114) EuGH 6. 6. 2000, C-35/98, Slg 2000, I-4071, Verkooijen – Tz 28 ff; EuGH
15. 7. 2004, C-315/02, Slg 2004, I-7063, Lenz; EuGH 7. 9. 2004, C-319/02,
Slg 2004, I-7477, Manninen; ausf dazu Englisch, ET 2004, 323 (324).
115) Dazu Englisch, Intertax 2005, 200 (202).
116) Siehe zB Toifl, SWI 1999, 255 (255 ff); Staringer, ÖStZ 2000/119, 26
(28); Raventós, ET 2000, 73 (74); Tumpel, SWI 2002, 454 (454 ff); Jacobs,
Internationale Unternehmensbesteuerung5 (2002) 229 ff; Liede/Hintsanen, ET 2003, 31 (34); Polivanova-Rosenauer/Toifl, SWI 2004, 228
(228 ff); Englisch, ET 2004, 323 (325).
117) Mitteilung der Kommission zur „Besteuerung von Dividenden natürlicher Personen im Binnenmarkt“, KOM(2003)810 endg, 16 f.
118) Mangels Vorlageberechtigung des Berufungssenats; EuGH 30. 5. 2002,
C-516/99, Slg 2002, I-4573, Schmid.
119) VwGH 27. 8. 2002, 99/14/0164, ÖStZB 2002/660.
120) BGBl I 2003/71.
121) Dazu D. Aigner/H. J. Aigner/G. Kofler, IWB 2003, Fach 5, Gruppe 2,
593 (593 ff); D. Aigner/H. J. Aigner/G. Kofler, ecolex 2003, 480 (480 ff);
Schmidt, GeS 2003, 187 (187 ff); Tissot, RdW 2003/588, 672 (672 ff).
oestz_8_06.indd 161
ÖStZ 15. April / Nr. 8 Artikel-Nr. 299 161
und die Endbesteuerung einbezogen; darüber hinaus unterwirft
§ 37 Abs 8 EStG gewisse Kapitalerträge ohne Inlandsbezug einer
der Endbesteuerung nach § 97 EStG angenäherten 25%igen
Abgeltungssteuer122). Ebenfalls im Rahmen des BudgetbegleitG
2003 wurde § 37 Abs 4 EStG dahin gehend adaptiert, dass nunmehr auch die betriebliche Veräußerung ausländischer Beteiligungen halbsatzbegünstigt wird123); damit war bereits vorweg
dem Urteil in Weidert und Paulus124) Genüge getan, das letztlich
keinen Zweifel daran lässt, dass für den Erwerb und die Veräußerung inländischer Gesellschaftsanteile vorgesehene Begünstigungen auch auf den Erwerb und die Veräußerung von Anteilen
an EU-Gesellschaften ausgedehnt werden müssen.
2.1.2 Besteuerung ausländischer Investmentfonds
Aufgrund der umfassenden Benachteiligung des Investments
in ausländische Investmentfonds stand die Fondsbesteuerung
lange im Fokus gemeinschaftsrechtlicher Bedenken125), die in
den vergangenen Jahren allerdings durch legistische Aktivität
weitgehend beseitigt wurden126). Als ein „Grundübel“ der Besteuerung ausländischer Investmentfonds verbleibt jedoch die
weite Tatbestandsbildung des § 42 Abs 1 InvFG, derzufolge
auch ausländischen Kapitalgesellschaften, zB risikogestreuten
Investitions-Tochtergesellschaften, für Zwecke des österreichischen Steuerrechts die Abschirmwirkung versagt werden
kann127). Aus gemeinschaftsrechtlicher Sicht ist allerdings ein
derart genereller und nur bei ausländischen Körperschaften erfolgender „Durchgriff“ jedenfalls bedenklich128), weshalb § 42
Abs 1 InvFG – ebenso wie § 42 Abs 1 ImmoInvFG – wohl
insofern nicht dem Gemeinschaftsrecht entspricht129).
2.1.3 Erstattung ausländischer Quellensteuern
Es bestehen nach dem Gilly-Urteil130) wohl kaum Zweifel, dass
ein abkommensrechtlicher Anrechnungshöchstbetrag grundsätzlich gemeinschaftsrechtskonform ist131). In diesem Zusammenhang stellt sich allerdings die – unlängst vom VwGH ausdrücklich offen gelassene132) – Folgefrage, ob es dem Gleichbe122) Zur Gemeinschaftsrechtskonformität der Neuregelung siehe die Mitteilung zur „Besteuerung von Dividenden natürlicher Personen im
Binnenmarkt“, KOM(2003)810 endg, 9; siehe auch Beiser, GesRZ 2003,
187 (197 f).
123) Krit zur früheren Rechtslage etwa Reiner/Reiner, RdW 1999, 230 (230);
Keppert, SWK 2000, 776 (777).
124) EuGH 15. 7. 2004, C-242/03, Slg 2004, I-7379, Weidert und Paulus; dazu
G. Kofler, ÖStZ 2004/897, 470 (470 ff).
125) Grundlegend Sedlaczek, Die EG-Rechtsverträglichkeit der unterschiedlichen Besteuerung in- und ausländischer Investmentfonds (1998);
Widhalm in Lechner/Staringer/Tumpel (Hrsg), Kapitalverkehrsfreiheit
und Steuerrecht (2000) 119 (121 ff)
126) Vor allem durch die Gleichbehandlung mit inländischen Kapitalerträgen im Rahmen des § 37 Abs 8, §§ 93 und 97 EStG durch das
BudgetbegleitG 2003 (BGBl I 2003/71), durch die Möglichkeit des
„Weißrechnens“ schwarzer Fonds durch den StPfl und die Schaffung
einer kapitalertragsteuerlichen Transparenz für „Meldefonds“ bzw
„blütenweißen“ Fonds im Rahmen des AbgÄG 2004 (BGBl I 2004/180)
sowie durch den Entfall der Sicherungssteuer bei „blütenweißen“
Fonds durch die InvFG-Novelle 2005 (BGBl I 9/2005). Siehe auch die
vorangehende Rsp VfGH 7. 3. 2002, G 278/01, ÖStZB 2002/572 (zur
Endbesteuerung); VfGH 15. 10. 2004, G 49/05, ÖStZB 2005/526 = ecolex
2005/80 m Anm G. Kofler (zur Pauschalbesteuerung); weiters auch
VwGH 11. 12. 2003, 99/14/0081, ÖStZB 2004/471.
127) Siehe zB EAS 984 = SWI 1997, 90; EAS 1485 = SWI 1999, 407; dazu D.
Aigner/G. Kofler, SWI 2002, 528 (528 ff).
128) Ebenso BFH 25. 2. 2004, I R 42/02, BFHE 206, 5, BStBl 2005 II 14 = IStR
2004, 527 m Anm Philipowski und Anm Wolff.
129) Siehe dazu Tumpel, SWI 2004, 501 (501 ff); G. Kofler, ecolex 2005, 321
(324).
130) EuGH 12. 5. 1998, C-336/96, Slg 1998, I-2793, Gilly.
131) Vgl zuletzt Cordewener/Schnitger, StuW 2006, 50 (62 f mwN).
132) Siehe VwGH 21. 1. 2004, 2001/13/0017, ÖStZB 2005/132 = ecolex
2005/81 m Anm Petritz, und VwGH 21. 10. 2004, 2001/13/0264, ÖStZB
2005/133.
07.04.2006 13:35:12
162 ÖStZ 15. April / Nr. 8 Artikel-Nr. 299
handlungsgebot der Grundfreiheiten entspricht, wenn zwar eine
Vollanrechnung oder Erstattung inländischer Quellensteuern
erfolgt, die Anrechnung ausländischer Quellensteuern aber durch
einen Anrechnungshöchstbetrag begrenzt ist. Virulent wird dies
vor allem bei in- und ausländischen Schachteldividenden, sofern
diese zwar gleichermaßen befreit sind, jedoch nur die inländische
Quellensteuervorbelastung erstattungs- oder anrechnungsfähig
ist133). Während ein Verstoß gegen das Gemeinschaftsrecht in
der dRsp bisher mit unterschiedlichen Begründungen abgelehnt
wurde134), fordert eine im Vordringen begriffene Auffassung eine
Vollanrechnung ausländischer Quellensteuern und macht zutreffend geltend, es komme andernfalls zu einer diskriminierenden Höherbelastung der ausländischen Einkünfte im Vergleich
zu inländischen Einkünften135). Geht man hier nämlich zutreffend davon aus, dass – nach Manninen136) – der Umstand, dass
es sich bei der inländischen Quellensteuer technisch um eine
Vorauszahlung auf die inländische Steuerschuld des Investors
handelt, während die ausländische Quellensteuer die (abschließende) Belastung zugunsten des ausländischen Fiskus sicherstellt, keinen Einfluss auf die Vergleichbarkeit der Situationen
nimmt137), wird man dieser Ansicht beizupflichten haben.
2.2 „Wegzugsbesteuerung“: X und Y, Hughes de
Lasteyrie du Saillant und das AbgÄG 2004
Das österreichische Steuerrecht kannte und kennt verschiedene
Wegzugs- bzw Entstrickungsnormen – § 6 Z 6, § 31 Abs 2 Z 2
EStG und die Entstrickungsbesteuerung im UmgrStG –, die wegen ihrer mobilitätshemmenden Wirkung bereits lange auf gemeinschaftsrechtliche Bedenken gestoßen sind138), die letztlich
durch die Urteile in den Rs X und Y139) und Hughes de Lasteyrie du
Saillant140) verschärft wurden. In diesen Urteilen wurde sowohl
für den Fall eines grenzüberschreitenden Aktientauschs als auch
für den Fall des Wegzugs einer natürlichen Person die sofortige
Aufdeckung und Besteuerung stiller Reserven auch für solche
Wirtschaftsgüter für unzulässig erklärt, für welche die Besteuerungshoheit dem Wegzugsstaat dauernd entzogen wurde. Im
Schrifttum wurde aus diesen Urteilen sowohl für das Einkommenwie auch das Körperschaft- und Umgründungssteuerrecht überwiegend gefolgert, dass – zumindest im Kontext der Niederlassungs- und Arbeitnehmerfreizügigkeit141) – eine Erfassung der vor
133) In diese Richtung auch Jacobs, Internationale Unternehmensbesteuerung5 (2002) 250.
134) BFH 3. 12. 2003, I S 10/03 PKH, IStR 2004, 279 m Anm Wassermeyer;
zur unilateralen Anrechnung ausländischer Erbschaftssteuer FG Rheinland-Pfalz 6. 6. 2002, 4 K 2643/00, EFG 2002, 1242; BFH 5. 4. 2004,
II R 33/02, IStR 2004, 759; FG Rheinland-Pfalz 16. 6. 2005, 4 K 1951/04
(Rev: II R 35/05), EFG 2005, 1446 m Anm Neu; weiters FG Köln 11. 7.
2002, 7 K 8572/98, EFG 2002, 1391 m zust Anm Herlinghaus = FR 2002,
1234 m krit Anm IMN.
135) Siehe Schaumburg, StuW 2000, 369 (375); Schaumburg in Ebling (Hrsg),
Besteuerung von Einkommen, DStJG 24 (2001) 225 (251); Jacobs, Internationale Unternehmensbesteuerung5 (2002) 249; Cordewener/Schnitger, StuW 2006, 50 (67 ff); ebenso speziell zu § 34c dEStG Spengel/
Jaeger/Müller, IStR 2000, 257 (259 f); Wassermeyer, IStR 2001, 113
(117); in diesem Sinne auch im IDW, WPg 2000, 243 (244). Keine Bedenken aber offenbar bei Schön, IStR 2004, 289 (293); Schönfeld in Flick/
Wassermeyer/Baumhoff (Hrsg), AStG6 (2005) Vor § 34c EStG Rz 31.
136) EuGH 7. 9. 2004, C-319/02, Slg 2004, I-7477, Manninen.
137) Ebenso Cordewener/Schnitger, StuW 2006, 50 (67 ff); aA Schönfeld
in Flick/Wassermeyer/Baumhoff (Hrsg), AStG6 (2005) Vor § 34c EStG
Rz 31.
138) Vgl zB Tumpel, Harmonisierung der direkten Unternehmensbesteuerung in der EU (1994) 390.
139) EuGH 21. 11. 2002, C-436/00, Slg 2002, I-10829, X und Y.
140) EuGH 11. 3. 2004, C-9/02, Slg 2004, I-2409, Hughes de Lasteyrie du
Saillant.
141) Zur möglichen Erfassung des Wegzugs durch die Kapitalverkehrsfreiheit bzw – in einem privaten Kontext – durch die allgemeine
Freizügigkeit nach Art 18 EG siehe etwa G. Kofler, ÖStZ 2003/503, 262
(262 ff mwN); siehe zu dieser Frage auch die beim EuGH angängige
oestz_8_06.indd 162
Steuerrecht aktuell
dem Ausscheiden aus der österreichischen Steuerhoheit entstandenen stillen Reserven zwar grundsätzlich zulässig sei, die Steuer
aber erst bei tatsächlicher Realisierung erhoben werden dürfe142).
Vor dem Hintergrund der europarechtlichen Bedenken gegen
eine sofortige Entstrickungsbesteuerung und der bestehenden
Unklarheiten143) hat der österreichische Gesetzgeber als europäischer Vorreiter im Rahmen des AbgÄG 2004144) eine „Komplettlösung“ vorgesehen145). Sofern nunmehr das Besteuerungsrecht an einen EU-Mitgliedstaat oder einen EWR-Staat, mit
dem eine umfassende Amts- und Vollstreckungshilfe besteht146),
verloren geht, ist die Steuer auf Antrag vorerst nicht festzusetzen.
Kommt es nach der Entstrickung zu einer (tatsächlichen oder
gesetzlich fingierten) Realisierung der stillen Reserven, so wird
dies als rückwirkendes Ereignis iSd § 295a BAO gewertet, das
– innerhalb der 10jährigen Verjährungsfrist des § 209 Abs 3
BAO – die Festsetzung der Steuer im Wege der Abänderung des
Bescheides des Entstrickungsjahres ohne Anspruchsverzinsung
nach § 205 BAO nach sich zieht. Im Rahmen dieser Besteuerung
werden aber auch nach dem „Wegzug“ eingetretene Wertverluste berücksichtigt. Die Bemessungsgrundlage ist insofern „doppelt
gedeckelt“, als lediglich die positive Differenz zwischen den Anschaffungskosten und dem gemeinen Wert im Entstrickungszeitpunkt bzw dem – niedrigeren – (tatsächlichen oder fiktiven)
Veräußerungserlös steuerlich erfasst wird. Im Rahmen des AbgÄG 2004 wurde auch die „Zuzugsproblematik“ in der Weise
gelöst, dass Vermögen, das erstmals in die österreichische Besteuerungshoheit hereinwächst, mit dem gemeinen Wert anzusetzen ist und damit die im Ausland entstandenen stillen Reserven vom österreichischen Steuerzugriff abgeschirmt werden147).
2.3 Verwertung ausländischer Verluste im Inland
2.3.1 „Befreite“ ausländische Betriebsstättenverluste
und § 2 Abs 8 EStG
Vor allem im deutschen148) und österreichischen149) Steuerrecht
gehörte es jahrzehntelang zu den Grundfesten richterlicher Abkommensauslegung, dass Verluste im Rahmen einer durch Abkommen freigestellten Einkunftsart nicht gegen steuerbare
Einkünfte verrechnet, sondern nur im Rahmen eines „negativen
142)
143)
144)
145)
146)
147)
148)
149)
Rs van Dijk (C-470/04; Vorlagefragen abgedruckt in ABl C 31/5 [5. 2.
2005]), und dazu bereits die Anwendbarkeit des Art 18 EG bejahend
Schlussanträge GA Kokott, 30. 3. 2006, C-470/04, N. Allerdings hat der
EuGH unlängst judiziert, dass die bloße Verlegung des Wohnsitzes
und der damit einhergehende Wechsel von der unbeschränkten zur
beschränkten StPfl keinen Kapitalverkehrsvorgang darstellt; siehe
EuGH 23. 2. 2006, C-513/03, van Hilten-van der Heijden – Tz 49 f (zur
verlängerten Erbschaftssteuerpflicht).
In diese Richtung nunmehr Schlussanträge GA Kokott 30. 3. 2006,
C-470/04, N; siehe aus dem Schrifttum zB G. Kofler, ÖStZ 2003/503,
262 (266), und ÖStZ 2004/483, 195 (197 f); D. Aigner/Tissot, SWI 2004,
293 (295); Schön, IStR 2004, 289 (296); Schindler, IStR 2004, 300 (309);
Schön/Schindler, IStR 2004, 571 (571 ff); Schön, 34 Tax Notes Int’l 197
(201 f) (Apr. 12, 2004); Schnitger, BB 2004, 804 (807); Wassermeyer,
GmbHR 2004, 613 (615). AA wohl Beiser, ÖStZ 2004/661, 282 (285);
Franz, EuZW 2004, 270 (272).
Siehe zB die Überlegungen von Beiser, ÖStZ 2004/661, 282 (284 ff).
BGBl I 180/2004.
Zur Neuregelung ausführlich Rz 2517a ff und Rz 6677 ff EStR 2000;
aus dem Schrifttum D. Aigner/G. Kofler, taxlex 2005, 6 (6 ff); Lechner
in Jirousek/Lang (Hrsg), Praxis des Internationalen Steuerrechts, FS
Loukota (2005) 289 ff; Staringer, SWI 2005, 213 (213 ff); ausf zum
neuen System Achatz/G. Kofler in Achatz/D. Aigner/G. Kofler/Tumpel
(Hrsg), Internationale Umgründungen (2005) 23 (31 ff und 54 ff).
Derzeit nur im Verhältnis zu Norwegen.
Zum Unterbleiben der Neubewertung in „Rückkehrersituationen“
siehe Rz 2517h f EStR 2000.
Grundlegend RFH 26. 6. 1935, VI A 414/35, RFHE 38, 64, RStBl 1935,
1358; zuletzt BFH 13. 11. 2002, I R 13/02, BFHE 201, 73, BStBl 2003 II
795; siehe auch Wassermeyer in Debatin/Wassermeyer, DBA, Art 23A
MA Rz 57 mwN.
Siehe aus der älteren Rsp VwGH 6. 3. 1984, 83/14/0107, ÖStZB 1985,
34; VwGH 21. 5. 1985, 85/14/0001, ÖStZB 1985, 347.
07.04.2006 13:35:12
ÖStZ 15. April / Nr. 8 Artikel-Nr. 299 163
Steuerrecht aktuell
Progressionsvorbehaltes“ berücksichtigt werden durften150). Begründet wurde dies damit, dass der Begriff der Einkünfte auch
„negative Einkünfte“ umfasse und – im Sinne der Symmetriethese – auch solche nicht in der Bemessungsgrundlage zu berücksichtigen seien151). Diese Sichtweise ist allerdings zunehmend auf gemeinschaftsrechtliche Kritik gestoßen152), zumal
der vergleichbare Inlandssachverhalt aufgrund der sofortigen
Verlustverrechnungsmöglichkeit steuerlich günstiger behandelt
würde. Solcherart entstehe bis zur allfälligen Verwertbarkeit im
Betriebsstättenstaat zumindest ein Liquiditätsnachteil153), der
auch nicht durch den – idR ohnehin nur bei natürlichen Personen relevanten – negativen Progressionsvorbehalt gemeinschaftsrechtskonform beseitigt werde154). In Österreich ist diese
Problematik aber mittlerweile durch zwei richtungsweisende
Erkenntnisse des VwGH155) und die darauf basierende Neuregelung in § 2 Abs 8 EStG im StRefG 2005156) entschärft worden: Demnach wird der nach innerstaatlichem Recht vorzunehmende Verlustausgleich mit negativen ausländischen Einkünften durch die Anwendung eines Doppelbesteuerungsabkommens mit Befreiungsmethode nicht beeinträchtigt, es sei
denn, die Verluste wurden im Ausland bereits verwertet; der
hereingenommene Verlust führt jedoch zu einer Nachversteuerung, wenn er in den Folgejahren im Ausland zB im Wege
eines Verlustvortrages genutzt werden kann157).
Vor allem aufgrund der Streichung des § 2a Abs 3 dEStG,
der bis vor kurzem eine Verlusthereinverrechnung gestattete158),
ist die Versagung der Hereinnahme „befreiter“ Auslandsverluste aber auch im deutschen Schrifttum auf erhebliche Bedenken
gestoßen159), die zunehmend von der dRsp geteilt wurden160).
150) In vielen anderen Staaten fehlt es bereits deshalb an einem vergleichbaren Diskussionsstoff, weil entweder durch die Anrechnungsmethode das Problem entweder nicht auftritt oder auf eine „symmetrische“
Anwendung der Freistellungsmethode verzichtet wird; siehe etwa
Bendlinger, SWI 1994, 221 (223 ff); Vogel, IStR 2002, 91 (91 mwN);
Vogel in Vogel/Lehner, DBA4 (2003) Art 23 Rz 49; unlängst auch Winandy, ET 2006, 82 (82 ff) (zu Luxemburg).
151) Zu dieser „Symmetriethese“ siehe nur BFH 28. 3. 1973, I R 59/71, BFHE
109, 127, BStBl 1973 II 531; dazu ausführlich Wassermeyer in Debatin/Wassermeyer, DBA, Art 23A MA, Rz 57 mwN; Schuch in Lehner
(Hrsg), Verluste im nationalen und Internationalen Steuerrecht (2004)
63 (74 ff); Cordewener in von Groll (Hrsg), Verluste im Steuerrecht,
DStJG 28 (2005) 255 (282 ff).
152) Siehe vor allem die gemeinschaftsrechtlichen Bedenken bei Lechner
in Gassner/Lang/Lechner (Hrsg), Doppelbesteuerungsabkommen und
EU-Recht (1996) 85 (93 ff).
153) Deutlich Zorn, SWI 2001, 456 (457).
154) Dazu Cordewener, DStR 2004, 1634 (1636 f); aA FG Baden-Württemberg 30. 6. 2004, 1 K 312/03, EFG 2004, 1694.
155) VwGH 25. 9. 2001, 99/14/0217, ÖStZB 2002/365, und VwGH 25. 10. 2001,
99/15/0149, ÖStZB 2002/732; dazu insb Zorn, SWI 2001, 456 (456 ff);
Loukota, SWI 2001, 466 (466 ff); Trenkwalder/Firlinger, SWI 2001, 514
(514 ff); Lang, SWI 2002, 86 (86 ff). Der VwGH stützte sein Ergebnis
allerdings auf eine Interpretation des DBA und verwies nur zur Begründung dafür, dass es für die Rechtsprechungsänderung keines
verstärkten Senates bedürfe, kurz auf das Gemeinschaftsrecht; krit
dazu Trenkwalder/Firlinger, ÖStZ 2001/1036, 550 (550).
156) BGBl I 2004/57.
157) Siehe dazu ausf Mayr, RdW 2005/236, 189 (189 f), sowie nunmehr
Rz 187 ff EStR 2000.
158) Siehe BTDrs 14/23, 7, 231; vgl weiters FG Baden-Württemberg 30. 6.
2004, 1 K 312/03, EFG 2004, 1694 mwN.
159) Für einen Verstoß gegen die Niederlassungsfreiheit zuletzt zB Kessler/Schmitt/Janson, IStR 2003, 307 (308 f); Cordewener, ET 2003, 294
(294 ff); Cordewener, DStR 2004, 1634 (1634 ff); Kessler in Lehner
(Hrsg), Verluste im nationalen und Internationalen Steuerrecht (2004)
83 (103 ff); Portner, IStR 2005, 376 (379); Cordewener in von Groll
(Hrsg), Verluste im Steuerrecht, DStJG 28 (2005) 255 (282 ff); Schaumburg/Schaumburg, StuW 2005, 306 (310).
160) BFH 13. 11. 2002, I R 13/02, BFHE 201, 73, BStBl 2003 II 795; Niedersächsisches FG 14. 10. 2004, 6 V 655/04, EFG 2005, 286 m Anm Herlinghaus;
FG München 14. 2. 2005, 1 V 305/04 EFG 2005, 928; FG Berlin 11. 4.
2005, 8 K 8101/00, IStR 2005, 571 m Anm Schönfeld; keine Bedenken
hingegen beim FG Baden-Württemberg 30. 6. 2004, 1 K 312/03, EFG
2004, 1694.
oestz_8_06.indd 163
Allerdings hat die vom BFH161) dem EuGH vorgelegte Rs Ritter-Coulais hinsichtlich der Berücksichtigung fiktiver ausländischer Vermietungsverluste nicht zur Klärung dieser Frage
beigetragen: Dort hat der EuGH die vom BFH primär gestellte Frage der Verlusthereinverrechnung aufgrund des konkreten
Ausgangsfalles ausdrücklich unbeantwortet gelassen und sodann
auf die eventualiter gestellte Vorlagefrage geantwortet, dass Verluste im Rahmen des negativen Progressionsvorbehaltes berücksichtigt werden müssen, sofern entsprechende Gewinne ebenfalls für die Progressionsberechnung herangezogen werden162).
Wenngleich der negative Progressionsvorbehalt nur ein minus
gegenüber der bemessungsgrundlagenbezogenen Verlusthereinnahme ist, kann in Ritter-Coulais dennoch keine prinzipielle
Ablehnung der gemeinschaftsrechtlichen Verlusthereinnahmeverpflichtung erblickt werden. Vielmehr spricht die – zu Tochtergesellschaften ergangene, aber in ihrer Grundüberlegung
wohl auch auf die Betriebsstättenproblematik übertragbare163)–
Rsp in Marks & Spencer164) dafür, dass zwar die primäre Verlustberücksichtigungsverpflichtung dem Betriebsstättenstaat obliegt165) und – entgegen den Überlegungen im Schrifttum – trotz
allfälliger Liquiditätsnachteile eine sofortige Verlusthereinnahme nicht erforderlich ist, umgekehrt aber im Falle der Nicht
(mehr)verwertbarkeit des Verlustes im Betriebsstättenstaat die
subsidiäre Berücksichtigungspflicht des Stammhausstaates eingreift. § 2 Abs 8 EStG geht damit offenbar über die gemeinschaftsrechtlichen Anforderungen hinaus.
2.3.2 Marks & Spencer und die österreichische
Gruppenbesteuerung
Der Marks & Spencer-Fall zur grenzüberschreitenden Berücksichtigungsverpflichtung von Verlusten ausländischer Tochtergesellschaften war aufgrund seinen potenziellen Budgetauswirkungen sicherlich einer der spektakulärsten Fälle der vergangenen
Jahre. Im Wesentlichen ging es um die Frage, ob die Niederlassungsfreiheit der britischen Steuerregelung des „Konzernabzugs“
(group relief ) entgegensteht, wonach die Verrechenbarkeit von
Verlusten innerhalb eines Konzerns von der Voraussetzung abhängig ist, dass die Tochtergesellschaften ihren Sitz im Vereinigten Königreich haben. Die Große Kammer des EuGH166)
kam hier unlängst zu dem Ergebnis, dass der Ansässigkeitsstaat
der Muttergesellschaft grundsätzlich nicht verpflichtet ist, den
Verlust einer ausländischen gleich jenem einer inländischen
Tochtergesellschaft zur Verwertung zuzulassen. Unter dem Gesichtspunkt der Verhältnismäßigkeit verstößt es nach Ansicht
des EuGH aber dennoch gegen die Niederlassungsfreiheit, wenn
die Verlusthereinnahme abgelehnt wird, sofern ein noch nicht
berücksichtigter Verlust im Sitzstaat der Tochtergesellschaft auch
zukünftig nicht mehr berücksichtigt werden kann167).
Obwohl Österreich das durch das StRefG 2005 geschaffene
neue Gruppenbesteuerungsregime bereits progressiv an den
gemeinschaftsrechtlichen Anforderungen ausgerichtet hat, ergibt sich doch aus Marks & Spencer ein punktueller Anpassungs161)
162)
163)
164)
165)
166)
BFH 13. 11. 2002, I R 13/02, BFHE 201, 73, BStBl 2003 II 795.
EuGH 21. 2. 2006, C-152/03, Ritter-Coulais.
Ebenso Sutter, EuZW 2006, 85 (88).
EuGH 13. 12. 2005, C-446/03, Marks & Spencer.
Zu § 102 Abs 2 EStG siehe bereits oben III.A.1.d.
EuGH 13. 12. 2005, C-446/03, Marks & Spencer; dazu etwa Thömmes,
IWB 24/2005, Fach 11a, 933 (938 ff); Lang, SWI 2006, 3 (3 ff); Englisch,
IStR 2006, 19 (22 f); Herzig/Wagner, DStR 2006, 1 (1 ff); Scheunemann,
Intertax 2006, 54 ff; G. Kofler, ÖStZ 2006/87, 48 (48 ff); Lang, ET 2006,
54 (54 ff); Wiesner/Mayr, RWZ 2006/1 (1 ff); Petritz/Schilcher, ecolex
2006, 147 (147 ff); Sutter, EuZW 2006, 85 (87 f).
167) Dazu ausführlich G. Kofler, ÖStZ 2006/87, 48 (48 ff).
07.04.2006 13:35:12
164 ÖStZ 15. April / Nr. 8 Artikel-Nr. 299
bedarf168): So zeigt sich zunächst, dass die generelle Möglichkeit
der grenzüberschreitenden Verlustverrechnung im Rahmen der
österreichischen Gruppenbesteuerung (§ 9 Abs 6 Z 6 KStG)
vor dem Hintergrund des Marks & Spencer-Urteils gemeinschaftsrechtlich zwar nicht zwingend erforderlich, standortpolitisch aber jedenfalls positiv zu beurteilen ist169). § 9 Abs 6 Z 6
KStG dürfte aber insofern zu eng sein, als eine Nachversteuerung
auch in jenen Fällen vorgesehen ist, in denen keine Verlustverrechnung im Ausland möglich ist170): So wird nach Marks & Spencer in den Fällen, in denen die Verlustverwertung des ausländische Gruppenmitglieds nach Ausscheiden nicht mehr möglich
ist, eine Nachversteuerung vollständig zu unterbleiben haben171);
auch im Liquidations- und Insolvenzfalle erscheint die Kürzung
des Nachversteuerungsbetrags mit den während der Gruppenzugehörigkeit nicht steuerwirksamen Teilwertabschreibungen
(§ 9 Abs 6 Z 6 letzter Satz KStG) gemeinschaftsrechtlich dann
unzureichend, wenn eine Verlustverwertung endgültig ausgeschlossen ist. Da es in Marks & Spencer um Verluste ausländischer Enkelgesellschaften ging, werden entgegen der Einschränkung auf eine Auslandsebene im österreichischen Gruppenbesteuerungsregime (§ 9 Abs 2 iVm Abs 6 KStG) zukünftig
auch Verluste von Enkel- und Urenkelgesellschaften etc berücksichtigt werden müssen172). Offen ist allerdings auch nach
Marks & Spencer, ob die prozentuell mit dem unmittelbaren
Beteiligungsausmaß beschränkte Verlusthereinnahme im Falle
ausländischer Konzerngesellschaften im Vergleich zur vollständigen Verlustverrechnung im Falle inländischer Konzerngesellschaften gemeinschaftsrechtlich bedenklich ist173).
2.4 Ausländische Schachteldividenden:
§ 10 Abs 1 versus § 10 Abs 2 KStG
Vor dem Hintergrund der gemeinschaftsrechtlichen Grundfreiheiten erweist sich auch die Unterscheidung zwischen der bedingungslosen Beteiligungsertragsbefreiung für Ausschüttungen
inländischer Gesellschaften nach § 10 Abs 1 KStG einerseits im
Vergleich zu der an die Voraussetzungen der Mindestbeteiligungshöhe von 10 % und der Mindestbeteiligungsdauer von
einem Jahr geknüpfte Beteiligungsertragsbefreiung für Ausschüttungen ausländischer Gesellschaften nach § 10 Abs 2 KStG
als problematisch174). Insofern hat auch der UFS Linz unlängst
zutreffend entschieden, dass die Begünstigung des § 10 Abs 1
KStG auf Beteiligungen an ausländischen Gesellschaften auszudehnen sei und auch die Mutter-Tochter-RL, an der § 10
168) Dazu bereits G. Kofler, ÖStZ 2006/87, 48 (52 ff); Wiesner/Mayr, RWZ
2006/1, 1 (4 f).
169) Ebenso Haunold/Tumpel/Widhalm, SWI 2006, 44 (47 f).
170) Petritz/Schilcher, ecolex 2006, 147 (150); siehe bereits Tumpel/Tissot
in Quantschnigg et al (Hrsg), Kommentar zur Gruppenbesteuerung
(2005) 435 (468 ff).
171) Ebenso Wiesner/Mayr, RWZ 2006/1, 1 (5), allerdings unter „Gegenrechnung“ der aufgrund der Liquiditätsvorteile aufgrund der – gemeinschaftsrechtlich nicht gebotenen – sofortigen Verlusthereinnahme.
172) G. Kofler, ÖStZ 2006/87, 48 (54). Hier wirft sich freilich die Frage auf,
wann zB die Enkelgesellschaft die „vorgesehenen Möglichkeiten zur
Berücksichtigung von Verlusten ausgeschöpft“ hat (zu diesem Erfordernis EuGH 13. 12. 2005, C-446/03, Marks & Spencer – Tz 55); so ist
zB vollkommen offen, ob auch eine allfällige Möglichkeit zur Gruppenbildung im Ausland genutzt werden müsste (so Wiesner/Mayr,
RWZ 2006, 1 [5]).
173) Dazu Tumpel/Tissot in Quantschnigg et al (Hrsg), Gruppenbesteuerung
(2005) 435 (465 ff).
174) Zur Gemeinschaftswidrigkeit dieser Divergenz bereits bisher etwa
Hirschler, Rechtsformplanung im Konzern (2000) 58 ff; Konezny/
Züger, SWI 2000, 218 (218 ff); Toifl, SWI 2002, 458 (466); Heinrich,
ÖStZ 2002/970; Blasina, SWI 2003, 14 (14 ff); D. Aigner, SWI 2003, 63
(63 ff); Beiser, GesRZ 2003, 187 (197 f); G. Kofler, ÖStZ 2003/1175, 554
(556); Postl, ecolex 2004, 968 (968 ff); D. Aigner, SWK 2004, S 1008
(S 1008 f).
oestz_8_06.indd 164
Steuerrecht aktuell
Abs 2 KStG orientiert ist, nicht als Rechtfertigung für die Diskriminierung herangezogen werden könne175). Eine entsprechende Amtsbeschwerde ist derzeit allerdings beim VwGH
anhängig176).
Vor diesem Hintergrund ist auch § 10 Abs 4 KStG bedenklich, der einen Wechsel von der Befreiung ausländischer Dividenden nach § 10 Abs 2 KStG zur indirekten Anrechnung
vorsieht, wenn die ausländische Gesellschaft passive Einkünfte
erzielt und niedrig besteuert177) wird178). Es zeigt sich zwar in
einem ersten Schritt, dass ein solcher Methodenwechsel durch
die Mutter-Tochter-RL gedeckt ist, da die Richtlinie sowohl
den Mitgliedstaaten die Befreiungsmethode und die Anrechnungsmethode als gleichwertige Alternativen zur Verfügung
stellt und daher einerseits die Anwendung beider Methoden
auch im Verhältnis zu ein und demselben Mitgliedstaat ermöglicht179) sowie andererseits das Heranziehen einer ausländischen
Niedrigbesteuerung als Grundlage für die konkrete Methodenwahl gestattet180). Diese Deckung durch das sekundäre Gemeinschaftsrecht hindert freilich in einem zweiten Schritt nicht die
Feststellung, dass der Methodenwechsel dem primären Gemeinschaftsrecht widerspricht: Denn solange nach § 10 Abs 1 KStG
inländische Holdinggesellschaften mit ausschließlichen Passiveinkünften akzeptiert werden, kann bei ausländischen Gesellschaften nicht unter Berufung auf den niedrigeren Steuersatz
im Ausland die Anwendung des – an § 10 Abs 1 KStG zu messenden – internationalen Schachtelprivilegs versagt und nach
§ 10 Abs 4 KStG zur Anrechnungsmethode gewechselt werden181). Erst in einem dritten Schritt ist sodann zu überprüfen,
ob der diskriminierende Methodenwechsel gem § 10 Abs 4
KStG als eine durch Art 1 Abs 2 der Mutter-Tochter-RL akzeptierte und durch die Rsp des EuGH gedeckte Anti-Missbrauchsbestimmung gerechtfertigt werden kann: Wenngleich
zwar § 10 Abs 4 KStG durchaus auch der Verhinderung der
Steuerumgehung dient, wird diese generelle Missbrauchsvermutung nicht den strengen, auf den Einzelfall bezogenen Anforderungen des EuGH gerecht182). Solcherart wird § 10 Abs 4
KStG als gemeinschaftswidrig zu beurteilen sein183).
175) So UFS Linz 13. 1. 2005, RV/0279-L/04; aus dem Schrifttum etwa D.
Aigner/G. Kofler, taxlex 2005, 49 (49 ff); G. Kofler/Toifl, ET 2005, 232
(232 ff mwN); Gudmundsson, Intertax 2006, 58 (74).
176) Zu Zl 2005/14/0020.
177) Zur Problemlage, wenn sich die Niedrigbesteuerung aus einer gemeinschaftsrechtlich genehmigten Beihilfe ergibt, siehe zuletzt G. Kofler,
RdW 2005/859, 786 (786 ff mwN).
178) Siehe Toifl, RdW 2004/230, 250 (251); Polivanova-Rosenauer/Toifl, SWI
2004, 228 (237); Beiser, GesRZ 2003, 187 (197 f).
179) De Hosson, Intertax 1990, 414 (432); Tumpel, Harmonisierung der
direkten Unternehmensbesteuerung in der EU (1994) 270; Thömmes
in Thömmes/Fuks (Hrsg), EC Corporate Tax Law, Chapter 6.4 Rz 15;
Terra/Wattel, European Tax Law4 (2005) 505.
180) Terra/Wattel, European Tax Law4 (2005) 505; ebenso wohl Thömmes
in Thömmes/Fuks (Hrsg), EC Corporate Tax Law, Chapter 6.4 Rz 15.
181) Dazu ausf G. Kofler/Toifl, ET 2005, 232 (238 f mwN); siehe weiters
auch Beiser, GesRZ 2003, 187 (197 f); allgemein in diese Richtung auch
Terra/Wattel, European Tax Law4 (2005) 505.
182) Siehe etwa EuGH 17. 7. 1997, C-28/95, Slg 1997, I-4161, Leur-Bloem
– Tz 44; EuGH 26. 9. 2000, C-478/98, Slg 2000, I-7587, Kommission/
Belgien – Tz 45. Obwohl es in diesem Zusammenhang auch argumentierbar wäre, dass § 10 Abs 4 KStG lediglich eine widerlegbare
Missbrauchsvermutung darstellt (so ausführlich G. Kofler, Die steuerliche Abschirmwirkung ausländischer Finanzierungsgesellschaften
(2002) 394 ff mwN), folgt zumindest die österreichische Finanzverwaltung dieser Ansicht nicht (Quantschnigg, ÖStZ 1995, 12 [13];
Loukota/Quantschnigg, SWI 1995, 9 [13 f]; Wiesner, SWI 1995, 127
[130]). Überdies würde auch eine solche Beweislastumkehrung per se
einen Verstoß gegen das Gemeinschaftsrecht darstellen; vgl nur EuGH
28. 10. 1999, C-55/98, Slg 1999, I-7641, Vestergaard – Tz 21; siehe auch
Haslinger, SWI 2005, 170 (180).
183) Sofern man § 10 Abs 4 KStG auch auf Veräußerungsgewinne nach
§ 10 Abs 3 KStG für anwendbar erachtet (dazu jüngst befürwortend
und mwN Haslinger, SWI 2005, 170 [170 f mwN]) könnte aufgrund der
07.04.2006 13:35:12
Steuerrecht aktuell
2.5 Verbleibende Problembereiche
Österreich hat sich in den vergangenen Jahren zum gemeinschaftsrechtlichen „Musterschüler“ entwickelt. Anders als manche eher zurückhaltende Mitgliedstaaten184) ist Österreich den
Anforderungen des Gemeinschaftsrechts in den meisten Bereichen mit progressiven Ansätzen gefolgt, sodass sich im geltenden
Ertragsteuerrecht wohl nur mehr in Randbereichen bedenkliche
Steuerregime finden. Neben den bereits genannten Problemfeldern gehören dazu etwa die auf Auslandssachverhalte beschränkte Anwendung der Verrechnungspreisregeln des § 6 Z 6
EStG185), die Inlandsbezogenheit des Sonderausgabenabzugs
von Versicherungsprämien nach § 18 Abs 1 Z 2 EStG186), die
Inlandsvoraussetzung für die begünstigte Anschaffung junger
Aktien nach § 18 Abs 1 Z 4 iVm Abs 3 Z 4 EStG187), das österreichische Besteuerungsregime für Beiträge an ausländischen
Pensionskassen188) und das Erfordernis der Beschäftigung durch
einen inländischen Betrieb für die Inanspruchnahme der Montagebegünstigung des § 3 Abs 1 Z 10 EStG189).
IV. Ausblick
Die Rsp des EuGH hat in den vergangenen Jahren zu einer
wahren Euphorie in der internationalen Steuerplanung geführt.
Wenn man sich vor Augen hält, dass bis Mitte 2005 lediglich
knapp 10 % der Fälle zu Ungunsten der StPfl entschieden
wurden, überrascht dies freilich nicht190). In jüngerer Zeit scheint
sich allerdings eine Trendwende abzuzeichnen: Wohl insb wegen
der zunehmenden Komplexität der Fälle, deren Lösung auch
184)
185)
186)
187)
188)
189)
190)
Steuerpflicht solcher Gewinne im rein nationalen Kontext eine vertikalen Diskriminierung diesbezüglich wohl nicht begründet werden;
siehe dazu auch G. Kofler/Toifl, ET 2005, 232 (239). Allerdings könnte
die Nichtanwendbarkeit des § 10 Abs 4 KStG aus einer OutboundMeistbegünstigung folgern (dazu oben III.1.3).
Siehe etwa den Bericht zur deutschen Situation bei Drüen/Kahler,
StuW 2005, 171 (171 ff).
Dazu D. Aigner/G. Kofler, taxlex 2005, 6 (9).
Siehe Haunold/Tumpel/Widhalm, EuGSWI 2002, 546 (546 ff); diese
Problematik wird allerdings durch Rz 463 LStR 2002 und VwGH 20. 1.
1999, 98/13/0002, ÖStZB 1999, 505 entschärft, wonach EWR-Versicherungsunternehmen die Erlaubnis zum Geschäftsbetrieb im Inland
besitzen und daher Prämien an diese Versicherungen als Sonderausgaben abgezogen werden können.
Haunold/Tumpel/Widhalm, SWI 2005, 97 (97 ff).
Dazu G. Kofler, ÖStZ 2003/874, 404 (407 ff).
Dies wurde unlängst vom UFS Feldkirch 5. 10. 2005, RV/0016-F/04, als
Verstoß gegen Art 39 EG beurteilt.
Von den 50 bis Mitte 2005 ergangenen Entscheidungen zum Verhältnis
zwischen dem direkten Steuerrecht und den Grundfreiheiten gingen
lediglich 4 mehr oder weniger vollständig zugunsten der Mitgliedstaaten aus (dies sind EuGH 27. 9. 1988, 81/87, Slg 1988, 5483, Daily
Mail; EuGH 26. 1. 1993, C-112/91, Slg 1993, I-429, Werner; EuGH 12. 5.
1998, C-336/96, Slg 1998, I-2793, Gilly, und EuGH 14. 9. 1999, C-391/97,
Slg 1999, I-5451, Gschwind).
Der Autor:
DDr. Georg Kofler, LL.M. (NYU), ist
Universitätsassistent an der Abteilung für
Steuerrecht der Johannes Kepler Universität
Linz und beschäftigt sich schwerpunktmäßig mit Fragen des Internationalen und
Europäischen Steuerrechts.
ÖStZ 15. April / Nr. 8 Artikel-Nr. 299 165
unter Experten umstritten ist, aber auch aufgrund einer stärken
Berücksichtung der Interessen der nationalen Fisci durch den
EuGH ist die „Erfolgsquote“ der StPfl auf etwa 40 % gesunken191). Der EuGH scheint nunmehr nicht nur die Vergleichbarkeit von Situationen enger zu betrachten192) bzw den Rechtfertigungsspielraum der Mitgliedstaaten auszudehnen193), sondern ganz generell in Richtung einer ausgewogenen Gesamtbetrachtung unter Vermeidung von „Überbegünstigungen“ zu
tendieren194) und auch vermehrt Aspekte aus seiner Grundfreiheitsprüfung auszuschließen, die sich letztlich auf bloße – nur
durch positive Harmonisierung beseitigbare – Disparitäten
zwischen den mitgliedstaatlichen Steuerrechtsordnungen zurückführen lassen195). Diese sich abzeichnende Tendenz macht
die zukünftige Judikatur freilich schwer prognostizierbar. Es
darf daher mit Spannung erwartet werden, wie sich der EuGH
den großen offenen Fragenkomplexen nähern wird: Hier geht
es zukünftig vor allem um den Einfluss von DBA auf die Grundfreiheitsprüfung196), die tatsächliche Reichweite der „ErgaOmes“-Wirkung der Kapitalverkehrsfreiheit bei Drittstaatssachverhalten197), die Einschränkung der Rückwirkung von budgetär besonders bedeutsamen EuGH-Urteilen198) sowie um die
nach wie vor offene Bedeutung des Beschränkungsverbots (ieS)
im direkten Steuerrecht, insb bei Fragen der unentlasteten Doppelbesteuerung199).
191) Von den 10 von Mitte 2005 bis März 2006 gefällten Entscheidungen
sind immerhin 6 mehr oder weniger zuungunsten des StPfl oder nur
mit starker Einschränkungen zulasten der Mitgliedstaaten entschieden
worden (dies sind EuGH 5. 7. 2005, C-376/03, D; EuGH 12. 7. 2005,
C-403/03, Schempp; EuGH 8. 9. 2005, C-512/03, Blanckaert; EuGH 27. 10.
2005, C-8/04, Bujara; EuGH 13. 12. 2005, C-446/03, Marks & Spencer,
und EuGH 23. 2. 2006, C-513/03, van Hilten-van der Heijden).
192) Siehe zB EuGH 5. 7. 2005, C-376/03, D; EuGH 12. 7. 2005, C-403/03,
Schempp.
193) So etwa in EuGH 13. 12. 2005, C-446/03, Marks & Spencer.
194) Siehe etwa EuGH 7. 9. 2004, C-319/02, Slg 2004, I-7477, Manninen.
195) Siehe etwa EuGH 12. 5. 1998, C-336/96, Slg 1998, I-2793, Gilly; EuGH
12. 7. 2005, C-403/03, Schempp, und EuGH 23. 2. 2006, C-513/03, van
Hilten-van der Heijden.
196) Vgl die anhängigen Fälle in den Rs ACT Group Litigation (C-374/04),
Kerckhaert-Morres (C-513/04), Columbus Container Services (C-298/05),
Denkavit II (C-170/05) und Amurta (C-379/05); siehe auch bereits EuGH
19. 1. 2006, C-265/04, Bouanich.
197) Zu diesem Themenkreis sind aber mittlerweile mehrere Fälle anhängig:
Rs Fidium Finanz AG (C-452/04), Lasertec (C-492/04), Thin Cap Group
Group Litigation (C-524/04); A (C-101/05) und A und B (C-102/05),
sowie Holböck (C-157/05); in der Rechtssache van Hilten-van der
Heijden (C-513/03) wurde hingegen der Drittstaatsaspekt weder vom
Generalanwalt (Schlussanträge GA Léger 30. 6. 2005, C-513/03, van
Hilten-van der Heijden – Tz 69) noch vom EuGH (EuGH 23. 2. 2006,
C-513/03, van Hilten-van der Heijden) behandelt.
198) Vgl die anhängigen Rs Banca Popolare di Cremona (C-475/03) und
Meilicke (C-292/04).
199) Dazu jüngst ausf G. Kofler, SWI 2006, 62 (62 ff).
Publikationen des Autors:
Regelmäßige Besprechung der
EuGH-Rechtsprechung zu den direkten
Steuern für die ÖStZ.
www.lexisnexis.at – Ihr Verlag für Steuern, Recht & Wirtschaft
oestz_8_06.indd 165
07.04.2006 13:35:13
Articles
European Union
Prof. Dr Frans Vanistendael*
In Defence of the European Court of Justice
This article is the basis for the Graduation
Lecture (Maarten J. Ellis Lecture) delivered by
Prof. Frans Vanistendael on 30 August 2007 at
the International Tax Center Leiden (LLM
Program in International Taxation) at the
University of Leiden, the Netherlands.
1. Introduction
Criticism of the tax decisions of the European Court of
Justice (ECJ) is a venerable tradition in the European
Union.1 The former Dutch State Secretary of Finance,
Willem Vermeend, characterized the decisions of the
ECJ as the “Alice in the Wonderland” of fiscal legislation,2
while David Williams, the distinguished British professor and judge, once described the ECJ as “the power to
destroy”.3 At the end of 2006, the German Minister of
Finance characterized an opinion of the Advocate-General as “unreasonable” and “completely incompatible and
in violation of the fundamental interests of a Member
State and its citizens”.4 From across the Atlantic, Alvin
Warren and Michael Graetz sent the message in The Yale
Law Journal that “[o]ur principal conclusion is that the
European Court of Justice (ECJ) is undermining the fiscal autonomy of member states by articulating an interpretation of income tax arrangements that is ultimately
unstable”.5 Finally, most recently, similar criticisms were
formulated in abundance at the annual meeting of the
European Association of Tax Law Professors (EATLP) in
Helsinki in June 2007, where four young and promising
tax professors, Dennis Weber, Raymond Luja, Francisco
Alfredo García Prats and Pasquale Pistone, debated with
experienced judges and academics the question of
which way the ECJ should go.6 This criticism echoes the
critical remarks by Julian Ghosh in his recent book Principles of the Internal Market and Direct Taxation.7 The
purpose of this lecture is to (1) summarize the essence of
these criticisms, (2) find out whether they are justified,
and (3) consider the direction in which the Court should
go. The title of the lecture gives an indication of my
opinion on the first two questions.
2. Summary of Criticisms Levelled at the ECJ
Although one of the major criticisms is the inconsistency in the reasoning of the ECJ in tax matters, this
summary reveals that the critics themselves do not
always point in the same direction and that the criticisms are therefore not always consistent with each
other.
2.1. The ECJ exceeds its judicial powers and infringes
on the fiscal autonomy of the Member States
This thesis, which is also often heard in Europe, is best
documented by Graetz and Warren when they wrote in
90
BULLETIN FOR INTERNATIONAL TAXATION MARCH 2008
their learned article: “The ECJ decisions to date suggest
potentially staggering constraints on countries’ freedom
to resolve what strike us as quintessentially legislative
issues – constraints that are fundamentally inconsistent
with the fiscal autonomy retained by the member states
in their right to veto EU taxing provisions.”8 They
pointed to the fact that it is impossible to achieve simultaneously capital-export neutrality (CEN) and capitalimport neutrality (CIN) in a single tax system: “The conflicts underlying this impossibility result can produce
irreconcilable claims of discrimination.”9 On the other
hand, they argued that, based on the concept of discrimination, there are no theoretical arguments to prefer
CIN over CEN and therefore that the ECJ would not be
entitled to make a choice:
There is simply no principled basis to prefer it [CEN] over the
opposite argument that exemption of foreign income (and
source taxation) is discriminatory. Putting the point more generally, prohibiting discrimination based on destination is ultimately inconsistent with prohibiting discrimination based on
origin. This indeterminacy confirms the limits of nondiscrimination as a tool for resolving basic issues of international taxation. The core tax policy issue here is the division of the tax base
between source and residence countries, the resolution of which
has depended more on compromise and practice than on any
overarching principle. Regulating that division by reasoning
from a principle of nondiscrimination ultimately produces an
incoherent result.10
* Prof. Frans Vanistendael is the Academic Chairman of the IBFD and
Director of the European Tax College.
1. See Avery Jones, John, “Carry on Discriminating”, European Taxation 2
(1996), at 46, 49, criticizing the Wielockx and Schumacker decisions: “What is
needed is some independent body which can give the Court the big picture
when the Court’s attention is focused on one small, and ... deceptively simple,
area.”
2. Vermeend, Willem, “The Court of Justice of the European Communities
and direct taxes: ‘Est-ce que la justice est de ce monde’?”, EC Tax Review
1996/2, at 54, 55.
3. Williams, David, “Asscher, the European Court of Justice and the power
to destroy”, EC Tax Review 1997/1, at 4: “The flaw to which I refer is the effect
of the European Union law on the tax and social security systems of the Member States, and the creation with the power to destroy is the European Court
of Justice.”
4. Press release of the German Ministry of Finance of 5 October 2006 on
the day of the submission of the opinion of Advocate-General Stix-Hackl in
Meilicke, Case C-292/04.
5. Graetz, Michael J. and Alvin C. Warren, “Income Tax Discrimination and
the Political and Economic Integration of Europe”, 115 The Yale Law Journal
1186 (2006), at 1188.
6. The reports submitted by Raymond Lula (Maastricht University), Dennis Weber (Amsterdam University), Francisco Alfredo García Prats (University of Valencia) and Pasquale Pistone (University of Salerno and Economic
University of Vienna) together with the other proceedings of the annual
meeting of the EATLP are published in Accounting and Taxation & Assessment
of ECJ Case Law, 2007 EATLP Congress, Helsinki (2008).
7. Ghosh, Julian, Principles of the Internal Market and Direct Taxation
(Oxford Key Haven Publications, 2007), at 266.
8. Graetz and Warren, supra note 5, at 1207.
9. Id. at 1217.
10. Id. at 1219.
© IBFD
Articles
Another point of criticism echoes the comments of
some European authors: “... making nondiscrimination
the sole criterion for the choice necessarily suppresses
considerations of efficiency, fairness, and administrability that should inform difficult tax policy decisions.”11
The principles that should govern national tax policy are
pushed away by the overriding concern for free movement and non-discrimination. This is a judicial reshaping of tax policy that again should be left to the legislator
and does not belong to the competences of the Court.
2.2. ECJ’s inconsistency in applying territoriality and
sovereignty of the Member States in determining
tax jurisdiction and the creation of new “taxing
rights”
The most radical criticism was formulated by Dennis
Weber in his Helsinki report: “The ECJ case law is incorrect from a dogmatic point of view because the Court
does not pay heed to the consequences of its own basic
assumptions e.g. that the Member States are free to
determine the criteria for taxation in order to delimit tax
jurisdiction and to avoid double taxation.”12 Weber’s criticism is based on the following reasoning: (1) capital and
labour-import neutrality (CLIN) is the principle that
best achieves the objectives of the internal market, (2)
CLIN requires applying the principle of territoriality, e.g.
taxation in accordance with the rules of the state of
source or origin and this principle applies to non-resident as well as resident taxpayers, (3) the Member States
have absolute sovereignty in determining their tax jurisdiction and in designing the way in which they eliminate
double taxation, and (4) the ECJ has accepted the principle of territoriality and the sovereignty of the Member
States to determine tax jurisdiction, but (5) the ECJ has
not drawn the logical consequences of its position as
illustrated in particular by its decisions in Bosal Holding,
Marks & Spencer, Manninen and Ritter-Coulais.
2.2.1. CLIN as the best solution for the internal market
In the debate between CLEN and CLIN, Weber favours
CLIN as the best solution for the internal market. It is
interesting to note that this view is quite different from
the position defended by Graetz and Warren. Weber,
however, pointed out that competition is not only
between private undertakings, but that “competition
between legal systems is one of the foundations of the
Internal Market”. Competition between legal systems
includes competition between tax systems. Competition
between tax systems enhances the efficiency of governments, which contributes to the overall efficiency of
economic systems.
2.2.2. Territoriality as a consequence of CLIN
The next step in Weber’s reasoning is that taxation on the
basis of territoriality is the principle which achieves
CLIN most adequately. This principle has also been
accepted by the ECJ as a legitimate criterion by which
the Member States, exercising their sovereign taxing
power, determine their tax jurisdiction. On incoming
© IBFD
movements of persons, services or capital, the ECJ has
consistently applied the fundamental freedoms taking
into account the limitation on tax jurisdiction based on
the principle of territoriality. The problem, however, is
with the application of the principle of territoriality to
outgoing movements by resident taxpayers.
2.2.3. By negating territoriality, the ECJ is creating new
“taxing rights”
The ECJ has recognized the power of the Member States
to decide the criteria for determining their tax jurisdiction and avoiding double taxation. This implies that the
Member States are free (sovereign) to limit their taxing
rights and thus not to levy tax on certain taxpayers or
types of income. The Member States have restricted their
tax jurisdiction either unilaterally or bilaterally in
treaties. In doing so, they applied the principle of territoriality to certain outgoing movements of persons or capital and, as a consequence, these persons or capital, by
exercising their freedom and moving abroad, have left
the tax jurisdiction of a Member State. “Disadvantages
arising because a certain person is not liable to tax or
because certain (negative) income falls outside the tax
base are ... not prohibited restrictions,” and further “[i]f
limiting tax jurisdiction were to be considered a restriction in certain circumstances (and the ECJ were thus
actually to require that a person or type of income had to
be subject to tax), Community law would be creating
taxing rights. This would be a direct breach of Member
State sovereignty”.13 García Prats in his report came to
similar conclusions.
2.2.4. Limitations on the fundamental freedoms as a
factor of negative integration
A similar criticism from a different point of view has
been formulated by Julian Ghosh. Starting from an
analysis of the functions of residence and source in
international taxation, he distinguishes between the
function of residence, on the one hand, in identifying the
tax unit and, on the other, in identifying the tax base, setting the rates, and regulating administration, assessment,
collection and recovery of taxes. This distinction seems
to correspond to the distinction made by the ECJ
between rules determining tax jurisdiction and rules
exercising tax jurisdiction. In the view of Ghosh: “... the
use of residence to define the tax unit cannot, as a matter
of principle, result in a breach of the EC treaty, whereas
the use of residence to define the tax base of a taxing
State ... could indeed result in such a breach.”14 This
rejoins the ECJ’s reasoning in Gilly15 that the determina-
11. Id. at 1212.
12. Accounting and Taxation & Assessment of ECJ Case Law, 2007 EATLP
Congress, Helsinki (2008), Report submitted by Denis Weber, at 113, 115.
13. Id. at 122.
14. Ghosh, supra note 7, at 3.
15. Case C-336/96, Gilly, 12 May 1998, Para. 30: “Although the criterion of
nationality appears as such in the second sentence of Article 14(1) for the purpose of allocation of fiscal jurisdiction, such differentiation cannot be
regarded as constituting a discrimination prohibited under art. 48 of the
Treaty.”
BULLETIN FOR INTERNATIONAL TAXATION MARCH 2008
91
Articles
tion of tax jurisdiction on the basis of nationality cannot, in itself, be considered discriminatory because, as
such, that criterion is totally neutral and does not disadvantage or favour foreign taxpayers.
In discussing Marks & Spencer, Ghosh wrote that the
consequence of this reasoning should be that “[i]n relation to a non-resident person, with no source of profits
within the jurisdiction of the taxing State, the State has
not exercised jurisdiction at all”.16 And then comes the
essence of his criticism of Marks & Spencer: “To require a
State to treat a non-resident as a resident is to extend its
legislative jurisdiction by force and to use the negative
integrative tools of the freedom as a positive integration
mechanism.”17
The correct decision in principle would have been that the freedoms ... were not breached by the UK group relief provisions.
This conclusion results from the negative integrationist nature
of the freedoms. This conclusion would also have been consistent with the Court’s previous case law. However the Court held
that there was a prima facie breach but which breach was justified (and proportional). ... [T]he finding of a prima facie breach
was an error.18
What the fundamental freedoms do not require is that a
Member State assert jurisdiction where it has not previously done so. It is the illegitimate exercise of (here fiscal) jurisdiction, not its existence, that is the subject of
the application of the freedoms. This is a shorter and
more radical formulation of the same criticism made by
Weber and García Prats – that the ECJ is creating positive rights for taxpayers where there are none.
2.3. Two examples of inconsistency: the wrong
decisions in Bosal Holding and Marks & Spencer
In Bosal Holding, the ECJ’s error is based on the argument that it wrongly rejected the arguments of coherence and territoriality and that it did not accept the economic link between the profits of the foreign subsidiary
and the costs of the share acquisition incurred by the
parent company.
In Marks & Spencer, the error is based on a variation of
the same argument. As Weber put it:19
Despite the fact that the UK chose not to tax non-resident subsidiaries (which choice it has the fullest right to make), the
Court has actually created a tax liability for the losses of nonresident subsidiaries in the UK, since, in principle, the losses of
the subsidiaries have to be taken into account at the level of the
parent company. This is a major breach of Member States’ sovereignty.
Because the United Kingdom relinquished tax jurisdiction over foreign subsidiaries, it had no obligation whatever under the fundamental freedoms of the EC Treaty
to take into account the losses of foreign subsidiaries,
and there was no legal basis for creating rights for foreign taxpayers over which the UK has no jurisdiction.
national tax policy and, by unlawfully extending its
powers, it creates taxing rights in cases where there
should be none, in particular in “outbound” cases. It is
clear that such fundamental criticisms deserve some
answers, although the answer here concentrates mainly
on the issue of how far the powers of the ECJ reach
under the fundamental freedoms.
3. Answering the Criticisms: What Should the
ECJ Do?
3.1. The ECJ’s consistency in applying the basic
principles
3.1.1. Bosal Holding
Was the ECJ not coherent in the Bosal Holding decision?
From an economic point of view, the argument has been
made that there was a direct link between the profits of
the foreign subsidiary and the interest deduction on the
loan contracted by the Dutch parent company to acquire
the shares of the subsidiary. Since the subsidiary’s profits
were not subject to tax, the interest deduction should not
be allowed against the parent company’s profits. It was
argued that the interest deduction should be taken by
the subsidiary, not by the parent company.
This reasoning overlooks the fact that there is no direct
link, even from an economic point of view, between the
interest expense and the profits of the subsidiary. Economically, there are indeed two steps, not one, to be
made between the interest deduction and the profits of
the subsidiary. The direct link is between the interest due
on the loan and the acquisition of the shares of the subsidiary. The acquisition of the shares does not by itself
result in profits either for the subsidiary or for the parent. In the case of a purchase of the shares for cash, the
cash paid does not even belong to the subsidiary. It
belongs to the parent. The subsidiary is obliged to
finance its current operations by sources other than the
loan contracted for the acquisition of the shares. Therefore, it would not be economically correct to deduct the
interest expenses paid for the acquisition of the shares of
the subsidiary from its profits. The interest should be
deducted only from the income distributed on the
shares. According to international tax principles, such
dividend distributions to the foreign parent company
can be made subject to the corporate income tax in its
residence country, but not in the residence country of
the subsidiary. Therefore, the interest deduction should
be accounted for in the residence country of the parent
company.
The same reasoning also overlooks the existence of two
legal dividing lines between the Dutch parent and the
foreign subsidiary. The companies are two distinct legal
entities and therefore two distinct taxpayers. In a consolidation regime, this dividing line could of course be
2.4. Conclusions
The result of this analysis is fairly devastating for the ECJ
case law. The ECJ is exceeding its judicial mandate, it
does not heed the basic principles of national and inter92
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16.
17.
18.
19.
Ghosh, supra note 7, at 81.
Id.
Id. at 82.
Weber, supra note 12, at 124.
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ignored. Both companies could be taxed as a single
entity. However, the issue of whether consolidation
regimes operate cross-border in Europe is subject to
debate. In addition, there is a dividing line between two
national tax systems: the subsidiary and the parent are
subject to different tax jurisdictions. If we respect the
boundaries of these jurisdictions, it is not evident that
the expenses incurred in one jurisdiction are deductible
in another jurisdiction. If we take into account these
considerations, the Bosal Holding decision by the ECJ
does not look so inconsistent.
3.1.2. Marks & Spencer
Marks & Spencer is, of course, the hallmark case of territoriality and the symmetric application of the laws of a
national tax jurisdiction. If there is no power to tax foreign income, there is no obligation to allow a deduction
for foreign losses. The outcome of the Marks & Spencer
decision followed this logic because the ECJ held that
the restriction was justified. It only made a (small)
exception on the basis of the principle of proportionality. Thus, the right to disallow foreign losses was not
absolute. Only in very extreme cases was a transfer of
losses from one tax jurisdiction to another held to be
mandatory under EU law. Is this inconsistent with the
principle of territoriality, an attack on the absolute tax
sovereignty of the Member States, or a deadly danger to
their tax policies or their power to determine tax jurisdiction?
From the point of view of principle, the UK’s tax jurisdiction did not extend to foreign subsidiaries (1)
because they were not residents and (2) because there
was no source of income in the UK. Therefore, in the
view of the Tax Commissioners, that was the end of the
story. There was no doubt that there was not even an
issue under the fundamental freedoms. Why did the ECJ
did not see this clear distinction?
We should keep in mind that the UK operates a system
of group relief allowing for the transfer of losses from
subsidiaries to the parent company and that foreign
companies can be members of the group. Therefore, the
question whether there was a discriminatory restriction
focused on the unequal application of the rules on the
transfer of losses between domestic and foreign subsidiaries and their respective UK parent companies,
while the basic issue of tax jurisdiction was somewhat
obscured. In general, however, even though it did not use
the right theoretical arguments, the ECJ in Marks &
Spencer gave clear priority to the determination of tax
jurisdiction over the discriminatory treatment of outbound companies. The subsequent Finnish case of OY
AA20 gave an indication of what could happen if companies were free to decide to transfer their losses from one
tax jurisdiction to another. The notion of national tax
jurisdiction would lose all its meaning, and the ECJ is
clearly determined not to permit such chaos.
On the other hand, the ECJ could not negate its own
well-established case law condemning all kinds of discriminatory restrictions on outbound movements in
© IBFD
non-tax cases. In addition, the full force of the principle
of division of tax jurisdiction may not have been apparent to the ECJ in Marks & Spencer because, until then,
the debate had concentrated mainly on coherence of the
national tax system. Hence the decision may not be
entirely satisfactory from the point of view of principle,
but is a valiant attempt to reconcile the legitimate interests of the Member States and their right to determine
tax jurisdiction, on the one hand, and the fundamental
freedoms enshrined in the EC Treaty, on the other. The
ECJ ultimately made a choice, as it should, for the primacy of the concept of the internal market over the
essential concepts of residence and source; nevertheless,
the ECJ clearly took account of the necessity to protect
national tax systems by respecting the boundaries of
their national tax jurisdiction. The damage done by
Marks & Spencer to national tax systems is very limited.
Current cross-border losses are clearly not deductible
under its holding, and I wonder how many groups of
companies will emulate the example in Marks & Spencer
and attempt to deduct their liquidating losses in the
Member State of the parent company.
3.2. Creation of new rights for taxpayers without legal
basis
This idea rejoins the widespread criticism that the ECJ is
not interpreting but legislating in the area of taxation.
Weber and García Prats brought more focus to this criticism: if a Member State that abstains from exercising its
taxing power is construed to be discriminating or
restricting and the ECJ grants rights to taxpayers as if the
Member State had exercised its tax jurisdiction, the ECJ
is creating taxing rights which did not exist before.
3.2.1. Fiscal sovereignty is neither exclusive nor absolute:
the EC Treaty
This criticism raises the question of the distribution of
powers in the European construction. First, it should be
mentioned that the much vaunted tax sovereignty of the
Member States is neither absolute nor exclusive. It is not
exclusive because the EC Treaty clearly provides in
Art. 94 that the EU “has the competence to approximate
the laws, regulations or administrative provisions of the
Member States, by way of directive, where they directly
affect the establishment or functioning of the common
market”. Contrary to the measures mentioned in Art. 95,
tax directives must be approved unanimously. Art. 96
provides that, when the Commission finds that a difference in national law is distorting competition in the
common market, “it shall consult the member states con-
20. Case C-231/05, Oy AA, 18 July 2007, Para. 56: “... to accept that an intragroup cross border transfer ... may be deducted from taxable income of the
transferor would result in allowing groups of companies to choose freely the
Member State in which the profits of the subsidiary are to be taxed, by removing the basis of the assessment of the latter and, where that transfer is regarded
as taxable income in the Member State of the parent company transferee,
incorporating them in the basis of assessment of the parent company. That
would undermine the system of the allocation of the power to tax between the
Member States ....”
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cerned”. If that consultation has no effect, “the Council
shall, acting on a proposal of the Commission, acting by
qualified majority, issue the necessary directives”. There
is no exception for taxation. Although the latter provision has never been used for tax purposes, it is clear that
the founding fathers of the European Community
clearly intended to grant legislative power to the Community, also in the area of direct taxation, when this
would be necessary for the functioning of the common
market. Since it is indisputable that direct taxation has
an important bearing on the functioning of the internal
market, it is clear that the sovereign taxing power of the
Member States is not exclusive; they share the power
with the EU.
The taxing power is also not absolute. All laws of the
Member States, including all tax laws, are subject to the
provisions of the EC Treaty: the free movement of goods
(Arts. 28-31), the four economic freedoms (Arts. 39-58),
and the non-discrimination provisions (Arts. 90-93).
There are some public policy exceptions to this primacy
of European law mentioned in the EC Treaty, but taxation and the loss of public revenue are not part of these
exceptions. The only possible exception could be Art.
293 of the EC Treaty stipulating that the Member States
shall enter into negotiation with each other in order to
abolish double taxation, which would mean that issues
of double taxation could only be resolved through bilateral tax treaties.
Such a conclusion is unwarranted, however. This follows
from the general structure of the EC Treaty. Art. 293
belongs to the general and final provisions of the Treaty,
which contain a mixed bag of unstructured, miscellaneous clauses. It cannot be disputed that issues of direct
cross-border taxation are vital to the functioning of the
common market. The legislative power with respect to
those issues in the area of taxation is laid down in Arts.
93, 94 and 96 of the EC Treaty. Taking into account the
public policy exceptions, the scope of the primacy of the
EC Treaty provisions is absolute. The consequence of
this hierarchy of norms is that Art. 293 cannot be viewed
as a kind of “carve out” for international taxation, e.g. a
provision that gives exclusive power to the Member
States to decide issues of international double taxation.
It is rather a specific supplemental provision that, in
addition to the ordinary Treaty rules, grants power to the
Member States also to regulate issues of international
double taxation.
3.2.2. Fiscal sovereignty is neither exclusive nor absolute:
the case law
Fiscal sovereignty is neither exclusive nor absolute. This
follows from decisions of the ECJ on these issues. The
Gilly decision is much cited as justifying the absolute
power of the Member States with respect to tax treaties.
This is not the correct reading of the case. Gilly accepted
the reasonable operative rules of tax treaties inspired by
the OECD because Art. 293 specifically invites the
Member States to conclude such treaties for the elimination of double taxation, and therefore these rules, agreed
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in bilateral treaties, constitute a valid legal basis for the
Member States to act in matters of direct taxation under
the EC Treaty. In the Gilly decision, however, the ECJ
said: “The Member States are competent to determine
the criteria for taxation of income and wealth with a
view to eliminating double taxation – by means, inter
alia, of international agreements – and have concluded
many bilateral conventions based, in particular, on the
model conventions on income and wealth tax drawn up
by the Organisation of Economic Cooperation and
Development (‘OECD’).”21 The key words here are “inter
alia”, which mean that next and in addition to the traditional and classical instruments like international tax
conventions for the avoidance of double taxation based
on the OECD Model, there is also room for the European communitarian instruments to eliminate economic double taxation. This is highlighted by the
approval of the Parent-Subsidiary Directive on dividends and also by the ECJ case law under the banner of
the fundamental freedoms.
The case in point here is Saint-Gobain where the
Swedish government argued in the style of the D case: “...
that double taxation treaties are based on the principle
of reciprocity and that the balance inherent in such
treaties would be disturbed if the benefit of their provisions was extended to companies established in Member
States which were not parties to them.”22 The ECJ literally repeated its holding in Gilly that, in the absence of
harmonization measures, the Member States remain
competent to determine the criteria for taxation with a
view to eliminating double taxation by means, inter alia,
of international agreements. But then it decided that
“[i]n the case of a double taxation treaty concluded
between a Member State and a non-member country,
the national treatment principle requires the Member
State ... to grant permanent establishments of non-resident companies the advantages provided for by that
treaty on the same conditions as those which apply to
resident companies”.23 This is a clear holding that the
right of establishment overrules a basic rule of international taxation, i.e. that permanent establishments of
non-resident companies do not have access to treaty
benefits. It may be a matter of debate whether this international tax rule is a rule determining jurisdiction or a
rule flowing from exercising tax jurisdiction, but the rule
was clearly set aside on the basis of the primacy of EU
Community law over international treaty law.
3.2.3. Consequences of ECJ decisions on the basis of
fundamental legal texts
Once the relative hierarchy between the legal order of
the European Community and the national legal order
of the Member States has clearly been established as it
has been in innumerable tax and non-tax decisions of
the ECJ, it is inevitable that the enforcement of the fun-
21. Case C-336/96, Gilly, 12 May 1998, Para. 24.
22. Case C-307/97, Saint-Gobain, 21 November 1999, Para. 56.
23. Id., Para. 58.
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damental freedoms under the EC Treaty results in creating “new taxing rights” which did not exist before. This is
indeed the inevitable consequence of using the technique of “fundamental rights” under the EC Treaty, but
also under other international treaties and even under
national constitutions.
If we look at the legal consequences of the application of
fundamental rights by national constitutional courts in
national legal systems, we find that, on the basis of these
fundamental rights, the constitutional courts have created rights to employment and access to professions,
education and equal pay that did not exist before. In fact,
in the area of non-discrimination or equal protection
under the law, the national constitutional courts have
used exactly the same technique as the ECJ by using
their negative power to strike down national statutes and
other regulations that excluded women or specific
minority groups from access to professions, education,
employment, medical care, etc. The major difference
with the EU has been that the national legislature in
most, but not all, cases has reacted very quickly to implement the constitutional court’s negative decisions in a
positive way in the framework of national legislation. In
creating these “rights”, including “taxing rights”, the ECJ
has acted precisely in the same way as international
courts and national supreme and constitutional courts
have acted on the basis of similar legal texts.
The argument that the ECJ has no legitimate basis to
make such decisions because it was not elected is not
valid because national constitutional courts are also not
elected. The constitutional freedoms on which they
based their decisions have, of course, been approved by
democratically elected constitutional assemblies, but so
has the EC Treaty been approved in special laws by all
democratically elected national parliaments of all the
Member States.
The argument that no one could have envisaged on 25
March 1957 at the signing of the Treaty of Rome the farreaching consequences for direct taxation of the fundamental freedoms is also not valid. This is clear when we
apply the same reasoning outside the area of taxation.
Most people could also not have envisaged the farreaching consequences for criminal law, family law or
labour or educational law of some national constitutional and international treaty freedoms with respect to
the rights of minority groups. This has not been a valid
reason for rejecting the decisions of courts in creating or
upholding these rights on the basis of international
treaties or constitutional texts.
This way of making tax laws is rather new. It is not the
traditional way founded on the principle of “no taxation
without representation”, which is strongly based on the
principle of legality and the approval of detailed statutes
in parliament. We should not overlook the fact, however,
that in many other areas of law, including even criminal
law, judge-made case law by the European Court of
Human Rights has sometimes taken the place of the
national legislature. In all these cases, it is because the
legislature was unwilling to confront these new develop© IBFD
ments that judges have taken the driver’s seat. But their
decisions are always based on treaty provisions that were
democratically approved by national parliaments.
3.3. In which direction should the ECJ go?
3.3.1. Role of the concept of the internal market
Once we have accepted that the application of the fundamental freedoms by court decisions inevitably results
in changing the substantive national tax law by abolishing some tax rules and thereby creating some new taxing
rights, the question put by García Prats and Pistone, of
course, remains: In which direction to go? The easy and
general answer to this question is clear: in the direction
of an internal market without borders and free and fair
competition and in the direction of a level playing field
at the snooker table. That, however, is only part of the
answer. The other part is that, within the internal market,
the Member States should have viable national tax systems capable of raising the major part of the revenue
needed to provide public services for their citizens,
although the EC Treaty does not contain substantive tax
principles to build such national systems. The more difficult question is: What is the correct balance between
these two objectives and which are the fundamental
principles achieving such balance?
There are many questions of tax policy on which the
concept of the internal market does not give the slightest
indication of an answer and on which consequently the
ECJ should not take a position – for example: double or
single taxation of dividend distributions to individuals,
the unit for personal income taxation (couple or individual), the progressivity of the tax scale in the personal
income tax, etc. Regarding such questions, the role of the
ECJ should be to stay out of any possible discussion of
these issues in the framework of a national tax system.
3.3.2. Concept of the internal market is decisive between
CLIN and CLEN
There is, however, one major question of policy on
which the ECJ could justifiably take a position, and that
is the question whether CLEN or CLIN is the tax system
most compatible with the internal market. Many academics in Europe have made a convincing plea from a
theoretical point of view to adopt CLIN as the general
tax system for the internal market. The essence of the
internal market has indeed been defined in Arts. 3(c)
and (g) of the EC Treaty as: “A ... market characterised by
the abolition, as between Member States, of obstacles to
free movement of goods, persons, services and capital ....
And a system ensuring that competition ... is not distorted.”24 The core of the internal market is based on
competition, not only between business enterprises, but
also between the tax systems of the Member States, and
24. Although in the renewed Treaty agreed upon at the Lisbon summit in
October 2007 the notion of competition is no longer specifically mentioned
in the concept of the internal market, the protocol to the Treaty makes it clear
that this vital element in the definition of the internal market remains
unchanged.
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this competition is best served by CLIN. The defenders
of CLEN argue that taxes are not neutral and undermine
economic efficiency and that, therefore, the differences
in tax systems should be eliminated by the CLEN policy
and the credit method. It is generally accepted, however,
that public services are indispensable for economic
activity in the market sector: without advanced public
services, no advanced market economy. These public
services are financed by tax systems. In order to provide
these services efficiently, competition between governments – and hence competition between tax systems – is
desirable. Such competition is possible with CLIN, but
almost entirely excluded with CLEN.
In addition, when, as seems more and more likely, the
United Kingdom moves to a system of exemption for
foreign-source dividends, this will leave only Greece,
Ireland, Malta and Poland in the EU as adherents of the
credit system. Even based on this overwhelming evidence, the ECJ may still not have the power to impose
CLIN and the exemption system on the Member States
right away, but the ECJ could certainly use its “power to
destroy” to sharpen its opinion on the discrimination
and restrictions resulting from the credit system and
make Community life more miserable for the Member
States continuing to apply that system.
3.3.3. Consequences of CLIN on the substantive tax law
of the Member States
The question is whether the ECJ in its decision-making
process should wait until the last EU Member State has
made up its mind and there is de facto unanimity in
favour of exemption and CLIN. In my view, the ECJ
should not because this would mean that a single Member State, however small in comparison to the mass of all
the other Member States, would be able to block the
decision-making process in the Court. For the approval
of legislation, the EC Treaty formally requires the unanimity of all the Member States for e.g. directives in taxation. However, for the ECJ to decide an issue concerning the internal market, which it has the power to decide
under the EC Treaty, there is no rule requiring consensus
or unanimity on the issue by all the Member States. If the
decision advances realization of the objectives of the
internal market and if the overwhelming majority of the
Member States has accepted a similar substantive solution in their tax legislation, the ECJ is reasonably
entitled to take such a decision.
In some areas, CLIN cannot be used as a principle of
policy, such as for instance the taxation of interest
income of individuals.25 For reasons of interpersonal
equity, the EU Member States have clearly chosen to tax
interest income, based on the exchange of information,
in the residence country of the taxpayer, but also to neutralize any tax levied in the source country. This is a clear
indication which the ECJ should follow in dealing with
double taxation and discrimination or restriction on
interest income paid to individuals. Withholding taxes
in the source country should be abolished when they
discriminate against non-resident taxpayers. Foreign
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withholding taxes should be credited when double taxation results from the parallel exercise of taxing powers.
3.3.4. The one or two country approach
Finally, there is the question of the one or two country
approach. This question should, in my view, be subdivided in two quite distinct situations: (1) where one
Member State is indeed discriminating, but the discrimination may be compensated by the impact of the
domestic tax system of the other Member State; and (2)
where cross-border flows of income, capital or labour
are indeed treated less favourably, but the disadvantage
results from the parallel and non-discriminatory exercise of the taxing powers of two Member States.
Regarding the first situation, the EFTA (European Free
Trade Association) Court, which operates under the
same rules as the ECJ, has taken the position that a state
of source or origin is not excused from violating the
EFTA Treaty because the negative consequences of its
discrimination are compensated by a favourable tax
treatment in the residences state.26 The ECJ has not yet
played its final hand. In Manninen,27 it indicated that it
might take into account the mitigating effect on double
taxation of the tax system of the other Member State (the
source state). In Denkavit Internationaal BV,28 it decided
that the combination of treaty provisions and the
domestic tax system of the other Member State (the residence state) was relevant in theory, but not in practice;
but the Court did not take any position on the sole effect
of the domestic rules of the other state (of residence)
without any reference to the provisions of a tax treaty.
The effective impact of a tax treaty concluded by a Member State may be taken into account in combination with
the domestic rules of the other state. But the Court did
not rule on the effect of advantageous parallel domestic
tax rules in another Member State when they incidentally would also resolve discrimination problems in the
source state. In this respect, CLIN may resolve discrimination issues in the source state, but CLIN by itself does
not resolve issues of double taxation following the parallel exercise of tax jurisdiction by the source and residence states.
The second situation is of a different nature. Two Member States are also involved, but the disadvantage results
from a double burden or a parallel and non-discriminatory exercise of taxing powers. It has been argued several
times by Advocate-General Geelhoed and also, among
others, in the famous case of Test Claimants Class IV of
the ACT Group Litigation that there is no legal basis for
eliminating these cases of economic or juridical double
taxation as a result of what he described as “quasi-restric-
25. Council Directive 2003/48 EC of 3 June 2003 on the taxation of savings
income in the form of interest payments.
26. Case E-1/04, Fokus Bank, 23 November 2004.
27. Case C-319/02, Pätri Manninen, 7 September 2004, Para. 34.
28. Case C-170/05, Denkavit Internationaal BV, 13 December 2006,
Paras. 44-54.
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tions”.29 According to this position, the ECJ has no legal
authority to eliminate cumulative administrative burdens, economic double taxation or even juridical double
taxation resulting from the juxtaposition of national tax
rules on the basis of the rules dividing and allocating
national tax jurisdiction.
I respectfully disagree with this position. Cumulative
burdens, economic and juridical double taxation, even
when they result from the parallel and non-discriminatory exercise of tax jurisdiction, are clearly in contradiction with the basic concept of the internal market. As
indicated above, these instances of double taxation can
be removed not only by tax treaties and secondary Community legislation like directives and regulations, but
also by Community jurisprudence on the basis of the
supremacy of the fundamental freedoms. In its case law,
the ECJ has made a distinction between establishing the
criteria determining tax jurisdiction and the rules by
which the Member States exercise tax jurisdiction. The
former are outside the scope of scrutiny by the ECJ, the
latter are within.
First, the distinction between the rules determining tax
jurisdiction and the rules exercising tax jurisdiction is
not an easy one to make. When a Member State determines that a person or company is a resident within the
ambit of its tax system, is the Member State determining
its jurisdiction or is it interpreting its national tax law
and exercising its jurisdiction? When a Member State
determines that interest income is connected to a permanent establishment in its territory, it decides at the
same time that the interest income is business income
and therefore income from a permanent establishment
falling within its tax jurisdiction. By deciding that the
interest income is connected to the permanent establishment, the Member State has interpreted its rules on
interest income as business income or as private investment income and therefore exercised its taxing power
within its jurisdiction. But the consequence of applying
this rule is that the income from a permanent establishment belongs to its tax jurisdiction and that means it is
defining its tax jurisdiction. I find it difficult to make the
intellectual distinction between the two parts of this single decision.
Second, there is no reason of principle why rules “exclusively” determining tax jurisdiction should be out of
bounds when applying the fundamental freedoms, at
least if we accept the concept of the internal market as
the guiding principle for deciding cases under the EC
Treaty. There is long-standing case law that the fact that
a particular area of (tax) law has not yet been harmonized is no excuse for not applying the fundamental
freedoms to this area. In other words, the fact of nonharmonization means that the Member States are indeed
still free to legislate or to conclude tax treaties, but these
treaties and tax laws, including the existing laws, must be
in conformity with the dominating provisions of the EC
Treaty. There is also no legal basis for “carving out” the
international rules determining tax jurisdiction, either
in the EC Treaty or elsewhere. The reason why the ECJ in
© IBFD
Gilly held that the tie-breaker rule of nationality did not
constitute discrimination was not that the ECJ had no
jurisdiction to rule on this question, but that it was a reasonable rule which in itself had no discriminatory effect.
A rule merely determining which state has the power to
tax is almost always absolutely neutral as to the operation of the internal market and therefore cannot under
any circumstances be discriminatory. The result of
applying this rule may well be that a taxpayer exercising
his right to free movement pays more tax in the new
Member State. But that result is not in contradiction
with the internal market. The objective of the internal
market is not to erase all tax differences between the
Member States, but, among other things, to erase the
double burdens occurring in the exercise of the basic
freedoms.
In this respect, it is of great interest to find out precisely
the scope of the international rules determining tax
jurisdiction. These rules are simple and few in number.
Their only purpose is to determine which state is entitled to tax. Residence and source in the national territory
and sometimes nationality are the criteria on the basis of
which tax jurisdiction is divided between states. Here I
would like to point out that the act of determining tax
jurisdiction is restricted to the decision of a state to tax
residents (in principle on their worldwide income) or to
tax non-residents (on their income from the national
territory).
29. See several opinions by Advocate-General Geelhoed in Case C-374/04,
Test Claimants Class IV of the ACT Group Litigation, 23 February 2006, Paras.
36-39: “... in the direct taxation sphere, there is no practical difference between
these two manners of formulation i.e. ‘restriction’ and ‘discrimination’. What is
essential, however, is to distinguish between two senses of the term ‘restriction’
when dealing with direct tax rules. The first refers to restrictions resulting
inevitably from the co-existence of national tax systems. In accordance with
Member State competence for the area in the present state of Community law,
direct tax within the E.U. is governed by co-existing discrete and varied
national tax systems. Certain disadvantages for companies active in crossborder situations result directly and inevitably from this juxtaposition of systems and in particular: (1) from the existence of cumulative compliance burdens for companies active cross-border; (2) the existence of disparities
between national tax systems; and (3) the necessity to divide tax jurisdiction,
meaning dislocation of tax base ....
... The use of the term ‘restriction’ – although employed in the Court’s
case law – is in this context misleading. In reality, at issue here are distortions
of economic activity resulting from the fact that different legal systems must
exist side-by-side. In certain cases these distortions provide disadvantages for
economic actors; in other cases, advantages. While in the first case they are
‘restrictive’, in the second case they stimulate cross border establishment activity. Although the Court is as a rule faced with what can be termed ‘quasirestrictions’ flowing from these distortions, one should not forget that there is
a second side to the coin – that is where particular advantages arise from the
cross border establishment .... The causes and character of these ‘quasi-restrictions’ mean that they may only be eliminated through the intervention of the
Community legislator, by putting in place a cohesive solution on an EU-wide
scale, that is an EU-wide tax system. In the absence of an EU-wide tax solution, therefore such quasi-restrictions should be held to fall outside the scope
of Article 43 EC.”
Case C-513/04, Kerckhaert-Morres, 6 April 2006, Paras. 30-31: “In this
regard, I would recall that the free movement provisions of the Treaty do not
as such oblige home states to relieve juridical double taxation resulting from
the dislocation of tax base between two Member States ... the possibility of
juridical double taxation, in the absence of priority rules between the relevant
States, is an inevitable consequence of the generally accepted method under
international tax law of dividing tax jurisdiction between States – that is, the
distinction between home State taxation (worldwide taxation of residents)
and source State taxation (territorial taxation of non-residents). Under Community law, the power to choose criteria of, and allocate, tax jurisdiction lies
purely with the Member States, as governed by international tax law.”
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Restricting the tax base of residents by exempting, by
treaty or unilaterally, parts of the worldwide tax base is
an act, not of determining tax jurisdiction, but of exercising it, and such exercise may have discriminatory
effects. One example is the Ritter-Coulais decision30
where Germany taxed residents on foreign real estate
income, but then by treaty excluded foreign income and
then by domestic provisions excluded foreign losses, but
included foreign profits for calculating the progressive
tax rate. By the combination of these two measures, Germany did not determine its tax jurisdiction, but did exercise it. If we restrict the rules determining the tax base to
their basic functions, it is logical that such rules escape
scrutiny under the fundamental freedoms because they
operate in the internal market in a strictly neutral way. In
all other cases, the state is exercising its tax jurisdiction,
and these rules are subject to scrutiny by the ECJ, also in
cases where there is economic or juridical double taxation because of the juxtaposition of legal systems.
double taxation in the sense of facilitating the internal
market if that decision is fully backed by the national
policy choices of a large majority of the Member States.
After a decision by the ECJ, the Member States have
more room for choice and manoeuvre than when a
directive or regulation has been approved. Therefore,
decisions of the ECJ on policy issues are satisfactorily
legitimized when they fulfil two conditions: (1) they
facilitate movements in the internal market, and (2) they
reflect the policy choices of the large majority of the
Member States. This also means that where the policy
choice of the Member States is not clear or is not supported by a large majority, the ECJ should abstain from
making decisions and refer the solution to the legislative
process of harmonization, subject to the unanimity
requirement.
4. Concluding Remarks
My concluding remarks can be very short.
3.3.5. Which national tax system must make the
concession?
When there is pure juxtaposition and no discrimination,
the final question that has been haunting the European
tax scene is: Which Member State must give in and on
what legal ground? In some cases, the choice for CLIN
may give an indication to the ECJ which priority to follow. However, when the Member States have clearly chosen to follow another road, like for residence taxation of
interest paid to individuals, the ECJ should follow the
priority indicated by the Member States. As the guiding
principle for the ECJ, I propose the policy choice of the
overwhelming majority of the Member States on any
given tax issue on the condition, of course, that this issue
raises a question of cross-border discrimination or
restriction under the EC Treaty. The legal basis for such a
decision is, on the one hand, the ECJ’s mandate under
the EC Treaty to enforce the basic freedoms in the sense
of the internal market and, on the other, the consideration that a single Member State or a few Member States,
representing only a very small part of the total European
population, should not be in a position to block a judicial decision on an important issue of market integration in the EU. Unanimity on a directive may be required
because the results are mandatory for all the Member
States within a given period of time. The judicial process
of the ECJ decisions and their implementation in the
Member States are quite a different and a much slower
and gradual process. Therefore, the ECJ would be fully
justified in taking a decision on double burdens and
98
BULLETIN FOR INTERNATIONAL TAXATION MARCH 2008
We should all keep in mind that building a multistate tax system by case law is much more difficult
that building a multi-state tax system by legislation,
even though the latter is also considered a very
difficult enterprise. What the ECJ is doing in
Europe is trying to reshape national tax systems so
that they become compatible with the EC Treaty in
general and the internal market in particular. The
ECJ is not in the business of harmonizing all
national tax systems. The mandate for this mission
is the EC Treaty, and the ECJ is using the Treaty in
the same way as other international courts and
national supreme and constitutional courts are
using their basic texts to reach decisions in many
fields of law, including taxation. In doing so, the ECJ
is acting the same way as the English common law
courts which have been building the English legal
system on a case-by-case basis. Citing John Avery
Jones: “It is difficult enough for a court to decide the
case before it. When the ECJ has been deciding
cases for as long as the courts have in English
common law, there will be less difficulty in seeing
where it is going.”31 The English courts have taken
more than 500 years; the ECJ, so far, has taken 50.
30. Case C-152/03, Ritter-Coulais, 21 February 2006.
31. Closing oral remarks of the intervention by John Avery Jones at the 2007
EATLP annual meeting in Helsinki.
© IBFD
Part II
Tax Harmonization and Tax Competition
Texts of the Directives



Parent-Subsidiary-Directive
Merger Direct ive
Interest-Royalties-Directive
1990L0435 — EN — 01.01.2007 — 004.001 — 1
This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B
COUNCIL DIRECTIVE
of 23 July 1990
on the common system of taxation applicable in the case of parent companies and subsidiaries of
different Member States
(90/435/EEC)
(OJ L 225, 22.9.1990, p. 6)
Amended by:
Official Journal
No
►M1
►M2
Council Directive 2003/123/EC of 22 December 2003
Council Directive 2006/98/EC of 20 November 2006
page
date
L 7
L 363
41
129
13.1.2004
20.12.2006
C 241
L 1
L 236
21
1
33
29.8.1994
1.1.1995
23.9.2003
Amended by:
►A1
►A2
Act of Accession of Austria, Sweden and Finland
(adapted by Council Decision 95/1/EC, Euratom, ECSC)
Act concerning the conditions of accession of the Czech Republic, the
Republic of Estonia, the Republic of Cyprus, the Republic of Latvia,
the Republic of Lithuania, the Republic of Hungary, the Republic of
Malta, the Republic of Poland, the Republic of Slovenia and the Slovak
Republic and the adjustments to the Treaties on which the European
Union is founded
Corrected by:
►C1
►C2
Corrigendum, OJ L 23, 29.1.1991, p. 35 (90/435)
Corrigendum, OJ L 16, 18.1.1997, p. 98 (90/435)
1990L0435 — EN — 01.01.2007 — 004.001 — 2
▼B
COUNCIL DIRECTIVE
of 23 July 1990
on the common system of taxation applicable in the case of parent
companies and subsidiaries of different Member States
(90/435/EEC)
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic
Community, and in particular Article 100 thereof,
Having regard to the proposal of the Commission (1),
Having regard to the opinion of the European Parliament (2),
Having regard to the opinion of the Economic and Social Committee (3),
Whereas the grouping together of companies of different Member States
may be necessary in order to create within the Community conditions
analogous to those of an internal market and in order thus to ensure the
establishment and effective functioning of the common market; whereas
such operations ought not to be hampered by restrictions, disadvantages
or distortions arising in particular from the tax provisions of the
Member States; whereas it is therefore necessary to introduce with
respect to such grouping together of companies of different Member
States, tax rules which are neutral from the point of view of competition, in order to allow enterprises to adapt to the requirements of the
common market, to increase their productivity and to improve their
competitive strength at the international level;
Whereas such grouping together may result in the formation of groups
of parent companies and subsidiaries;
Whereas the existing tax provisions which govern the relations between
parent companies and subsidiaries of different Member States vary
appreciably from one Member State to another and are generally less
advantageous than those applicable to parent companies and subsidiaries
of the same Member State; whereas cooperation between companies of
different Member States is thereby disadvantaged in comparison with
cooperation between companies of the same Member State; whereas it is
necessary to eliminate this disadvantage by the introduction of a
common system in order to facilitate the grouping together of
companies;
Whereas where a parent company by virtue of its association with its
subsidiary receives distributed profits, the State of the parent company
must:
— either refrain from taxing such profits,
— or tax such profits while authorizing the parent company to deduct
from the amount of tax due that fraction of the corporation tax paid
by the subsidiary which relates to those profits;
Whereas it is furthermore necessary, in order to ensure fiscal neutrality,
that the profits which a subsidiary distributes to its parent company be
exempt from withholding tax; whereas, however, the Federal Republic
of Germany and the Hellenic Republic, by reason of the particular
nature of their corporate tax systems, and the Portuguese Republic,
(1) OJ No C 39, 22. 3. 1969, p. 7 and Amendment transmitted on 5 July 1985.
(2) OJ No C 51, 29. 4. 1970, p. 6.
(3) OJ No C 100, 1. 8. 1969, p. 7.
1990L0435 — EN — 01.01.2007 — 004.001 — 3
▼B
for budgetary reasons, should be authorized to maintain temporarily a
withholding tax,
HAS ADOPTED THIS DIRECTIVE:
Article 1
1.
Each Member State shall apply this Directive:
— to distributions of profits received by companies of that State which
come from their subsidiaries of other Member States,
— to distributions of profits by companies of that State to companies of
other Member States of which they are subsidiaries,
▼M1
— to distributions of profits received by permanent establishments
situated in that State of companies of other Member States which
come from their subsidiaries of a Member State other than that
where the permanent establishment is situated,
— to distributions of profits by companies of that State to permanent
establishments situated in another Member State of companies of the
same Member State of which they are subsidiaries.
▼B
2.
This Directive shall not preclude the application of domestic or
agreement-based provisions required for the prevention of fraud or
abuse.
Article 2
►M1 1. ◄ For the purposes of this Directive ‘company of a
Member State’ shall mean any company which:
(a) takes one of the forms listed in the Annex hereto;
(b) according to the tax laws of a Member State is considered to be
resident in that State for tax purposes and, under the terms of a
double taxation agreement concluded with a third State, is not
considered to be resident for tax purposes outside the Community;
(c) moreover, is subject to one of the following taxes, without the
possibility of an option or of being exempt:
— impôt des sociétés/vennootschapsbelasting in Belgium,
— selskabsskat in Denmark,
— Körperschaftsteuer in the Federal Republic of Germany,
— φόρος εισοδήματος νομικών
χαρακτήρα in Greece,
προσώπων
κερδοσκοπικού
— impuesto sobre sociedades in Spain,
— impôt sur les sociétés in France,
— corporation tax in Ireland,
— imposta sul reddito delle persone giuridiche in Italy,
— impôt sur le revenu des collectivités in Luxembourg,
— vennootschapsbelasting in the Netherlands,
— imposto sobre o rendimento das pessoas colectivas in Portugal,
— corporation tax in the United Kingdom,
1990L0435 — EN — 01.01.2007 — 004.001 — 4
▼A1
— Körperschaftsteuer in Austria,
— yhteisöjen tulovero/inkomstskatten för samfund in Finland,
— statlig inkomstskatt in Sweden,
▼A2
— Daň z příjmů právnických osob in the Czech Republic,
— Tulumaks in Estonia,
— Φόρος Εισοδήματος in Cyprus,
— uzņēmumu ienākuma nodoklis in Latvia,
— Pelno mokestis in Lithuania,
— Társasági adó, osztalékadó in Hungary,
— Taxxa fuq l-income in Malta,
— Podatek dochodowy od osób prawnych in Poland,
— Davek od dobička pravnih oseb in Slovenia,
— daň z príjmov právnických osôb in Slovakia,
▼M2
— корпоративен данък in Bulgaria,
— impozit pe profit in Romania,
▼B
or to any other tax which may be substituted for any of the above
taxes.
▼M1
2.
For the purposes of this Directive the term ‘permanent establishment’ means a fixed place of business situated in a Member State
through which the business of a company of another Member State is
wholly or partly carried on in so far as the profits of that place of
business are subject to tax in the Member State in which it is situated
by virtue of the relevant bilateral tax treaty or, in the absence of such a
treaty, by virtue of national law.
▼B
Article 3
1.
►M1 For the purposes of applying this Directive:
(a) the status of parent company shall be attributed at least to any
company of a Member State which fulfils the conditions set out
in Article 2 and has a minimum holding of 20 % in the capital of a
company of another Member State fulfilling the same conditions;
such status shall also be attributed, under the same conditions, to a
company of a Member State which has a minimum holding of 20 %
in the capital of a company of the same Member State, held in
whole or in part by a permanent establishment of the former
company situated in another Member State;
from 1 January 2007 the minimum holding percentage shall be
15 %;
from 1 January 2009 the minimum holding percentage shall be
10 %;
(b) ‘subsidiary’ shall mean that company the capital of which includes
the holding referred to in (a). ◄
2.
By way of derogation from paragraph 1, Member States shall have
the option of:
1990L0435 — EN — 01.01.2007 — 004.001 — 5
▼B
— replacing, by means of bilateral agreement, the criterion of a holding
in the capital by that of a holding of voting rights,
— not applying this Directive to companies of that Member State
which do not maintain for an uninterrupted period of at least two
years holdings qualifying them as parent companies or to those of
their companies in which a company of another Member State does
not maintain such a holding for an uninterrupted period of at least
two years.
Article 4
▼M1
1.
Where a parent company or its permanent establishment, by virtue
of the association of the parent company with its subsidiary, receives
distributed profits, the State of the parent company and the State of its
permanent establishment shall, except when the subsidiary is liquidated,
either:
— refrain from taxing such profits, 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 related to those profits and
paid by the subsidiary and any lower-tier subsidiary, subject to
the condition that at each tier a company and its lower-tier
subsidiary meet the requirements provided for in Articles 2 and 3,
up to the limit of the amount of the corresponding tax due.
1 a. Nothing in this Directive shall prevent the State of the parent
company from considering a subsidiary to be fiscally transparent on the
basis of that State's assessment of the legal characteristics of that
subsidiary arising from the law under which it is constituted and
therefore from taxing the parent company on its share of the profits
of its subsidiary as and when those profits arise. In this case the State of
the parent company shall refrain from taxing the distributed profits of
the subsidiary.
When assessing the parent company's share of the profits of its
subsidiary as they arise the State of the parent company shall either
exempt those profits or authorise the parent company to deduct from the
amount of tax due that fraction of the corporation tax related to the
parent company's share of profits and paid by its subsidiary and any
lower-tier subsidiary, subject to the condition that at each tier a
company and its lower-tier subsidiary meet the requirements provided
for in Articles 2 and 3, up to the limit of the amount of the corresponding tax due.
▼B
2.
However, each Member State shall retain the option of providing
that any charges relating to the holding and any losses resulting from
the distribution of the profits of the subsidiary may not be deducted
from the taxable profits of the parent company. Where the management
costs relating to the holding in such a case are fixed as a flat rate, the
fixed amount may not exceed 5 % of the profits distributed by the
subsidiary.
3.
►M1 Paragraphs 1 and 1a shall apply until the date of effective
entry into force of a common system of company taxation. ◄
The Council shall at the appropriate time adopt the rules to apply after
the date referred to in the first subparagraph.
1990L0435 — EN — 01.01.2007 — 004.001 — 6
▼B
Article 5
1.
►M1 Profits which a subsidiary distributes to its parent company
shall be exempt from withholding tax. ◄
▼M1
__________
▼B
Article 6
The Member State of a parent company may not charge withholding tax
on the profits which such a company receives from a subsidiary.
Article 7
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
with a distribution of profits to its parent company.
2.
This Directive shall not affect the application of domestic or
agreement-based provisions designed to eliminate or lessen economic
double taxation of dividends, in particular provisions relating to the
payment of tax credits to the recipients of dividends.
Article 8
1.
Member States shall bring into force the laws, regulations and
administrative provisions necessary for them to comply with this
Directive before 1 January 1992. They shall forthwith inform the
Commission thereof.
2.
Member States shall ensure that the texts of the main provisions of
domestic law which they adopt in the field covered by this Directive are
communicated to the Commission.
Article 9
This Directive is addressed to the Member States.
1990L0435 — EN — 01.01.2007 — 004.001 — 7
▼M2
ANNEX
LIST OF COMPANIES REFERRED TO IN ARTICLE 2(1)(A)
(a)
companies incorporated under Council Regulation (EC) No 2157/2001 of 8
October 2001 on the Statute for a European company (SE) and Council
Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a
European company with regard to the involvement of employees and cooperative societies incorporated under Council Regulation (EC) No 1435/2003
of 22 July 2003 on the Statute for a European Cooperative Society (SCE)
and Council Directive 2003/72/EC of 22 July 2003 supplementing the
Statute for a European Cooperative Society with regard to the involvement
of employees;
(b)
companies under Belgian law known as ‘société anonyme’/‘naamloze
vennootschap’,‘société en commandite par actions’/‘commanditaire
vennootschap op aandelen’, ‘société privée à responsabilité limitée’/‘besloten vennootschap met beperkte aansprakelijkheid’, ‘société coopérative
à responsabilité limitée’/‘coöperatieve vennootschap met beperkte aansprakelijkheid’, ‘société coopérative à responsabilité illimitée’/‘coöperatieve
vennootschap met onbeperkte aansprakelijkheid’, ‘société en nom collectif’/‘vennootschap onder firma’, ‘société en commandite simple’/‘gewone
commanditaire vennootschap’, public undertakings which have adopted
one of the abovementioned legal forms, and other companies constituted
under Belgian law subject to Belgian corporate tax;
(c)
companies under Bulgarian law known as: ‘събирателното дружество’,
‘командитното дружество’, ‘дружеството с ограничена отговорност’,
‘акционерното дружество’, ‘командитното дружество с акции’, ‘неперсонифицирано
дружество’,
‘кооперации’,
‘кооперативни
съюзи’‘държавни предприятия’ constituted under Bulgarian law and
carrying on commercial activities;
(d)
companies under Czech law known as: ‘akciová společnost’, ‘společnost
s ručením omezeným’;
(e)
companies under Danish law known as ‘aktieselskab’ and ‘anpartsselskab’.
Other companies subject to tax under the Corporation Tax Act, insofar as
their taxable income is calculated and taxed in accordance with the general
tax legislation rules applicable to ‘aktieselskaber’;
(f)
companies under German law known as ‘Aktiengesellschaft’, ‘Kommanditgesellschaft auf Aktien’, ‘Gesellschaft mit beschränkter Haftung’, ‘Versicherungsverein auf Gegenseitigkeit’, ‘Erwerbs- und Wirtschaftsgenossenschaft’, ‘Betriebe gewerblicher Art von juristischen Personen des öffentlichen Rechts’, and other companies constituted under German law subject
to German corporate tax;
(g)
companies under Estonian law known as: ‘täisühing’, ‘usaldusühing’,
‘osaühing’, ‘aktsiaselts’, ‘tulundusühistu’;
(h)
companies under Greek law known as ‘ανώνυμη εταιρεία’,·‘εταιρεία περιορισμένης ευθύνης (Ε.Π.Ε.)’·and other companies constituted under Greek
law subject to Greek corporate tax;
(i)
companies under Spanish law known as: ‘sociedad anónima’, ‘sociedad
comanditaria por acciones’, ‘sociedad de responsabilidad limitada’, public
law bodies which operate under private law. Other entities constituted under
Spanish law subject to Spanish corporate tax (‘Impuesto sobre Sociedades’);
(j)
companies under French law known as ‘société anonyme’, ‘société en
commandite par actions’, ‘société à responsabilité limitée’, ‘sociétés par
actions simplifiées’, ‘sociétés d'assurances mutuelles’, ‘caisses d'épargne
et de prévoyance’, ‘sociétés civiles’ which are automatically subject to
corporation tax, ‘coopératives’, ‘unions de coopératives’, industrial and
commercial public establishments and undertakings, and other companies
constituted under French law subject to French corporate tax;
(k)
companies incorporated or existing under Irish law, bodies registered under
the Industrial and Provident Societies Act, building societies incorporated
under the Building Societies Acts and trustee savings banks within the
meaning of the Trustee Savings Banks Act, 1989;
(l)
companies under Italian law known as ‘società per azioni’, ‘società in
accomandita per azioni’, ‘società a responsibilità limitata’, ‘società cooperative’, ‘società di mutua assicurazione’, and private and public entities
whose activity is wholly or principally commercial;
1990L0435 — EN — 01.01.2007 — 004.001 — 8
▼M2
(m) under Cypriot law: ‘εταιρείες’ as defined in the Income Tax laws;
(n)
companies under Latvian law known as: ‘akciju sabiedrība’, ‘sabiedrība ar
ierobežotu atbildību’;
(o)
companies incorporated under the law of Lithuania;
(p)
companies under Luxembourg law known as ‘société anonyme’, ‘société en
commandite par actions’, ‘société à responsabilité limitée’, ‘société coopérative’, ‘société coopérative organisée comme une société anonyme’, ‘association d'assurances mutuelles’, ‘association d'épargne-pension’, ‘entreprise
de nature commerciale, industrielle ou minière de l'Etat, des communes, des
syndicats de communes, des établissements publics et des autres personnes
morales de droit public’, and other companies constituted under
Luxembourg law subject to Luxembourg corporate tax;
(q)
companies under Hungarian law known as: ‘közkereseti társaság’, ‘betéti
társaság’, ‘közös vállalat’, ‘korlátolt felelősségű társaság’, ‘részvénytársaság’, ‘egyesülés’, ‘szövetkezet’;
(r)
companies under Maltese law known as: ‘Kumpaniji ta' Responsabilita'
Limitata’, ‘Soċjetajiet en commandite li l-kapital tagħhom maqsum f'azzjonijiet’;
(s)
companies under Dutch law known as ‘naamloze vennnootschap’, ‘besloten
vennootschap met beperkte aansprakelijkheid’, ‘Open commanditaire
vennootschap’, ‘Coöperatie’, ‘onderlinge waarborgmaatschappij’, ‘Fonds
voor gemene rekening’, ‘vereniging op coöperatieve grondslag’, ‘vereniging
welke op onderlinge grondslag als verzekeraar of kredietinstelling optreedt’,
and other companies constituted under Dutch law subject to Dutch
corporate tax;
(t)
companies under Austrian law known as ‘Aktiengesellschaft’, ‘Gesellschaft
mit beschränkter Haftung’, ‘Versicherungsvereine auf Gegenseitigkeit’,
‘Erwerbs- und Wirtschaftsgenossenschaften’, ‘Betriebe gewerblicher Art
von Körperschaften des öffentlichen Rechts’, ‘Sparkassen’, and other
companies constituted under Austrian law subject to Austrian corporate tax;
(u)
companies under Polish law known as: ‘spółka akcyjna’, ‘spółka z ograniczoną odpowiedzialnością’;
(v)
commercial companies or civil law companies having a commercial form
and cooperatives and public undertakings incorporated in accordance with
Portuguese law;
(w) companies under Romanian law known as: ‘societăți pe acțiuni’, ‘societăți
în comandită pe acțiuni’, ‘societăți cu răspundere limitată’;
(x)
companies under Slovenian law known as: ‘delniška družba’, ‘komanditna
družba’, ‘družba z omejeno odgovornostjo’;
(y)
companies under Slovak law known as: ‘akciová spoločnosť’, ‘spoločnosť
s ručením obmedzeným’, ‘komanditná spoločnosť’;
(z)
companies under Finnish law known as ‘osakeyhtiö’/‘aktiebolag’, ‘osuuskunta’/‘andelslag’,‘säästöpankki’/‘sparbank’and
‘vakuutusyhtiö’/‘försäkringsbolag’;
(aa) companies under Swedish law known as ‘aktiebolag’, ‘försäkringsaktiebolag’, ‘ekonomiska föreningar’, ‘sparbanker’, ‘ömsesidiga försäkringsbolag’;
(ab) companies incorporated under the law of the United Kingdom.
1990L0434 — EN — 01.01.2007 — 004.001 — 1
This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B
►M1 COUNCIL DIRECTIVE
of 23 July 1990
on the common system of taxation applicable to mergers, divisions, partial divisions, transfers of
assets and exchanges of shares concerning companies of different Member States and to the
transfer of the registered office, of an SE or SCE, between Member States
(90/434/EEC) ◄
(OJ L 225, 20.8.1990, p. 1)
Amended by:
Official Journal
No
►M1
►M2
Council Directive 2005/19/EC of 17 February 2005
Council Directive 2006/98/EC of 20 November 2006
page
date
L 58
L 363
19
129
4.3.2005
20.12.2006
C 241
L 1
L 236
21
1
33
29.8.1994
1.1.1995
23.9.2003
Amended by:
►A1
►A2
Act of Accession of Austria, Sweden and Finland
(adapted by Council Decision 95/1/EC, Euratom, ECSC)
Act concerning the conditions of accession of the Czech Republic, the
Republic of Estonia, the Republic of Cyprus, the Republic of Latvia,
the Republic of Lithuania, the Republic of Hungary, the Republic of
Malta, the Republic of Poland, the Republic of Slovenia and the Slovak
Republic and the adjustments to the Treaties on which the European
Union is founded
1990L0434 — EN — 01.01.2007 — 004.001 — 2
▼B
▼M1
COUNCIL DIRECTIVE
of 23 July 1990
on the common system of taxation applicable to mergers, divisions,
partial divisions, transfers of assets and exchanges of shares
concerning companies of different Member States and to the
transfer of the registered office, of an SE or SCE, between
Member States
(90/434/EEC)
▼B
THE COUNCIL OF THE EUROPEAN COMMUNITIES,
Having regard to the Treaty establishing the European Economic
Community, and in particular Article 100 thereof,
Having regard to the proposal of the Commission (1),
Having regard to the opinion of the European Parliament (2),
Having regard to the opinion of the Economic and Social Committee (3),
Whereas mergers, divisions, transfers of assets and exchanges of shares
concerning companies of different Member States may be necessary in
order to create within the Community conditions analogous to those of
an internal market and in order thus to ensure the establishment and
effective functioning of the common market; whereas such operations
ought not to be hampered by restrictions, disadvantages or distortions
arising in particular from the tax provisions of the Member States;
whereas to that end it is necessary to introduce with respect to such
operations tax rules which are neutral from the point of view of competition, in order to allow enterprises to adapt to the requirements of the
common market, to increase their productivity and to improve their
competitive strength at the international level;
Whereas tax provisions disadvantage such operations, in comparison
with those concerning companies of the same Member State; whereas
it is necessary to remove such disadvantages;
Whereas it is not possible to attain this objective by an extension at the
Community level of the systems presently in force in the Member
States, since differences between these systems tend to produce
distortions; whereas only a common tax system is able to provide a
satisfactory solution in this respect;
Whereas the common tax system ought to avoid the imposition of tax in
connection with mergers, divisions, transfers of assets or exchanges of
shares, while at the same time safeguarding the financial interests of the
State of the transferring or acquired company;
Whereas in respect of mergers, divisions or transfers of assets, such
operations normally result either in the transformation of the transferring
company into a permanent establishment of the company receiving the
assets or in the assets becoming connected with a permanent establishment of the latter company;
Whereas the system of deferral of the taxation of the capital gains
relating to the assets transferred until their actual disposal, applied to
such of those assets as are transferred to that permanent establishment,
(1) OJ No C 39, 22. 3. 1969, p. 1.
(2) OJ No C 51, 29. 4. 1970, p. 12.
(3) OJ No C 100, 1. 8. 1969, p. 4.
1990L0434 — EN — 01.01.2007 — 004.001 — 3
▼B
permits exemption from taxation of the corresponding capital gains,
while at the same time ensuring their ultimate taxation by the State
of the transferring company at the date of their disposal;
Whereas it is also necessary to define the tax regime applicable to
certain provisions, reserves or losses of the transferring company and
to solve the tax problems occurring where one of the two companies has
a holding in the capital of the other;
Whereas the allotment to the shareholders of the transferring company
of securities of the receiving or acquiring company would not in itself
give rise to any taxation in the hands of such shareholders;
Whereas it is necessary to allow Member States the possibility of
refusing to apply this Directive where the merger, division, transfer of
assets or exchange of shares operation has as its objective tax evasion or
avoidance or results in a company, whether or not it participates in the
operation, no longer fulfilling the conditions required for the representation of employees in company organs,
HAS ADOPTED THIS DIRECTIVE:
TITLE I
General provisions
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Article 1
Each Member State shall apply this Directive to the following:
(a) mergers, divisions, partial divisions, transfers of assets and
exchanges of shares in which companies from two or more
Member States are involved,
(b) transfers of the registered office from one Member State to another
Member State of European companies (Societas Europaea or SE), as
established in Council Regulation (EC) No 2157/2001 of 8 October
2001, on the statute for a European Company (SE) (1), and
European Cooperative Societies (SCE), as established in Council
Regulation (EC) No 1435/2003 of 22 July 2003 on the Statute
for a European Cooperative Society (SCE) (2).
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Article 2
For the purposes of this Directive:
(a)
‘merger’ shall mean an operation whereby:
— one or more companies, on being dissolved without going
into liquidation, transfer all their assets and liabilities to
another existing company in exchange for the issue to their
shareholders of securities respresenting the capital of that
other company, and, if applicable, a cash payment not
exceeding 10 % of the nominal value, or, in the absence of
a nominal value, of the accounting par value of those securities,
— two or more companies, on being dissolved without going
into liquidation, transfer all their assets and liabilities to a
company that they form, in exchange for the issue to their
(1) OJ L 294, 10.11.2001, p. 1. Regulation as amended by Regulation (EC) No
885/2004 (OJ L 168, 1.5.2004, p. 1).
(2) OJ L 207, 18.8.2003, p. 1. Regulation as amended by Decision of the EEA
Joint Committee No 15/2004 (OJ L 116, 22.4.2004, p. 68).
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shareholders of securities representing the capital of that new
company, and, if applicable, a cash payment not exceeding
10 % of the nominal value, or in the absence of a nominal
value, of the accounting par value of those securities,
— a company, on being dissolved without going into liquidation,
transfers all its assets and liabilities to the company holding
all the securities representing its capital;
(b)
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‘division’ shall mean an operation whereby a company, on being
dissolved without going into liquidation, transfers all its assets
and liabilities to two or more existing or new companies, in
exchange for the pro rata issue to its shareholders of securities
representing the capital of the companies receiving the assets and
liabilities, and, if applicable, a cash payment not exceeding 10 %
of the nominal value or, in the absence of a nominal value, of the
accounting par value of those securities;
(b)(a) ‘partial division’ shall mean an operation whereby a company
transfers, without being dissolved, one or more branches of
activity, to one or more existing or new companies, leaving at
least one branch of activity in the transferring company, in
exchange for the pro-rata issue to its shareholders of securities
representing the capital of the companies receiving the assets and
liabilities, and, if applicable, a cash payment not exceeding 10 %
of the nominal value or, in the absence of a nominal value, of the
accounting par value of those securities;
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(c)
‘transfer of assets’ shall mean an operation whereby a company
transfers without being dissolved all or one or more branches of
its activity to another company in exchange for the transfer of
securities representing the capital of the company receiving the
transfer;
(d)
‘exchange of shares’ shall mean an operation whereby a company
acquires a holding in the capital of another company such that it
obtains a majority of the voting rights in that company, or,
holding such a majority, acquires a further holding, in
exchange for the issue to the shareholders of the latter
company, in exchange for their securities, of securities representing the capital of the former company, and, if applicable, a
cash payment not exceeding 10 % of the nominal value, in the
absence of a nominal value, of the accounting par value of the
securities issued in exchange;
(e)
‘transferring company’ shall mean the company transferring its
assets and liabilities or transferring all or one or more branches of
its activity;
(f)
‘receiving company’ shall mean the company receiving the assets
and liabilities or all or one or more branches of the activity of the
transferring company;
(g)
‘acquired company’ shall mean the company in which a holding
is acquired by another company by means of an exchange of
securities;
(h)
‘acquiring company’ shall mean the company which acquires a
holding by means of an exchange of securities;
(i)
‘branch of activity’ shall mean all the assets and liabilities of a
division of a company which from an organizational point of
view constitute an independent business, that is to say an entity
capable of functioning by its own means;
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(j)
‘transfer of the registered office’ shall mean an operation
whereby an SE or an SCE, without winding up or creating a
new legal person, transfers its registered office from one
Member State to another Member State.
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Article 3
For the purposes of this Directive, ‘company from a Member State’
shall mean any company which:
(a) takes one of the forms listed in the Annex hereto;
(b) according to the tax laws of a Member State is considered to be
resident in that State for tax purposes and, under the terms of a
double taxation agreement concluded with a third State, is not
considered to be resident for tax purposes outside the Community;
(c) moreover, is subject to one of the following taxes, without the
possibility of an option or of being exempt:
— impôt des sociétés/vennootschapsbelasting in Belgium,
— selskabsskat in Denmark,
— Körperschaftsteuer in the Federal Republic of Germany,
— φόρος εισοδήματος νομικών
χαρακτήρα, in Greece,
προσώπων
κερδοσκοπικού
— impuesto sobre sociedades in Spain,
— impôt sur les sociétés in France,
— corporation tax in Ireland,
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— imposta sul reddito delle società in Italy,
— impôt sur le revenu des collectivités in Luxembourg,
— vennootschapsbelasting in the Netherlands,
— imposto sobre o rendimento das pessoas colectivas in Portugal,
— corporation tax in the United Kingdom,
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— Körperschaftsteuer in Austria,
— yhteisöjen tulovero/inkomstskatten för samfund in Finland,
— statlig inkomstskatt in Sweden,
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— Daň z příjmů právnických osobin the Czech Republic,
— Tulumaks in Estonia,
— Φόρος Εισοδήματος in Cyprus,
— uzņēmumu ienākuma nodoklis in Latvia,
— Pelno mokestis in Lithuania,
— Társasági adó in Hungary,
— Taxxa fuq l-income in Malta,
— Podatek dochodowy od osób prawnych in Poland,
— Davek od dobička pravnih oseb in Slovenia,
— Daň z príjmov právnických osôb in Slovakia,
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— корпоративен данък in Bulgaria,
— impozit pe profit in Romania,
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or to any other tax which may be substituted for any of the above
taxes.
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TITLE II
Rules applicable to mergers, divisions, partial divisions, and
exchanges of shares
Article 4
1.
A merger, division or partial division shall not give rise to any
taxation of capital gains calculated by reference to the difference
between the real values of the assets and liabilities transferred and
their values for tax purposes.
For the purpose of this Article the following definitions shall apply:
(a) ‘value for tax purposes’: the value on the basis of which any gain or
loss would have been computed for the purposes of tax upon the
income, profits or capital gains of the transferring company if such
assets or liabilities had been sold at the time of the merger, division
or partial division but independently of it;
(b) ‘transferred assets and liabilities’: those assets and liabilities of the
transferring company which, in consequence of the merger, division
or partial division, are effectively connected with a permanent establishment of the receiving company in the Member State of the
transferring company and play a part in generating the profits or
losses taken into account for tax purposes.
2.
Where paragraph 1 applies and where a Member State considers a
non-resident transferring company as fiscally transparent on the basis of
that State’s assessment of the legal characteristics of that company
arising from the law under which it is constituted and therefore taxes
the shareholders on their share of the profits of the transferring company
as and when those profits arise, that State shall not tax any income,
profits or capital gains calculated by reference to the difference between
the real values of the assets and liabilities transferred and their values
for tax purposes.
3.
Paragraphs 1 and 2 shall apply only if the receiving company
computes any new depreciation and any gains or losses in respect of
the assets and liabilities transferred according to the rules that would
have applied to the transferring company or companies if the merger,
division or partial division had not taken place.
4.
Where, under the laws of the Member State of the transferring
company, the receiving company is entitled to have any new depreciation or any gains or losses in respect of the assets and liabilities
transferred computed on a basis different from that set out in
paragraph 3, paragraph 1 shall not apply to the assets and liabilities
in respect of which that option is exercised.
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Article 5
The Member States shall take the necessary measures to ensure that,
where provisions or reserves properly constituted by the transferring
company are partly or wholly exempt from tax and are not derived
from permanent establishments abroad, such provisions or reserves
may be carried over, with the same tax exemption, by the permanent
1990L0434 — EN — 01.01.2007 — 004.001 — 7
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establishments of the receiving company which are situated in the
Member State of the transferring company, the receiving company
thereby assuming the rights and obligations of the transferring company.
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Article 6
To the extent that, if the operations referred to in Article 1, paragraph a,
were effected between companies from the Member State of the transferring company, the Member State would apply provisions allowing the
receiving company to take over the losses of the transferring company
which had not yet been exhausted for tax purposes, it shall extend those
provisions to cover the take-over of such losses by the receiving
company’s permanent establishments situated within its territory.
▼B
Article 7
1.
Where the receiving company has a holding in the capital of the
transferring company, any gains accruing to the receiving company on
the cancellation of its holding shall not be liable to any taxation.
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2.
The Member States may derogate from paragraph 1 where the
receiving company has a holding of less than 20 % in the capital of
the transferring company.
From 1 January 2007 the minimum holding percentage shall be 15 %.
From 1 January 2009 the minimum holding percentage shall be 10 %.
Article 8
1.
On a merger, division or exchange of shares, the allotment of
securities representing the capital of the receiving or acquiring
company to a shareholder of the transferring or acquired company in
exchange for securities representing the capital of the latter company
shall not, of itself, give rise to any taxation of the income, profits or
capital gains of that shareholder.
2.
On a partial division, the allotment to a shareholder of the transferring company of securities representing the capital of the receiving
company shall not, of itself, give rise to any taxation of the income,
profits or capital gains of that shareholder.
3.
Where a Member State considers a shareholder as fiscally transparent on the basis of that State’s assessment of the legal characteristics
of that shareholder arising from the law under which it is constituted
and therefore taxes those persons having an interest in the shareholders
on their share of the profits of the shareholder as and when those profits
arise, that State shall not tax those persons on income, profits or capital
gains from the allotment of securities representing the capital of the
receiving or acquiring company to the shareholder.
4.
Paragraphs 1 and 3 shall apply only if the shareholder does not
attribute to the securities received a value for tax purposes higher than
the value the securities exchanged had immediately before the merger,
division or exchange of shares.
5.
Paragraphs 2 and 3 shall apply only if the shareholder does not
attribute to the sum of the securities received and those held in the
transferring company, a value for tax purposes higher than the value
the securities held in the transferring company had immediately before
the partial division.
6.
The application of paragraphs 1, 2 and 3 shall not prevent the
Member States from taxing the gain arising out of the subsequent
1990L0434 — EN — 01.01.2007 — 004.001 — 8
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transfer of securities received in the same way as the gain arising out of
the transfer of securities existing before the acquisition.
7.
In this Article the expression ‘value for tax purposes’ means the
value on the basis of which any gain or loss would be computed for the
purposes of tax upon the income, profits or capital gains of a shareholder of the company.
8.
Where, under the law of the Member State in which he is resident,
a shareholder may opt for tax treatment different from that set out in
paragraphs 4 and 5, paragraphs 1, 2 and 3 shall not apply to the
securities in respect of which such an option is exercised.
9.
Paragraphs 1, 2 and 3 shall not prevent a Member State from
taking into account when taxing shareholders any cash payment that
may be made on the merger, division, partial division or exchange of
shares.
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TITLE III
Rules applicable to transfers of assets.
Article 9
The provisions of Articles 4, 5 and 6 shall apply to transfers of assets.
TITLE IV
Special case of the transfer of a permanent establishment
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Article 10
1.
Where the assets transferred in a merger, a division, a partial
division or a transfer of assets include a permanent establishment of
the transferring company which is situated in a Member State other than
that of the transferring company, the Member State of the transferring
company shall renounce any right to tax that permanent establishment.
The Member State of the transferring company may reinstate in the
taxable profits of that company such losses of the permanent establishment as may previously have been set off against the taxable
profits of the company in that State and which have not been recovered.
The Member State in which the permanent establishment is situated and
the Member State of the receiving company shall apply the provisions
of this Directive to such a transfer as if the Member State where the
permanent establishment is situated were the Member State of the transferring company.
These provisions shall also apply in the case where the permanent
establishment is situated in the same Member State as that in which
the receiving company is resident.
2.
By way of derogation from paragraph 1, where the Member State
of the transferring company applies a system of taxing worldwide
profits, that Member State shall have the right to tax any profits or
capital gains of the permanent establishment resulting from the
merger, division, partial division or transfer of assets, on condition
that it gives relief for the tax that, but for the provisions of this
Directive, would have been charged on those profits or capital gains
in the Member State in which that permanent establishment is situated,
in the same way and in the same amount as it would have done if that
tax had actually been charged and paid.
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TITLE IVa
Special case of transparent entities
Article 10a
1.
Where a Member State considers a non-resident transferring or
acquired company to be fiscally transparent on the basis of that
State’s assessment of the legal characteristics of that company arising
from the law under which it is constituted, it shall have the right not to
apply the provisions of this Directive when taxing a direct or indirect
shareholder of that company in respect of the income, profits or capital
gains of that company.
2.
A Member State exercising the right referred to in paragraph 1
shall give relief for the tax which, but for the provisions of this
Directive, would have been charged on the fiscally transparent
company on its income, profits or capital gains, in the same way and
in the same amount as that State would have done if that tax had
actually been charged and paid.
3.
Where a Member State considers a non-resident receiving or
acquiring company to be fiscally transparent on the basis of that
State’s assessment of the legal characteristics of that company arising
from the law under which it is constituted, it shall have the right not to
apply Article 8 paragraphs 1, 2 and 3.
4.
Where a Member State considers a non-resident receiving
company to be fiscally transparent on the basis of that State’s
assessment of the legal characteristics of that company arising from
the law under which it is constituted, that Member State may apply
to any direct or indirect shareholders the same treatment for tax
purposes as it would if the receiving company were resident in that
Member State.
TITLE IVb
Rules applicable to the transfer of the registered office of an SE or
an SCE
Article 10b
1.
Where,
(a) an SE or an SCE transfers its registered office from one Member
State to another Member State, or
(b) in connection with the transfer of its registered office from one
Member State to another Member State, an SE or an SCE, which
is resident in the first Member State, ceases to be resident in that
Member State and becomes resident in another Member State,
that transfer of registered office or the cessation of residence shall not
give rise to any taxation of capital gains, calculated in accordance with
of Article 4(1), in the Member State from which the registered office
has been transferred, derived from those assets and liabilities of the SE
or SCE which, in consequence, remain effectively connected with a
permanent establishment of the SE or of the SCE in the Member
State from which the registered office has been transferred and play a
part in generating the profits or losses taken into account for tax
purposes.
2.
Paragraph 1 shall apply only if the SE or the SCE computes any
new depreciation and any gains or losses in respect of the assets and
liabilities that remain effectively connected with that permanent establishment, as though the transfer of the registered office had not taken
place or the SE or the SCE had not so ceased to be tax resident.
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3.
Where, under the laws of that Member State, the SE or the SCE is
entitled to have any new depreciation or any gains or losses in respect
of the assets and liabilities remaining in that Member State computed on
a basis different from that set out in paragraph 2, paragraph 1 shall not
apply to the assets and liabilities in respect of which that option is
exercised.
Article 10c
1.
Where,
(a) an SE or an SCE transfers its registered office from one Member
State to another Member State, or
(b) in connection with the transfer of its registered office from one
Member State to another Member State, an SE or an SCE, which
is resident in the first Member State, ceases to be resident in that
Member State and becomes resident in another Member State,
the Member States shall take the necessary measures to ensure that,
where provisions or reserves properly constituted by the SE or the
SCE before the transfer of the registered office are partly or wholly
exempt from tax and are not derived from permanent establishments
abroad, such provisions or reserves may be carried over, with the same
tax exemption, by a permanent establishment of the SE or the SCE
which is situated within the territory of the Member State from which
the registered office was transferred.
2.
To the extent that a company transferring its registered office
within the territory of a Member State would be allowed to carry
forward or carry back losses which had not been exhausted for tax
purposes, that Member State shall allow the permanent establishment,
situated within its territory, of the SE or of the SCE transferring its
registered office, to take over those losses of the SE or SCE which have
not been exhausted for tax purposes, provided that the loss carry
forward or carry back would have been available in comparable circumstances to a company which continued to have its registered office or
which continued to be tax resident in that Member State.
Article 10d
1.
The transfer of the registered office of an SE or of an SCE shall
not, of itself, give rise to any taxation of the income, profits or capital
gains of the shareholders.
2.
The application of paragraph 1 shall not prevent the Member
States from taxing the gain arising out of the subsequent transfer of
the securities representing the capital of the SE or of the SCE that
transfers its registered office.
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TITLE V
Final provisions
Article 11
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1.
A Member State may refuse to apply or withdraw the benefit of all
or any part of the provisions of Titles II, III, IV and IVb where it
appears that the merger, division, partial division, transfer of assets,
exchange of shares or transfer of the registered office of an SE or an
SCE:
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(a) has as its principal objective or as one of its principal objectives tax
evasion or tax avoidance; the fact that one of the operations referred
to in Article 1 is not carried out for valid commercial reasons such
as the restructuring or rationalisation of the activities of the
companies participating in the operation may constitute a
presumption that the operation has tax evasion or tax avoidance
as its principal objective or as one of its principal objectives;
(b) results in a company, whether participating in the operation or not,
no longer fulfilling the necessary conditions for the representation
of employees on company organs according to the arrangements
which were in force prior to that operation.
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2.
Paragraph 1 (b) shall apply as long as and to the extent that no
Community law provisions containing equivalent rules on representation
of employees on company organs are applicable to the companies
covered by this Directive.
Article 12
1.
Member States shall bring into force the laws, regulations and
administrative provisions necessary to comply with this Directive not
later than 1 January 1992 and shall forthwith inform the Commission
thereof.
2.
By way of derogation from paragraph 1, the Portuguese Republic
may delay the application of the provisions concerning transfers of
assets and exchanges of shares until 1 January 1993.
3.
Member States shall communicate to the Commission the texts of
the main provisions of national law which they adopt in the field
covered by this Directive.
Article 13
This Directive is addressed to the Member States.
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ANNEX
LIST OF COMPANIES REFERRED TO IN ARTICLE 3(a)
(a)
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companies incorporated under Council Regulation (EC) No 2157/2001 of 8
October 2001 on the Statute for a European company (SE) and Council
Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a
European company with regard to the involvement of employees, and
cooperative societies incorporated under Council Regulation (EC) No
1435/2003 of 22 July 2003 on the Statute for a European Cooperative
Society (SCE) and Council Directive 2003/72/EC of 22 July 2003 supplementing the Statute for a European Cooperative Society with regard to the
involvement of employees;
(aa) companies under Bulgarian law known as: ‘събирателното дружество’,
‘командитното дружество’, ‘дружеството с ограничена отговорност’,
‘акционерното дружество’, ‘командитното дружество с акции’,
‘кооперации’, ‘кооперативни съюзи’, ‘държавни предприятия’
constituted under Bulgarian law and carrying on commercial activities;
(ab) companies under Romanian law known as: ‘societăţi pe acţiuni’, ‘societăţi
în comandită pe acţiuni’, ‘societăţi cu răspundere limitată’;
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(b)
companies under Belgian law known as ‘société anonyme’/‘naamloze
vennootschap’, ‘société en commandite par actions’/‘commanditaire
vennootschap op aandelen’, ‘société privée à responsabilité limitée’/‘besloten vennootschap met beperkte aansprakelijkheid’‘société coopérative à
responsabilité limitée’/‘coöperatieve vennootschap met beperkte aansprakelijkheid’, ‘société coopérative à responsabilité illimitée’/‘coöperatieve
vennootschap met onbeperkte aansprakelijkheid’, ‘société en nom collectif’/‘vennootschap onder firma’, ‘société en commandite simple’/ ‘gewone
commanditaire vennootschap’, public undertakings which have adopted one
of the abovementioned legal forms, and other companies constituted under
Belgian law subject to the Belgian Corporate Tax;
(c)
companies under Czech law known as: ‘akciová společnost’, ‘společnost s
ručením omezeným’;
(d)
companies under Danish law known as ‘aktieselskab’ and ‘anpartsselskab’.
Other companies subject to tax under the Corporation Tax Act, in so far as
their taxable income is calculated and taxed in accordance with the general
tax legislation rules applicable to ‘aktieselskaber’;
(e)
companies under German law known as ‘Aktiengesellschaft’, ‘Kommanditgesellschaft auf Aktien’, ‘Gesellschaft mit beschränkter Haftung’, ‘Versicherungsverein auf Gegenseitigkeit’, ‘Erwerbs- und Wirtschaftsgenossenschaft’, ‘Betriebe gewerblicher Art von juristischen Personen des öffentlichen Rechts’, and other companies constituted under German law subject
to German corporate tax;
(f)
companies under Estonian law known as: ‘täisühing’, ‘usaldusühing’,
‘osaühing’, ‘aktsiaselts’, ‘tulundusühistu’;
(g)
companies under Greek law known as ‘αvώvυμη εταιρεία’, ‘εταιρεία περιoρισμέvης ευθύvης (Ε.Π.Ε.)’;
(h)
companies under Spanish law known as ‘sociedad anónima’, ‘sociedad
comanditaria por acciones’, ‘sociedad de responsabilidad limitada’, and
those public law bodies which operate under private law;
(i)
companies under French law known as ‘société anonyme’, ‘société en
commandite par actions’, ‘société à responsabilité limitée’, ‘sociétés par
actions simplifiées’, ‘sociétés d’assurances mutuelles’, ‘caisses d’épargne
et de prévoyance’, ‘sociétés civiles’ which are automatically subject to
corporation tax, ‘coopératives’, ‘unions de coopératives’, industrial and
commercial public establishments and undertakings, and other companies
constituted under French law subject to the French Corporate Tax;
(j)
companies incorporated or existing under Irish laws, bodies registered under
the Industrial and Provident Societies Act, building societies incorporated
under the Building Societies Acts and trustee savings banks within the
meaning of the Trustee Savings Banks Act, 1989;
(k)
companies under Italian law known as ‘società per azioni’, ‘società in
accomandita per azioni’, ‘società a responsabilità limitata’, ‘società coop-
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erative’, ‘società di mutua assicurazione’, and private and public entities
whose activity is wholly or principally commercial;
(l)
under Cypriot law: ‘εταιρείες’ as defined in the Income Tax laws;
(m) companies under Latvian law known as: ‘akciju sabiedrība’, ‘sabiedrība ar
ierobežotu atbildību’;
(n)
companies incorporated under the law of Lithuania;
(o)
companies under Luxembourg law known as ‘société anonyme’, ‘société en
commandite par actions’, ‘société à responsabilité limitée’, ‘société coopérative’, ‘société coopérative organisée comme une société anonyme’, ‘association d’assurances mutuelles’, ‘association d’épargne-pension’, “entreprise
de nature commerciale, industrielle ou minière de l’État, des communes, des
syndicats de communes, des établissements publics et des autres personnes
morales de droit public’, and other companies constituted under
Luxembourg law subject to the Luxembourg Corporate Tax;
(p)
companies under Hungarian law known as: ‘közkereseti társaság’, ‘betéti
társaság’, ‘közös vállalat’, ‘korlátolt felelősségű társaság’, ‘részvénytársaság’, ‘egyesülés’, ‘közhasznú társaság’, ‘szövetkezet’;
(q)
companies under Maltese law known as: ‘Kumpaniji ta’ Responsabilita
Limitata’, ‘Soċjetajiet en commandite li l-kapital tagħhom maqsum f’azzjonijiet’;
(r)
companies under Dutch law known as ‘naamloze vennootschap’, ‘besloten
vennootschap met beperkte aansprakelijkheid’, ‘Open commanditaire
vennootschap’, ‘Coöperatie’, ‘onderlinge waarborgmaatschappij’, ‘Fonds
voor gemene rekening’, ‘vereniging op coöperatieve grondslag’ and ‘vereniging welke op onderlinge grondslag als verzekeraar of kredietinstelling
optreedt’, and other companies constituted under Dutch law subject to the
Dutch Corporate Tax;
(s)
companies under Austrian law known as ‘Aktiengesellschaft’, ‘Gesellschaft
mit beschränkter Haftung’, ‘Erwerbs- und Wirtschaftsgenossenschaften’;
(t)
companies under Polish law known as: ‘spółka akcyjna’, ‘spółka z ograniczoną odpowiedzialnością’;
(u)
commercial companies or civil law companies having a commercial form as
well as other legal persons carrying on commercial or industrial activities,
which are incorporated under Portuguese law;
(v)
companies under Slovenian law known as: ‘delniška družba’, ‘komanditna
družba’, ‘družba z omejeno odgovornostjo’;
(w) companies under Slovak law known as: ‘akciová spoločnosť ’, ‘spoločnosť
s ručením obmedzeným’, ‘komanditná spoločnosť ’.
(x)
companies under Finnish law known as ‘osakeyhtiö’/‘aktiebolag’, ‘osuuskunta’/‘andelslag’, ‘säästöpankki’/‘sparbank’ and ‘vakuutusyhtiö’/‘försäkringsbolag’;
(y)
companies under Swedish law known as ‘aktiebolag’, ‘försäkringsaktiebolag’, ‘ekonomiska föreningar’, ‘sparbanker’, ‘ömsesidiga försäkringsbolag’;
(z)
companies incorporated under the law of the United Kingdom.
2003L0049 — EN — 01.01.2007 — 002.001 — 1
This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
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COUNCIL DIRECTIVE 2003/49/EC
of 3 June 2003
on a common system of taxation applicable to interest and royalty payments made between
associated companies of different Member States
(OJ L 157, 26.6.2003, p. 49)
Amended by:
Official Journal
No
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Council Directive 2004/66/EC of 26 April 2004
Council Directive 2004/76/EC of 29 April 2004
Council Directive 2006/98/EC of 20 November 2006
L 168
L 195
L 363
page
35
33
129
date
1.5.2004
2.6.2004
20.12.2006
2003L0049 — EN — 01.01.2007 — 002.001 — 2
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COUNCIL DIRECTIVE 2003/49/EC
of 3 June 2003
on a common system of taxation applicable to interest and royalty
payments made between associated companies of different Member
States
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community, and
in particular Article 94 thereof,
Having regard to the proposal from the Commission (1),
Having regard to the opinion of the European Parliament (2),
Having regard to the opinion of the European Economic and Social
Committee (3),
Whereas:
(1)
In a Single Market having the characteristics of a domestic
market, transactions between companies of different Member
States should not be subject to less favourable tax conditions
than those applicable to the same transactions carried out
between companies of the same Member State.
(2)
This requirement is not currently met as regards interest and
royalty payments; national tax laws coupled, where applicable,
with bilateral or multilateral agreements may not always ensure
that double taxation is eliminated, and their application often
entails burdensome administrative formalities and cash-flow
problems for the companies concerned.
(3)
It is necessary to ensure that interest and royalty payments are
subject to tax once in a Member State.
(4)
The abolition of taxation on interest and royalty payments in the
Member State where they arise, whether collected by deduction at
source or by assessment, is the most appropriate means of eliminating the aforementioned formalities and problems and of
ensuring the equality of tax treatment as between national and
cross-border transactions; it is particularly necessary to abolish
such taxes in respect of such payments made between associated
companies of different Member States as well as between
permanent establishments of such companies.
(5)
The arrangements should only apply to the amount, if any, of
interest or royalty payments which would have been agreed by
the payer and the beneficial owner in the absence of a special
relationship.
(6)
It is moreover necessary not to preclude Member States from
taking appropriate measures to combat fraud or abuse.
(7)
Greece and Portugal should, for budgetary reasons, be allowed a
transitional period in order that they can gradually decrease the
taxes, whether collected by deduction at source or by assessment,
on interest and royalty payments, until they are able to apply the
provisions of Article 1.
(1) OJ C 123, 22.4.1998, p. 9.
(2) OJ C 313, 12.10.1998, p. 151.
(3) OJ C 284, 14.9.1998, p. 50.
2003L0049 — EN — 01.01.2007 — 002.001 — 3
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(8)
Spain, which has launched a plan for boosting the Spanish technological potential, for budgetary reasons should be allowed
during a transitional period not to apply the provisions of
Article 1 on royalty payments.
(9)
It is necessary for the Commission to report to the Council on the
operation of the Directive three years after the date by which it
must be transposed, in particular with a view to extending its
coverage to other companies or undertakings and reviewing the
scope of the definition of interest and royalties in pursuance of
the necessary convergence of the provisions dealing with interest
and royalties in national legislation and in bilateral or multilateral
double-taxation treaties.
(10)
Since the objective of the proposed action, namely setting up a
common system of taxation applicable to interest and royalty
payments of associated companies of different Member States
cannot be sufficiently achieved by the Member States and can
therefore be better achieved at Community level, the Community
may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty. In accordance with
the principle of proportionality, as set out in that Article, this
Directive does not go beyond what is necessary in order to
achieve that objective,
HAS ADOPTED THIS DIRECTIVE:
Article 1
Scope and procedure
1.
Interest or royalty payments arising in a Member State shall be
exempt from any taxes imposed on those payments in that State,
whether by deduction at source or by assessment, provided that the
beneficial owner of the interest or royalties is a company of another
Member State or a permanent establishment situated in another Member
State of a company of a Member State.
2.
A payment made by a company of a Member State or by a
permanent establishment situated in another Member State shall be
deemed to arise in that Member State, hereafter referred to as the
‘source State’.
3.
A permanent establishment shall be treated as the payer of interest
or royalties only insofar as those payments represent a tax-deductible
expense for the permanent establishment in the Member State in which
it is situated.
4.
A company of a Member State shall be treated as the beneficial
owner of interest or royalties only if it receives those payments for its
own benefit and not as an intermediary, such as an agent, trustee or
authorised signatory, for some other person.
5.
A permanent establishment shall be treated as the beneficial owner
of interest or royalties:
(a) if the debt-claim, right or use of information in respect of which
interest or royalty payments arise is effectively connected with that
permanent establishment; and
(b) if the interest or royalty payments represent income in respect of
which that permanent establishment is subject in the Member State
in which it is situated to one of the taxes mentioned in Article 3(a)
(iii) or in the case of Belgium to the ‘impôt des non-résidents/belasting der niet-verblijfhouders’ or in the case of Spain to the ‘Impuesto sobre la Renta de no Residentes’ or to a tax which is identical or substantially similar and which is imposed after the date of
2003L0049 — EN — 01.01.2007 — 002.001 — 4
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entry into force of this Directive in addition to, or in place of, those
existing taxes.
6.
Where a permanent establishment of a company of a Member
State is treated as the payer, or as the beneficial owner, of interest or
royalties, no other part of the company shall be treated as the payer, or
as the beneficial owner, of that interest or those royalties for the purposes of this Article.
7.
This Article shall apply only if the company which is the payer, or
the company whose permanent establishment is treated as the payer, of
interest or royalties is an associated company of the company which is
the beneficial owner, or whose permanent establishment is treated as the
beneficial owner, of that interest or those royalties.
8.
This Article shall not apply where interest or royalties are paid by
or to a permanent establishment situated in a third State of a company
of a Member State and the business of the company is wholly or partly
carried on through that permanent establishment.
9.
Nothing in this Article shall prevent a Member State from taking
interest or royalties received by its companies, by permanent establishments of its companies or by permanent establishments situated in that
State into account when applying its tax law.
10. A Member State shall have the option of not applying this Directive to a company of another Member State or to a permanent establishment of a company of another Member State in circumstances
where the conditions set out in Article 3(b) have not been maintained
for an uninterrupted period of at least two years.
11. The source State may require that fulfilment of the requirements
laid down in this Article and in Article 3 be substantiated at the time of
payment of the interest or royalties by an attestation. If fulfilment of the
requirements laid down in this Article has not been attested at the time
of payment, the Member State shall be free to require deduction of tax
at source.
12. The source State may make it a condition for exemption under
this Directive that it has issued a decision currently granting the exemption following an attestation certifying the fulfilment of the requirements
laid down in this Article and in Article 3. A decision on exemption shall
be given within three months at most after the attestation and such
supporting information as the source State may reasonably ask for
have been provided, and shall be valid for a period of at least one
year after it has been issued.
13. For the purposes of paragraphs 11 and 12, the attestation to be
given shall, in respect of each contract for the payment, be valid for at
least one year but for not more than three years from the date of issue
and shall contain the following information:
(a) proof of the receiving company's residence for tax purposes and,
where necessary, the existence of a permanent establishment certified by the tax authority of the Member State in which the receiving
company is resident for tax purposes or in which the permanent
establishment is situated;
(b) beneficial ownership by the receiving company in accordance with
paragraph 4 or the existence of conditions in accordance with paragraph 5 where a permanent establishment is the recipient of the
payment;
(c) fulfilment of the requirements in accordance with Article 3(a)(iii) in
the case of the receiving company;
(d) a minimum holding or the criterion of a minimum holding of voting
rights in accordance with Article 3(b);
(e) the period for which the holding referred to in (d) has existed.
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Member States may request in addition the legal justification for the
payments under the contract (e.g. loan agreement or licensing contract).
14. If the requirements for exemption cease to be fulfilled, the receiving company or permanent establishment shall immediately inform the
paying company or permanent establishment and, if the source State so
requires, the competent authority of that State.
15. If the paying company or permanent establishment has withheld
tax at source to be exempted under this Article, a claim may be made
for repayment of that tax at source. The Member State may require the
information specified in paragraph 13. The application for repayment
must be submitted within the period laid down. That period shall last for
at least two years from the date when the interest or royalties are paid.
16. The source State shall repay the excess tax withheld at source
within one year following due receipt of the application and such supporting information as it may reasonably ask for. If the tax withheld at
source has not been refunded within that period, the receiving company
or permanent establishment shall be entitled on expiry of the year in
question to interest on the tax which is refunded at a rate corresponding
to the national interest rate to be applied in comparable cases under the
domestic law of the source State.
Article 2
Definition of interest and royalties
For the purposes of this Directive:
(a) the term ‘interest’ means income from debt-claims of every kind,
whether or not secured by mortgage and whether or not carrying a
right to participate in the debtor's profits, and in particular, income
from securities and income from bonds or debentures, including
premiums and prizes attaching to such securities, bonds or debentures; penalty charges for late payment shall not be regarded as
interest;
(b) the term ‘royalties’ means payments of any kind received as a
consideration for the use of, or the right to use, any copyright of
literary, artistic or scientific work, including cinematograph films
and software, any patent, trade mark, design or model, plan, secret
formula or process, or for information concerning industrial, commercial or scientific experience; payments for the use of, or the right
to use, industrial, commercial or scientific equipment shall be regarded as royalties.
Article 3
Definition of company, associated company and permanent
establishment
For the purposes of this Directive:
(a) the term ‘company of a Member State’ means any company:
(i) taking one of the forms listed in the Annex hereto; and
(ii) which in accordance with the tax laws of a Member State is
considered to be resident in that Member State and is not,
within the meaning of a Double Taxation Convention on Income concluded with a third state, considered to be resident for
tax purposes outside the Community; and
(iii) which is subject to one of the following taxes without being
exempt, or to a tax which is identical or substantially similar
and which is imposed after the date of entry into force of this
Directive in addition to, or in place of, those existing taxes:
2003L0049 — EN — 01.01.2007 — 002.001 — 6
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— impôt des sociétés/vennootschapsbelasting in Belgium,
— selskabsskat in Denmark,
— Körperschaftsteuer in Germany,
— Φόρος εισοδήματος νομικών προσώπων in Greece,
— impuesto sobre sociedades in Spain,
— impôt sur les sociétés in France,
— corporation tax in Ireland,
— imposta sul reddito delle persone giuridiche in Italy,
— impôt sur le revenu des collectivités in Luxembourg,
— vennootschapsbelasting in the Netherlands,
— Körperschaftsteuer in Austria,
— imposto sobre o rendimento da pessoas colectivas in Portugal,
— yhteisöjen tulovero/inkomstskatten för samfund in Finland,
— statlig inkomstskatt in Sweden,
— corporation tax in the United Kingdom,
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— Daň z příjmů právnických osob in the Czech Republic,
— Tulumaks in Estonia,
— φόρος εισοδήματος in Cyprus,
— Uzņēmumu ienākuma nodoklis in Latvia,
— Pelno mokestis in Lithuania,
— Társasági adó in Hungary,
— Taxxa fuq l-income in Malta,
— Podatek dochodowy od osób prawnych in Poland,
— Davek od dobička pravnih oseb in Slovenia,
— Daň z príjmov právnických osôb in Slovakia,
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— корпоративен данък in Bulgaria,
— impozit pe profit, impozitul pe veniturile obținute din România de nerezidenți in Romania;
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(b) a company is an ‘associated company’ of a second company if, at
least:
(i) the first company has a direct minimum holding of 25 % in the
capital of the second company, or
(ii) the second company has a direct minimum holding of 25 % in
the capital of the first company, or
(iii) a third company has a direct minimum holding of 25 % both in
the capital of the first company and in the capital of the second
company.
Holdings must involve only companies resident in Community territory.
However, Member States shall have the option of replacing the
criterion of a minimum holding in the capital with that of a minimum holding of voting rights;
2003L0049 — EN — 01.01.2007 — 002.001 — 7
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(c) the term ‘permanent establishment’ means a fixed place of business
situated in a Member State through which the business of a company of another Member State is wholly or partly carried on.
Article 4
Exclusion of payments as interest or royalties
1.
The source State shall not be obliged to ensure the benefits of this
Directive in the following cases:
(a) payments which are treated as a distribution of profits or as a
repayment of capital under the law of the source State;
(b) payments from debt-claims which carry a right to participate in the
debtor's profits;
(c) payments from debt-claims which entitle the creditor to exchange
his right to interest for a right to participate in the debtor's profits;
(d) payments from debt-claims which contain no provision for repayment of the principal amount or where the repayment is due more
than 50 years after the date of issue.
2.
Where, by reason of a special relationship between the payer and
the beneficial owner of interest or royalties, or between one of them and
some other person, the amount of the interest or royalties exceeds the
amount which would have been agreed by the payer and the beneficial
owner in the absence of such a relationship, the provisions of this
Directive shall apply only to the latter amount, if any.
Article 5
Fraud and abuse
1.
This Directive shall not preclude the application of domestic or
agreement-based provisions required for the prevention of fraud or abuse.
2.
Member States may, in the case of transactions for which the
principal motive or one of the principal motives is tax evasion, tax
avoidance or abuse, withdraw the benefits of this Directive or refuse
to apply this Directive.
Article 6
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Transitional rules for the Czech Republic, Greece, Spain, Latvia,
Lithuania, Poland, Portugal and Slovakia
1.
Greece, Latvia, Poland and Portugal shall be authorised not to
apply the provisions of Article 1 until the date of application referred
to in Article 17(2) and (3) of Council Directive 2003/48/EC of 3 June
2003 on taxation of savings income in the form of interest payments (1).
During a transitional period of eight years starting on the aforementioned date, the rate of tax on payments of interest or royalties made to an
associated company of another Member State or to a permanent establishment situated in another Member State of an associated company of
a Member State must not exceed 10 % during the first four years and
5 % during the final four years.
Lithuania shall be authorised not to apply the provisions of Article 1
until the date of application referred to in Article 17(2) and (3) of
Directive 2003/48/EC. During a transitional period of six years starting
on the aforementioned date, the rate of tax on payments of royalties
(1) OJ L 157, 26.6.2003, p. 38.
2003L0049 — EN — 01.01.2007 — 002.001 — 8
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made to an associated company of another Member State or to a permanent establishment situated in another Member State of an associated
company of a Member State must not exceed 10 %. During the first
four years of the six-year transitional period, the rate of tax on payments
of interest made to an associated company of another Member State or
to a permanent establishment situated in another Member State must not
exceed 10 %; and for the following two years, the rate of tax on such
payments of interest must not exceed 5 %.
Spain and the Czech Republic shall be authorised, for royalty payments
only, not to apply the provisions of Article 1 until the date of application referred to in Article 17(2) and (3) of Directive 2003/48/EC. During
a transitional period of six years starting on the aforementioned date, the
rate of tax on payments of royalties made to an associated company of
another Member State or to a permanent establishment situated in another Member State of an associated company of a Member State must
not exceed 10 %. Slovakia shall be authorised, for royalty payments
only, not to apply the provisions of Article 1 during a transitional period
of two years starting on 1 May 2004.
These transitional rules shall, however, remain subject to the continued
application of any rate of tax lower than those referred to in the first,
second and third subparagraphs provided by bilateral agreements concluded between the Czech Republic, Greece, Spain, Latvia, Lithuania,
Poland, Portugal or Slovakia and other Member States. Before the end
of any of the transitional periods mentioned in this paragraph the Council may decide unanimously, on a proposal from the Commission, on a
possible extension of the said transitional periods.
2.
Where a company of a Member State, or a permanent establishment situated in that Member State of a company of a Member State:
— receives interest or royalties from an associated company of Greece,
Latvia, Lithuania, Poland or Portugal,
— receives royalties from an associated company of the Czech Republic, Spain or Slovakia,
— receives interest or royalties from a permanent establishment situated
in Greece, Latvia, Lithuania, Poland or Portugal, of an associated
company of a Member State,
or
— receives royalties from a permanent establishment situated in the
Czech Republic, Spain or Slovakia, of an associated company of
a Member State,
the first Member State shall allow an amount equal to the tax paid in the
Czech Republic, Greece, Spain, Latvia, Lithuania, Poland, Portugal, or
Slovakia in accordance with paragraph 1 on that income as a deduction
from the tax on the income of the company or permanent establishment
which received that income.
3.
The deduction provided for in paragraph 2 need not exceed the
lower of:
(a) the tax payable in the Czech Republic, Greece, Spain, Latvia, Lithuania, Poland, Portugal or Slovakia, on such income on the basis
of paragraph 1,
or
(b) that part of the tax on the income of the company or permanent
establishment which received the interest or royalties, as computed
before the deduction is given, which is attributable to those payments under the domestic law of the Member State of which it is a
company or in which the permanent establishment is situated.
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Article 7
Implementation
1.
Member States shall bring into force the laws, regulations and
administrative provisions necessary to comply with this Directive not
later than 1 January 2004. They shall forthwith inform the Commission
thereof.
When Member States adopt these measures, they shall contain a reference to this Directive or shall be accompanied by such reference on the
occasion of their official publication. The methods of making such a
reference shall be laid down by the Member States.
2.
Member States shall communicate to the Commission the text of
the main provisions of national law which they adopt in the field
covered by this Directive, together with a table showing how the provisions of this Directive correspond to the national provisions adopted.
Article 8
Review
By 31 December 2006, the Commission shall report to the Council on
the operation of this Directive, in particular with a view to extending its
coverage to companies or undertakings other than those referred to in
Article 3 and the Annex.
Article 9
Delimitation clause
This Directive shall not affect the application of domestic or agreementbased provisions which go beyond the provisions of this Directive and
are designed to eliminate or mitigate the double taxation of interest and
royalties.
Article 10
Entry into force
This Directive shall enter into force on the day of its publication in the
Official Journal of the European Union.
Article 11
Addressees
This Directive is addressed to the Member States.
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ANNEX
List of companies covered by Article 3(a) of the Directive
(a)
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Companies under Belgian law known as: ‘naamloze vennootschap/société
anonyme, commanditaire vennootschap op aandelen/société en commandite
par actions, besloten vennootschap met beperkte aansprakelijkheid/société
privée à responsabilité limitée’ and those public law bodies that operate
under private law;
(aa) companies under Bulgarian law known as: ‘събирателното дружество’,
‘командитното дружество’, ‘дружеството с ограничена отговорност’,
‘акционерното дружество’, ‘командитното дружество с акции’, ‘кооперации’, ‘кооперативни съюзи’, ‘държавни предприятия’ constituted
under Bulgarian law and carrying on commercial activities;
(ab) companies under Romanian law known as: ‘societăți pe acțiuni’, ‘societăți
în comandită pe acțiuni’, ‘societăți cu răspundere limitată’;
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(b)
companies under Danish law known as: ‘aktieselskab’ and ‘anpartsselskab’;
(c)
companies under German law known as: ‘Aktiengesellschaft, Kommanditgesellschaft auf Aktien, Gesellschaft mit beschränkter Haftung’ and
‘bergrechtliche Gewerkschaft’;
(d)
companies under Greek law known as: ‘ανώνυμη εταιρíα’;
(e)
companies under Spanish law known as: ‘sociedad anónima, sociedad
comanditaria por acciones, sociedad de responsabilidad limitada’ and
those public law bodies which operate under private law;
(f)
companies under French law known as: ‘société anonyme, société en
commandite par actions, société à responsabilité limitée’ and industrial
and commercial public establishments and undertakings;
(g)
companies in Irish law known as public companies limited by shares or by
guarantee, private companies limited by shares or by guarantee, bodies
registered under the Industrial and Provident Societies Acts or building
societies registered under the Building Societies Acts;
(h)
companies under Italian law known as: ‘società per azioni, società in
accomandita per azioni, società a responsabilità limitata’ and public and
private entities carrying on industrial and commercial activities;
(i)
companies under Luxembourg law known as: ‘société anonyme, société en
commandite par actions and société à responsabilité limitée’;
(j)
companies under Dutch law known as: ‘naamloze vennootschap’ and
‘besloten vennootschap met beperkte aansprakelijkheid’;
(k)
companies under Austrian law known as: ‘Aktiengesellschaft’ and ‘Gesellschaft mit beschränkter Haftung’;
(l)
commercial companies or civil law companies having a commercial form,
cooperatives and public undertakings incorporated in accordance with
Portuguese law;
(m) companies under Finnish law known as: ‘osakeyhtiö/aktiebolag,osuuskunta/
andelslag, säästöpankki/sparbank’ and ‘vakuutusyhtiö/försäkringsbolag’;
(n)
companies under Swedish law known as: ‘aktiebolag’ and ‘försäkringsaktiebolag’;
(o)
companies incorporated under the law of the United Kingdom;
(p)
companies under Czech law known as: ‘akciová společnost’, ‘společnost s
ručením omezeným’, ‘veřejná obchodní společnost’, ‘komanditní společnost’, ‘družstvo’;
(q)
companies under Estonian law known as: ‘täisühing’, ‘usaldusühing’,
‘osaühing’, ‘aktsiaselts’, ‘tulundusühistu’;
(r)
companies under Cypriot law known as: companies in accordance with the
Company’s Law, Public Corporate Bodies as well as any other Body which
is considered as a company in accordance with the Income tax Laws;
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2003L0049 — EN — 01.01.2007 — 002.001 — 11
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(s)
companies under Latvian law known as: ‘akciju sabiedrība’, ‘sabiedrība ar
ierobežotu atbildību’;
(t)
companies incorporated under the law of Lithuania;
(u)
companies under Hungarian law known as: ‘közkereseti társaság’, ‘betéti
társaság’, ‘közös vállalat’, ‘korlátolt felelősségű társaság”, ‘részvénytársaság’, ‘egyesülés’, ‘közhasznú társaság’, ‘szövetkezet’;
(v)
companies under Maltese law known as: ‘Kumpaniji ta’ Responsabilita’
Limitata’, ‘Soċjetajiet in akkomandita li l-kapital tagħhom maqsum f’azzjonijiet’;
(w) companies under Polish law known as: ‘spółka akcyjna’, ‘spółka z ograniczoną odpowiedzialnością’;
(x)
companies under Slovenian law known as: ‘delniška družba’, ‘komanditna
delniška družba’, ‘komanditna družba’, ‘družba z omejeno odgovornostjo’,
‘družba z neomejeno odgovornostjo’;
(y)
companies under Slovak law known as: ‘akciová spoločnos’, ‘spoločnosť s
ručením obmedzeným’, ‘komanditná spoločnos’, ‘verejná obchodná spoločnos’, ‘družstvo’.