„Viva Telecom Bulgaria“ EOOD v Direktor na Direktsia „Obzhalvane i danachno-osiguritelna praktika“ - Sofia.

JurisdictionEuropean Union
Date24 February 2022
CourtCourt of Justice (European Union)

Provisional text

JUDGMENT OF THE COURT (Fifth Chamber)

24 February 2022 (*)

(Reference for a preliminary ruling – Taxation – Withholding tax on notional interest on an interest-free loan granted to a resident subsidiary by a non-resident parent company – Directive 2003/49/EC – Payments of interest between associated companies of different Member States – Article 1(1) – Exemption from withholding tax – Article 4(1)(d) – Exclusion of certain payments – Directive 2011/96/EU – Corporation tax – Article 1(1)(b) – Distribution of profits by a resident subsidiary to its non-resident parent company – Article 5 – Exemption from withholding tax – Directive 2008/7/EC – Raising of capital – Article 3 – Contributions of capital – Article 5(1)(a) – Indirect tax exemption – Articles 63 and 65 TFEU – Free movement of capital – Taxation of the gross amount of notional interest – Recovery procedure for the purposes of the deduction of expenses related to the grant of the loan and a possible refund – Difference in treatment – Justification – Balanced allocation of the power to impose taxes between the Member States – Effective collection of tax – Combating of tax avoidance)

In Case C‑257/20,

REQUEST for a preliminary ruling under Article 267 TFEU from the Varhoven administrativen sad (Supreme Administrative Court, Bulgaria), made by decision of 4 May 2020, received at the Court on 9 June 2020, in the proceedings

‘Viva Telecom Bulgaria’ EOOD

v

Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ – Sofia,

intervener:

Varhovna administrativna prokuratura na Republika Bulgaria,

THE COURT (Fifth Chamber),

composed of E. Regan (Rapporteur), President of the Chamber, K. Lenaerts, President of the Court, acting as Judge of the Fifth Chamber, C. Lycourgos, President of the Fourth Chamber, I. Jarukaitis and M. Ilešič, Judges,

Advocate General: A. Rantos,

Registrar: M. Ferreira, Principal Administrator,

having regard to the written procedure and further to the hearing on 30 June 2021,

after considering the observations submitted on behalf of:

– ‘Viva Telecom Bulgaria’ EOOD, represented initially by D. Yordanov, M. Emanuilov and S. Hristozova-Yordanova, and subsequently by Y. Kamburov, E. Emanuilov, V. Rangelov, T. Todorov and D. Dimitrova, advokati,

– the Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ – Sofia, by N. Kalistratov and M. Bakalova, acting as Agents,

– the Bulgarian Government, by T. Tsingileva and L. Zaharieva, acting as Agents,

– the European Commission, by W. Roels and Y. Marinova, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 30 September 2021,

gives the following

Judgment

1 This request for a preliminary ruling concerns the interpretation of Article 5(4) and Article 12(b) TEU, Article 47 of the Charter of Fundamental Rights of the European Union (‘the Charter’), Articles 49 and 63 TFEU, Article 4(1)(d) of 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 2003 L 157, p. 49), Article 1(1)(b) and (3) and Article 5 of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 2011 L 345, p. 8), as amended by Council Directive (EU) 2015/121 of 27 January 2015 (OJ 2015 L 21, p. 1) (‘Directive 2011/96’), Article 3(h) to (j), Article 5(1)(a) and (b), Article 7(1) and Article 8 of Council Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on the raising of capital (OJ 2008 L 46, p. 11), Annex VI, Section 6, point 3 to the Protocol concerning the conditions and arrangements for admission of the Republic of Bulgaria and Romania to the European Union (OJ 2005 L 157, p. 29)(‘the Admission Protocol’) and Annex VI, Section 6, point 3 to the Act concerning the conditions of accession of the Republic of Bulgaria and Romania and the adjustments to the Treaties on which the European Union is founded (OJ 2005 L 157, p. 203)(‘the Act of Accession’).

2 The request has been made in proceedings between ‘Viva Telecom Bulgaria’ EOOD, a company established in Sofia (Bulgaria), and the Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ – Sofia (Director of the ‘Tax and Social Security Appeals and Practice’ Directorate of Sofia, Bulgaria) concerning the taxation, by means of a withholding tax, of notional interest on an interest-free loan granted to Viva Telecom Bulgaria by its parent company established in another Member State.

Legal context

European Union law

Accession of the Republic of Bulgaria to the European Union

3 Article 20 of the Admission Protocol and Article 23 of the Act of Accession, concerning transitional measures, provide that the measures listed in the respective Annex VI to that protocol and to that act are to apply to the Republic of Bulgaria under the conditions laid down in those annexes.

4 Those annexes, entitled ‘List referred to in Article 20 of the Protocol: transitional measures, Bulgaria’ and ‘List referred to in Article 23 of the Act of Accession: Transitional provisions, Bulgaria’, respectively, refer, in point 3 of Section 6, headed ‘Taxation’, to Directive 2003/49, as amended by Council Directive 2004/76/EC of 29 April 2004 (OJ 2004 L 157, p. 106), and state, in the same terms, as follows:

‘Bulgaria shall be authorised not to apply the provisions of Article 1 of [Directive 2003/49] until 31 December 2014. During that transitional period, 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% until 31 December 2010 and must not exceed 5% for the following years until 31 December 2014.’

Directive 2003/49

5 Recitals 1 to 4 of Directive 2003/49 are worded as follows:

‘(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.’

6 Article 1 of that directive, entitled ‘Scope and procedure’, provides:

‘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”.

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.

…’

7 Article 2 of that directive, entitled ‘Definition of interest and royalties’, provides as follows:

‘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;

…’

8 Article 4 of that directive, entitled ‘Exclusion of certain payments as interest or royalties’, provides:

‘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;

(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.’

Directive 2008/7

9 Article 3 of Directive 2008/7, entitled ‘Contributions of capital’, lays down:

‘For the purposes of this Directive and subject to Article 4, the following transactions shall be considered to be “contributions of capital”:

(h) an increase in the assets of a capital...

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6 practice notes
  • TJ v Inspectoratul General pentru Imigrări.
    • European Union
    • Court of Justice (European Union)
    • 22 Diciembre 2022
    ...para responder adecuadamente a las cuestiones que se le hayan planteado (sentencia de 24 de febrero de 2022,Viva Telecom Bulgaria, C‑257/20, EU:C:2022:125, apartado 41 y jurisprudencia 26 En el presente asunto, procede señalar, por lo que respecta a la alegación basada en la claridad de las......
  • Opinion of Advocate General Emiliou delivered on 2 June 2022.
    • European Union
    • Court of Justice (European Union)
    • 2 Junio 2022
    ...de cette mesure d’harmonisation et non pas de celles du droit primaire ». Arrêt du 24 février 2022, arrêt Viva Telecom Bulgaria (C‑257/20, EU:C:2022:125, point 45 et la jurisprudence 9 Arrêt du 19 janvier 2017, Queisser Pharma (C‑282/15, EU:C:2017:26, point 39 et la jurisprudence citée). 10......
  • Comité interprofessionnel des huiles essentielles françaises (CIHEF) and Others v Ministre de la Transition écologique and Premier ministre.
    • European Union
    • Court of Justice (European Union)
    • 19 Enero 2023
    ...las disposiciones de la medida de armonización y no de las del Derecho primario (sentencia de 24 de febrero de 2022, Viva Telecom Bulgaria, C‑257/20, EU:C:2022:125, apartado 45 y jurisprudencia citada). 27 Así pues, procede entender la cuestión prejudicial planteada por el órgano jurisdicci......
  • Confédération paysanne and Others v Premier ministre and Ministre de l'Agriculture et de l'Alimentation.
    • European Union
    • Court of Justice (European Union)
    • 7 Febrero 2023
    ...Sinne Urteile vom 1. Dezember 2011, Painer, C‑145/10, EU:C:2011:798, Rn. 64 und 65, sowie vom 24. Februar 2022, Viva Telecom Bulgaria, C‑257/20, EU:C:2022:125, Rn. 37 In Anbetracht der vorstehenden Erwägungen ist das Vorabentscheidungsersuchen für zulässig zu erklären. Zu den Vorlagefragen ......
  • Request a trial to view additional results
8 cases
  • TJ v Inspectoratul General pentru Imigrări.
    • European Union
    • Court of Justice (European Union)
    • 22 Diciembre 2022
    ...para responder adecuadamente a las cuestiones que se le hayan planteado (sentencia de 24 de febrero de 2022,Viva Telecom Bulgaria, C‑257/20, EU:C:2022:125, apartado 41 y jurisprudencia 26 En el presente asunto, procede señalar, por lo que respecta a la alegación basada en la claridad de las......
  • Opinion of Advocate General Emiliou delivered on 2 June 2022.
    • European Union
    • Court of Justice (European Union)
    • 2 Junio 2022
    ...de cette mesure d’harmonisation et non pas de celles du droit primaire ». Arrêt du 24 février 2022, arrêt Viva Telecom Bulgaria (C‑257/20, EU:C:2022:125, point 45 et la jurisprudence 9 Arrêt du 19 janvier 2017, Queisser Pharma (C‑282/15, EU:C:2017:26, point 39 et la jurisprudence citée). 10......
  • Comité interprofessionnel des huiles essentielles françaises (CIHEF) and Others v Ministre de la Transition écologique and Premier ministre.
    • European Union
    • Court of Justice (European Union)
    • 19 Enero 2023
    ...las disposiciones de la medida de armonización y no de las del Derecho primario (sentencia de 24 de febrero de 2022, Viva Telecom Bulgaria, C‑257/20, EU:C:2022:125, apartado 45 y jurisprudencia citada). 27 Así pues, procede entender la cuestión prejudicial planteada por el órgano jurisdicci......
  • Confédération paysanne and Others v Premier ministre and Ministre de l'Agriculture et de l'Alimentation.
    • European Union
    • Court of Justice (European Union)
    • 7 Febrero 2023
    ...Sinne Urteile vom 1. Dezember 2011, Painer, C‑145/10, EU:C:2011:798, Rn. 64 und 65, sowie vom 24. Februar 2022, Viva Telecom Bulgaria, C‑257/20, EU:C:2022:125, Rn. 37 In Anbetracht der vorstehenden Erwägungen ist das Vorabentscheidungsersuchen für zulässig zu erklären. Zu den Vorlagefragen ......
  • Request a trial to view additional results

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