ACC Silicones Ltd. v Bundeszentralamt für Steuern.

• Jurisdiction: European Union
• ECLI: ECLI:EU:C:2022:469
• Date: 16 June 2022
• Docket Number: C-572/20
• Celex Number: 62020CJ0572
• Court: Court of Justice (European Union)

Provisional text

JUDGMENT OF THE COURT (Fourth Chamber)

16 June 2022 (*)

(Reference for a preliminary ruling – Free movement of capital – Dividends from ‘free-float’ shares – Reimbursement of tax on income from capital paid by a non-resident company – Conditions – Free movement of capital – Principle of proportionality)

In Case C‑572/20,

REQUEST for a preliminary ruling under Article 267 TFEU from the Finanzgericht Köln (Finance Court, Cologne, Germany), made by decision of 20 May 2020, received at the Court on 3 November 2020, in the proceedings

ACC Silicones Ltd

v

Bundeszentralamt für Steuern

THE COURT (Fourth Chamber),

composed of C. Lycourgos, President of the Chamber, S. Rodin, J.C. Bonichot (Rapporteur), L.S. Rossi and O. Spineanu-Matei, Judges,

Advocate General: A.M. Collins,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

– ACC Silicones Ltd., by B. Pignot, Rechtsanwalt and A. Linn, Steuerberater,

– the German Government, by J. Möller and R. Kanitz, acting as Agents,

– the European Commission, by W. Roels and V. Uher, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 20 January 2022,

gives the following

Judgment

1 This request for a preliminary ruling concerns the interpretation of Article 63 TFEU.

2 The request has been made in proceedings between ACC Silicones Ltd and the Bundeszentralamt für Steuern (Federal Tax Office, Germany) concerning the reimbursement of tax on income from capital withheld at source, for the years 2006 to 2008, on dividends distributed to that company by Ambratec GmbH, a company established in Germany.

Legal context

European Union law

3 In accordance with Article 3(1)(a) of 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 (OJ 1990 L 225, p. 6), as amended by Council Directive 2003/123/EC of 22 December 2003 (OJ 2004 L 7, p. 41) (‘Directive 90/435’), that directive applied to parent companies holding a minimum holding in the capital of their subsidiaries of 20%, that minimum holding percentage having been reduced to 15% from 1 January 2007 and to 10% from 1 January 2009. Directive 90/435 was repealed by 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).

German law

4 Point 1 of Paragraph 20(1) of the Einkommensteuergesetz (Law on income tax), in the version applicable to the dispute in the main proceedings (‘the EStG’), provides that income from capital includes shares of profits (dividends).

5 Point 1 of the first sentence of Paragraph 43(1) of the EStG provides that, in the case, inter alia, of income from capital within the meaning of point 1 of Paragraph 20(1) of the EStG, ‘income tax is levied by deduction from the income from capital (tax on income from capital)’.

6 Under the first sentence of Article 8b(1) of the Körperschaftsteuergesetz (Law on corporation tax), in the version applicable to the dispute in the main proceedings (‘the KStG’), relating to shareholdings in other companies and associations, earnings received within the meaning, inter alia, of point 1 of Paragraph 20(1), of the EStG are not to be taken into account for the purpose of determining income and are therefore not subject to corporation tax.

7 As regards the taxation of dividends distributed to a company whose registered office is in Germany, it is apparent from the combined provisions of the first sentence of Paragraph 31(1) of the KStG and point 2 of Paragraph 36(2) of the EStG that the tax on income from capital which has been levied by way of a withholding tax is set off in full against the corporation tax payable by that company and, where appropriate, may be reimbursed to it. The set-off (and reimbursement, if any) of the tax presupposes that the tax has been withheld and paid, which must be proved by submission of an administrative certificate, in accordance with Paragraph 45a(2) or (3) of the EStG.

8 As regards the taxation of dividends distributed to a company whose registered office is not established in Germany, Paragraph 32(5) of the KStG is worded as follows:

‘(5) Where the corporation tax owed by the creditor on income from capital within the meaning of point 1 of Paragraph 20(1) of [the EStG] has been definitively disposed of in accordance with subparagraph 1 [hereof], the tax on income from capital which has been withheld and paid shall, on application, be reimbursed to the creditor of the income from capital in accordance with point 2 of Paragraph 36(2) of [the EStG], where

1. the creditor of the income from capital is a company subject to limited tax liability as provided for in Paragraph 2(1), which

(a) is also a company within the meaning of Article 54 [TFEU] or Article 34 of [the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3)],

(b) has its registered office and centre of effective management within the territory of a Member State of the European Union or a State to which the [EEA Agreement] is applicable,

(c) is subject, in the State of its centre of effective management, to non-optional, unlimited tax liability comparable to that referred to in Paragraph 1, and is not exempt therefrom, and

2. the creditor has a direct holding in the initial capital or share capital of the debtor of the income from capital and does not meet the minimum participation threshold laid down in Paragraph 43b(2) of [the EStG].

Sentence 1 shall apply only in so far as

1. reimbursement of the tax on income from capital in question is not available under any other provision,

2. the income from capital would not be taken into account in the calculation of income, in accordance with Paragraph 8b(1),

3. the income from capital is not attributed, under provisions in another country, to any person who would not be entitled to reimbursement pursuant to this subparagraph if he or she were to receive the income from capital directly,

4. a right to full or partial reimbursement of the tax on income from capital would not be excluded if Paragraph 50d(3) of [the EStG] were applied mutatis mutandis, and

5. the creditor or a shareholder having a direct or indirect equity holding in the creditor cannot offset the tax on income from capital or deduct it as an operating cost or as work-related outgoings; the possibility of carrying forward a set-off shall be treated as a set-off.

The creditor of the income from capital shall provide proof of compliance with the conditions of reimbursement. In particular, he or she shall prove, by way of a certificate from the tax authorities of his or her country of residence, that he or she is regarded as being resident for tax purposes in that country, is subject to unlimited corporation tax liability there, is not exempt from corporation tax and is the actual recipient of the income from capital. The certificate from the foreign tax administration shall show that the German tax on income from capital cannot be offset, deducted or carried forward and that no set-off, deduction or carry-forward has actually taken place either. The tax on income from capital shall be reimbursed in relation to all income from capital received in a calendar year within the meaning of the first sentence on the basis of an exemption notice as provided for in the third sentence of Paragraph 155(1) of the Abgabenordnung [(German Tax Code)].’

The double taxation convention

9 The Convention of 26 November 1964 between the Federal Republic of Germany and the United Kingdom of Great Britain and Northern Ireland for the avoidance of double taxation and the prevention of fiscal evasion, as amended by the protocol of 23 March 1970 (BGBl. 1966 II, p. 359; BGBl. 1967 II, p. 828, BGBl. 1971 II, p. 46; ‘the double taxation convention’) provides in Article VI(1):

‘(1) Dividends paid by a company resident in one of the territories to a resident of the other territory may also be taxed in the former territory. Tax shall not, however, be charged in that former territory at a rate in excess of 15 per cent on the gross amount of such dividends provided that those dividends either are subject to tax in the other territory or, being dividends paid by a company which is resident in the United Kingdom, are exempt from Federal Republic tax under the provisions of sub-paragraph (a) of paragraph (2) of Article XVIII.’

10 Article XVIII(1)(a) of that convention is worded as follows:

‘(1) Subject to the provisions of the law of the United Kingdom regarding the allowance as a credit against United Kingdom tax of tax payable in a territory outside the United Kingdom (which shall not affect the general principle hereof):

(a) Federal Republic [of Germany] tax payable under the laws of the Federal Republic [of Germany] and in accordance with this Convention, whether directly or by deduction, on profits, income or chargeable gains from sources within the Federal Republic [of Germany] (excluding in the case of a dividend, tax payable in respect of the profits out of which the dividend is paid) shall be allowed as a credit against any United Kingdom tax computed by reference to the same profits, income or chargeable gains by reference to which the Federal Republic [of Germany] tax is computed.’

The...