N v Inspecteur van de Belastingdienst Oost/kantoor Almelo.

• Jurisdiction: European Union
• Celex Number: 62004CJ0470
• ECLI: ECLI:EU:C:2006:525
• Date: 07 September 2006
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling
• Docket Number: C-470/04

Case C-470/04

N

v

Inspecteur van de Belastingdienst Oost/kantoor Almelo

(Reference for a preliminary ruling from the Gerechtshof te Arnhem)

(Freedom of movement for persons – Article 18 EC – Freedom of establishment – Article 43 EC – Direct taxation – Taxation of notional increases in value of substantial shareholdings where tax residence transferred to another Member State)

Summary of the Judgment

1. Freedom of movement for persons – Freedom of establishment – Provisions of the Treaty – Scope

(Art. 43 EC)

2. Freedom of movement for persons – Freedom of establishment – Tax legislation

(Art. 43 EC)

3. Community law – Rights conferred on individuals – Breach by a Member State

1. A Community national who has been living in one Member State since the transfer of his residence and who holds all the shares of companies established in another Member State, may rely on Article 43 EC.

(see para. 30, operative part 1)

2. Article 43 EC must be interpreted as precluding a Member State from establishing a system for taxing increases in the value of rights in a company in the case of a taxpayer’s transferring his residence outside that Member State, which makes the granting of deferment of the payment of that tax conditional on the provision of guarantees and does not take full account of reductions in value capable of arising after the transfer of residence by the person concerned and which were not taken into account by the host Member State.

(see para. 55, operative part 2)

3. An obstacle arising from a requirement, in breach of Community law, that a guarantee be constituted cannot be raised with retroactive effect merely by releasing that guarantee. The form of the document on the basis of which the guarantee was released is immaterial to that assessment. Where a Member State makes provision for the payment of interest on arrears where a guarantee demanded in breach of national law is released, such interest is also due in the case of an infringement of Community law. Moreover, it is for the national court to assess, in accordance with the guidelines provided by the Court of Justice and in compliance with the principles of equivalence and effectiveness, whether the Member State is liable on account of the damage caused by the obligation to constitute such a guarantee.

(see para. 67, operative part 3)

JUDGMENT OF THE COURT (Second Chamber)

7 September 2006 (*)

(Freedom of movement for persons –Article 18 EC– Freedom of establishment –Article 43 EC – Direct taxation – Taxation of notional increases in value of substantial shareholdings where tax residence transferred to another Member State)

In Case C-470/04,

REFERENCE for a preliminary ruling under Article 234 EC by the Gerechtshof te Arnhem (Netherlands), made by decision of 27 October 2004, received at the Court on 2 November 2004, in the proceedings

N

v

Inspecteur van de Belastingdienst Oost/kantoor Almelo

THE COURT (Second Chamber),

composed of C.W.A. Timmermans, President of Chamber, R. Schintgen, R. Silva de Lapuerta, G. Arestis and J. Klučka (Rapporteur), Judges,

Advocate General: J. Kokott,

Registrar: R. Grass,

after considering the observations submitted on behalf of:

– N, by P.L.M. van Gorkom, advocaat,

– the Netherlands Government, by H.G. Sevenster and C.A.H.M. ten Dam, acting as Agents,

– the Danish Government, by J. Molde, acting as Agent,

– the German Government, by W.-D. Plessing, acting as Agent,

– the Italian Government, by I.M. Braguglia, acting as Agent, assisted by G. Albenzio, avvocato dello Stato,

– the Commission of the European Communities, by R. Lyal and A. Weimar, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 30 March 2006,

gives the following

Judgment

1 This reference for a preliminary ruling concerns the interpretation of Articles 18 EC and 43 EC

2 It was submitted in a dispute between N and the Inspecteur van de Belastingdienst Oost/kantoor Almelo (‘the inspector’) concerning a decision by the latter holding a complaint by N against a tax notice concerning income tax and social security contributions for 1997 to be inadmissible.

Legal context

The law on income tax

3 Under Article 3 of the Law on Income Tax (Wet op de inkomstenbelasting) of 1964 (‘the WIB’), the tax payable by a national taxpayer is calculated on the basis of the taxable income, which includes, inter alia, according to Article 4 of that Law, the profits derived from a substantial shareholding.

4 According to the wording of Article 20a(1)(b) of the WIB, the total amount of the benefits gained from the disposal of shares forming part of a holding constitutes a benefit derived from a substantial holding. According to paragraph (3) of that article, there is a substantial holding where the taxpayer directly or indirectly holds 5% of a company’s capital.

5 Article 20a(6)(i) of the WIB provides that loss of the status of national taxpayer, other than by death, is assimilated to a disposal of shares.

6 The detailed rules for calculating the benefit derived from a notional disposal are laid down in Article 20c of the WIB. Under Article 20c(1), the gain resulting from the disposal is normally constituted by the difference between the purchase price and the sale price. Under Article 20c(4), where there is no consideration on a disposal or acquisition, it is the market value which may be attributed to the holding at the time of the disposal that is regarded as the consideration. If the taxpayer establishes his residence in the Netherlands, Article 20c(7) provides that the reference amount shall, instead of the purchase price, be the market value of the securities at the date of that taxpayer’s entering the Netherlands.

7 Article 20c(18) of the WIB provides:

‘A ministerial order shall lay down the rules on the acquisition price in cases where the taxpayer’s assets include the shares of a company to which Article 20a(6)(i) has applied in relation to the taxpayer during a previous year. A ministerial order may also lay down rules as regards remission of the tax determined pursuant to Article 20a(6)(i) or the second sentence of Article 49(4) if the taxpayer returns to the Netherlands less than ten years after transferring his residence outside the Netherlands.’

The Law on the Collection of Taxes

8 The deferment of payment of a tax due by reason of loss of the status of national taxpayer otherwise than by death was provided for, at the time of the facts in the main proceedings, by Article 25(6) of the Law on the Collection of Taxes (Invorderingswet) of 1990 (‘the IW’). That provision referred to a ministerial order to determine the rules for granting a deferment of payment for a period of ten years on condition that a sufficient security was provided. Such deferment could end if, in particular, the shares in question were disposed of within the meaning of Article 20a(1) or 6(a) to (h) of the WIB.

9 Article 26(2) of the IW provided, at the time of the facts in the main proceedings:

‘A ministerial order shall determine the rules whereby a taxpayer may be granted remission of the tax for which a deferment of payment was granted on the basis of Article 25(6):

…

b) up to the amount of the tax actually levied abroad on the disposal of those shares by virtue of the benefit derived from the disposal within the meaning of Article 25(8), provided that the amount of the remission shall not exceed the amount of the tax in respect of which deferment is still being granted;

c) of an amount equal to that still due after 10 years.’

The Decree Implementing the Law on the Collection of Taxes

10 The Decree Implementing the Law on the Collection of Taxes (Uitvoeringsregeling invorderingswet) of 1990 (‘the URIW’) is referred to in particular in Articles 25 and 26 of that Law. Articles 2 and 4 of that decree provide:

‘Article 2

1. In situations as referred to in Article 25(6) of the Law, the Collector of Taxes shall, on the taxpayer’s request and by decision against which an objection may be lodged, grant deferment of payment – without interest on overdue tax being charged – provided that adequate security is provided and agreement is reached on conditions to be specified by the Collector of Taxes.

2. The deferment shall be granted in respect of the amount of the tax due by virtue of the benefit taken into account pursuant to Article 20a(6)(i) of the ... [WIB] and the amount of interest relating thereto ...

3. If the shares, holding certificates or debts concerned by the suspension are disposed of within the meaning of Article 20a, first or sixth paragraph, points (a) to (h) of the ... [WIB], the Collector of Taxes shall, by decision against which an objection may be lodged, put an end to the deferment in relation to those shares

…

…

Article 4

1. In situations as referred to in Article 26(2) of the Law, the Collector of Taxes shall, at the taxpayer’s request and by decision against which an objection may be lodged, grant remission of income tax up to an amount as referred to in the abovementioned paragraph, provided that, in relation to a share, the amount of the remission shall not be higher than the lesser of the following amounts:

1. the amount of the tax for which a deferment was granted in relation to that share …;

2. the amount of the tax actually levied abroad on the disposal of that share, by virtue of the benefit derived from the disposal and for which deferment of payment was granted by virtue of Article 25(6) …’.

The main proceedings and the questions referred for a preliminary ruling

11 On 22 January 1997, N transferred his residence from the Netherlands to the United Kingdom. At the time he left the Netherlands, he was the sole shareholder of three limited liability Netherlands companies (besloten vennootschappen), the management of which has since that same date been in Curaçao (Netherlands Antilles).

12 For 1997, N declared taxable...