Groupe Steria SCA v Ministère des Finances et des Comptes publics.

• Jurisdiction: European Union
• Court: Court of Justice (European Union)
• ECLI: ECLI:EU:C:2015:392
• Docket Number: C-386/14
• Date: 11 June 2015
• Procedure Type: Reference for a preliminary ruling

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 11 June 2015 ( 1 )

Case C‑386/14

Groupe Steria SCA

v

Ministère des finances et des comptes publics

(Request for a preliminary ruling from the Cour administrative d’appel de Versailles (France))

‛Tax legislation — Freedom of establishment — Article 4(2) of Directive 90/435/EEC — Cross-border distributions of profits — National corporation tax — Group taxation (French ‘intégration fiscale’) — Tax exemption for revenue from holdings — Non-deductible charges relating to the holding — Distributions of profits from non-resident subsidiaries’

I – Introduction

1. The Court has dealt with the group taxation regimes of Member States on several occasions in the past, ( 2 ) including one case concerning the French regime, ( 3 ) which is the subject of this request for a preliminary ruling.

2. French legislation on corporation tax stipulates that distributions of profits from a subsidiary to a parent company are not, in principle, taxed at the parent. Excluded from this, however, is a 5% proportion, which represents the charges incurred by the parent company in connection with its holding in the subsidiary. These charges are not to be deductible because they serve the realisation of non-taxable income by the parent company, namely the distribution of profits from its subsidiaries.

3. This effectively partial taxation of profit distributions does not occur, however, if the parent company and the subsidiary are taxed jointly under a regime known as intégration fiscale. Since foreign companies are not allowed to take part in this form of group taxation, the Court has been asked to examine whether such a regime is consistent with the freedom of establishment and the corporation tax legislation of the European Union.

II – Legal framework

A – EU law

4. The relevant legislation on the freedom of establishment for the period to which the main proceedings refer is Article 43 EC (now Article 49 TFEU): ‘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.’

5. Article 48 EC (now Article 54 TFEU) broadens the scope of application of the freedom of establishment as follows: ‘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-profit-making.’

6. According to Article 1(1) 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 ( 4 ) (‘Parent-Subsidiary Directive’), that directive, which is relevant to the main proceedings, is to be applied to certain cross-border distributions of profits. According to its third recital, it serves to eliminate the tax disadvantage faced by cross-border groups as compared to domestic ones. Its Article 4(1) in the version of Directive 2003/123/EC ( 5 ) contains the following provision to this end: ‘(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 … up to the limit of the amount of the corresponding tax due.’

7. Article 4(2) of the Parent-Subsidiary Directive adds: ‘However, each Member State shall retain the option of providing that any charges relating to the holding … 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.’

B – National law

8. The French Republic charges corporation tax on the income of companies, a regime which is governed by the Code général des impôts (French General Tax Code, ‘the CGI’).

9. Article 216 of the CGI contains the following general provision governing income from holdings and their costs: ‘1. Net revenues from holdings giving entitlement to application of the tax regime for parent companies … may be deducted from the net total profits of that company, after deduction of a proportion of costs and expenses. The proportion of costs and expenses … is fixed in every case at 5% of the gross revenue from the holdings, including tax credits.’

10. Article 223 A of the CGI contains a special provision for the joint taxation of groups under certain conditions: ‘A company … can render itself the sole party liable for corporation tax due on the overall profits of the group formed by it and the companies of which it is the holder, continuously throughout the financial year, directly or indirectly through companies in the group, of at least 95% of the capital … Only those companies … whose results are subject to corporation tax under the conditions of the general law may be members of the group …’

11. The group’s overall profit is determined according to Article 223 B of the CGI: ‘The overall profit is to be determined by the parent company through the algebraic sum of the results of each of the companies in the group, determined under the conditions of the general law ... As regards the determination of the profits for financial years beginning on or before 1 January 1993, or ending after 31 December 1998, the overall profit shall be reduced by the proportion of costs and expenses which a group company has included in its results by virtue of its holding in another group company …’

III – Main proceedings

12. The main proceedings concern the corporation tax of the French company Groupe Steria SCA (‘Groupe Steria’) from 2005 to 2008. Groupe Steria is the parent company of a group subject to the special rules governing group taxation.

13. Groupe Steria is seeking to deduct the 5% proportion for costs and expenses (‘5% proportion’), which is non-deductible under point 1 of Article 216 of the CGI, in respect of revenue that one of its French subsidiaries received from its holdings in companies established in other EU Member States. The French authorities refuse this deduction because it is only possible under paragraph 2 of Article 223 B of the CGI if the holdings’ revenue originates from a member of the tax group. Under paragraph 2 of Article 223 A of the CGI, however, companies resident abroad may not be members of a tax group.

14. Groupe Steria does in fact accept the exclusion of foreign companies from group taxation. However, it takes the view that the French legislation is inconsistent with the freedom of establishment in so far as it refuses to allow deduction of the 5% proportion in respect of holdings that could be part of the tax group were they not resident abroad.

IV – Proceedings before the Court

15. The Cour administrative d’appel de Versailles (Administrative Court of Appeal, Versailles), which is now dealing with the main proceedings, referred the following question to the Court on 13 August 2014 for a preliminary ruling pursuant to Article 267 TFEU: Does Article 43 EC preclude the rules governing French group taxation which enable the parent company of a group to neutralise the add-back of the proportion of costs and expenses, fixed at 5% of the net amount only of those dividends received by it from resident companies included within the tax group, when such a right is refused to it under those rules as regards the dividends distributed to it from its subsidiaries established in another Member State which, had they been resident, would have been eligible in practice, if they so elected?

16. In the proceedings before the Court, Groupe Steria, the Federal Republic of Germany, the French Republic, the Kingdom of the Netherlands, the United Kingdom of Great Britain and Northern Ireland, and the European Commission all submitted written observations. Groupe Steria, the French Republic and the Commission also made submissions at the hearing held on 13 May 2015.

V – Legal assessment

17. To answer the question referred for a preliminary ruling it is necessary to examine whether a regime such as the French one is consistent with the freedom of establishment.

A –...