C-379/05, Amurta v Inspecteur van de Belastingdienst

Certain provisions of Dutch law on taxation of dividends infringing Art. 56 EC

Dutch legislation on the taxation of dividends (Wet DB) provided for a withholding tax on dividends distributed by a company established in that Member State to a company established in another Member State, where the minimum threshold for the parent company’s shareholdings in the share capital of the subsidiary set out in Art. 5(1) of Directive 90/435 was not reached.

However, the legislation exempted from that tax the dividends paid to a company liable to corporation tax in the Netherlands or which had a permanent establishment in the Netherlands which owned shared in the company paying the dividends.

The referring Court first of all asked whether the national legislation concerned was compatible with Articles 56 to 58 EC. Secondly, it asked to what extent the existence of a full tax credit, granted by the Member State of residence of the recipient company to which the exemption under Art. 4 of the Wet DB did not apply, might influence the answer to the first question.

The Court reiterated that in the absence of any unifying or harmonising Community measures, Member States retained the power to define, by treaty or unilaterally, the criteria for allocating their powers of taxation, particularly with a view to eliminating double taxation.

However, Member States must none the less exercise that competence consistently with Community law. (see e.g.
C-446/03, Marks & Spencer and C-196/04, Cadbury Schweppes).

The Court held that the situation in the main proceedings did not fall within the scope of Directive 90/435. It was therefore for the Member States to determine whether, and to what extent, economic double taxation of distributed profits was to be avoided and, for that purpose, to establish, either unilaterally or through double taxation conventions concluded with other Member States, procedures intended to prevent or mitigate such economic double taxation.

However, this did not of itself mean that the Member States were entitled to impose measures that contravened the freedoms of movement guaranteed by the EC Treaty. (see e.g.
C-374/04, Test Claimants in Class IV of the ACT Group Litigation).

The Court held that the national legislation infringed Art. 56 EC, as it introduced a difference of treatment between, on the one hand, companies receiving dividends with their seat in the Netherlands or having a permanent establishment there which held shares in the distributing company and, on the other, companies receiving dividends which were not established in the Netherlands

Although, as the Court had held before, the need to maintain the cohesion of a tax system could justify a restriction on the exercise of the fundamental freedoms guaranteed by the Treaty.
However, for an argument based on such a justification to succeed, a direct link must be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy. No such link existed in the present case. (see e.g. C-319/02, Manninen and C-9/02, Lasteyrie du Saillant).

Text of Judgment