C-39/16 Argenta
Under Belgian interest limitation rules, a deduction of interest payments is disallowed where the taxpayer receives exempt dividends from shares held by the company for less than a year. The question for the CJEU was whether the Belgian rules are compatible with the Parent-Subsidiary Directive (PSD).
The Advocate General (AG) reasoned that the Directive did not apply because Argenta did not meet the one-year holding period requirement. The AG also held that Article 3(2) of the PSD, which gives MS the option of exempting companies from the PSD benefits if they have not remained in possession of a holding for a period of at least two years, is not time constrained. In any event, the PSD only allows Member States to provide that ‘the costs relating to the holding in the subsidiary’ are non-deductible. Consequently, the Directive precludes the Belgian interest limitation rules as they do not take into account the situation where the interest cost was connected to the holdings for which an exemption was granted. Further, the AG found that the rules are not provisions of domestic law preventing tax evasion and abuse. The case is available here.
This article appears in the JHA May 2017 Tax Newsletter, which also features:
