The case deals with circumstances in which a Member State may refuse – on the grounds of preventing tax evasion – an exemption from WHT that would normally be granted for dividend payments of a resident subsidiary to its non-resident parent company.
French tax authorities refused to exempt from WHT the dividends of a French company that were paid to its Luxembourg parent company, which was indirectly controlled by a Swiss company, on the grounds that proof was required to show that the ownership structure was not tax-related. Moreover, the proof had to come from the beneficiary of the dividends, i.e. the non-EU parent company, without the French tax authorities being obliged to provide sufficient indications of tax evasion. AG Kokott found that such a rule was disproportionate and that it went beyond what is required to prevent tax evasion. The mere reference to the direct/indirect control by shareholders in third States cannot be regarded as an indication of tax evasion.
AG Kokott also held that that it is irrelevant that the company relying on the freedom of establishment is controlled by persons with their seat in a non-Member State. The origin of the shareholders of companies does not affect the right of those companies, who are resident in the EU, to rely on the freedom of establishment. Consequently, a difference in the tax treatment of dividends between parent companies, based on the location of their seat, constitutes a restriction on the freedom of establishment.
Full opinion can be found here.
This article appears in the JHA January 2017 Tax Newsletter, which also features:
