| REVENUE — Income tax — Dividends — Dividends received from company established in another member state — Deduction at source of tax in company’s state not taken into account on taxation in resident’s state — Whether contrary to free movement of capital — EC Treaty, art 73b(1) (art 56(1) EC)
Kerckhaert and another v Belgische Staat (Case C-513/04)
ECJ: President Skouris, Judges Jann, Timmermans, Rosas, Lenaerts, Juhász, Cunha Rodrigues, Silva de Lapuerta, Arestis, Borg Barthet and Levits: 14 November 2006
Article 73b(1) of the EC Treaty (article 56(1) EC), prohibiting restrictions on the free movement of capital between member states, did not preclude legislation of a member state which made dividends from shares in companies established both in that state and in another member state subject to the same uniform rate of taxation, without providing for the possibility of setting off tax levied by deduction at source in that other state.
The Grand Chamber of the Court of Justice of the European Communities so ruled on a reference for a preliminary ruling by the Rechtbank van eerste aanleg te Gent, Belgium.
Under Belgian law, dividends were charged to income tax at a rate of 25%, irrespective of whether the company paying the dividend was established in Belgium or in another EC member state. Dividends paid by a French company to the claimants, resident in Belgium, were subject to income tax in France at a rate of 15% deducted at source. That tax was not taken into account on the taxation in Belgium of the claimants’ dividends, and the claimants brought proceedings alleging inter alia infringement of article 73b(1) of the EC Treaty in that dividends originating in France were taxed more heavily than those originating in Belgium.
THE COURT said that, by the case law of the court, discrimination contrary to the fundamental freedoms in the EC Treaty could only arise inter alia in instances where comparable relevant groups of persons were treated in different ways, eg where a national law treated in different ways dividend income from companies established in the taxpayer’s state and from ones established in another state, but the situations of taxpayers receiving the two types of income were not objectively different. The present case was different in that, while Belgian shareholders were not in a different situation depending on whether their dividend income came from companies established in Belgium or from ones established in other member states, the Belgian legislation made no distinction between the two types of dividend income: both were taxed identically at 25%. The adverse effects felt by the claimants were the result of two member states exercising in parallel their own fiscal sovereignty. Community law did not at present lay down general criteria in relation to member states’ competence as to eliminating double taxation.
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