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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Metallgesellschaft & Ors (Free movement of persons) [2001] EUECJ C-410/98 (08 March 2001) URL: http://www.bailii.org/eu/cases/EUECJ/2001/C41098.html Cite as: [2001] All ER (EC) 496, [2001] 2 CMLR 32, 3 ITL Rep 385, [2001] EUECJ C-410/98, Case C-410/98, [2001] Ch 620, [2001] STI 498, [2001] STC 452, [2001] 2 WLR 1497, [2001] ECR I-1727, [2001] BTC 99 |
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JUDGMENT OF THE COURT (Fifth Chamber)
8 March 2001 (1)
(Freedom of establishment - Free movement of capital - Advance payment of corporation tax on profits distributed by a subsidiary to its parent company - Parent company having its seat in another Member State - Breach of Community law - Action for restitution or action for damages - Interest)
In Joined Cases C-397/98 and C-410/98,
REFERENCES to the Court under Article 177 of the EC Treaty (now Article 234 EC) by the High Court of Justice of England and Wales, Chancery Division, for a preliminary ruling in the proceedings pending before that court between
Metallgesellschaft Ltd and Others (C-397/98),
Hoechst AG,
Hoechst UK Ltd (C-410/98)
and
Commissioners of Inland Revenue,
H.M. Attorney General,
on the interpretation of Articles 6 and 52 of the EC Treaty (now, after amendment, Articles 12 EC and 43 EC), Article 58 of the EC Treaty (now Article 48 EC) and/or Article 73b of the EC Treaty (now Article 56 EC),
THE COURT (Fifth Chamber),
composed of: A. La Pergola, President of the Chamber, M. Wathelet (Rapporteur), D.A.O. Edward, P. Jann and L. Sevón, Judges,
Advocate General: N. Fennelly,
Registrar: L. Hewlett, Administrator,
after considering the written observations submitted on behalf of:
- Metallgesellschaft Ltd and Others, by J. Gardiner QC and F. Fitzpatrick, Barrister, instructed by Slaughter and May, Solicitors,
- Hoechst AG and Hoechst UK Ltd, by M. Barnes QC, instructed by Slaughter and May, Solicitors,
- the United Kingdom Government, by J.E. Collins, acting as Agent, D. Wyatt QC and R. Singh, Barrister,
- the Netherlands Government, by M.A. Fierstra, acting as Agent,
- the Finnish Government, by H. Rotkirch and T. Pynnä, acting as Agents,
- the Commission of the European Communities, by R. Lyal, H. Michard and M. Patakia, acting as Agents,
having regard to the Report for the Hearing,
after hearing the oral observations of Metallgesellschaft Ltd and Others, represented by J. Gardiner and F. Fitzpatrick; of Hoechst AG and Hoechst UK Ltd, represented by M. Barnes; of the United Kingdom Government, represented by G. Amodeo, acting as Agent, and D. Wyatt; of the German Government, represented by B. Muttelsee-Schön, acting as Agent; of the French Government, represented by S. Seam, acting as Agent; of the Netherlands Government, represented by M. Fierstra; and of the Commission, represented by R. Lyal and H. Michard, at the hearing on 25 May 2000,
after hearing the Opinion of the Advocate General at the sitting on 12 September 2000,
gives the following
The relevant national provisions
Advance corporation tax
Tax credit
Group Income Election
The facts of the main proceedings
The questions submitted for preliminary ruling
'(1) In the circumstances set out in the orders for reference, is it consistent with Community law and, in particular, with Articles 6, 52, 58 and/or 73b of the EC Treaty for the legislation of a Member State to permit a group income election (allowing distributions to be paid by a subsidiary to its parent without accounting for advance corporation tax (ACT)) only where both the subsidiary and parent are resident in that Member State?
(2) If the answer to Question 1 is no, do the abovementioned provisions of the EC Treaty give rise to a restitutionary right for a resident subsidiary of a parent company resident in another Member State and/or the said parent to claim a sum of money by way of interest on the ACT which the subsidiary paid on the basis that the national laws did not allow it to make a group income election, or can such a sum only be claimed, if at all, by way of an action for damages pursuant to the principles laid down by the Court of Justice in Joined Cases C-46/93 and C-48/93 Brasserie du Pêcheur SA v Federal Republic of Germany and R v Secretary of State for Transport, ex parte Factortame and Others [1996] ECR I-1029 and Case C-66/95 R v Secretary of State for Social Security, ex parte Eunice Sutton [1997] ECR I-2163, and in either case is the national court obliged to grant a remedy even if under national law interest cannot be awarded (whether directly or by way of restitution or damages) on principal sums which are no longer owing to the plaintiffs?
(3) In the circumstances set out in the orders for reference, is it consistent with the abovementioned provisions of the EC Treaty for the authorities of one Member State to deny any tax credit to a company resident in another Member State when it grants such credit to resident companies and to companies resident in certain other Member States by virtue of the terms of its double taxation conventions with those other Member States?
(4) If the answer to Question 3 above is no, is and was the first Member State at all material times obliged to make a tax credit available to such company on the same terms as to resident companies or as to companies resident in Member States with provision for such credits in their double- taxation conventions?
(5) Is a Member State entitled to plead in answer to such a claim for restitution, tax credit or damages, that the plaintiffs are not entitled to recover, or that the plaintiffs' claim should be reduced, on the grounds that, despite the terms of the national statute which prevented them from doing so, as a matter of national law they ought to have made a group income election, or claimed a tax credit and have appealed to the Commissioners and, if necessary, the courts, against the decision of the Inspector of Taxes refusing the election or claim, relying upon the primacy and direct effect of the provisions of Community law?
The first question
The second question
- Where a subsidiary resident in one Member State has been obliged to pay advance corporation tax in respect of dividends paid to its parent company having its seat in another Member State even though, in similar circumstances, the subsidiaries of parent companies resident in the first Member State were entitled to opt for a taxation regime that allowed them to avoid that obligation, Article 52 of the Treaty requires that resident subsidiaries and their non-resident parent companies should have an effective legal remedy in order to obtain reimbursement or reparation of the financial loss which they have sustained and from which the authorities of the Member State concerned have benefited as a result of the advance payment of tax by the subsidiaries.
- The mere fact that the sole object of such an action is the payment of interest equivalent to the financial loss suffered as a result of the loss of use of thesums paid prematurely does not constitute a ground for dismissing such an action.
- While, in the absence of Community rules, it is for the domestic legal system of the Member State concerned to lay down the detailed procedural rules governing such actions, including ancillary questions such as the payment of interest, those rules must not render practically impossible or excessively difficult the exercise of rights conferred by Community law.
The third and fourth questions
The fifth question
Costs
108. The costs incurred by the United Kingdom, German, French, Netherlands and Finnish Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT (Fifth Chamber),
in answer to the questions referred to it by the Court of Justice of England and Wales, Chancery Division, by orders of 2 October 1998, hereby rules:
1. It is contrary to Article 52 of the EC Treaty (now, after amendment, Article 43 EC) for the tax legislation of a Member State, such as that in issue in the main proceedings, to afford companies resident in that Member State the possibility of benefiting from a taxation regime allowing them to pay dividends to their parent company without having to pay advance corporation tax where their parent company is also resident in that Member State but to deny them that possibility where their parent company has its seat in another Member State.
2. Where a subsidiary resident in one Member State has been obliged to pay advance corporation tax in respect of dividends paid to its parent companyhaving its seat in another Member State even though, in similar circumstances, the subsidiaries of parent companies resident in the first Member State were entitled to opt for a taxation regime that allowed them to avoid that obligation, Article 52 of the Treaty requires that resident subsidiaries and their non-resident parent companies should have an effective legal remedy in order to obtain reimbursement or reparation of the financial loss which they have sustained and from which the authorities of the Member State concerned have benefited as a result of the advance payment of tax by the subsidiaries.
The mere fact that the sole object of such an action is the payment of interest equivalent to the financial loss suffered as a result of the loss of use of the sums paid prematurely does not constitute a ground for dismissing such an action.
While, in the absence of Community rules, it is for the domestic legal system of the Member State concerned to lay down the detailed procedural rules governing such actions, including ancillary questions such as the payment of interest, those rules must not render practically impossible or excessively difficult the exercise of rights conferred by Community law.
3. It is contrary to Community law for a national court to refuse or reduce a claim brought before it by a resident subsidiary and its non-resident parent company for reimbursement or reparation of the financial loss which they have suffered as a consequence of the advance payment of corporation tax by the subsidiary, on the sole ground that they did not apply to the tax authorities in order to benefit from the taxation regime which would have exempted the subsidiary from making payments in advance and that they therefore did not make use of the legal remedies available to them to challenge the refusals of the tax authorities, by invoking the primacy and direct effect of the provisions of Community law, where upon any view national law denied resident subsidiaries and their non-resident parent companies the benefit of that taxation regime.
La Pergola
Jann Sevón
|
Delivered in open court in Luxembourg on 8 March 2001.
R. Grass A. La Pergola
Registrar President of the Fifth Chamber
1: Language of the cases: English.