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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Lankhorst-Hohorst (Freedom of establishment) [2002] EUECJ C-324/00 (12 December 2002) URL: https://www.bailii.org/eu/cases/EUECJ/2002/C32400.html Cite as: [2002] EUECJ C-324/00, [2003] BTC 254, 5 ITL Rep 467, [2003] 2 CMLR 22, [2002] ECR I-11779, [2002] STI 1807, EU:C:2002:749, [2002] EUECJ C-324/, [2003] STC 607 |
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JUDGMENT OF THE COURT (Fifth Chamber)
12 December 2002 (1)
(Freedom of establishment - Tax provisions - Corporation tax - Covert distribution of profits - Tax credit - Coherence of the tax system - Tax evasion)
In Case C-324/00,
REFERENCE to the Court under Article 234 EC by the Finanzgericht Münster (Germany) for a preliminary ruling in the proceedings pending before that court between
Lankhorst-Hohorst GmbH
and
Finanzamt Steinfurt,
on the interpretation of Article 43 EC,
THE COURT (Fifth Chamber),
composed of: M. Wathelet (Rapporteur), President of the Chamber, C.W.A. Timmermans, D.A.O. Edward, P. Jann and A. Rosas, Judges,
Advocate General: J. Mischo,
Registrar: L. Hewlett, Principal Administrator,
after considering the written observations submitted on behalf of:
- the German Government, by W.-D. Plessing and T. Jürgensen, acting as Agents,
- the Danish Government, by J. Molde, acting as Agent,
- the United Kingdom Government, by J.E. Collins, acting as Agent, assisted by R. Singh, Barrister,
- the Commission of the European Communities, by R. Lyal, acting as Agent, assisted by R. Bierwagen, Rechtsanwalt,
having regard to the Report for the Hearing,
after hearing the oral observations of Lankhorst-Hohorst GmbH, represented by J. Schirmer and J.A. Schirmer, Steuerberater; of the German Government, by W.-D. Plessing and G. Müller-Gatermann, acting as Agent; of the United Kingdom Government, represented by J.E. Collins, assisted by R. Singh; and of the Commission, represented by R. Lyal, assisted by R. Bierwagen, at the hearing on 30 May 2002,
after hearing the Opinion of the Advocate General at the sitting on 26 September 2002,
gives the following
The national legislation
'Repayments in respect of loan capital which a company limited by shares subject to unlimited taxation has obtained from a shareholder not entitled to corporation tax credit which had a substantial holding in its share or nominal capital at any point in the financial year shall be regarded as a covert distribution of profits,
...
2. where repayment calculated as a fraction of the capital is agreed and the loan capital is more than three times the shareholder's proportional equity capital at any point in the financial year, save where the company limited by shares could have obtained the loan capital from a third party under otherwise similar circumstances or the loan capital constitutes borrowing to finance normal banking transactions. ...'
The main proceedings and the question referred for a preliminary ruling
'Is the requirement of freedom of establishment for nationals of a Member State in the territory of another Member State laid down in Article 43 of the Treaty of 10 November 1997 establishing the European Community to be interpreted as precluding the national rule contained in Paragraph 8a of the German Körperschaftsteuergesetz?'
Reply of the Court
The existence of an obstacle to freedom of establishment
Justification for the obstacle to freedom of establishment
Costs
46. The costs incurred by the German, Danish and United Kingdom 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 action 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 question referred to it by the Finanzgericht Münster by order of 21 August 2000, hereby rules:
Article 43 EC is to be interpreted as precluding a measure such as that contained in Paragraph 8a(1), Head 2, of the Körperschaftsteuergesetz (Law on corporation tax).
Wathelet
Jann Rosas
|
Delivered in open court in Luxembourg on 12 December 2002.
R. Grass M. Wathelet
Registrar President of the Fifth Chamber
1: Language of the case: German.