![]() |
[Home] [Databases] [World Law] [Multidatabase Search] [Help] [Feedback] [DONATE] | |||||||||
Court of Justice of the European Communities (including Court of First Instance Decisions) |
||||||||||
PLEASE SUPPORT BAILII & FREE ACCESS TO LAW
To maintain its current level of service, BAILII urgently needs the support of its users.
Since you use the site, please consider making a donation to celebrate BAILII's 25 years of providing free access to law. No contribution is too small. If every visitor this month gives just £5, it will have a significant impact on BAILII's ability to continue providing this vital service.
Thank you for your support! | ||||||||||
You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> F.E. Familienprivatstiftung Eisenstadt (Judgment) [2015] EUECJ C-589/13 (17 September 2015) URL: https://www.bailii.org/eu/cases/EUECJ/2015/C58913.html Cite as: [2015] EUECJ C-589/13, EU:C:2015:612, ECLI:EU:C:2015:612 |
[New search]
[Context]
[Printable version]
[Help]
JUDGMENT OF THE COURT
(
Fifth
Chamber)
class="C19Centre">17Â
September 2015 (*)
(Reference for
a preliminary ruling —
Free
movement of
capitalÂ
— Article 56 EC — Interim taxation of
capital
gains and income
from
the
disposal
of holdings by a national
foundationÂ
— Refusal of right to
deduct
from
the taxable amount gifts to non-resident beneficiaries exempt
from
tax in the Member State of the
foundation
under a
double
taxation
convention)
class="C02AlineaAltA">In
Case
C‑589/13,
class="C02AlineaAltA">REQUEST
for
a preliminary ruling under Article 267 TFEU
from
the Verwaltungsgerichtshof (Austria), made by
decision
of 23Â October 2013, received at the
Court
on 19Â November 2013, in the proceedings
F.E. Familienprivatstiftung
Eisenstadt,
Intervener:
Unabhängiger Finanzsenat,
Außenstelle
Wien,
class="C19Centre">THE
COURT
(
Fifth
Chamber),
class="C02AlineaAltA">composed
of T. von
Danwitz,
President of the
Chamber,
C.Â
Vajda, A. Rosas (Rapporteur), E. Juhász and
D.Â
Šváby, Judges,
Advocate General: M. Wathelet,
class="C02AlineaAltA">Registrar:
M. Aleksejev, Administrator,
having regard to the written
procedure and
further
to the hearing on 21Â January 2015,
after considering
the observations submitted on behalf of:
–        the Austrian Government, by C.Â
Pesendorfer, J. Bauer and M. Klamert, acting as Agents,
–        the European Commission,
by A.Â
Cordewener,
W.Â
Roels and M.Â
Wasmeier,
acting as Agents,
having decided,
after hearing the Advocate General, to proceed to judgment
without
an Opinion,
gives the following
class="C75Debutdesmotifs">Judgment
class="C01PointnumeroteAltN">
NAME="point1">1Â Â Â Â Â Â Â Â This request
for
a preliminary ruling
concerns
the interpretation of Article 56(1) EC.
2Â Â Â Â Â Â Â Â The request has been made in proceedings brought by F.E.Â
Familienprivatstiftung
Eisenstadt (‘the private
foundation’)
against the
decision
of the Unabhängiger
Finanzsenat,
Außenstelle
Wien
(Independent
Finance
Tribunal, External Section, Vienna, ‘the UFS’) that refused the private
foundation
the right to have gifts paid to beneficiaries resident in other Member States taken account of in
calculating
a tax to
which
the private
foundation
was
subject in respect of the 2001 and 2002 assessment periods.
 Austrian Law
3Â Â Â Â Â Â Â Â The Austrian legislation relevant to the case
in the main proceedings
concerns
the taxation of private
foundations
in 2001 and 2002.
 System of taxation of private foundations
before 2001
4Â Â Â Â Â Â Â Â Private foundations
(Privatstiftungen)
were
introduced by the Austrian legislature in 1993 by means of the Privatstiftungsgesetz (Private
Foundations
Law, BGBl. No 694/1993).
5Â Â Â Â Â Â Â Â Private foundations
are subject to
corporation
tax. Nevertheless, on the basis of the legislation that
was
in
force
until the end of 2000,
capital
gains and income
from
holdings,
when
received by private
foundations,
were
generally exempt
from
corporation
tax at the level of the
foundation.
Taxation thus took place at the time
when
the income
was
transferred to the various beneficiaries as a result of gifts made by private
foundations.
Under Paragraph 27(1), point 7, of the Einkommensteuergesetz 1988 (Income Tax Law, ‘the EStG 1988’), those gifts
were
considered,
when
received by their beneficiary, to be
capital
gains subject to
capital
gains tax at a rate of 25%.
 System of taxation of private foundations
from
2001 to 2004
6Â Â Â Â Â Â Â Â The system of taxation of private foundations
was
amended
from
2001 by the Budgetbegleitgesetz 2001 (Supplementary Budget Law, BGBl. I, No 142/2000), inter alia by the introduction of several new provisions in the Körperschaftsteuergesetz 1988 (Law on
corporation
tax 1988, ‘the KStG 1988’).
7Â Â Â Â Â Â Â Â According to the explanatory memorandum to the Budgetbegleitgesetz 2001, those provisions were
principally intended to reduce the
complete
exemption
from
corporation
tax
from
which
private
foundations
previously benefited and to levy a ‘schedular’ tax
directly
on those
foundations
at a reduced rate on
certain
private
foundations’
capital
gains and income
from
holdings. That
direct
tax at a reduced rate has been termed as ‘interim taxation’ (Zwischensteuer, ‘the interim tax’).
8        Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, states:
‘In the case
of [private]
foundations
which
do
not
fall
under Paragraph 5, points 6 or 7, or under Paragraph 7(3), the
following
are not to be taken into account either as earnings or as income, but are to be taxed separately in accordance
with
Paragraph 22(3):
1.      domestic
and
foreign
capital
gains
from
–      cash
deposits
and other accounts
with
credit
institutions (Paragraph 93(2), point 3, of the [EStG 1988]),
–      debt
securities
within
the meaning of Paragraph 93(3), points 1 to 3, of the [EStG 1988], if,
when
issued, they are offered, in law and in
fact,
to unspecified persons,
–      debt
securities
within
the meaning of Paragraph 93(3), points 4 and 5, of the [EStG 1988], in so
far
as such
capital
gains
fall
within
the scope of income
from
capital
assets
within
the meaning of Paragraph 27 of the [EStG 1988];
2.      Income from
the
disposal
of holdings
within
the meaning of Paragraph 31 of the [EStG 1988], unless subparagraph 4 applies.
Tax shall not be payable (Paragraph 22(3)) on capital
gains and income
from
the
disposal
of holdings in so
far
as gifts
within
the meaning of Paragraph 27(1), point 7, of the [EStG 1988]
were
made in the assessment period,
capital
gains tax
was
withheld
from
them and
capital
gains tax is not exempted on the basis of a
double
taxation
convention.’
9        Under Paragraph 22(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, the rate of corporation
tax
for
a private
foundation’s
capital
gains and other income taxable under Paragraph 13(3) of the KStG 1988
was
12.5%.
10      Under Paragraph 24(5) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001:
‘Corporation tax payable on capital
gains and income
within
the meaning of Paragraph 13(3) and (4) shall be
credited
by
way
of assessment in accordance
with
the
following
provisions:
1.      Corporation
tax shall be
determined
and paid on the submission of a tax return after an assessment of the taxable amount.
2.      Private foundations
must have made gifts
within
the meaning of Paragraph 27(1), point 7, of the [EStG 1988] that are not exempted
from
tax
within
the meaning of the last sentence of Paragraph 13(3).
3.      The tax credit
shall be 12.5% of the taxable amount of the gifts
for
the purpose of
withholding
capital
gains tax.
4.      Private foundations
shall maintain an account in
which
the
corporation
tax paid in each year, the amounts
credited
and the balance remaining after the
deduction
of each tax
credit
shall be recorded on an ongoing basis.
5.      In the event of the dissolution
of a private
foundation,
the
whole
of the amount eligible to be
credited
at the
date
of
dissolution
shall be the subject of a tax
credit.’
 Information relating to the system of interim taxation in Austrian law
11Â Â Â Â Â Â The explanatory memorandum of the Budgetbegleitgesetz 2001, cited
by the referring
court,
states,
with
regard to the interim tax:
‘… from
2001[, i]nterest earned on
deposit
securities and
debt
securities is to be subject to a
form
of interim tax, and at a specially reduced rate. The tax
falls
due
first
when
the income accrues. If gifts are (subsequently) made by a private
foundation,
however, a tax
credit
will
be granted in accordance
with
the
detailed
statutory rules.
Consequently,
the amount of the gifts
does
not affect the overall tax
charge.
The system is implemented by amendments to the law in two areas. First,
the previous exemption provisions in Paragraph 13(2) [of the KStG 1988] are
correspondingly
modified. Previously exempt income
will
be taxed in the
form
of schedular taxation at a reduced rate of 12.5% (Paragraph 13(3) [of the KStG 1988]) by
way
of assessment. No tax
will
be
due
where
distributions
are made in the year
when
interest earnings accrue. Secondly, a tax
credit
at the same rate as that of the reduced tax is provided
for
in Paragraph 24(5) [of the KStG 1988]; this is effected by
way
of assessment. The tax
credit
presupposes,
first,
that the reduced tax has in
fact
been paid at the
date
when
the tax return is submitted. In addition, there must be gifts
from
which
capital
gains tax has been
withheld.
The tax
credit
is granted at a rate of 12.5% of a gift,
which
is the same as the reduced rate of the tax. In terms of
form,
an account must be kept,
detailing
the movements and balance of the sums that may be used
for
a tax
credit.
For example: in 2001 a private foundation
receives income
from
interest in the amount of 2 000 000 Austrian schillings (‘ATS’). Gifts in that year total ATS 500 000. Interim tax at a rate of 12.5%, that is to say ATS 187 500, is
due.
In 2002, income
from
interest amounts to ATS 2Â 500Â 000. No gifts are made in that year. Interim tax
for
2002 is ATS 312Â 500. In 2003, income
from
interest is ATS 2Â 000Â 000 and gifts total ATS 2Â 100Â 000. No interim tax is
due
for
that year.
Consequently,
12.5% of ATS 100Â 000, that is to say ATS 12Â 500, is
credited
from
the interim tax paid in 2001 and 2002.’
 The dispute
in the main proceedings and the question referred
for
a preliminary ruling
12Â Â Â Â Â Â In 2001 and 2002 the private foundation,
which
is established under Austrian law, received
capital
gains and income
from
the
disposal
of holdings
falling
under the scope of the
first
sentence of Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001. At the same time, the private
foundation
made gifts
during
those two years to a person residing in Belgium and another residing in Germany.
13Â Â Â Â Â Â In each of those two years, the private foundation
withheld
the
capital
gains tax at source at a rate of 25% to
which
the beneficiaries of those gifts
were
subject and transferred that amount to the Austrian tax authorities.
14Â Â Â Â Â Â However, both of the foreign
beneficiaries subsequently requested the Austrian tax authorities to reimburse the
capital
gains tax
charged
on their gifts on the basis of the
double
taxation
convention
in
force
between the Republic of Austria and their State of residence. The beneficiary residing in Belgium made his requests
with
regard to 2001 and 2002 and obtained a
full
reimbursement of the Austrian
capital
gains tax that had been
withheld
at source on the gifts that he had received. The beneficiary residing in Germany made his request only
for
2001 and also obtained a
full
reimbursement of the
corresponding
capital
gains tax.
15Â Â Â Â Â Â In its tax return concerning
corporation
tax
for
2001 and 2002, the private
foundation
reduced the amount of its
capital
gains and income
derived
from
disposals
of holdings that
were
in principle subject to ‘interim taxation’ under the
first
sentence of Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, by
deducting
the gifts made to those two beneficiaries
from
its taxable amount
for
both years. Since the amount of those gifts
was
greater that the
capital
gains and income
from
disposals,
the private
foundation
declared
a taxable amount of EURÂ 0, on the basis of
which
it should have been exempted
from
paying any tax.
16Â Â Â Â Â Â However, the Finanzamt
(
Finance
Court)
having jurisdiction in the
case
considered
that to
deduct
the gifts made to the beneficiaries
from
its taxable amount
was
precluded by the
first
sentence of Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, since those beneficiaries had been exempted
from
capital
gains tax under a
double
taxation
convention.
As a result, the tax authorities
charged
interim tax at a rate of 12.5% on the
capital
gains and income
from
holdings
derived
in 2001 and 2002 under Paragraph 22(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001.
17Â Â Â Â Â Â The private foundation
appealed before the UFS against the
decisions
concerning
the
corporation
tax of
which
it had been notified
for
2001 and 2002.
18Â Â Â Â Â Â In the alternative, the private foundation
claimed
before the UFS that it should be granted a tax
credit
in the
following
years in the amount of the interim tax previously paid under Paragraph 24(5) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001.
19Â Â Â Â Â Â By decision
of 10Â June 2010, the UFS upheld the validity of the interim tax
which
had been levied on the private
foundation
at the then applicable rate of 12.5% of the taxable amount
which
had been not reduced by the gifts to the beneficiaries in Belgium and Germany in 2001 and to the beneficiary in Belgium in 2002.
20Â Â Â Â Â Â In upholding the position of the tax authorities, the UFS took the view that, with
regard to those gifts, exemption
from
capital
gains tax
was
granted on the basis of
double
taxation
conventions,
which
meant that the gifts
could
not be
deducted
from
the taxable amount of the interim tax.
21      Nevertheless, the UFS partially upheld the private foundation’s
plea in the alternative that it should be granted a tax
credit
a posteriori
for
the interim tax
due
in 2001, under Paragraph 24(5) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, in respect of
corporation
tax
for
the 2002 tax year. The UFS thus
considered
that the gifts made in 2002 to the beneficiary residing in Belgium entitled the private
foundation
to such a partial tax
credit.
class="C01PointnumeroteAltN">
NAME="point22">22Â Â Â Â Â Â The private
foundation
appealed against the
decision
of the UFS before the Verwaltungsgerichtshof (Administrative
Court,
Austria).
23Â Â Â Â Â Â The private foundation
claims
before the referring
court
that it is
contrary
to the
free
movement of
capital
under Article 56 EC to preclude gifts on
which
the beneficiaries have been exempted
from
capital
gains tax on the basis of a
double
taxation
convention
from
being
deducted
from
the taxable amount
for
the purposes of
calculating
the interim tax, even if the UFS accepts that gifts of the same type made in subsequent years may give rise to an entitlement to tax
credits.
class="C01PointnumeroteAltN">
NAME="point24">24Â Â Â Â Â Â The referring
court,
which
has already held that
cross-border
gifts by private
foundations
are movements of
capital
within
the meaning of Article 56 EC, is of the view that it is very likely that to levy a tax on private
foundations,
which
arises only in the
case
of gifts to
foreign
beneficiaries but not in the
case
of gifts to
domestic
beneficiaries, as the tax authorities and the UFS have
decided
to
do
in the
case
in the main proceedings,
constitutes
a restriction of the
free
movement of
capital
because it is likely to
discourage
similar
cross-border
arrangements
whereas,
in accordance
with
the principle of
free
movement, even a restriction of limited scope or minor importance is prohibited.
25Â Â Â Â Â Â The referring court
states that assessing
whether
the restriction of the
free
movement of
capital
brought about by Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, is potentially justified is made more
difficult
by the
fact
that its purpose
was
never explained in the preparatory
work
leading to that law.
26Â Â Â Â Â Â The referring court
explains in that regard that the system of interim taxation aimed to overcome two problems relating to the system of taxing resident private
foundations.
The
first
problem
was
related to the ability to reinvest
free
of
corporation
tax since
capital
gains and income
from
disposals
of holdings
were,
until the end of 2000, not taxed. The second
was
related to the
fact
that in Austria gifts to beneficiaries residing abroad
were
not taxed, since only the Member State of the beneficiaries’ residence
was
entitled to tax those gifts under
double
taxation
conventions.
class="C01PointnumeroteAltN">
NAME="point27">27Â Â Â Â Â Â In the present
case,
the referring
court
is of the view that,
where
the interim tax must be paid even if a gift is made, the system of interim taxation serves to alleviate the
consequences
of the second of the problems of that system of taxation, namely the lack of taxation in Austria.
28Â Â Â Â Â Â In that regard, the referring court
observes that the last sentence of Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, merely mitigated the problem but
did
not resolve it entirely because private
foundations
are not taxed
definitively,
but are required to pay a tax — the interim tax —
which,
under Paragraph 24(5) of the KStG 1988, as amended,
will
be the subject of a tax
credit
and reimbursed in
full
at the latest
when
the
foundation
is
dissolved.
Until that tax
credit
is granted, the private
foundation
at issue
will
not be able to reduce its taxable amount through gifts to beneficiaries
who
are exempt
from
tax under a
double
taxation
convention.
class="C01PointnumeroteAltN">
NAME="point29">29Â Â Â Â Â Â The referring
court
does
not rule out the possibility that such a restriction introduced by the national tax legislation may impair the
free
movement of
capital
referred to in Article 56 EC, but takes the view that the
differences
between the
complex
tax system on
which
it is required to give a ruling and similar
cases
examined in the relevant
case-law
of the
Court
of Justice are too great
for
that
conclusion
to be regarded as obvious.
30Â Â Â Â Â Â In those circumstances,
the Verwaltungsgerichtshof has
decided
to stay proceedings and to refer the
following
question to the
Court
for
a preliminary ruling:
‘Is Article 56 EC to be interpreted as precluding a system for
the taxation of
capital
gains and income
from
the
disposal
of holdings of an Austrian private
foundation
in the
case
where
that system provides
for
a tax
charge
to be imposed on the
foundation
in the
form
of an ‘interim tax’ in order to ensure single national taxation only in the
case
where,
on the basis of a
double
taxation
convention,
the recipient of gifts
from
the private
foundation
is exempt
from
capital
gains tax
which
in principle is
chargeable
on gifts?’
 The question referred for
a preliminary ruling
 Preliminary observations
31Â Â Â Â Â Â According to its wording,
the question referred by the national
court
concerns
the levying of the interim tax on resident private
foundations
where
the beneficiaries of gifts made by those
foundations
are exempt
from
tax in Austria on the basis of a
double
taxation
convention.
That question is intended to ascertain
whether
Article 56 EC precludes a system such as that established
for
the levying of the interim taxation on
foundations
from
2001
which
is at issue in the
case
in the main proceedings.
32Â Â Â Â Â Â As is apparent from
paragraphs 7, 11, 26 to 28 of the present judgment, the order
for
reference
describes
at some length the system of interim taxation at issue in the
case
in the main proceedings,
which
is a
complex
system in the light of
which
the referring
court
states that it refers its question and one
which
must be taken into
consideration
before the question itself
can
be
fully
understood.
33Â Â Â Â Â Â In the light of that description,
it appears that the
doubts
of the referring
court
relate,
within
the
context
of interim taxation
which
is
charged
on the
capital
gains and income
from
the
disposal
of holdings that a resident private
foundation
has received in the
course
of a given assessment period, to the right of such a
foundation
to
deduct
the amount of gifts made
during
that term
from
its taxable amount. That
deduction
is permitted only if the beneficiary of the gift is taxable in the Republic of Austria. However, such a
deduction
is refused to a
foundation
where
the beneficiary of a gift resides in a Member State other than the Republic of Austria and relies on a
double
taxation
convention
in order to be exempted
from
Austrian
capital
gains tax.
34Â Â Â Â Â Â As a result, by its question, the Verwaltungsgerichtshof asks, in essence, whether
Article 56 EC must be interpreted as precluding tax legislation of a Member State such as that at issue in the
case
in the main proceedings under
which,
as regards interim tax
which
is
charged
on
capital
gains and income
from
the
disposal
of holdings of a resident private
foundation,
that
foundation
has the right to
deduct
from
its taxable amount only gifts made in the
course
of a given assessment period that have been the subject of a tax levied on the beneficiaries of those gifts in the Member State in
which
the
foundation
is taxed,
whereas
such a
deduction
is excluded by that national tax legislation
where
the beneficiaries reside in another Member State and are exempted, on the basis of a
double
taxation
convention,
from
a tax that is otherwise
charged
on gifts in the Member State in
which
the
foundation
is taxed.
 Restriction on the free
movement of
capital
35Â Â Â Â Â Â According to the settled case-law
of the
Court,
Article 56(1) EC lays
down
a general prohibition on restrictions on the movement of
capital
between Member States (judgments in Persche,
C‑318/07,
EU:
C:2009:33,
paragraph 23, and Mattner,
C‑510/08,
EU:
C:2010:216,
paragraph 18).
36Â Â Â Â Â Â In the absence of a definition
in the EC Treaty of ‘movement of
capital’
for
the purposes of Article 56(1) EC, the
Court
has recognised the nomenclature
which
forms
Annex I to
Council
Directive
88/361/EEC of 24Â June 1988
for
the implementation of Article 67 of the Treaty [repealed by the Treaty of Amsterdam] (OJ 1988 L 178, p. 5) as having indicative value, even though that
directive
was
adopted on the basis of Articles 69 and 70(1) of the EEC Treaty (later Articles 69 and 70(1) of the EC Treaty both of
which
were
repealed by the Treaty of Amsterdam), it being understood that, in accordance
with
the introduction to that annex, the list it
contains
is not exhaustive. Gifts and endowments appear under heading XI, ‘Personal
capital
movements’, of that annex (judgments in Persche,
C‑318/07,
EU:
C:2009:33,
paragraph 24; Mattner,
C‑510/08,
EU:
C:2010:216,
paragraph 19; and
Commission
v Spain,
C‑127/12,
EU:
C:2014:2130,
paragraph 52).
37Â Â Â Â Â Â The Court
has already held that the tax treatment of gifts,
whether
they are gifts of money, immovable property or movable property,
falls
under the provisions of the Treaty on the movement of
capital,
except
where
their
constituent
elements are
confined
within
a single Member State (see, to that effect, judgments in Persche,
C‑318/07,
EU:
C:2009:33,
paragraph 27; Mattner,
C‑510/08,
EU:
C:2010:216,
paragraph 20; and Q,
C‑133/13,
EU:
C:2014:2460,
paragraph 18).
38Â Â Â Â Â Â The case
in the main proceedings
does
not
directly
relate to the tax treatment of gifts in the sense of a
difference
in treatment between gifts made to resident recipients and gifts made to recipients resident in another Member State. It
concerns
the tax treatment of resident private
foundations
which
differs
according to
whether
the gifts that it makes are made to recipients residing in Austria or recipients residing in another Member State.
39Â Â Â Â Â Â In the case
in the main proceedings, in 2001 and 2002, the private
foundation
made gifts, in particular, to two recipients residing in a Member State other than the Republic of Austria. Those gifts involved payments being made
without
any
consideration
being given by the recipients. As the
Commission
correctly
states, both the initial
contribution
of the assets to the
foundation
on its being set up by the
founder
as
well
as the subsequent payments made
from
those assets to the recipients
fall
within
the
concept
of ‘movement of
capital’
within
the meaning of Article 56(1) EC.
40Â Â Â Â Â Â It follows
that a situation such as that in the
case
in the main proceedings in
which
a private
foundation
established in Austria makes gifts to two recipients, one residing in Belgium and the other in Germany,
concerns,
both
for
2001 and 2002, international movements of
capital,
which
may not be the subject of any restriction under Article 56(1) EC.
41Â Â Â Â Â Â It must therefore be examined, in the first
place,
whether,
as submitted by the private
foundation
in the
case
in the main proceedings and the
Commission
in its
written
observations before the
Court,
national legislation such as that at issue in the
case
in the main proceedings
constitutes
a restriction on the movement of
capital.
42      The system established by Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, involves a difference
of treatment between resident private
foundations
in their right to an immediate reduction in the interim tax according to
whether
the beneficiaries of the gifts that they make in the
course
of a given tax year are or not subject to Austrian
capital
gains tax.
43Â Â Â Â Â Â Although, as the Austrian Government claims,
gifts
for
which
such a right to immediate reduction or immediate reimbursement is excluded
can
also include gifts to beneficiaries residing in Austria
where
those beneficiaries are exempted
from
capital
gains tax, they
cover
in particular gifts made to non-resident beneficiaries in so
far
as, under the model
double
taxation
convention
drafted
by the Organisation
for
Economic
Co-operation
and
Development
(OECD), gifts are
considered
to be income
within
the meaning of Article 21(1) of that model
convention,
and are not taxable in Austria since they are subject to the exclusive powers of taxation of the State of residence of the beneficiary.
44Â Â Â Â Â Â As the Commission
submits, such movements of
capital
are restricted by the last sentence of Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001,
which
is applicable to the
case
in the main proceedings.
45Â Â Â Â Â Â Since a resident private foundation
is entitled to a reduction of, and even exemption
from,
the interim tax on gifts that it has made to national beneficiaries as a result of the
deductibility
of those types of gifts
from
the taxable amount of that tax, such a
foundation
will,
all other things being equal, always have greater
financial
means at its
disposal
that
can
be used either immediately to make additional gifts to resident beneficiaries or used to obtain additional income,
which
will
enable it subsequently to grant larger gifts to the same beneficiaries.
46Â Â Â Â Â Â In addition, the unfavourable tax treatment which
follows
from
the application of the last sentence of Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, in the
case
of gifts to beneficiaries exempt
from
capital
gains tax in Austria as a result of a
double
taxation
convention
concluded
between the beneficiaries’ Member State of residence and the Republic of Austria, is
capable
of leading to a restriction at the level of the
foundation
itself.
47Â Â Â Â Â Â A foundation
which
has beneficiaries residing in the national territory and others residing in another Member State
would
therefore be
discouraged
from
making gifts to the latter because,
without
being able to benefit
from
a tax reduction or reimbursement in
connection
with
those gifts, the interim tax
charged
on its income reduces the aggregate
financial
means at its
disposal
both
for
generating income and
for
making gifts to resident beneficiaries. At the level of the
foundation,
this
would
lead to a
distortion
in the resulting selection,
from
a tax point of view, between international gifts
which
are less advantageous and national gifts
which
are more advantageous.
48Â Â Â Â Â Â Furthermore,
in so
far
as gifts to beneficiaries residing in another Member State
will
lead to interim taxation being levied at a rate of 12.5% on his
foundation,
it is
from
the
founder’s
point of view less advantageous
from
the outset to set up a private
foundation
with
beneficiaries residing in another Member State than setting up an equivalent
foundation
with
beneficiaries residing only in Austria.
49Â Â Â Â Â Â In this context,
it is
clear
that it is not necessary
for
the tax
charge
to be excessive or
definitive
for
tax legislation to be regarded as
forming
a prohibited restriction of a
fundamental
freedom.
class="C01PointnumeroteAltN">
NAME="point50">50Â Â Â Â Â Â According to the settled
case-law
of the
Court,
a restriction on a
fundamental
freedom
is prohibited by the Treaty, even if it is of limited scope or minor importance (see, to that effect, regarding the
free
movement of
capital,
judgment in
Dijkman
and
Dijkman-Lavaleije,
C‑233/09,
EU:
C:2010:397,
paragraph 42; and, regarding the
freedom
of establishment, judgments in
Commission
v
France,
C‑34/98,
EU:
C:2000:84,
paragraph 49, and
de
Lasteyrie
du
Saillant,
C‑9/02,
EU:
C:2004:138,
paragraph 43).
51Â Â Â Â Â Â A cash-flow
disadvantage
which
arises
from
a
cross-border
situation
can
form
a restriction on a
fundamental
freedom
where
such a
disadvantage
does
not arise in a purely national situation (see, to that effect, judgments in Metallgesellschaft and Others,
C‑397/98
and
C‑410/98,
EU:
C:2001:134,
paragraphs 44, 54 and 76; X and Y,
C‑436/00,
EU:
C:2002:704,
paragraphs 36 and 37; Rewe Zentralfinanz,
C‑347/04,
EU:
C:2007:194,
paragraphs 26 to 30; National Grid Indus,
C‑371/10,
EU:
C:2011:785,
paragraphs 36 and 37;
DMC,
C‑164/12,
EU:
C:2014:20,
paragraphs 40 to 43; and
Commission
v Germany,
C‑591/13,
EU:
C:2015:230,
paragraphs 55 to 61).
52Â Â Â Â Â Â A difference
of treatment
concerning
the
calculation
of the interim tax is
capable
of resulting in a
disadvantage
in terms of
cash-flow
for
a resident private
foundation
wishing
to make gifts to recipients residing in another Member State and
can
therefore
form
a restriction on
fundamental
freedoms
if the private
foundation
at issue
does
not incur the same
disadvantage
in a purely national situation. The private
foundation
in the
case
in the main proceedings incurred a
cash-flow
disadvantage
of that kind arising
from
gifts that it made to beneficiaries residing in Belgium and Germany in 2001 and 2002, and that
disadvantage
has not been offset by the tax
credit
upheld by the UFS,
which
attributed part of the interim tax
due
for
2001 to that
due
in 2002.
53      The application of the last sentence of Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, therefore leads to a restriction of the free
movement of
capital,
which
is, in principle, prohibited by Article 56 EC.
54Â Â Â Â Â Â It must, however, be considered,
in the second place,
whether
that restriction on the
free
movement of
capital
is
capable
of being objectively justified having regard to the provisions of the Treaty.
55      In that regard, under Article 58(1)(a) EC, the provisions of Article 56 EC ‘shall be without
prejudice to the right of Member States … to apply the relevant provisions of their tax law
which
distinguish
between taxpayers
who
are not in the same situation
with
regard to their place of residence or
with
regard to the place
where
their
capital
is invested’.
56Â Â Â Â Â Â In so far
as Article 58(1)(a) EC is a
derogation
from
the
fundamental
principle of the
free
movement of
capital,
it must be interpreted strictly. It
cannot
therefore be interpreted as meaning that all tax legislation
which
draws
a
distinction
between taxpayers on the basis of their place of residence or the State in
which
they invest their
capital
is automatically
compatible
with
the Treaty (judgments in Mattner,
C‑510/08,
EU:
C:2010:216,
paragraph 32, and Santander Asset Management SGIIC and Others,
C‑338/11
to
C‑347/11,
EU:
C:2012:286,
paragraph 21).
57Â Â Â Â Â Â The derogation
in Article 58(1)(a) EC is itself limited by Article 58(3) EC,
which
states that the national provisions referred to in paragraph 1 of that article ‘shall not
constitute
a means of arbitrary
discrimination
or a
disguised
restriction on the
free
movement of
capital
and payments as
defined
in Article 56’ (judgments in Mattner,
C‑510/08,
EU:
C:2010:216,
paragraph 33, and Santander Asset Management SGIIC and Others,
C‑338/11
to
C‑347/11,
EU:
C:2012:286,
paragraph 22).
58Â Â Â Â Â Â The differences
in treatment authorised by Article 58(1)(a) EC must therefore be
distinguished
from
discrimination
prohibited by Article 58(3) EC. The
case-law
of the
Court
shows that,
for
national tax legislation such as that at issue in the
case
in the main proceedings to be
capable
of being regarded as
compatible
with
the provisions of the Treaty on the
free
movement of
capital,
it is necessary that the
difference
in treatment
concern
situations
which
are not objectively
comparable
or be justified by an overriding reason in the public interest. In order to be justified, moreover, the
difference
in treatment between those two
categories
of gifts must not go beyond
what
is necessary in order to attain the objective of the legislation in question (see, to that effect, judgments in Manninen,
C‑319/02,
EU:
C:2004:484,
paragraph 29; Mattner,
C‑510/08,
EU:
C:2010:216,
paragraph 34; and Santander Asset Management SGIIC and Others,
C‑338/11
to
C‑347/11,
EU:
C:2012:286,
paragraph 23).
 Whether
the situations are
comparable
class="C01PointnumeroteAltN">
NAME="point59">59Â Â Â Â Â Â The Austrian Government
claims
that the legislation at issue in the main proceedings
does
not
constitute
a restriction of the
free
movement of
capital
because the situation of a private
foundation
making gifts to beneficiaries that are residents of a Member State
with
which
the Republic of Austria has
concluded
a
double
taxation
convention
on the basis of the OECD
convention
model is not objectively
comparable
to that of a private
foundation
making gifts to resident beneficiaries.
60Â Â Â Â Â Â According to that government, in the case
of gifts to non-resident beneficiaries, the situation of a resident private
foundation
that principally
falls
within
the scope of the powers of taxation of the Austrian State is, at the most,
comparable
to the situation of such a
foundation
in the
case
of gifts to resident beneficiaries
where
that Member State
can
exercise its powers of taxation principally over those gifts as
far
as they
concern
non-resident beneficiaries.
61Â Â Â Â Â Â However, that would
not be the
case
as a general rule since it appears
from
the
double
taxation
conventions
that
follow
the OECD model that the Republic of Austria
does
not have powers of taxation over gifts to non-resident beneficiaries.
Consequently,
since the situations are not
comparable,
there is no reason in such
cases
for
applying, at the level of the
foundation,
the system of granting tax
credit
with
regard to the interim tax
which
is granted in the
case
of gifts to resident beneficiaries in order to prevent economic
double
taxation and to ensure systematic single taxation in the national territory.
62Â Â Â Â Â Â In that regard, contrary
to the submissions of the Austrian Government, the
difference
in treatment is not explained by a
difference
in objective situation as
far
as the
foundation
is
concerned.
class="C01PointnumeroteAltN">
NAME="point63">63Â Â Â Â Â Â As stated by the
Commission,
having regard to Article 58(1)(a) EC, the making of gifts by Austrian private
foundations
to resident beneficiaries is a situation objectively
comparable
to that
where
the same
foundations
make gifts to beneficiaries residing in another Member State. In both
cases,
the gifts are made
from
the assets of the private
foundation
or
from
increases in those assets resulting
from
their investment.
64Â Â Â Â Â Â Furthermore,
under the
double
taxation
conventions
that it has
concluded
with
the Kingdom of Belgium on the one hand and the
Federal
Republic of Germany on the other,
which,
in accordance
with
the OECD
convention
model,
determine
the exclusive right,
for
each of the
contracting
States, to tax the beneficiaries of gifts residing in its territory, the Republic of Austria renounced the exercise of its powers of taxation over gifts to persons residing in those two other Member States. It
cannot
therefore invoke a
difference
in objective situation between resident private
foundations
whereby
the beneficiaries of gifts that those
foundations
make are either resident in Austria and taxable there, or resident in one of those other two Member States and not subject to its powers of taxation, in order to subject
foundations
making gifts to the latter to a specific tax on the ground that those beneficiaries are not subject to its tax jurisdiction.
65Â Â Â Â Â Â In addition, even if it were
also necessary to take the beneficiaries of those
foundations’
gifts into account, it is
clear
from
the order
for
reference that the system of interim tax
was
intended to
create
a ‘schedular’ system of taxation at the level of the
foundation
whilst
attributing only a temporary nature to the tax in order to
counteract
the tendency of private
foundations
to ‘reinvest’. In line
with
its ‘temporary’ nature, that tax
was
required to be reimbursed in
full
at the latest
when
the private
foundation
is
dissolved
since it resulted in a tax
credit
in
favour
of the
foundation
corresponding
to the amount that it had paid in respect of the interim tax. The place of residence of the beneficiary of a gift
was
irrelevant in that regard.
 An overriding reason in the public interest
66Â Â Â Â Â Â It must be determined,
also,
whether
the restriction on the movement of
capital
which
is the result of national legislation such as that at issue in the
case
in the main proceedings may be objectively justified by an overriding reason in the general interest.
67Â Â Â Â Â Â In the first
place, it is necessary to ascertain
whether
the
difference
in treatment at issue in the main proceedings may be justified by the need to preserve the balanced allocation of powers of taxation between the Member States, as the Austrian Government
claims.
class="C01PointnumeroteAltN">
NAME="point68">68Â Â Â Â Â Â It should be recalled in that regard that preservation of a balanced allocation of powers of taxation between Member States is a legitimate objective recognised by the
Court.
Moreover, it is settled
case-law
of the
Court
that, in the absence of any unifying or harmonising measures adopted by the European Union, the Member States retain the power to
define,
by treaty or unilaterally, the
criteria
for
allocating their powers of taxation, particularly
with
a view to eliminating
double
taxation (judgments in
DMC,
C‑164/12,
EU:
C:2014:20,
paragraphs 46 and 47;
Commission
v Germany,
C‑591/13,
EU:
C:2015:230,
paragraph 64; and Grünewald,
C‑559/13,
EU:
C:2015:109,
paragraph 40).
69Â Â Â Â Â Â However, in circumstances
such as those of the
case
in the main proceedings, that justification
does
not appear to be established.
70Â Â Â Â Â Â A justification concerning
the necessity to preserve a balanced allocation of powers of taxation between Member States may be sanctioned, in particular,
where
the tax regime at issue is
designed
to prevent
conduct
capable
of jeopardising the right of a Member State to exercise its tax jurisdiction in relation to activities
carried
out in its territory (see, to that effect, judgments in Rewe Zentralfinanz,
C‑347/04,
EU:
C:2007:194,
paragraph 42; Oy AA,
C‑231/05,
EU:
C:2007:439,
paragraph 54; and Aberdeen Property
Fininvest
Alpha,
C‑303/07,
EU:
C:2009:377,
paragraph 66).
71Â Â Â Â Â Â In the present case,
as
was
stated in paragraph 64 of the present judgment, the issue of the allocation of powers of taxation between the Republic of Austria and the Kingdom of Belgium, on the one hand, and the
Federal
Republic of Germany, on the other hand, is governed by
double
taxation
conventions
concluded
with
both of those Member States
which,
in accordance
with
the OECD
convention
model,
determine
the exclusive right,
for
each of the
contracting
States, to tax the beneficiaries of gifts residing in its territory. In other
words,
having abandoned its powers of taxation on gifts to persons residing in those Member States, the Republic of Austria
cannot
rely on a balanced allocation of powers of taxation in order to levy a specific tax on
foundations
that make gifts to such persons on the basis that those persons are not subject to its tax jurisdiction. That Member State has therefore
freely
accepted the allocation of powers of taxation that results
from
the terms of the
double
taxation
conventions
that it has
concluded
with
the Kingdom of Belgium and the
Federal
Republic of Germany respectively.
72Â Â Â Â Â Â In a situation such as that of the present case,
a tax
charge
is levied at the level of the private
foundation
without
the possibility of
deduction
or reimbursement regarding gifts made to beneficiaries that, on the ground of a
double
taxation
convention,
are not subject to
capital
gains tax in Austria. The Austrian Government submits that the restrictive effects of the last sentence of Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001,
can
be justified by the
fact
that that paragraph ensures single taxation of
certain
capital
gains and income
from
holdings
derived
by a private
foundation
in Austria.
73Â Â Â Â Â Â In that regard, it is relevant to note that, in several cases
concerning
situations in
which
a Member State had attempted to
counterbalance
its inability to impose a tax on another taxpayer, in particular
cases
giving rise to the judgments in Lankhorst-Hohorst (
C‑324/00,
EU:
C:2002:749)
and Glaxo
Wellcome
(
C‑182/08,
EU:
C:2009:559),
the
Court
considered
the reasons that had been invoked in order to justify the restriction effected by the national law at issue, in particular, the argument that national legislation
was
intended to ensure the single taxation of
certain
income in the Member State. In none of those
cases,
however,
did
the
Court
recognise a principle of single taxation as a
distinct
justification.
74Â Â Â Â Â Â Furthermore,
in the
case
giving rise to the judgment in Argenta Spaarbank (
C‑350/11,
EU:
C:2013:447),
which
concerned
the tax treatment of
corporation
tax and the taking of losses into account, the
Court
held, in paragraph 51 of that judgment, that the
fact
that under a
double
taxation
convention
the profits attributable to a permanent establishment situated in a Member State are solely taxable in that Member State and that,
consequently,
the other Member State to the
convention
cannot
exercise its power to tax in relation to the profits attributable to that permanent establishment
cannot
systematically justify any refusal to grant an advantage to the
company
established in the territory of the latter Member State to
which
the permanent establishment belongs.
75Â Â Â Â Â Â Such a refusal would
be tantamount to justifying a
difference
in treatment solely on the ground that a
company
established in a Member State has
developed
a
cross-border
economic activity
which
is not liable to generate tax revenue
for
that Member State (see, to that effect, judgment in Argenta Spaarbank,
C‑350/11,
EU:
C:2013:447,
paragraph 52 and the
case-law
cited).
76Â Â Â Â Â Â In the same way,
the
Court
has held that any advantage resulting
from
the low taxation to
which
a subsidiary established in a Member State other than the one in
which
the parent
company
was
incorporated is subject
cannot
by itself authorise that Member State to offset that advantage by less
favourable
tax treatment of the parent
company.
The need to prevent the reduction of tax revenue is indeed not one of the grounds listed in Article 46(1) EC or a matter of overriding general interest
which
would
justify a restriction on a
freedom
introduced by the Treaty (see, to that effect, judgment in
Cadbury
Schweppes and
Cadbury
Schweppes Overseas,
C‑196/04,
EU:
C:2006:544,
paragraph 49).
77Â Â Â Â Â Â Such considerations
are also relevant in the
context
of the
case
in the main proceedings,
concerning
a
difference
in tax treatment of
foundations
according to
whether
the gifts that they have made lead to their beneficiaries being taxed in Austria.
78Â Â Â Â Â Â In any event, as far
as gifts to
foreign
beneficiaries under the last sentence of Paragraph 13(3) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001, are
concerned,
the interim tax levied on the private
foundation
does
not ensure the single taxation of the income mentioned in the
first
sentence of that provision.
79      As is stated in paragraph 28 of the present judgment, it appears from
the order
for
reference that the tax
charge
thereby levied on the private
foundation
is not
definitive.
According to the Verwaltungsgerichtshof, since the interim tax at issue in the
case
in the main proceedings applies at the level of the private
foundation,
the problem
created
by the
double
taxation
convention
at the level of the beneficiary is mitigated but is not resolved entirely because private
foundations
are not taxed
definitively,
but are required to pay a tax
which,
under Paragraph 24(5) of the KStG 1988, as amended by the Budgetbegleitgesetz 2001,
will
be the subject of tax
credit
at the latest
when
the
foundation
is
dissolved.
80Â Â Â Â Â Â In the second place, the difference
in treatment at issue in the
case
in the main proceedings also
cannot
be justified by the need to safeguard the
coherency
of the national tax regime.
81Â Â Â Â Â Â For
an argument based on such a justification to succeed, the
Court
requires a
direct
link to be established between the tax advantage
concerned
and the offsetting of that advantage by a particular tax, and the
directness
of that link to be assessed
with
regard to the purpose of the legislation at issue (see, to that effect, judgments in Papillon,
C‑418/07,
EU:
C:2008:659,
paragraphs 43 and 44;
Commission
v Germany,
C‑211/13,
EU:
C:2014:2148,
paragraph 55; and Grünewald,
C‑559/13,
EU:
C:2015:109,
paragraph 47).
82Â Â Â Â Â Â There is no such a direct
link in the present
case
for
several reasons.
83Â Â Â Â Â Â First,
there is no such
direct
link
when
it is a question, in particular, of
different
taxes or the tax treatment of
different
taxpayers (see, to that effect, judgments in
DI.Â
VI.Â
Finanziaria
di
Diego
della
Valle &
C.,
C‑380/11,
EU:
C:2012:552,
paragraph 47, and Grünewald,
C‑559/13,
EU:
C:2015:109,
paragraph 49). That is the
case
here since the
deduction
of the amount
corresponding
to the gifts made by the private
foundation
subject to the interim tax and the taxation of the beneficiaries
for
those gifts necessarily
concern
different
taxpayers.
84Â Â Â Â Â Â In addition, as submitted by the Commission,
whereas
the tax advantage of the beneficiary residing in another Member State
consists
in a permanent exception
from
Austrian
capital
gains tax,
for
an amount that varies under each
double
taxation
convention,
a private
foundation
suffers only a temporary
disadvantage
due
to the interim tax.
85Â Â Â Â Â Â In the light of the foregoing
considerations
taken as a
whole,
the answer to the question referred is that Article 56 EC must be interpreted as precluding tax legislation of a Member State, such as that at issue in the main proceedings under
which,
as regards interim tax
which
is
charged
on
capital
gains and income
from
the
disposal
of holdings of a resident private
foundation,
that
foundation
has the right to
deduct
from
its taxable amount only gifts made in the
course
of a given assessment period that have been the subject of a tax levied
within
that period on the beneficiaries of those gifts in the Member State in
which
the
foundation
is taxed,
whereas
such a
deduction
is excluded by that national tax legislation
where
the beneficiaries reside in another Member State and are exempt, on the basis of a
double
taxation
convention,
from
a tax that is otherwise
charged
on gifts in the Member State in
which
the
foundation
is taxed.
 Costs
class="C01PointnumeroteAltN">
NAME="point86">86Â Â Â Â Â Â 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.
Costs
incurred in submitting observations to the
Court,
other than the
costs
of those parties, are not recoverable.
On those grounds, the Court
(
Fifth
Chamber)
hereby rules:
Article 56 EC must be interpreted as precluding tax legislation of a Member State, such as that at issue in the main proceedings under which,
as regards interim tax
which
is
charged
on
capital
gains and income
from
the
disposal
of holdings of a resident private
foundation,
that
foundation
has the right to
deduct
from
its taxable amount only gifts made in the
course
of a given assessment period that have been the subject of a tax levied
within
that period on the beneficiaries of those gifts in the Member State in
which
the
foundation
is taxed,
whereas
such a
deduction
is excluded by that national tax legislation
where
the beneficiaries reside in another Member State and are exempt, on the basis of a
double
taxation
convention,
from
a tax that is otherwise
charged
on gifts in the Member State in
which
the
foundation
is taxed.
[Signatures]
* Language of the case:
German.
© European Union
The source of this judgment is the Europaweb
site. The information on this site is subject to a information
found here: Important legal notice. This electronic version is not authentic and is subject to amendment.
BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII
URL: https://www.bailii.org/eu/cases/EUECJ/2015/C58913.html