(September 2, 2015)

On September 2, 2015 the European Court of Justice (CJEU) ruled in Case C‑386/14 Groupe Steria SCA versus Ministère des finances et des comptes publics (ECLI:EU:C:2015:524).

Must Article 43 EC (now Article 49 TFEU) on freedom of establishment be interpreted as precluding the rules governing the French tax integration regime from granting a tax-integrated parent company neutralisation as regards the add-back of the proportion of costs and expenses, fixed at 5% of the net amount of the dividends received by it from tax-integrated resident companies only, when such a right is refused to it under those rules as regards the dividends distributed to it from its subsidiaries established in another Member State, which, had they been resident, would have been eligible in practice, if they so elected?

The dispute in the main proceedings and the question referred for a preliminary ruling

·        The appellant in the main proceedings is the parent company of a tax-integrated group as provided for in Article 223 A of the CGI. Steria, a company which is a member of that group, has holdings of more than 95% in subsidiaries established in France and in other Member States. In accordance with Article 216 of the CGI, the dividends received by Steria from subsidiaries established in other Member States were deducted from its net total profits, except for a proportion of costs and expenses, fixed at 5% of the net amount of the dividends received (‘the proportion of costs and expenses’) and representing the costs and expenses borne by the parent company, relating to its holding in the subsidiary that distributed the dividends.

·        Having on that basis paid the corporation tax and additional amounts of its own accord, the appellant in the main proceedings requested repayment, for the tax years 2005 to 2008, of the proportion of those taxes corresponding to the proportion of costs and expenses. Its request was based on the incompatibility of the relevant national rules with Article 43 EC (now Article 49 TFEU). It raised the unequal treatment of dividends received by a parent company of a tax-integrated group, depending on whether the dividends come from companies which are themselves members of that integrated group, which means that they are established in France, or from subsidiaries established in other Member States. In the first situation only, the dividends are fully exempt from corporation tax on account of the neutralisation, under Article 223 B of the CGI, of the add-back to the parent company’s profits of the proportion of costs and expenses.

·        Since the tax authorities did not grant the request made by the appellant in the main proceedings, the latter brought an action before the tribunal administratif de Montreuil (Administrative Court, Montreuil). Following the dismissal of that action by judgment of 4 October 2012, the appellant in the main proceedings lodged an appeal against that judgment before the cour administrative d’appel de Versailles (Administrative Court of Appeal, Versailles).

·        The referring court recalls that, in its judgment in X Holding (C‑337/08, EU:C:2010:89), the Court of Justice held that Articles 49 TFEU and 54 TFEU do not preclude legislation of a Member State which makes it possible for a parent company to form a single tax entity with its resident subsidiary, but which prevents the formation of such a single tax entity with a non-resident subsidiary, in that the profits of that non-resident subsidiary are not subject to the fiscal legislation of that Member State. However, according to the referring court, that judgment did not examine whether all the advantages reserved to companies that are members of a tax-integrated group are consistent with EU law.

·        In those circumstances, the cour administrative d’appel de Versailles decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:

‘Must Article 43 EC (now Article 49 TFEU) on freedom of establishment be interpreted as precluding the rules governing the French tax integration regime from granting a tax-integrated parent company neutralisation as regards the add-back of the proportion of costs and expenses, fixed at 5% of the net amount of the dividends received by it from tax-integrated resident companies only, when such a right is refused to it under those rules as regards the dividends distributed to it from its subsidiaries established in another Member State, which, had they been resident, would have been eligible in practice, if they so elected?’

The CJEU ruled as follows:

Article 49 TFEU must be interpreted as precluding rules of a Member State that govern a tax integration regime under which a tax-integrated parent company is entitled to neutralisation as regards the add-back of a proportion of costs and expenses, fixed at 5% of the net amount of the dividends received by it from tax-integrated resident companies, when such neutralisation is refused to it under those rules as regards the dividends distributed to it from subsidiaries located in another Member State, which, had they been resident, would have been eligible in practice, if they so elected.

For further information click here to be forwarded to the text of the ruling as published on the website of the CJEU, which will open in a new window.

Did you know that in our section CJEU Rulings we have made a selection of rulings of the CJEU? We have organized these rulings based on the subject they relate to (e.g. Freedom of establishment, Free movement of capital, Indirect taxes on the raising of capital, etc).

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