On June 30, 2016 the Court of Justice of the European Union (CJEU) judged in Case C-176/15 Guy Riskin and Geneviève Timmermans versus État belge (ECLI:EU:C:2016:488).
This request for a preliminary ruling concerns the interpretation of Articles 63 TFEU and 65 TFEU, read in conjunction with Article 4 TEU.
The request has been made in proceedings between (1) Mr Guy Riskin and Ms Geneviève Timmermans and (2) the État belge (Belgian State) concerning the taxation, in Belgium, of dividends received from a company established in Poland which were subject to withholding tax in Poland.
Is the rule laid down in Article 285 of the CIR 1992, implicitly endorsing the double taxation of foreign dividends in the case of a natural person residing in Belgium, consistent with the principles of EU law enshrined in Article 63 TFEU, read in conjunction with Article 4 TEU, in so far as it enables Belgium to give advantage as it sees fit — according to the provisions of Belgian law to which the double taxation convention negotiated by Belgium refers (Article 285 which lays down the conditions for tax credits or Article 286 which merely prescribes the fixed percentage of tax that may be allowed as a credit) — to investment in third countries (United States), to the detriment of possible investment in the Member States of the European Union (Poland)?
The dispute in the main proceedings and the questions referred for a preliminary ruling
· Mr Riskin and Ms Timmermans, Belgian residents, hold shares in a company established in Poland. In 2009, they received dividends in respect of that shareholding, on which a tax of 15% was deducted at source by Poland.
· In 2012, the fiscal control services of the Belgian tax authority sent Mr Riskin and Ms Timmermans a correction notice in respect of their personal income tax return for the 2010 tax year. According to the tax authority, in accordance with Article 10 of the Belgium-Poland Convention and Articles 5, 6 and 17(1) of the CIR 1992, dividends derived from the company established in Poland were taxable in Belgium at a rate of 25%.
· Mr Riskin and Ms Timmermans challenged that correction, arguing that, in accordance with Article 23 of the Belgium-Poland Convention, the tax paid in Poland should be allowed as a credit against the tax payable in Belgium.
· The tax authority replied that Article 23 of that convention provided for Polish tax to be allowed as a credit against Belgian tax subject to the application of Belgian law, namely Article 285 of the CIR 1992, under which such a set-off could be made only if the capital and property that had generated the dividends concerned were applied in Belgium in the conduct of a professional activity. The Belgian tax authority took the view that that was not the case here, refused to allow the Polish tax deducted at source as a credit against Belgian tax and accordingly rejected their claim.
· Mr Riskin and Ms Timmermans brought an action before the referring court against the tax authority’s decision, claiming that, unlike the Belgium-Poland Convention, other double taxation conventions concluded between Belgium and certain third States that are not members of the European Union do not provide for reference to be made to Belgian law and thus allow tax paid in those third States to be allowed as a credit against Belgian tax, without any account being taken of the conditions laid down by Belgian law. They submit that it cannot reasonably be accepted that Belgium can accord more favourable fiscal treatment to a third State than that which it accords to Member States.
· In those circumstances, the tribunal de première instance de Liège (Court of First Instance, Liège, Belgium) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘1. Is the rule laid down in Article 285 of the CIR 1992, implicitly endorsing the double taxation of foreign dividends in the case of a natural person residing in Belgium, consistent with the principles of EU law enshrined in Article 63 TFEU, read in conjunction with Article 4 TEU, in so far as it enables Belgium to give advantage as it sees fit — according to the provisions of Belgian law to which the double taxation convention negotiated by Belgium refers (Article 285 which lays down the conditions for tax credits or Article 286 which merely prescribes the fixed percentage of tax that may be allowed as a credit) — to investment in third countries (United States), to the detriment of possible investment in the Member States of the European Union (Poland)?
2. In so far as it makes the possibility of allowing foreign tax as a credit against Belgian tax conditional upon the capital and property from which the income is derived being applied in Belgium in the conduct of professional activity, is Article 285 of the CIR 1992 not contrary to Articles 49 TFEU, 56 TFEU and 58 TFEU?’
The CJEU judged as follows:
Articles 63 TFEU and 65 TFEU, read in conjunction with Article 4 TEU, must be interpreted as not precluding a Member State from not extending, in a situation such as that at issue in the main proceedings, the benefit of the advantageous treatment accorded to a resident shareholder as a result of a bilateral double taxation convention concluded between that Member State and a third State — by which tax deducted at source by the third State is allowed unconditionally as a credit against tax payable in the shareholder’s Member State of residence — to a resident shareholder in receipt of dividends from a Member State with which that Member State of residence has concluded a bilateral double taxation convention under which the granting of such a set-off is subject to compliance with additional conditions provided for by national law.
For further information click here to be forwarded to the text of the judgment 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).
Copyright – internationaltaxplaza.info
and
Stay informed: Subscribe to International Tax Plaza’s Newsletter! It’s completely FREE OF CHARGE!
