On May 26, 2016 the Court of Justice of the European Union (CJEU) judged in Case C‑48/15 État belge versus NN (L) International, formerly ING International SA, successor to the rights and obligations of ING Dynamic SA (ECLI:EU:C:2016:356).
The request for a preliminary ruling concerns the interpretation of Articles 2, 4, 10 and 11 of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (OJ, English Special Edition 1969 (II), p. 412), as amended by Council Directive 85/303/EEC of 10 June 1985 (OJ 1985 L 156, p. 23) (‘Directive 69/335’), Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ 1985 L 375, p. 3), read in conjunction with Article 10 EC and the second indent of Article 293 EC, and Articles 49 to 60 EC, read in conjunction with Article 10 EC and the second indent of Article 293 EC.
The dispute in the main proceedings and the questions referred for a preliminary ruling
· NN (L), a company established in Luxembourg, lodged an annual tax declaration in respect of the tax on UCIs for the financial year 2006, which covered the net amounts invested in Belgium as at 31 December 2005, and paid that tax, amounting to EUR 185 739.34, within the statutory time-limit. It then brought proceedings before the tribunal de première instance de Bruxelles (Court of First Instance, Brussels, Belgium) in order to contest the lawfulness of that tax in the light of Directive 69/335, Articles 56 to 60 EC, Directive 85/611 and Article 10 EC as well as, in the alternative, Article 22 of the Convention between the Kingdom of Belgium and the Grand Duchy of Luxembourg for the avoidance of double taxation and regulating certain other questions on taxes on income and capital, signed in Luxembourg on 17 September 1970 (‘the Belgian-Luxembourg convention’).
· By judgment of 23 November 2011, the tribunal de première instance de Bruxelles rejected the complaint alleging infringement of Directive 69/335, but granted NN (L)’s application, upholding the complaint submitted by NN (L) in the alternative, alleging infringement of the Belgian-Luxembourg convention.
· The État belge, SPF Finances lodged an appeal against that judgment before the referring court, from which it seeks a declaration that the annual tax on UCIs is not covered by the Belgian-Luxembourg convention, that Articles 160 et seq. of the Inheritance Tax Code are compatible with EU law and that that tax, which was duly levied, cannot be repaid.
· NN (L) sought confirmation of the judgment under appeal. In the alternative, it brought a cross-appeal, in so far as the court of first instance rejected the complaint alleging infringement of Directive 69/335 and did not rule on the other complaints alleging infringement of other provisions of EU law. In that regard, NN (L) invited the referring court to refer the matter to the Court of Justice for a preliminary ruling.
· The referring court states that, whatever the classification given to the annual tax on UCIs for the purpose of determining whether or not it falls within the scope of the Belgian-Luxembourg convention, that tax does not escape the general prohibition of limitations on freedom of movement and the possibility cannot be ruled out a priori that the provisions of Directive 69/335 apply to that tax.
· In those circumstances, the cour d’appel de Bruxelles (Appeal Court, Brussels) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
1. Must Directive 69/335 and more specifically Articles 2, 4, 10 and 11 thereof read together, be interpreted as precluding provisions of national law, such as Articles 161 to 162 of the Inheritance Tax Code concerning the tax on UCIs, in so far as that tax is imposed annually on UCIs established as companies with share capital in another Member State and marketing their units in Belgium, on the total amount of their units subscribed in Belgium, reduced by the amount of repurchases or refunds of those subscriptions, with the consequence that the sums collected in Belgium by such UCIs are subject to that tax while they remain at the disposal of those UCIs?
2. Must Articles 49 to 55 and 56 to 60 EC, read, if appropriate, in conjunction with Articles 10 EC and 293, second indent, EC be interpreted as precluding a Member State modifying unilaterally the criterion on the basis of which a tax is imposed, as provided for by Article 161 et seq. of the Inheritance Tax Code, in order to replace a personal criterion for taxation, based on the domicile of the taxpayer and laid down in international tax law, with an alleged criterion of actual connection, which is not laid down in international tax law, account being taken of the fact that in order to establish its fiscal sovereignty the Member State adopts a specific penalty, such as that laid down by Article 162(2) of the Inheritance Tax Code, as regards foreign operators only?
3. Must Articles 49 and 56 EC, read, if appropriate, in conjunction with Articles 10 and 293, second indent, EC, be interpreted as precluding the imposition of tax, such as that described above, which, inasmuch as it takes no account of the tax already imposed in the Member State of origin of UCIs established in another Member State, represents an additional pecuniary burden likely to impede the marketing of their units in Belgium?
4. Must Directive 85/611, read, if appropriate, in conjunction with Articles 10 and 293, second indent, EC, be interpreted as precluding the imposition of tax, as described above, inasmuch as it prejudices the principal aim of the directive of facilitating the marketing of units of UCIs in the European Union?
5. Must Articles 49 and 56 EC be interpreted as precluding administrative charges incurred by the levying of taxation such as that described above on UCIs established in another Member State that market their units in Belgium?
6. Must Articles 49 and 56 EC be interpreted as precluding a provision of national law, such as Article 162(2) of the Inheritance Tax Code, inasmuch as that provision imposes a specific penalty on UCIs established in another Member State that market their units in Belgium, namely the prohibition, ordered by a court, of making future investments of its units in Belgium in the event of failure to submit their declarations by 31 March each year or if they fail to pay the tax described above?
The CJEU judged as follows:
1. Articles 2, 4, 10 and 11 of Council Directive 69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital, as amended by Council Directive 85/303/EEC of 10 June 1985, must be interpreted as not precluding legislation of a Member State imposing an annual tax on undertakings for collective investment, such as the tax at issue in the main proceedings, which makes undertakings for collective investment governed by foreign law marketing units in that Member State subject to that tax.
2. Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), read, if appropriate, in conjunction with Article 10 EC and Article 293, second indent, EC, must be interpreted as not precluding the legislation of a Member State imposing an annual tax on UCIs, such as the tax at issue in the main proceedings, which makes UCIs governed by foreign law marketing units in that Member State subject to that tax, provided that that legislation is applied in a non-discriminatory way.
3. Article 56 EC must be interpreted as not precluding the legislation of a Member State imposing an annual tax on UCIs, such as the tax at issue in the main proceedings, which makes UCIs governed by foreign law marketing units in that Member State subject to that tax.
4. Article 49 EC must be interpreted as precluding a national provision, such as Article 162(2) of the Inheritance Tax Code, as amended by the Programme Law of 22 December 2003, by which a Member State imposes a specific penalty, namely the prohibition, ordered by a court, of making future investments of its units in that Member State, on UCIs governed by foreign law in the event of non-compliance by the latter with the obligation to file the annual declaration necessary for the recovery of a tax on UCIs or in the event of non-payment of that tax.
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.
The opinion in this case as delivered on January 21, 2016 by Advocate General Bobek can be found here.
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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