Category Archives: Tax

Une remise en question par le Tribunal de l’Union européenne de la méthodologie de la Commission européenne et, implicitement, de son impartialité et du respect du principe de bonne administration, dans les affaires d’aides d’Etat de nature fiscale à l’occasion du dossier concernant le régime belge relatif aux bénéfices excédentaires

Jugement
Affaires T-131/16 et T-263/16
14.02.2019
PartiesJuridictionFormationJuge RapporteurAvocat GénéralSujet
AppelRoyaume de Belgique et Magnetrol International contre Commission européenneTribunal de l’Union européenne7ème Chambre élargie V. Tomljenović/Aides d’Etat – Décision fiscale anticipée – Régime d’aides
Mots-clésAides d’État – Régime d’aide mise en exécution par la Belgique – Décision déclarant le régime d’aides incompatible avec le marché intérieur et illégal et ordonnant la récupération de l’aide versée – Décision fiscale anticipée (tax ruling) – Exonération des bénéfices excédentaires – Autonomie fiscale des États membres – Notion de régime d’aides – Mesures d’application supplémentaires
RésuméSi l’on excepte le premier moyen tiré de l’atteinte à la compétence exclusive des Etats membres en matière de fiscalité directe, qui s’opposerait à un contrôle de la Commission au titre des aides d’Etat, qui a été balayé car outrancier, l’objet immédiat de l’arrêt rendu par le Tribunal de l’Union européenne (le « TUE ») le 14 février 2019 dans les affaires T-131/16 et T-263/16, opposant respectivement la Belgique et Magnetrol International à la Commission européenne était technique puisqu’il portait sur la notion de régime d’aides par opposition à celle d’aide individuelle. Toutefois, l’arrêt rendu revêt de l’importance dans l’offensive lancée par la Commission européenne contre ce qu’elle considère comme des cadeaux fiscaux de certains Etats membres aux groupes multinationaux. Au travers d’une motivation précise et fouillée, il met, en effet, en évidence certains manquements méthodologiques des services de la Commission dans ses investigations au titre des règles relatives aux aides d’Etat dans le domaine fiscal.

La Commission avait-elle pu à bon droit identifier un régime d’aides concernant l’exonération des bénéfices excédentaires en droit belge ? Les enjeux pratiques étaient substantiels. L’existence d’un régime d’aides dispensait la Commission européenne d’examiner toutes les mesures individuelles octroyées à des entreprises sur la base du supposé régime. Elle pouvait prendre une seule décision sur le régime, interdisant son maintien. C’était donc toute une législation qui cessait de s’appliquer. L’atteinte à la politique fiscale de la Belgique était bien plus substantielle et rapide, au prix d’un investissement en travail nettement moindre de la Commission européenne. Pour la même raison, une telle qualification était de nature à permettre à la Commission européenne, dès l’ouverture de la procédure formelle d’investigation, d’ordonner la suspension de l’application de la législation concernée dans son ensemble. Si, en l’espèce, elle ne l’avait pas requis expressément, la Belgique, consciente des risques encourus, avait opté pour une telle suspension.

Pour retenir la présence d’un régime d’aides et non d’un faisceau d’aides individuelles disparates, la Commission européenne n’avait pas pu identifier un acte juridique instituant un tel régime d’aides. Comme la jurisprudence l’y autorise dans un tel cas, elle avait cherché à se fonder sur un ensemble de circonstances de nature à déceler l’existence en fait d’un tel régime. A cet effet, elle avait retenu pas moins de quatre éléments juridiques, de nature différente et s’échelonnant dans le temps : une disposition légale (l’article 185, paragraphe 2, sous b), un extrait de ses travaux préparatoires (l’exposé des motifs de la loi du 21 juin 2004), une circulaire administrative (du 4 juillet 2006) et, enfin, les réponses du ministre des Finances aux questions parlementaires sur l’application de ladite disposition légale. Selon elle, ceux-ci constituaient les actes sur la base desquels l’exonération des bénéfices excédentaires est accordée.

Le TUE a toutefois mis en lumière que plusieurs des éléments essentiels du prétendu régime d’aides, dégagés par la Commission européenne, ne découlaient pas des bases du régime retenues par la Commission mais provenaient de l’examen d’un échantillon des mesures individuelles. Autrement dit, elle avait bâti, à partir de certaines mesures individuelles, un prétendu régime général qu’elle avait cherché à rattacher à des fragments juridiques de portée générale du droit fiscal belge. Bref, elle avait construit un dossier à charge de l’Etat belge. Les éléments essentiels en question prêtés au régime postulé étaient la méthode de calcul en deux étapes des bénéfices excédentaires et certaines formes d’intensification de la présence en Belgique.

Dans un ordre d’idées proche, le TUE a également relevé que la catégorie des bénéficiaires identifiée par la Commission ne correspondait pas à celle figurant dans la disposition légale retenue par elle comme l’une des bases du régime. Ceci constituait une nouvelle distorsion du cadre juridique belge par la Commission et confirmait que le rattachement du régime qu’elle prétendait avoir identifié aux bases qu’elle avait retenues était forcé.

Le TUE a également relevé que l’un des éléments présentés comme essentiels par la Commission, la méthode de calcul en deux étapes des bénéfices excédentaires, n’avait pas été systématiquement adoptée.

Par ailleurs, le TUE a souligné que l’administration fiscale belge disposait d’une marge d’appréciation substantielle pour déterminer s’il y avait lieu à ajustement des bénéfices, ce qui contredisait la thèse d’un régime général donnant lieu à de simples mesures individuelles d’application.

D’une part, l’approche était au cas par cas. L’ajustement ne nécessitait pas l’attribution des bénéfices concernés à une autre société. Contrairement au prescrit de la disposition légale, le montant à exonérer et les bénéfices excédentaires ne faisaient pas l’objet d’une définition dans les actes de base. Seuls 50 % des dossiers soumis à l’administration donnaient lieu à une décision anticipée.

D’autre part, il n’y avait pas une ligne systématique de conduite de l’administration fiscale, que la Commission, dans une attitude de repli devant le TUE, avait cherché à présenter, à titre subsidiaire, comme la base du prétendu régime général. Non seulement le Tribunal a fort logiquement écarté cette prétention, en indiquant qu’il ne pouvait pas accepter une motivation postérieure à l’adoption de la décision de la Commission, mais il s’est employé à démonter les faiblesses méthodologiques de la Commission dans l’invocation de cette prétendue ligne systématique. C’est ainsi que celle-ci avait cherché à asseoir l’existence d’une telle constance sur un échantillon couvrant un tiers des décisions individuelles de l’administration fiscale belge sans préciser le choix de cet échantillon ni les raisons pour lesquelles il avait été considéré comme représentatif de l’ensemble des décisions individuelles. Pour un autre point, elle s’était contentée de se référer à un onzième des décisions sans aucune précision sur le caractère suffisamment représentatif de l’échantillon.
A retenirLe Tribunal a mis en lumière de substantielles erreurs de la Commission européenne dans l’analyse des éléments de droit fiscal belge concernés comme constituant un régime général d’aides. Celles-ci confinent à l’arbitraire. Leur multiplication donne l’impression que, pour certains services de la Commission, la fin (lutte contre l’optimalisation fiscale et la concurrence fiscale dommageable, recherche d’une imposition plus substantielle des multinationales, harmonisation fiscale au sein de l’Union européenne) justifie les moyens (la dénaturation des faits, distorsion de la réalité). Au terme d’une démonstration magistrale, le Tribunal rappelle que l’instrumentalisation politique a des limites dans une Union de droit. Que la Commission développe des thèses juridiques nouvelles et ambitieuses est une chose, qu’elle prenne des distances avec la réalité et plie les faits à ses désirs en est une autre.

Ce manque de rigueur, cette dérive de la Commission amènent à s’interroger sur la fiabilité du traitement qu’elle a réservé à d’autres affaires d’aides d’Etat de nature fiscale, encore en cours. Les prochains arrêts du Tribunal en la matière sont attendus avec impatience.

Par ailleurs, le souci du Tribunal et le contrôle par celui-ci d’une analyse rigoureuse du droit fiscal national en cause par la Commission européenne procède peut-être d’une volonté de trouver un point d’équilibre entre, d’une part, la compétence exclusive des Etats membres en matière de fiscalité directe et, d’autre part, le fait que le droit des aides d’Etat a néanmoins vocation à s’appliquer à cette matière. Le respect par la Commission de la compétence des Etats membres à continuer à développer une politique fiscale vis-à-vis des entreprises requiert, à tout le moins, qu’elle traite le droit fiscal d’un Etat membre comme il l’est, sans a priori défavorable.

The methodology of the EU Commission and implicitly its impartiality and its good admnistration questioned by the General Court in the tax state aid investigations in the Belgian excess profit regime case

Judgment
Cases T-131/16 and T-263/16
14.02.2019
PartiesCourtChamberJudge-RapporteurAdvocate GeneralSubject-matter
AppealKingdom of Belgium and Magnetrol International v European CommissionGeneral Court7th Chamber (Extended Composition) V. Tomljenović/State aid – Aid scheme – Tax ruling
KeywordsState aid – Aid scheme implemented by Belgium – Decision declaring the aid scheme incompatible with the internal market and unlawful and ordering recovery of the aid granted – Tax ruling – Excess profit exemption – Fiscal autonomy of the Member States – Concept of an aid scheme – Further implementing measures
Significant pointsApart from the first plea alleging infringement of the exclusive competence of Member States in the field of direct taxation, which would preclude the Commission’s control of State aid, and which was dismissed by the General Court (“GC”), the object of the judgment delivered was technical. It concerned the concept of an aid scheme as opposed to that of an individual aid measure. The judgment is important with regard to the Commission's offensive against what it considers to be tax gifts granted by certain Member States to multinational groups. By means of a precise and detailed statement of reasons, it highlights certain methodological shortcomings by the Commission in its investigations in this area.

Could the Commission have correctly identified an aid scheme concerning the exemption of excess profits under Belgian law? The practical stakes were substantial because the existence of an aid scheme exempted the European Commission from examining all individual measures granted to companies on the basis of the alleged scheme. The Commission could instead take a single decision on the regime as a whole, prohibiting its continuation. Such a classification enabled the Commission to order the suspension of the legislation concerned as a whole as soon as the formal investigation procedure was opened. While the Commission had not expressly requested it in the case at hand, Belgium opted for such a suspension considering the risks at stake.

In determining the existence of an aid scheme and not of a range of individual aid measures, the Commission had been unable to identify a legal act establishing such a scheme. On the basis of established case law allowing it to do so, the Commission had sought to rely on a set of circumstances likely to demonstrate the existence of the scheme. To this end, the Commission had identified four legal elements: a legal provision (Article 185(2)(b)); an extract from its preparatory work (the explanatory memorandum of the law of 21 June 2004); an administrative circular (of 4 July 2006); and, finally, the responses of the Minister of Finance to parliamentary questions on the application of the abovementioned legal provision. In the Commission’s view, these were the acts on the basis of which the excess profits exemption was granted.

However, the GC pointed out, first, that several essential elements of the alleged aid scheme did not actually stem from the bases of the scheme identified by the Commission but were derived from the examination of a sample of individual measures. In other words, the Commission had built, on the basis of certain individual measures, an alleged general scheme which it sought to link to elements of Belgian tax law. The essential elements of the alleged scheme in question that were not present in the bases of the scheme were the two-step method of calculating excess profits and certain forms of intensification of the companies’ presence in Belgium].

In a similar vein, the GC noted that the category of beneficiaries identified by the Commission did not correspond to that contained in the legal provision considered by the Commission as one of the bases of the alleged scheme. This constituted a further distortion of the Belgian legal framework by the Commission and confirmed that the connection established between the alleged aid scheme and the elements identified as the bases of that scheme was erroneous.

The GC also considered that one of the elements presented as essential by the Commission, the two-step method of calculating surplus profits, had not been systematically adopted in the decision.

In addition, the GC pointed out that the Belgian tax administration enjoyed a substantial margin of discretion in determining whether or not a profit adjustment was necessary, which contradicted the hypothesis of a general scheme giving rise to simple individual implementing measures.

On the one hand, the approach by the Belgian taw authorities was done on a case-by-case basis. The profit adjustment did not require the allocation of the profits concerned to another company. Contrary to the requirement of the legal provision, the amount to be exempted and the excess profits were not defined in the basic acts. Only 50% of the files submitted to the administration gave rise to an advance ruling.

On the other hand, the tax administration’s systematic approach presented in the alternative by the Commission as the basis of the alleged general scheme was inexistent. Not only did the GC logically dismiss this claim, indicating that it could not accept a justification provided only subsequent to the adoption of the Commission's decision, but it also sought to demonstrate the Commission's methodological weaknesses in invoking this alleged systematic approach. In particular, the Commission had sought to establish the existence of such a consistent treatment on a sample covering one third of the Belgian tax administration's individual decisions without justifying the choice of this sample or specifying the reasons why it had been considered representative of all individual decisions. On another point, it had simply referred to one eleventh of the decisions without any clarification on the sufficiently representative nature of the sample.
NoteworthyThe GC found substantial errors on the part of the Commission in its analysis of the elements of Belgian tax law considered as constituting a general aid scheme. The assessment was regarded as arbitrary by the GC. Their multiplication gives the impression that, for the Commission, the ends (i.e. the fight against tax optimisation and harmful tax competition, increased taxation of multinationals, tax harmonisation within the European Union) justified the means (i.e. distortion of facts, distortion of reality). At the end of a masterful demonstration, the GC recalls that political instrumentalisation has limits in a Union governed by the rule of law. It is one thing for the Commission to develop new and ambitious legal arguments, but it is another to distance itself from reality and manipulate the facts in order to serve specific purposes.

The Commission's drift and lack of rigour in the decision raise questions as to the reliability of the way in which it has handled other tax-related state aid cases, which are still ongoing. The GC's forthcoming judgments in this area are eagerly awaited, therefore.

Moreover, the GC's concern and its scrutiny of the Commission’s analysis of the national tax law at stake may stem from a desire to strike a balance between, on the one hand, the exclusive competence of the Member States in the field of direct taxation and, on the other hand, the fact that State aid law is nevertheless intended to apply in this area. The Commission's respect for the competence of the Member States to continue to develop tax policies towards companies requires, at the very least, that it treats the tax law of a Member State as it is, without pre-conceived bias.

Towards limitations to the ne bis idem principle notably in banking and financial matters : the extent to which bankers and financial operators may be exposed to the duplication of proceedings and penalties of criminal and administrative fines and other sanctions

Judgment
C-524/15 & C-537/16
20.03.2018
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Preliminary rulingMenci ; Garlsson et al.Court of Justice Grand ChamberT. von DanwitzM. M. Campos Sánchez-BordonaNe bis in idem principle – Protection of the integrity of financial markets and public confidence in financial instruments
KeywordsReference for a preliminary ruling — Directive 2003/6/EC — Market manipulation — Penalties — Value added tax (VAT) — Directive 2006/112/EC — Failure to pay VAT due National legislation which provides for an administrative penalty and a criminal penalty for the same acts — Charter of Fundamental Rights of the European Union — Article 50 — Ne bis in idem principle — Criminal nature of the administrative penalty — Existence of the same offence — Article 52(1) — Limitations to the ne bis in idem principle — Conditions
Significant pointsThe Court of Justice delivered two judgements on the same day concerning the application of the ne bis in idem principle, which provides, pursuant to Article 50 of the Charter of Fundamental Rights of the European Union (“EU Charter”), that a person cannot be criminally prosecuted or punished twice for the same offence.

The first case (C-537/16) regarded the imposition by the Italian authority for the financial markets (“Consob”) of an administrative penalty for market abuse (Directive 2003/6) on a person who had previously been sentenced (and later pardoned) to a criminal penalty with respect to the same acts. The second case (C-524/15) regarded VAT collection, where a person liable for payment was imposed an administrative penalty by tax authorities for failing to pay VAT, and against which criminal proceedings were also brought with respect to the same acts.

Having determined in both cases that a unique offence was subject to two separate proceedings of a criminal nature (one of which being an administrative proceeding), the Court then assessed whether these limitations of the ne bis in idem principle were compatible with the EU Charter in light of Article 52 of the latter. Following the provisions of the EU Charter and a judgment delivered under the urgent preliminary ruling procedure (C-129/14 PPU Spasic) in 2014, the Court stated that any restriction of this principle must be provided for by law, respect the essence of the ne bis in idem principle and respect the following conditions:
- it must pursue an objective of general interest which is such as to justify a duplication of proceedings and penalties, it being necessary for those proceedings and penalties to pursue additional objectives;
- it must establish clear and precise rules allowing individuals to predict which acts or omissions are liable to be subject to such a duplication of proceedings and penalties;
- it must ensure that the proceedings are coordinated in order to limit to what is strictly necessary the additional disadvantage which results, for the persons concerned, from the duplication of proceedings, and
- it must ensure that the severity of all of the penalties imposed is limited to what is strictly necessary in relation to the seriousness of the offence concerned.

Of particular interest, the Court considered that provisions seeking to protect the integrity of the financial markets of the European Union and public confidence in financial instruments (C-537/16) and provisions seeking to combat VAT offences (C-524/15) meet an objective of general interest. The Court noted that, in light of the importance that is given in the Court’s case law to combating market abuses and VAT infringements, a duplication of criminal proceedings and penalties may be justified where those proceedings and penalties pursue, for the purpose of achieving such an objective, different aspects of the same unlawful conduct at issue.

The Court also assessed whether the provisions respected the principle of proportionality, which implies the existence of rules ensuring coordination so as to reduce to what is strictly necessary the additional disadvantage associated with such duplication for the persons concerned. In the case relating to VAT, the Court considered that the legislation ensures the proportionality of all of the penalties imposed given that, among other things, a criminal conviction would prevent the enforcement of an administrative penalty. On the contrary, in the case relating to market manipulation, the Court was of the opinion that the principle of proportionality was not respected – a question which is for the referring court to ultimately determine – given the absence of a similar limitation.

Henceforth, in the VAT case, the Court agreed in principle to a duplication of proceedings of a criminal nature. Finally, the CJ affirmed such that such a conclusion is in line with the ne bis in idem principle as set by the European Convention on Human Rights (“ECHR”) and the case law of the European Court of Human Rights. According to the CJ, the required conditions for a duplication of proceedings ensure a level of protection of that fundamental right that do not conflict with its meaning and scope in the ECHR.
NoteworthyIn these two judgments, the CJ reiterated its attachment to the decisions handed down by the European Court of Human Rights.

First, the Court implicitly relied on the Grande Stevens decision (ECHR, 4 March 2014, Grande Stevens v. Italy), which was expressly mentioned in the AG's opinion, to assert, on the one hand, that the provisions in question were aimed at guaranteeing the integrity of the financial markets and maintaining public confidence in the security of transactions and, on the other hand, that the Consob sanctions were aimed at both a preventive and a punitive objective (paras. 46 and 47).

Second, these judgments constitute a reversal of case law in relation to the C-617/10 Åkerberg Fransson judgment rendered in 2013. In that judgment, the CJ had established that the ne bis in idem principle does not preclude the duplication of fiscal and criminal penalties, in so far as the first penalty is not of a criminal nature. From now on, the CJ has relaxed its case law by admitting the possibility of a combination of two criminal sanctions, under certain conditions. In doing so, the CJ aligns its case law with that of the ECHR, which in 2016 had already admitted the accumulation of different criminal penalties in the case of an integrated mixed procedure, i.e. administrative and criminal, provided that the procedures, although different, have a sufficiently close material and temporal link between them and form part of an integrated sanctions mechanism (ECHR, 15 November 2016, A and B v. Norway). The judgment in A and B v. Norway did not constitute a genuine reversal of case law by the ECHR but rather the clarification of the contours of case law initiated by the Nilsson judgment in 2005, in the case of the parallel execution of linked procedures that form a coherent whole.

Third, the judgments represent a step further towards the convergence (without there being identity) of the two European Courts on the complex issue of the appraisal of the link between parallel procedures. While most of the criteria laid down by the CJ overlap with those of the ECHR (complementary goals, need for clear rules, proportionality of the severity of all penalties), some minor differences appear to persist. Firstly, the CJ requires that the limitation of the ne bis in idem principle meets an objective of general interest. Secondly, the ECHR seem to attach particular importance to the temporal link between the procedures, while the CJ basically requires that procedures are coordinated with each other.

The judgment of the CJ in the case C-537/16 is of the utmost importance given the increasing severity of EU law and of the supervising authorities towards breaches of the rules by banking and financial operators, which is also in line with the recommendations of the Financial Stability Board and the 2010 Communication from the EU Commission “Reinforcing sanctioning regimes in the financial services sector”.

Registration tax on leased or rented vehicles by Greek residents from suppliers established in another Member State

Judgment
C-66/15
14.01.2016
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Action for failure to fulfil obligationsEuropean Commission
v
Hellenic Republic
CJUE10th Ch.M.E. Levitis M. M. BobekFreedom to provide service
KeywordsPublic measures concerning the Failure of a Member State to fulfil obligations - Restriction to the freedom to provide services – Articles 56 to 62 TFUE - Leasing or renting of a vehicle by a resident of a Member State from a supplier established in another Member State – Imposition of the whole registration tax
Significant pointsBy collecting the full amount of a registration tax foreseen by its national legislation and payable by a supplier established in another Member State on vehicles which are rented or leased to a client residing in its national territory and by doing so without taking into account the duration of the rental contract or lease contract and the duration of the use of the vehicle in the national territory, the Hellenic Republic failed to fulfil its obligations under Article 56 – 62 TFEU.

The Court observes that the registration tax at issue applies to leased or rented vehicles that are not destined to be used on a permanent basis in the Member State. Moreover, the rental or leasing undertakings established in another Member State are liable to pay such a tax.

The imposition of the whole tax, which is calculated without taking into consideration the duration of the renting or leasing agreement for that vehicle or the length of time that that vehicle will be used in the national territory, could therefore disadvantage a vehicle leasing or renting undertaking established in another Member State in terms of the depreciation of such a tax, potentially dissuading it from providing its services.

In this respect, the Court states that the Greek legislation is such that it could discourage Greek residents to rent or lease a vehicle from an undertaking established in another Member State, insofar as it makes these operations more expensive; it consequently violates Article 56 TFUE by creating a restriction to freedom to provide services.
NoteworthyThe Court follows its well-established case law on the matter at issue, e.g. the judgment in Cura Anlagen (C-451/99) and orders van de Coevering (C-242/05) and Ilhan (C-42/08).
The Court also repeats that national registration tax rules are subject to the respect of the principle of proportionality and that this principle is violated, like in the case at hand, by imposing the entirety of such a tax on vehicles temporarily present in the Member State.

State aid – Annulment of Commission decision on a Spanish tax exemption for lack of selectivity

Judgment
T-515/13 and T-719/13
17.12.2015
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
AppealKingdom of Spain and others v
European Commission
General Court7th Ch.M. van der Woude /State aid
KeywordsState aid – Tax measures applicable for the financing and purchase of ships – Decision finding incompatible State aid and the recovery of aid – Annulment proceedings – Advantage – Selectivity – Effect on interstate trade and competition - Reasoning
Significant pointsThe case involved an appeal against a decision by the European Commission in July 2013 to find tax breaks granted by Spain to economic interest groups (EIGs) for the order of ships to constitute incompatible State aid within the meaning of Article 107 TFEU.

The General Court annulled the Commission decision for failing to establish a selective advantage granted to the investors of the EIGs and for failing to provide sufficient reasoning on how the potential advantage distorted competition and affected trade in the internal market.

On the failure to establish a selective advantage (paras 119-180):

- The economic advantage conferred onto the members of the EIGs was available to all taxpayers in Spain, in exactly the same conditions, even in the presence of an authorisation system. Accordingly, the advantage was not deemed selective within the meaning of Article 107(1) TFEU.

- The EIGs certainly benefitted from the tax measures. However, due to their financial transparency, the advantages directly produced by these measures were entirely passed onto their members.

- The fact that the advantage only related to an investment in a certain type of asset and not to other investments or in other assets did not make it selective as regards the investors themselves because the investment was open to all undertakings.

On the failure to show the distortion of competition and effect on trade between Member States (paras 181-209):

- As regards the Commission’s statement that the investors operated in all sectors of the economy and that the advantage conferred strengthened their position on their respective markets, this is a very general statement which could be applied to all types of State support. This statement does not contain any specific element that might explain how the measures involved could distort competition and affect trade between Member States on the markets where the investors were operating.

- The Commission should have provided more information explaining how the advantage received by the investors in the EIGs, and not the shipping companies and shipyards, was capable of restricting or potentially restricting competition and interstate trade within the meaning of Article 107(1) TFEU on the markets where the investors were active.
Noteworthy1. This significant judgment confirms that the approach taken by the EU General Court in its judgments of 7 November 2014 in T-219/10 Autogrill España v Commission and T-399/11 Banco Santander and Santusa v Commission (currently under appeal before the Court of Justice) to thoroughly review the selectivity of tax measures. The EU General Court observed that an advantage must benefit certain undertakings under Article 107 TFEU and that a tax advantage which is open to all types of undertakings cannot be considered selective. A tax measure that benefits a certain type of investment open to all investors is a general measure and does not constitute State aid.

2. In addition, the EU General Court touched upon an area of State aid frequently ignored by the Commission when finding State aid: providing an explanation of how competition and trade are affected by the aid measure. In its decision of July 2013, the Commission had found that the measure benefitted investors who operated in all sectors of the economy. The General Court found this reasoning to be wholly insufficient. Even if an effect can be presumed in most cases, the Commission decision must still explain on which markets this effect will take place.

3. It is notable that the Commission’s decision did not find that State aid had been conferred to the Spanish shipyards. The fact that ordering ships became cheaper for EIGs through the tax breaks offered is likely to have led to an increase in demand for ships built in the Spanish shipyards. The Commission chose instead to identify a selective advantage benefitting the investors of the EIGs who ordered the ships and its decision was annulled for its weak reasoning in this regard.

VAT fraud – principles of effectiveness and equivalence

Judgment

C-662/13

12.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for a preliminary ruling

Surgicare — Unidades de Saúde SA

v.

Fazenda Pública

CJEU

9th Ch.

K. Jürimäe

P. Mengozzi

VAT

Key-words

VAT — Directive 2006/112/EC — Deduction of input tax — Transactions constituting an abusive practice — National tax law — Special national procedure where the existence of abusive practices is suspected in the field of taxation — Principles of effectiveness and equivalence.

Significant points

In the absence of any EU rules in the area, the means of preventing VAT fraud falls within the internal legal order of the Member States under the principle of procedural autonomy of the latter. In that regard, it is apparent from the Court’s settled case-law that it is for the domestic legal system of each Member State, in particular, to designate the authorities responsible for combatting VAT fraud and to lay down detailed procedural rules for safeguarding rights which individuals derive from EU law, provided that such rules are not less favourable than those governing similar domestic actions (principle of equivalence) and that they do not render impossible in practice or excessively difficult the exercise of rights conferred by the EU legal order (principle of effectiveness).

  1. As regards, first, the principle of effectiveness, it must be held that the special procedure laid down by Article 63 of the CPPT, subject to a limitation period of three years, is characterised by a preliminary hearing within 30 days for the taxpayer concerned, the submission by the taxpayer of all the evidence that he considers to be relevant and the obtaining of an authorisation from the head of the department, or the official to whom he has delegated the relevant power, responsible for the application of anti-abuse rules. Furthermore, in accordance with that provision, reasons must be given for the decision adopted. It follows from those elements that the national procedure in question is favourable to the person suspected of having committed an abuse of rights, inasmuch as it seeks to guarantee the observance of certain fundamental rights, in particular the right to be heard.
  2. As regards, second, the principle of equivalence, it cannot be excluded that, for the same reason, compliance with the principle of equivalence requires the application of the special procedure when a taxpayer is suspected of VAT fraud.

Consequently, Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that it does not preclude the mandatory preliminary application of a national administrative procedure, such as that laid down by Article 63 of the Code of Taxation Procedure and Proceedings (Código de Procedimento e de Processo Tributário), in the event that the revenue authorities suspect the existence of an abusive practice.

Noteworthy

Excise duties – Concept of “formalities connected with the crossing of frontiers”

Judgment

C-349/13

12.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for a preliminary ruling

Minister Finansów

v.

Oil Trading Poland sp. Z.o.o

CJEU

10th Ch.

M.C. Vajda

N.Jääskinen

Tax

Key-words

Excise duties — Directives 92/12/EEC and 2008/118/EC — Scope — Mineral oils and energy products — Lubricating oils used for purposes other than as motor fuels or as heating fuels — Not included — Excise duty levied on the consumption of energy products, imposed by a Member State pursuant to its own harmonised excise duty arrangements — Concept of ‘formalities connected with the crossing of frontiers’ — Article 110 TFEU — Shorter payment deadline in certain cases for intra-Community purchases than for products acquired on the domestic market

Significant points

  1. In this case, lubricating oils are products other than ‘excise goods’ within the meaning of Article 1(1) of Directive 2008/118, so that, in accordance with Article 1(3) of that directive, Member States may levy taxes on those products, provided that the levying of such taxes does not, in trade between Member States, give rise to formalities connected with the crossing of frontiers (see, to that effect, in relation to Article 3(1) and (3) of Directive 92/12, judgment in Fendt Italiana, EU:C:2007:411, paragraph 44).
  2. It follows that Article 1(3) of that directive does not preclude, in itself, Member States from imposing on products other than those subject to the harmonised excise duty arrangements a tax governed by rules identical to those relating to those arrangements.
  3. However, in order to comply with the requirements of Article 1(3) of Directive 2008/118, a tax charged on lubricating oils used for purposes other than as motor fuels or as heating fuels must not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.
  4. In that regard, it is clear from the case-law of the Court that, if the purpose of a formality imposed on the importer of a product subject to a national tax is to ensure payment of the debt corresponding to that tax, such a formality is related to the event giving rise to the tax, namely an intra-Community acquisition, and not to the crossing of a frontier in the sense of that provision (see, to that effect, judgments in Brzeziński, EU:C:2007:33, paragraphs 47 and 48, and Kalinchev, EU:C:2010:312, paragraph 27).
  5. According to settled case-law, a system of taxation of a Member State can be considered compatible with Article 110 TFEU only if it is proved to be so structured as to exclude any possibility of imported products being taxed more heavily than domestic products, so that it cannot in any event have discriminatory effect (see judgment in X, C‑437/12, EU:C:2013:857, paragraph 28 and the case-law cited).
  6. Subject to verification by the referring court, it appears that the deadline for payment of the excise duty due for lubricating oils imported under the duty suspension arrangement, beginning from their placing into circulation on the Polish market, is the same as that which is laid down for lubricating oils acquired on that market. Moreover, lubricating oils which are imported may be imported under the excise payment procedure, which results in a shorter deadline for paying the excise.

Noteworthy

Article 49 TFEU – Transfer of losses sustained by a non-resident subsidiary

Judgment

C-172/13

03.02.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Infingement proceedings – Failure to fulfil obligations

European Commission

v

United kingdom of Great Britain and Northern Ireland

CJEU

Grand Chamber

 M. K. Lenaerts

J. Kokott

Freedom of establishment

Keywords

 Article 49 TFEU — Article 31 of the EEA Agreement — Corporation tax — Groups of companies — Group relief — Transfer of losses sustained by a non-resident subsidiary — Conditions — Date to be used for determining whether the losses of the non-resident subsidiary are definitive.

Significant points

The Commission submits that Section 119(4) of the Corporation Tax Act 2010 (CTA 2010), as amended after the Mark & Spencer CJEU’s judgment, does not meet the requirements entailed for the Member State concerned by paragraphs 55 and 56 of this judgment in so far as, under that provision, the determination that it is impossible for losses sustained by a subsidiary established in another Member State, or in a non-member State party to the EEA Agreement, to be taken into account in the future must be made ‘as at the time immediately after the end’ of the accounting period in which the losses were sustained. According to the Commission, that provision has the effect of making it virtually impossible for a resident parent company to obtain cross-border group relief and as a result constitutes a disproportionate obstacle to the freedom of establishment.According to the Commission, Section 119(4) allows the resident parent company to take such losses into account in only two situations: (i) where the legislation of the Member State of residence of the subsidiary concerned makes no provision for losses to be carried forward and (ii) where the subsidiary is put into liquidation before the end of the accounting period in which the loss was sustained.The Court stated that the first of those situations referred to by the Commission is irrelevant for the purposes of assessing the proportionality of Section 119(4) of the CTA 2010. It is settled law that losses sustained by a non-resident subsidiary cannot be characterised as definitive, as described in paragraph 55 of the judgment in Marks & Spencer, by dint of the fact that the Member State in which the subsidiary is resident precludes all possibility of losses being carried forward. In such a situation, the Member State in which the parent company is resident may not allow cross-border group relief without thereby infringing Article 49 TFEU.As regards the second situation referred to, the Court stated that the Commission has not established the truth of its assertion that Section 119(4) of the CTA 2010 requires the non-resident subsidiary to be put into liquidation before the end of the accounting period in which the losses are sustained in order for its resident parent company to be able to obtain cross-border group relief. In addition, it is clear from the wording of that provision that it does not, on any view, impose any requirement for the subsidiary concerned to be wound up before the end of the accounting period in which the losses are sustained.The Commission submits that losses sustained before 1 April 2006 are excluded from cross-border group relief, contrary to Article 49 TFEU and Article 31 of the EEA Agreement, inasmuch as the provisions laid down in the CTA 2010 concerning that relief apply only to losses sustained after 1 April 2006, the date on which the Finance Act 2006 entered into force.

Again, the Court stated that the Commission has not established the existence of situations in which cross-border group relief for losses sustained before 1 April 2006 was not granted.

Consequently, the Court dismissed the action in its entirety.

Noteworthy

According to the judgment in Marks & Spencer, cross-border group relief is not required in principle by European Union law. Nevertheless, an exception applies in the case where losses incurred by a foreign subsidiary within the framework of foreign taxation cannot be taken into account either for past or for future tax years.

The Advocate General seems to plead for the abandonment of the Marks & Spencer exception due to its contradictions in relation to the Court’s other case-law on tax matters, which provides for a clear demarcation of the fiscal powers of the Member States. The Marks & Spencer exception does not either satisfy the requirement of legal certainty, but makes investment conditions unforeseeable and liable to give rise to disputes

Directive 77/388/EEC – VAT – Concept of “exempted letting of immovable property”

Judgment

C-55/14

22.01.2015

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for  preliminary ruling

Régie communale autonome du stade Luc Varenne VEtat belge

CJEU

9th Ch.

M. Safjan

/

VAT

Keywords

Directive 77/388/EEC — VAT — Exemptions — Article 13B(b) — Concept of ‘exempted letting of immovable property’ — Provision, for consideration, of a football stadium — Contract for provision reserving certain rights and prerogatives to the owner — Supply, by the owner, of various services representing 80% of the charge specified in the contract

Significant points

  1. Article 13B(b) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment constitutes an exception to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person and it must therefore be interpreted strictly.
  2. As a result, this provision , must be interpreted as meaning that the act of making available, for consideration, a football stadium under a contract reserving certain rights and prerogatives to the stadium owner and providing for the supply, by the owner, of various services, including services of maintenance, cleaning, repair and upgrading, representing 80% of the charge which is agreed in the contact to be payable, does not constitute, as a general rule, a ‘letting of immovable property’ within the meaning of that provision. The finding of the facts is however for the referring court.
  3. In the circumstances at issue of the main proceedings, what seems to be involved is the supply, by the corporation, of a more complicated service consisting of provision of access to sporting facilities, where the corporation takes charge of the supervision, management, maintenance and cleaning of those facilities. In this respect, the length of the period of enjoyment specified in the supply contract concerns a maximum of 18 days when football is played, such a period not being a priori negligible. The referring court will however have to assess whether, in the light of all the circumstances, the contractual period of enjoyment should rather be classified as being occasional and temporary, which would be additional evidence in support of the view being taken that the transaction at issue in the main proceedings, considered as a whole, should be classified as a supply of services rather than as a letting of immovable property

Noteworthy

Freedom to provide services – Taxation – Winnings from casinos

Judgment

Joint cases
C-344/13
and C-367/13

22.10.2014

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Reference for a preliminary ruling

Cristiano Blanco e.a.

v.

Agenzia delle Entrate – Direzione Provinciale I di Roma – Ufficio Controlli

CJEU

3rd Ch.

C. Toader

/

Freedom to provide services

Key-words

Freedom to provide services — Restrictions — Tax legislation — Income from winnings from games of chance — Difference in taxation between winnings obtained abroad and those from national casinos

Summary

Articles 56 and 52 TFEU preclude legislation of a Member State which subjects winnings from games of chance obtained in casinos in other Member States to income tax and exempts similar income from that tax if it is obtained from casinos in its national territory. A discriminatory restriction is compatible with EU law only if it falls under an express derogation, such as Article 52 TFEU to which Article 62 TFEU refers, and which is intended to safeguard public policy, public security and public health. Excluding the benefit of a tax exemption in a general manner would appear to be a disproportionate approach, to combatting money laundering, other methods being available to the Member States in this respect, such as Directive 2005/60 which is intended to combat money laundering and which applies to casinos.

Finally, taxation by a Member State of winnings from casinos in other Member States and the exemption of such winnings from casinos situated on its territory are not a suitable and coherent means of ensuring the attainment of the objective of combatting compulsive gambling, as such an exemption is in fact likely to encourage consumers to participate in games of chance which allow them to benefit from such an exemption.

Noteworthy

Classical judgment on discriminatory restrictions to freedom of circulation – tests of appropriateness and proportionality clearly and carefully operated.