Case C-157/05
Winfried L. Holböck
v
Finanzamt Salzburg-Land
(Reference for a preliminary ruling from the Verwaltungsgerichtshof)
(Free movement of capital – Freedom of establishment – Income tax – Distribution of dividends – Income from capital originating in a non-member country)
Summary of the Judgment
1.Freedom of movement for persons – Freedom of establishment – Free movement of capital – Provisions of the Treaty – Scope
(Arts 43 EC and 56 EC)
2.Free movement of capital – Restrictions on movements of capital to or from non-member countries
(Arts 56 EC and 57(1) EC)
1.National legislation which makes the receipt of dividends liable to tax, where the rate depends on whether the source of those dividends is national or otherwise, irrespective of the extent of the holding which the shareholder has in the company making the distribution, may fall within the scope of both Article 43 EC on freedom of establishment and Article 56 EC on free movement of capital.
However, the provisions of the chapter of the Treaty concerning freedom of establishment cannot be relied on in a situation where a shareholder receives dividends from a company established in a non-member country. That chapter does not include any provision extending its application to situations which involve the establishment in a non-member country of a Member State national or of a company incorporated under the legislation of a Member State.
(see paras 24, 28-29)
2.Article 57(1) EC must be interpreted as meaning that Article 56 EC is without prejudice to the application by a Member State of legislation which existed on 31 December 1993 under which a shareholder in receipt of dividends from a company established in a non-member country, who holds two thirds of the share capital in that company, is taxed at the ordinary rate of income tax, whereas a shareholder in receipt of dividends from a resident company is taxed at a rate of half the average tax rate.
Even if such a shareholder were entitled to rely on Article 56 EC, a restriction on capital movements involving direct investments, such as a less favourable tax treatment of foreign-sourced dividends, comes within the scope of Article 57(1) EC, inasmuch as it relates to holdings acquired with a view to establishing or maintaining lasting and direct economic links between the shareholder and the company concerned and which allow the shareholder to participate effectively in the management of the company or in its control, which is true of less favourable tax treatment of foreign-sourced dividends associated with a shareholding of two thirds of the shares of the company making the distribution.
(see paras 36-38, 44-45, operative part)