Case C-303/07 Aberdeen Property Susanna Kuisma Pepe Tamminen

Case facts Reference for a preliminary ruling from the Supreme Administrative Court of Finland Parties: Aberdeen Property Finninvest Alpha Oy (Alpha) Aberdeen Property Nordic Fund I SICAV (Nordic fund SICAV) the Finnish Government Withholding tax charged on dividends paid to non-resident companies other than companies within the meaning of 90/435/EEC

Legal background EC legislation Parent-Subsidiary Directive Right of establishment Article 43 EC Article 48 EC Free movement of capital and payments Article 56 EC Article 58 EC

Legal background (continued..) National legislation Law on the taxation of business income Per se: a dividend received by a corporation is not taxable income There are some exceptions Article 2 of Parent-Subsidiary Directive LU & FIN Convention Taxing power in state of residence of dividend payer max 5% withholding tax

Case background Alpha made an application to the Finnish central tax commission for a preliminary ruling on the taxation of dividends paid by that company to Nordic Fund SICAV Finnish central tax commission Alpha is obliged to charge withholding tax on dividends paid to Nordic Fund SICAV SICAVs did not appear on the list in the annex to Directive 90/435 Did not pay income tax in Luxemburg SIVAC and Finnish share companies were not therefore comparable for the purposes of Community law  Alpha challenged the decision

SAC’s question for the Court of justice Is Finnish share companies and SICAV companies to be regarded as in order to safeguard the fundamental freedoms comparable when taking into account: SICAV is not recognized in Finnish legislation SICAV is not mentioned in the list of companies referred to in Article 2(a) of Parent-Subsidiary Directive the fact that a SICAV is exempt from income tax under the domestic tax legislation of [the Grand Duchy of] Luxembourg  Tax avoidance

Ruling of CJEU Articles 43 EC and 48 EC must be interpreted as precluding legislation of a Member State  Taxation should be interpreted as in case of two Finnish companies  Alpha is not obliged to charge withholding tax on dividends paid to Nordic Fund SICAV

Reasons for the ruling Only articles 43 and 48 have been taken into account Even though SICAV is not mentioned PS-directive, different type of tax treatment can district Right of establishment The fact that in Finnish law there is no type of company with a legal form identical to that of a SICAV, is no good enough reason for difference in treatment compared to the Finnish companies Is not tax avoidance Not objective difference between FIN and LU companies

Reasons for the ruling (continued..) Finland has chosen not to tax these kind of dividend payments It cannot rely on the argument that there is a need to safeguard the balanced apportionment of the power to tax between MS  A restriction of freedom of establishment Effect: Dividend payments from Finnish companies to Luxembourgish SICAV companies are tax-free If Finland wants to extend the taxing power to these payments, it should also tax dividend payments between Finnish companies.