Case C-303/07 Aberdeen Property

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

2. 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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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 • Arestriction 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.