Court of Justice (Sixth Chamber) 20 December 2017, C-504/16 and C-613/16 (Deister Holding AG and Juhler Holding A/S v Bundeszentralamt für Steuern.)

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In joined preliminary ruling proceedings concerning disputes over the refusal by the German tax authorities to grant withholding tax relief on dividends distributed to non-resident parent companies under Paragraph 50d(3) of the Income Tax Act (Einkommensteuergesetz), the Court of Justice considered the compatibility of that national anti-abuse provision with EU law. The decisive legal issue was whether Article 1(2) in conjunction with Article 5(1) of Directive 90/435/EEC (the Parent-Subsidiary Directive) and the freedom of establishment preclude domestic legislation that denies withholding tax exemption to a non-resident parent company if its shareholders would not be entitled to the benefit directly and it meets predetermined conditions regarding economic activity and substance. The Court held that Article 1(2) in conjunction with Article 5(1) of Directive 90/435/EEC precludes such national legislation because it establishes a general, irrebuttable presumption of fraud or abuse without requiring tax authorities to provide prima facie evidence or conducting an individual case-by-case assessment of economic reality.AI