Brussels, 26/04/2013 (Agence Europe) - Spanish legislation regarding corporate tax is in breach of freedom of establishment as it provides for the immediate taxation of unrealised capital gains on the transfer of the place of residence or of the assets of a company established in Spain to another member state.
Such is the ruling relating to case C-64/11, delivered by the Court of Justice of the EU further to action initiated by the European Commission for failure to comply. The Commission considered as discriminatory the legislation that provides for unrealised capital gains to be integrated in the taxable base of the fiscal year when a company established in Spain transfers its residence or its assets to another member state or when it ceases all activity. According to the Commission, since those capital gains do not have any immediate consequences in terms of taxation if operations are carried out within Spanish territory, such legislation constitutes a discriminatory measure and an obstacle to the freedom of establishment in that it puts the companies which have exercised that freedom at a cash-flow disadvantage.
The Court partially agrees with this interpretation. It considers that the immediate taxation of unrealised capital gains on the transfer of the place of residence or of the assets of a company established in Spain to another member state amounts to a restriction on the freedom of establishment, since it results not from a transfer of residence or of assets of the establishment in question but simply from cessation of activity. It is therefore a purely internal situation and does not relate to disparity of treatment with situations coming under freedom of establishment. On the other hand, the immediate taxation of capital gains on the transfer of residence or assets from a company established in Spain to another member state effectively comprises restriction of the freedom of establishment. Indeed, in such cases, a company exercising this freedom is financially penalised compared to a similar company that carries out such transfers on Spanish soil, and whose capital gains generated by such operations are not integrated in the corporate tax base until the moment they are realised.
Furthermore, the Court considers that EU law is not opposed to the tax due on unrealised capital gains from being determined at the time of transfer of the company or of assets to another member state but is opposed to the immediate payment of such taxation. It considers that it is possible to demand payment after transfer and that the demand for immediate payment is disproportionate to the objective set by Spanish legislation (i.e. safeguard of the exercise of Spain's fiscal competence). (FG/transl.jl)