FOR THE CJEU THE FISCO SHALL DEMONSTRATE THE ABUSE OF EU LAW
On 26 February 2019, the Court of Justice of the European Union (CJEU), in the joined cases C-116/16 and C-117/16, dealing with the benefits of the Directive 90/435/CE (so-called Parent-Subsidiary Directive or PSD, whose purpose is, within the UE, to eliminate double taxation of profits distributed by a company to its parent company, exempting the levying of withholding tax on dividends) delivered two significant explanations on the concepts of abuse of law and beneficial ownership, by clarifying how complex a multinational group can set the shareholder structure without falling in the field of the abuse of law.
Notably, the Court states the legal general principle that individuals cannot benefit from a right or an advantage guaranteed from the EU law when the transaction is set merely with the objective of tax avoidance, by means of artificial legal constructions and, therefore, incompatible with the objective pursued by the Directive itself (para. 70 et seq. and case-law cited), and the absence of domestic or agreement-based anti-abuse provisions does not affect the national authorities’ obligation to refuse to grant entitlement to rights provided for by the EU law, where they are invoked for fraudulent or abusive ends.
However, the burden of proving rests on the tax authority of the source Member State which shall establish a combination of objective circumstances in which, despite formal observance of the conditions laid down by the EU rules, the purpose of those rules has not been achieved and, second, a subjective element consisting in the intention to obtain an advantage from the EU rules by artificially creating the conditions laid down for obtaining it.
In order to determine whether an operation pursues an objective of fraud and abuse, the competent national authorities may not confine themselves to applying predetermined general criteria, but must carry out an individual examination of the whole operation at issue. The imposition of a general tax measure automatically excluding certain categories of taxpayers from the tax advantage, without the tax authorities being obliged to provide even prima facie evidence of fraud and abuse, would go further than is necessary for preventing fraud and abuse.
On the other hand, the Court also stated that, generally, there is no reason why the tax authorities concerned should not request from the taxpayer the evidence that they consider they need for a concrete assessment of the taxes and duties concerned and, where appropriate, refuse the exemption applied for if that evidence is not supplied.
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