‘NEO GROUP’ UAB v. Valstybinė mokesčių inspekcija

Parent not a conduit company: Whether national practice can levy withholding tax on dividends ‘even though that parent company actually carries on an economic activity and is therefore not a conduit company.’ [42] under Article 1(2) and (3) of Council Directive 2011/96/EU.

Article 1(2) and (3) of Council Directive 2011/96/EU (Parent-Subsidiary Directive) on abuse interpreted: Benefits refused to arrangements ‘put into place with the main purpose or one of its main purposes being that of obtaining a tax advantage that defeats the object or purpose of that directive’ which ‘are not genuine having regard to all relevant facts and circumstances’ [48]. Merck, 292/82 and Generalstaatsanwaltschaft Frankfurt am Main (Export of cash to Russia), C-246/24.

Parent-Subsidiary Directive interpreted purposively: Directive ‘seeks to ensure the neutrality, from a tax point of view, of the distribution of profits by a company established in one Member State to its parent company established in another Member State’ [44]. Viva Telecom Bulgaria, C-257/20.

1. 3.1

   Parent-Subsidiary Directive interpreted literally: ‘wording of that provision does not provide that it is applicable only to specific situations or types of arrangement.’ [52] Nordcurrent Group, C-228/24.

2. 3.2

   Parent-Subsidiary Directive interpreted systematically: ‘having regard both to its position, that is to say, in the first article of that directive, and to the objective thus expressed, that provision is cross-cutting in nature … A narrower interpretation would not be consistent with the objective of preventing misuse’ [53].

Recital 7 of Directive 2015/121 on objective analysis applied: ‘Member States’ tax administrations should undertake an objective analysis of all relevant facts and circumstances when assessing whether an arrangement or a series of arrangements are abusive.’ [54]

1. 4.1

   T Danmark & Y Denmark, C-116/16 and C-117/16 on burden of proof applied: Burden ‘lies with the tax authority of the Member State which seeks to refuse to grant the exemption … That authority cannot, however, be required to furnish evidence that would be impossible for it to provide’ [59].

Every step of arrangement: ‘Nothing in the anti-abuse provision of the Parent-Subsidiary Directive suggests that the relevant facts and circumstances … are confined to the situation existing as at the date of one of the steps of the arrangement in question’ [55].

1. 5.1

   T Danmark & Y Denmark, C-116/16 and C-117/16 on conduit companies interpreted: ‘situation of a conduit company is just one example of the application of the principle of the prohibition of abuse’ [61]. ‘To analyse only the economic activity of that parent company, without taking into account the other relevant elements, would not be consistent with the necessity of carrying out an overall examination’ [62].

Marhaux, C-150/25 on double taxation conventions applied: No jurisdiction ‘to examine the relationship between a national measure and the provisions of a double taxation convention’ [64]. Referring court ‘whose task it is to interpret national law and the LT-CY Convention’ [68]. In any event, conventions ‘cannot be relied upon to achieve a result contrary to EU law’ [69]. Denkavit Internationaal & Denkavit France, C-170/05 and Keva & Ors, C-39/23.

Matching amounts, transferred continuously: Whether tax authorities can treat amounts transferred ‘similar, or even identical, to the amounts of dividends’ as indications of abuse even if ‘not in a short period of time after the payment of those dividends, but on a continuous basis over a certain period.’ [71] under Article 1(2) and (3) of Parent-Subsidiary Directive.

Elektrorazpredelitelni mrezhi Zapad, C-310/24 on claims of facts in preliminary reference applied: ‘even where the facts set out in the order for reference are disputed by a party to the main proceedings, it is on the basis of the information provided by the referring court that the questions submitted must be answered’ [72].

T Danmark & Y Denmark, C-116/16 and C-117/16 on transferred amounts applied: Correspondence of amounts an indication [74]. But ‘such evidence cannot give rise to a general presumption of abuse.’ [75]

Continuous transfers relevant: ‘a non-genuine arrangement, the effects of which are repeated over a certain period, is no less contrary to that object or purpose than a one-off arrangement.’ [77] Tax authorities ‘cannot be required to limit their examination to a short period.’ [78]

Transactions outside Lithuania: Whether national practice can evaluate relevant non-genuine transactions ‘carried out by natural or legal persons not resident in that Member State … and irrespective of the stage in the chain of transactions at which the tax advantage is obtained.’ [80] under Article 1(2) and (3) of Parent-Subsidiary Directive.

Cross-border element inherent: ‘Parent-Subsidiary Directive concerns cross-border situations, which invariably involve companies resident in different Member States.’ [81]

Advantage at any stage: Provision ‘does not require proof of the existence of a tax advantage that defeats the object or purpose of that directive as regards the subsidiary which initially distributed the dividends … Such an advantage may be derived by the natural person who controls the group of companies’ [85].

1. 15.1

   Nordcurrent Group, C-228/24 on steps of arrangement applied: ‘circumstances subsequent to the formation of the arrangement may be taken into account in assessing whether or not the step of the arrangement in question is genuine’ [83]. Overall examination ‘includes transactions carried out outside that Member State, before or after the distribution of the dividends by the subsidiary to the parent company.’ [84]

Principle of proportionality in Article 5(4) TEU applied: Analysis of transactions abroad ‘clearly appropriate for attaining that objective … essential in order to combat arrangements the abusive nature of which can be established only following such an analysis.’ [87] Deister Holding & Juhler Holding, C-504/16 and C-613/16.

1. 16.1

   T Danmark & Y Denmark, C-116/16 and C-117/16 on abuse of Treaty freedoms applied: Company ‘cannot claim the benefit of the freedoms enshrined in the FEU Treaty in order to call into question the legislation governing the taxation of dividends … where it is established that the application of that legislation makes it possible to avoid such abuse’ [88].

Subsidiary unaware: Whether national practice can levy withholding tax without establishing ‘that that subsidiary was or could have been aware that that distribution was part of a chain of transactions, all or some of which were not genuine.’ [90] under Article 1(2) and (3) of Parent-Subsidiary Directive.

Nordcurrent Group, C-228/24 on subjective element applied: Abuse requires ‘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’ [92].

1. 19.1

   Distribution decided by parent: ‘it is possible that a distribution of dividends results from a decision of the parent company.’ [95]

Subjective element at group level: ‘sufficient that the existence of the subjective element … is demonstrated with regard to at least one of the companies in the group participating in that chain of transactions or to the natural person who, as a result of the creation of that chain of transactions, benefits from that advantage, without it being necessary for that subsidiary itself to have been aware of that intention.’ [98] Otherwise ‘the effectiveness of the anti-abuse provision of that directive … would be undermined.’ [97]