CJEU - Recent Developments in Direct Taxation 2020

S. 721. State of Canada v Tax and Customs Authority (Case C-613/18)

1.1. Introduction

The Canada case (Estado do Canadá v Autoridade Tributária e Aduaneira), C‑613/18, has been decided by order of the CJEU of 21 January 2020. It is the outcome of a request for a preliminary ruling from the first instance tax court of Lisbon (Tribunal Tributário de Lisboa). This is a case regarding withholding taxes at source on outbound dividends, distributed between 1 January 2009 and 31 December 2009, in relation to shares held by Canadian Pension Plan Investment Funds in Portuguese companies. The European Law issue raised, concerns the possible violation of free movement of capital in respect of a third country (Article 63 TFEU).

The concrete question referred to the Court of Justice of the European Union was the following:

“In the context of taxation of dividends distributed by a company established in the national territory to a non-resident entity, is it compatible with the principle precluding restrictions on movement of capital between Member States and third countries for there to be an effective rate of corporation tax which is applied more disadvantageously to entities resident in a third country...