«(Freedom of establishment – Taxation – Taxes on company profits – Limitation of the deductibility in one Member State of costs connected with holdings of a parent company in its subsidiaries established in other Member States – Coherence of the tax system)»

Approximation of laws – Common system of taxation applicable in the case of parent companies and subsidiaries of different Member States – Directive 90/435 – Costs of a parent company established in one Member State incurred in connection with its holding in the capital of its subsidiaries established in other Member States – Deductibility subject to the condition that such costs contribute to making profits taxable in the first Member State – Not permissible having regard to Article 52 of the Treaty (now, after amendment, Article 43 EC) (EC Treaty, Art. 52 (now, after amendment, Art. 43 EC); Council Directive 90/435) Directive 90/435 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, interpreted in the light of Article 52 of the EC Treaty (now, after amendment, Article 43 EC) precludes a national provision which, when determining the tax on the profits of a parent company established in one Member State, makes the deductibility of costs in connection with that company's holding in the capital of a subsidiary established in another Member State subject to the condition that such costs be indirectly instrumental in making profits which are taxable in the Member State where the parent company is established.see para. 43 and operative part

JUDGMENT OF THE COURT (Fifth Chamber) 18 September 2003 (1)

((Freedom of establishment – Taxation – Taxes on company profits – Limitation of the deductibility in one Member State of costs connected with holdings of a parent company in its subsidiaries established in other Member States – Coherence of the tax system))

In Case C-168/01,

REFERENCE to the Court under Article 234 EC by the Hoge Raad der Nederlanden (Netherlands) for a preliminary ruling in the proceedings pending before that court between

and

on the interpretation of Article 52 of the EC Treaty (now, after amendment, Article 43 EC), of Article 58 of the EC Treaty (now Article 48 EC), and of Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 225, p. 6),

THE COURT (Fifth Chamber),,

composed of: M. Wathelet, President of the Chamber, C.W.A. Timmermans, D.A.O. Edward (Rapporteur), P. Jann and S. von Bahr, Judges,

Advocate General: S. Alber,

after considering the written observations submitted on behalf of:

having regard to the Report for the Hearing,

after hearing the oral observations of Bosal Holding BV, represented by F.C. de Hosson, of the Netherlands Government, represented by H.G. Sevenster, of the United Kingdom Government, represented by J.E. Collins, R. Singh and M. Hoskins, Barrister, and of the Commission, represented by R. Lyal and H. van Vliet, at the hearing on 11 July 2002,

after hearing the Opinion of the Advocate General at the sitting on 24 September 2002,

gives the following

Community Law

The Council shall at the appropriate time adopt the rules to apply after the date referred to in the first subparagraph.

The national legislation

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Hoge Raad der Nederlanden by judgment of 11 April 2001, hereby rules:

Wathelet

Timmermans

Edward

Jann

von Bahr

Delivered in open court in Luxembourg on 18 September 2003.

R. Grass

M. Wathelet

Registrar

President of the Fifth Chamber