CYIL vol. 12 (2021)

CYIL 12 (2021) IMPACTS OF THE CJEU CASE LAW ON REGULATORY COMPETITION … company with its registered office in another Member State of the EU. Even though the issues of direct taxes did not belong and do not belong among the EU powers, the CJEU decided that even in that area the EU Member States must respect prohibition of discrimination on the basis of nationality and it declared the rule assessed as such to be prohibited discrimination that France was unable to justify by any admissible reason. The CJEU furthermore stated that the same important role which is played in case of a natural person by their permanent residence is played, in case of a company, by its registered office, actual seat (place of its main administration) or by the main place of business. 14 Like in the case of a natural person, who must not be (except for justified exceptions) discriminated in any manner on the basis of their permanent residence in another Member State in comparison to domestic nationals, a similar regime holds for companies in relation to the above-mentioned categories. Case 81/87 – Daily Mail 15 In this case the matter concerned another conflict of the incorporation principle with the seat principle on the background of tax optimisation. The holding company “Daily Mail and General Trust plc” had its registered office as well as actual seat in the territory of the United Kingdom, nevertheless it decided to transfer its actual seat (place of management of the company) to the Netherlands in order to avoid British tax on capital yields of its investments. Although English law is otherwise built upon the incorporation principle, in tax matters it is based on the doctrine of the actual seat, and any transfer of the actual seat of a company incorporated in the United Kingdom is conditioned by the previous consent of the British Ministry of Finance. The Ministry, however, refused to grant such consent to the Daily Mail company, or more specifically – it required cancellation of the existing entity and founding a new one without maintaining the company statute. Daily Mail challenged this approach in a judicial way and through the preliminary ruling procedure the case was referred to the CJEU, which expressly confirmed that the challenged rules of the English legal order limiting the transfer of the seat of the company incorporated in the United Kingdom are not in contradiction with the Article 52 and 58 (at that time) of the Treaty establishing the European Economic Community 16 . The CJEU arrived at a conclusion that primary freedom of establishment had never been available to companies according to primary law of the EU, and therefore they could not claim a cross-border transfer of their actual seat to another Member State of the EU without meeting the conditions prescribed by domestic legal order either 17 . The Court also stated that freedom of establishment does not deal with the issue of different theories of determination of the seat of a company and that since companies are (unlike natural persons) artificial legal constructs, whose incorporation and functioning are given by national regulations, their destiny cannot be separated from applicable national rules. 18 The judgement leads to a clear conclusion that while natural persons can make use of both primary and secondary freedoms of establishment, companies (being legal entities) can make use of secondary freedom of establishment only. This means that they can establish branches or other representations in another EU Member State without the destination 14 Judgement: Commission of the European Communities v. French Republic . Case 270/83. Par. 18. 15 Judgement of the Court of Justice of 27 September 1988. The Queen v. H. M. Treasury and Commissioners of Inland Revenue, ex parte Daily Mail and General Trust plc. Case 81/87.

16 At present Articles 49 and 54 of the TFEU. 17 Judgement: Daily Mail. Case 81/87. Par. 1. 18 Judgement: Daily Mail. Case 81/87. Par. 19.


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