Judgment of the Court (Sixth Chamber) of 3 April 2025

Uitspraak

Provisional text

JUDGMENT OF THE COURT (Sixth Chamber)

3 April 2025 (^*)

( Reference for a preliminary ruling – Taxation – Directive 2011/96/EU – Common system of taxation applicable in the case of parent companies and subsidiaries of different Member States – Exemption from corporation tax in respect of dividends paid by a non-resident subsidiary to a resident parent company – Article 1(2) and (3) – Anti-abuse provision – Classification of the subsidiary as a non-genuine arrangement – Steps of an arrangement – Tax advantage )

In Case C‑228/24,

REQUEST for a preliminary ruling under Article 267 TFEU from the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania), made by decision of 20 February 2024, received at the Court on 26 March 2024, in the proceedings

‘Nordcurrent group’ UAB

v

Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos,

THE COURT (Sixth Chamber),

composed of A. Kumin, President of the Chamber, T. von Danwitz (Rapporteur), Vice-President of the Court, and S. Gervasoni, Judge,

Advocate General: A. Rantos,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

–        ‘Nordcurrent group’ UAB, by J. Karvelė, advokatė, and by M. Mainionytė, I. Ščeponienė and G. Skirbutienė,

–        the Lithuanian Government, by V. Kazlauskaitė-Švenčionienė and E. Kurelaitytė, acting as Agents,

–        the Belgian Government, by S. Baeyens and P. Cottin, acting as Agents,

–        the French Government, by R. Bénard and O. Duprat-Mazaré, acting as Agents,

–        the European Commission, by A. Ferrand and J. Jokubauskaitė, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

1        This request for a preliminary ruling concerns the interpretation of Article 1(2) and (3) of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 2011 L 345, p. 8), as amended by Council Directive (EU) 2015/121 of 27 January 2015 (OJ 2015 L 21, p. 1) (‘Directive 2011/96’).

2        The request has been made in proceedings between, on the one hand, ‘Nordcurrent group’ UAB, a company incorporated under Lithuanian law (‘Nordcurrent’), and, on the other, Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos (State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania; ‘the Inspectorate’), concerning an exemption from corporation tax in respect of dividends distributed to Nordcurrent by its subsidiary Nordcurrent Ltd (‘the subsidiary’), resident in the United Kingdom of Great Britain and Northern Ireland.

 Legal context

 European Union law

3        Recitals 3 to 6 of Directive 2011/96 state:

‘(3)      The objective of this Directive is to exempt dividends and other profit distributions paid by subsidiary companies to their parent companies from withholding taxes and to eliminate double taxation of such income at the level of the parent company.

(4)      The grouping together of companies of different Member States may be necessary in order to create within the [European] Union conditions analogous to those of an internal market and in order thus to ensure the effective functioning of such an internal market. Such operations should [not be] hampered by restrictions, disadvantages or distortions arising in particular from the tax provisions of the Member States. It is therefore necessary, with respect to such grouping together of companies of different Member States, to provide for tax rules which are neutral from the point of view of competition, in order to allow enterprises to adapt to the requirements of the internal market, to increase their productivity and to improve their competitive strength at the international level.

(5)      Such grouping together may result in the formation of groups of parent companies and subsidiaries.

(6)      Before the entry into force 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 tax provisions governing the relations between parent companies and subsidiaries of different Member States varied appreciably from one Member State to another and were generally less advantageous than those applicable to parent companies and subsidiaries of the same Member State. Cooperation between companies of different Member States was thereby disadvantaged in comparison with cooperation between companies of the same Member State. It was necessary to eliminate that disadvantage by the introduction of a common system in order to facilitate the grouping together of companies at Union level.’

4        Recitals 1 to 8 of Directive 2015/121 state:

‘(1)      Council Directive [2011/96] exempts dividends and other profit distributions paid by subsidiary companies to their parent companies from withholding taxes and eliminates double taxation of such income at the level of the parent company.

(2)      It is necessary to ensure that Directive [2011/96] is not abused by taxpayers who fall within the scope of its application.

(3)      Some Member States apply domestic or agreement-based provisions aimed at tackling tax evasion, tax fraud or abusive practices in a general or in a specific way.

(4)      However, those provisions may have different levels of severity and, in any case, they are designed to reflect the specificities of each Member State’s tax system. Moreover, some Member States do not have any domestic or agreement-based provisions for the prevention of abuse.

(5)      Therefore, the inclusion of a common minimum anti-abuse rule in Directive [2011/96] would be very helpful to prevent misuse of that Directive and to ensure greater consistency in its application in different Member States.

(6)      The application of anti-abuse rules should be proportionate and should serve the specific purpose of tackling an arrangement or a series of arrangements which are not genuine, that is, which do not reflect economic reality.

(7)      To that end, when assessing whether an arrangement or a series of arrangements are abusive, Member States’ tax administrations should undertake an objective analysis of all relevant facts and circumstances.

(8)      While Member States should use the anti-abuse clause to tackle arrangements which are, in their entirety, not genuine, there may also be cases where single steps or parts of an arrangement are, on a stand-alone basis, not genuine. Member States should be able to use the anti-abuse clause also to tackle those specific steps or parts, without prejudice to the remaining genuine steps or parts of the arrangement. That would maximise the effectiveness of the anti-abuse clause while guaranteeing its proportionality. …’

5        Article 1 of Directive 2011/96 provides:

‘1.      Each Member State shall apply this Directive:

(a)      to distributions of profits received by companies of that Member State which come from their subsidiaries of other Member States;

…

2.      Member States shall not grant the benefits of this Directive to an arrangement or a series of arrangements which, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of this Directive, are not genuine having regard to all relevant facts and circumstances.

An arrangement may comprise more than one step or part.

3.      For the purposes of paragraph 2, an arrangement or a series of arrangements shall be regarded as not genuine to the extent that they are not put into place for valid commercial reasons which reflect economic reality.

4.      This Directive shall not preclude the application of domestic or agreement-based provisions required for the prevention of tax evasion, tax fraud or abuse.’

6        Article 4(1) of Directive 2011/96 is worded as follows:

‘1.      Where a parent company or its permanent establishment, by virtue of the association of the parent company with its subsidiary, receives distributed profits, the Member State of the parent company and the Member State of its permanent establishment shall, except when the subsidiary is liquidated, either:

(a)      refrain from taxing such profits to the extent that such profits are not deductible by the subsidiary, and tax such profits to the extent that such profits are deductible by the subsidiary; or

(b)      tax such profits while authorising the parent company and the permanent establishment to deduct from the amount of tax due that fraction of the corporation tax related to those profits and paid by the subsidiary and any lower-tier subsidiary, subject to the condition that at each tier a company and its lower-tier subsidiary fall within the definitions laid down in Article 2 and meet the requirements provided for in Article 3, up to the limit of the amount of the corresponding tax due.’

7        Article 6 of Directive 2011/96 provides:

‘The Member State of a parent company may not charge withholding tax on the profits which such a company receives from a subsidiary.’

 Lithuanian law

8        Article 35 of the Lietuvos Respublikos pelno mokesčio įstatymas (Law of the Republic of Lithuania on corporation tax; ‘the Law on corporation tax’) states, in paragraph 1 thereof:

‘Except in the cases provided for in paragraphs 2 and 3 of this article, dividends received by a Lithuanian entity in respect of shares or other rights that it holds in a foreign entity, or received by a permanent establishment in respect of shares or other rights allocated to it in a foreign entity, shall be subject to corporation tax at a rate of 15%. …’

9        Article 35(2) of that law provides:

‘Dividends received by a Lithuanian entity in respect of shares or other rights that it holds in a foreign entity which is incorporated or otherwise set up in a State of the European Economic Area and the profits of which are subject to corporation tax or a tax equivalent to corporation tax, or received by a permanent establishment in respect of shares or other rights allocated to it in such a foreign entity, shall be exempt from tax.’

10      Article 32(6) of that law provides:

‘The provisions of … Article 35(2) and (3) of this Chapter on the exemption of dividends do not apply to an arrangement or a series of arrangements which, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of [Directive 2011/96] … are not genuine having regard to all relevant facts and circumstances. An arrangement may comprise more than one step or part. An arrangement or a series of arrangements shall be regarded as not genuine to the extent that they are not put into place for valid commercial reasons which reflect economic reality.’

 The dispute in the main proceedings and the questions referred for a preliminary ruling

11      Nordcurrent’s commercial activity consists in the creation and distribution of electronic games. In the context of a tax inspection of that company in 2023, the Inspectorate concluded that that company should have paid corporation tax in the amount of EUR 3 205 211.53 in respect of dividends received from the subsidiary in 2018 and 2019. The Inspectorate reached that conclusion after finding that, during those years, the subsidiary was covered by the concept of a ‘non-genuine arrangement’, not having been put into place for valid commercial reasons.

12      Furthermore, the Inspectorate found that Nordcurrent had improperly reduced its taxable profits for those years, by deducting commissions paid to the subsidiary for game distribution in the total amount of EUR 728 762.81. Consequently, Nordcurrent was required to pay additional corporation tax in the amount of EUR 586 722, together with default interest amounting to EUR 222 028.08, and a fine of EUR 176 017.

13      According to the Inspectorate, the existence of a non-genuine arrangement is demonstrated by the fact that, in 2018 and 2019, the subsidiary did not have human resources corresponding to the large number of games distributed, customers and sales channels, the only employee of that subsidiary being its director, who at the same time managed seven other companies. Further, according to the Inspectorate, the subsidiary had neither its own place of business nor any tangible assets in the United Kingdom. In fact, a large number of undertakings, namely 97 110, were registered at the same address as the subsidiary, which was provided through a company registration service in that country.

14      The Inspectorate therefore found that, in 2018 and 2019, the activities relating to the creation and distribution of games by the subsidiary had, in actual fact, been carried out by the employees of Nordcurrent itself, who had access to the platforms used by the subsidiary for advertising and game distribution.

15      Nordcurrent challenged the Inspectorate’s decision before the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania), which is the referring court. That company denies that the subsidiary was a non-genuine arrangement; it maintains that the subsidiary provided it with an actual commercial advantage. Established in 2009 and wound up in 2021, the subsidiary was necessary as an intermediary between Nordcurrent and advertising and game distribution platforms until that company had succeeded in concluding direct agreements with such platforms. In 2018 and 2019, Nordcurrent had no opportunity to sell games directly from Lithuania. In view of the mode of distribution of electronic games, the subsidiary did not need physical premises. Similarly, the conclusion of standard agreements for game distribution or the purchase of advertising by the subsidiary did not require staff other than the director.

16      According to Nordcurrent, the subsidiary’s distribution functions were partially transferred to it in 2017, after the conclusion of an agreement with the Google platform. In 2018, the organisation of activities was changed, and all the risks associated with the creation of games, the financing of that creation and the advertising expenditure were transferred from the subsidiary to Nordcurrent. It was therefore Nordcurrent that held all the rights to the games, the subsidiary remaining responsible solely for their distribution. At the end of 2019, no further game distribution or advertising purchase activities were carried out via the subsidiary and it was decided to wind it up.

17      Comparing the situation before it with that which gave rise to the judgment of 26 February 2019, T Danmark and Y Denmark (C‑116/16 and C‑117/16, EU:C:2019:135), the referring court states that the subsidiary received the income from the activity which it carried out in its own name and that it was therefore not acting as a conduit entity interposed in the structure of the group of which it was part, but as an entity which generated that income itself. Accordingly, that court is uncertain as regards the application of the anti-abuse provision, set out in Article 1(2) and (3) of Directive 2011/96, in respect of the subsidiary.

18      The referring court notes also that the Inspectorate has not called into question the reasons for the formation of the subsidiary or its activity during periods other than 2018 and 2019. In addition, the referring court points to the fact that, according to Nordcurrent, there was no actual tax advantage, on the ground that the subsidiary, established in the United Kingdom, was making a profit and that the rate of corporation tax to which taxable profits are subject in Lithuania (namely 15%) is lower than that applied in the United Kingdom (which is 24%).

19      In those circumstances, the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1)      In circumstances such as those of the present case, is a national practice under which an exemption from taxation on dividends is not granted to a parent company in a Member State in respect of the dividends received from a subsidiary established in another Member State on the ground that such a subsidiary is recognised as an arrangement, where the subsidiary is not an intermediate company and the profits distributed by way of dividends were generated by activities carried out under the subsidiary’s name, so that removing the subsidiary would result in a situation where there are no profits at all or no payment of dividends, consistent with the objectives of the anti-abuse rule in Directive 2011/96?

(2)      If the answer to the first question is in the affirmative, is a national practice under which, for the purpose of recognising a subsidiary established in another Member State as an arrangement as such, an assessment is made of the circumstances at the time of payment of the dividends, where the establishment of the subsidiary is justified by commercial reasons, consistent with the objectives of the anti-abuse rule in Directive 2011/96?

(3)      May the anti-abuse rule in Directive 2011/96 be interpreted as meaning that, where a parent company has received dividends from a subsidiary that is established in another Member State and is recognised as an arrangement, that recognition alone is sufficient for it to be found that the parent company, through the application of the exemption from taxation on dividends, obtained a tax advantage that defeats the object or purpose [of Directive 2011/96]? Furthermore, are the circumstances relating to the fact that the profits earned by a subsidiary that has been recognised as an arrangement were subject to corporation tax in the Member State of establishment in accordance with the national rules in force in that Member State to be regarded as relevant for the purpose of challenging the finding that a tax advantage was obtained or that there was an arrangement?’

 The questions referred

 The first question

20      By its first question, the referring court asks, in essence, whether the anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96 must be interpreted as precluding a national practice under which a parent company is denied, in its Member State of residence, an exemption from corporation tax in respect of dividends received from a subsidiary established in another Member State, on the ground that that subsidiary is a non-genuine arrangement, where that subsidiary is not a conduit company and the profits distributed by way of dividends were generated in the course of activities carried out under that subsidiary’s name.

21      As a preliminary point, it must be recalled that it is clear from Article 4(1) of Directive 2011/96 that, where a parent company, by virtue of its association with its subsidiary, receives distributed profits, the Member State in which the parent company is established is to either refrain from taxing such profits or authorise that parent company to deduct from the amount of tax due that fraction of the subsidiary’s tax related to those profits. In the present case, according to the file before the Court, the Republic of Lithuania opted for the exemption system, which is provided for in Article 4(1)(a) of that directive.

22      That said, in accordance with Article 1(2) and (3) of Directive 2011/96, which contains an anti-abuse provision, Member States are not to grant the benefits of that directive to an arrangement or a series of arrangements which, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of that directive, are not genuine having regard to all relevant facts and circumstances. An arrangement or a series of arrangements are to be regarded as not genuine to the extent that they are not put into place for valid commercial reasons which reflect economic reality.

23      In interpreting that provision, account must be taken not only of its wording, but also of the scheme and objectives of Directive 2011/96 (see, by analogy, judgment of 12 May 2022, Schneider Electric and Others, C‑556/20, EU:C:2022:378, paragraph 40).

24      For the purpose of interpreting the anti-abuse provision, the clarifications provided by the Court in respect of the general principle of the prohibition of abuse in its case-law relating to Directive 90/435, which was applicable before being repealed by Directive 2011/96, are also relevant.

25      As regards, first of all, the wording of the anti-abuse provision, that wording does not suggest that that provision is applicable only to specific situations or types of arrangement. On the contrary, it adopts an overall perspective consisting in identifying the potential non-genuine nature of an arrangement having regard to all relevant facts and circumstances, that arrangement being characterised by the absence of valid commercial reasons which reflect economic reality.

26      As regards, next, the scheme and objectives of Directive 2011/96, it is apparent from recitals 4 and 5 of Directive 2015/121, which inserted into Directive 2011/96 the anti-abuse provision that has since been contained in Article 1(2) and (3) thereof, that that provision is very helpful, in particular in the light of the diversity of the national tax systems, to prevent misuse of Directive 2011/96. It should be stated that, having regard both to its position, that is to say, in the first article of Directive 2011/96, and to the objective thus expressed, that provision is cross-cutting in nature, which militates in favour of an interpretation permitting its application irrespective of the circumstances in which abuse occurs. A narrower interpretation would not be consistent with the objective of preventing misuse.

27      Lastly, in its case-law relating to Directive 90/435, the Court has found that a group of companies may be regarded as being an artificial arrangement where it is not set up for reasons that reflect economic reality, its structure is purely one of form and its principal objective or one of its principal objectives is to obtain a tax advantage running counter to the aim or purpose of the applicable tax law. That is so inter alia where, on account of a conduit entity interposed in the structure of the group between the company that pays dividends and the company in the group which is their beneficial owner, payment of tax on the dividends is avoided (judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraph 100).

28      It cannot, however, be inferred from those grounds that the anti-abuse provision applies only to arrangements involving conduit companies and that the situation at issue in the main proceedings does not come within that scope. On the contrary, it is clear from that paragraph of the judgment of 26 February 2019, T Danmark and Y Denmark (C‑116/16 and C‑117/16, EU:C:2019:135), that the situation of a conduit company is just one example of the application of the principle of the prohibition of abuse, which is indicated by the use of the words ‘inter alia’.

29      That method of proceeding by means of an example in order to assess the abusive nature of a practice is consistent with the Court’s case-law, in the context of which it has also been held, in the light of the principle of the prohibition of abuse of rights, that a ‘letterbox’ or ‘front’ subsidiary could be regarded as having the characteristics of a wholly artificial arrangement (judgment of 12 September 2006, Cadbury Schweppes and Cadbury Schweppes Overseas, C‑196/04, EU:C:2006:544, paragraph 68).

30      It is therefore for the referring court to establish, in the light of the set of facts at issue in the main proceedings, whether, in the present case, the constituent elements of an abusive practice are present (see, by analogy, judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraphs 98 and 99).

31      In the light of the foregoing, the answer to the first question is that the anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96 must be interpreted as not precluding national practice under which a parent company is denied, in its Member State of residence, an exemption from corporation tax in respect of dividends received from a subsidiary established in another Member State on the ground that that subsidiary is a non-genuine arrangement, where that subsidiary is not a conduit company and the profits distributed by way of dividends were generated in the course of activities carried out under that subsidiary’s name, provided that the constituent elements of an abusive practice are present.

 The second question

32      By its second question, the referring court asks, in essence, whether the anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96 must be interpreted as precluding a national practice under which only the situation existing as at the dates of payment of dividends is to be taken into account in order to classify a subsidiary established in another Member State as a non-genuine arrangement, where that subsidiary was set up for valid commercial reasons and the genuine nature of its activity before those dates is not called into question.

33      The referring court states that the Inspectorate’s findings establishing a non-genuine arrangement relate solely to the situation existing as at the dates of payment of the dividends exempted from corporation tax. By contrast, the Inspectorate has not called into question either the formation of the subsidiary or the activity carried out by it before those dates, namely prior to 2018 and 2019.

34      Although, in the light of the wording of the anti-abuse provision, the application thereof appears to be limited to the putting into place of an arrangement, since it specifically refers to this in the two paragraphs of Article 1 of Directive 2011/96 where it is contained, it is important to take into account also the clarification, made in the second subparagraph of Article 1(2) of that directive, that an arrangement may comprise more than one step or part.

35      In that regard, it follows from recital 8 of Directive 2015/121 that single steps or parts of an arrangement might, on a stand-alone basis, not be genuine and could, therefore, be covered by the anti-abuse clause, making it possible to give that clause its full effectiveness while guaranteeing its proportionality.

36      In that context, as the French Government stated in its written observations, it cannot be ruled out that an arrangement, initially put into place for valid commercial reasons which reflect economic reality, has to be regarded as not genuine from a certain point onwards, on account of the fact that that arrangement has been maintained despite a change in circumstances.

37      Accordingly, the possibility of applying the anti-abuse provision to non-genuine steps of an arrangement must be understood as meaning that 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.

38      While it is therefore not appropriate to limit the assessment of whether an abuse of rights exists solely to the formation of the arrangement in question, the circumstances as at the date of that formation or, in any event, prior to the step of the arrangement in question – a step consisting, in the present case, in the payment of the dividends at issue in the main proceedings – cannot be disregarded for the purpose of establishing such an abuse.

39      According to recital 7 of Directive 2015/121, 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. That wording is reproduced in essence in Article 1(2) of Directive 2011/96, according to which the benefits of that directive are not to be granted to arrangements which are not genuine having regard to all relevant facts and circumstances.

40      It is also clear from the Court’s case-law relating to Directive 90/435 that examination of a set of facts is needed to establish whether the constituent elements of an abusive practice are present (judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraph 98).

41      It follows that, in a situation in which an arrangement consists of more than one step, all relevant facts and circumstances must be taken into account in order to establish that there are one or more steps which are not genuine. Nothing in the anti-abuse provision suggests that the relevant facts and circumstances the examination of which is necessary for that purpose are confined to the situation existing as at the date of the step of the arrangement in question, namely, in the present case, the payment of the dividends at issue in the main proceedings.

42      While it is therefore open to the national authorities to take that latter situation into account in order to classify a subsidiary established in another Member State as a non-genuine arrangement, that situation alone cannot be relevant for the purposes of such a classification.

43      In the light of the foregoing, the anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96 must be interpreted as precluding a national practice under which, without exception, only the situation existing as at the dates of payment of dividends is to be taken into account in order to classify a subsidiary established in another Member State as a non-genuine arrangement, where that subsidiary was set up for valid commercial reasons and the genuine nature of its activity before those dates is not called into question.

 The third question

44      By its third question, the referring court asks, in essence, whether the anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96 must be interpreted as meaning that, where a parent company has received dividends from a subsidiary classified as a non-genuine arrangement, that classification alone is sufficient to find that, by enjoying an exemption from corporation tax in respect of those dividends, the parent company obtained a tax advantage that defeats the object and purpose of that directive.

45      In the light of the wording of the anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96, two conditions must be satisfied in order for the benefits of that directive to be denied. First, there must be a non-genuine arrangement, within the meaning set out in paragraph 3. Second, the arrangement must have been put into place with the main purpose or one of its main purposes being that of obtaining a tax advantage that defeats the object of that directive.

46      Therefore, it is not sufficient to establish that the arrangement was not put into place for valid commercial reasons reflecting economic reality, which corresponds to the definition of a non-genuine arrangement set out in Article 1(3) of Directive 2011/96. It is also necessary, in accordance with Article 1(2) of that directive, for the arrangement to have been put into place with the main purpose of obtaining a tax advantage that defeats the object or purpose of that directive.

47      This reading corresponds to the Court’s case-law, from which it is clear that proof of an abusive practice requires, first, 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 (judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraph 97 and the case-law cited).

48      If, in order to find that, in the present case, the parent company, by enjoying an exemption from corporation tax in respect of dividends received by it from a subsidiary, would obtain a tax advantage defeating the object or purpose of Directive 2011/96, it were sufficient to classify the subsidiary at issue in the main proceedings as not genuine on the basis of the evidence put forward by the Inspectorate, namely an absence of human and material resources and the absence of any actual economic activity, the subjective element linked to the tax advantage would not, contrary to the case-law cited in the preceding paragraph, be taken into account as a separate factor enabling classification as an abuse of rights.

49      It cannot be considered that the classification of the subsidiary as a non-genuine arrangement is sufficient to deny the parent company the exemption from corporation tax in respect of dividends received from the subsidiary, pursuant to the anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96.

50      As regards, lastly, the concept of tax advantage, it must be stated that that concept is not defined in Directives 2011/96 and 2015/121.

51      The question therefore arises as to whether, in the present case, the tax advantage covered by those directives must be interpreted as being the tax exemption referred to in Directive 2011/96, which is asserted, in essence, by the Lithuanian, Belgian and French Governments in their respective observations, or, in a broader sense, as suggested by Nordcurrent and by the European Commission, by taking into account whether, in the light of the difference in the rate of corporation tax between the United Kingdom and Lithuania, that company made a ‘tax saving’.

52      The mere wording of the anti-abuse provision in Article 1(2) and (3) of Directive 2011/96 does not mean that the tax advantage must be assessed in isolation. On the contrary, as the Commission claims, the requirement to take account of all the facts and circumstances, laid down in that provision, militates in favour of taking into consideration the overall tax effect resulting from the formation of the arrangement in the Member State in question.

53      In the absence of such an overall view, it would also be difficult to assess the subjective element required in order to establish the existence of an abuse of rights. In that regard, it cannot be ruled out that there might be another justification for putting into place an arrangement in another Member State, inasmuch as that arrangement might seek to achieve a reduction in the tax burden rather than a benefit under that directive (see, by analogy, judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraph 110).

54      Accordingly, the fact, referred to by Nordcurrent, that the profits made by the subsidiary were subject, in the United Kingdom, to a tax rate that is higher than the rate of corporation tax which would have been applied in Lithuania, supposing it were established, is a relevant factor, inter alia, for assessing whether the main purpose or one of the main purposes of the subsidiary’s existence as at the dates on which the dividends at issue were paid was to benefit from a tax advantage, for the purposes of the anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96.

55      In the light of the foregoing, the anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96 must be interpreted as meaning that, where a parent company has received dividends from a subsidiary classified as a non-genuine arrangement, that classification alone is not sufficient to find that, by enjoying an exemption from corporation tax in respect of those dividends, the parent company obtained a tax advantage that defeats the object and purpose of that directive.

 Costs

56      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Sixth Chamber) hereby rules:

1.      The anti-abuse provision set out in Article 1(2) and (3) of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, as amended by Council Directive (EU) 2015/121 of 27 January 2015,

must be interpreted as not precluding national practice under which a parent company is denied, in its Member State of residence, an exemption from corporation tax in respect of dividends received from a subsidiary established in another Member State on the ground that that subsidiary is a non-genuine arrangement, where that subsidiary is not a conduit company and the profits distributed by way of dividends were generated in the course of activities carried out under that subsidiary’s name, provided that the constituent elements of an abusive practice are present.

2.      The anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96, as amended by Directive 2015/121,

must be interpreted as precluding a national practice under which, without exception, only the situation existing as at the dates of payment of dividends is to be taken into account in order to classify a subsidiary established in another Member State as a non-genuine arrangement, where that subsidiary was set up for valid commercial reasons and the genuine nature of its activity before those dates is not called into question.

3.      The anti-abuse provision set out in Article 1(2) and (3) of Directive 2011/96, as amended by Directive 2015/121,

must be interpreted as meaning that, where a parent company has received dividends from a subsidiary classified as a non-genuine arrangement, that classification alone is not sufficient to find that, by enjoying an exemption from corporation tax in respect of those dividends, the parent company obtained a tax advantage that defeats the object and purpose of that directive.

[Signatures]