AG Kokott: qualifying parent stake unlocks full dividend relief

Advocate General Kokott proposes that the Court of Justice read the minimum holding period in the Parent-Subsidiary Directive as a test of status, not of each dividend-bearing share.Europa Once a dividend recipient qualifies as a parent company, its Member State must grant full exemption-route reliefEuropa: all profits received by virtue of the parent-subsidiary association are deducted from the parent's tax base. A rule granting relief only for dividends on shares individually held throughout the minimum period is, on this reading, incompatible with EU law.Europa She proposes the Court answer the reference as set out in the Opinion's conclusion.

The reference concerns dividends Caixa Geral de Depósitos received in 2003Europa from four Portuguese companies — Banco Comercial Português (6.03%), Electricidade de Portugal (4.84%), Portugal Telecom (4.17%) and Brisa Auto-Estradas de Portugal (5.10%) — each holding worth over EUR 30 million at acquisition. The Portuguese tax authority allowed only a 50% deductionEuropa, holding that not every holding met the one-year test in Article 46(1)(c) of the Código do Imposto sobre o Rendimento das Pessoas ColetivasEuropa, so only the Article 46(7) fallback applied. The case is now before the Supremo Tribunal Administrativo after two levels of litigation.Europa

Full deduction under Article 46(1)(c) requires a stake of at least 10% of the distributing company's capital or an acquisition value of at least EUR 20 millionEuropa, held without interruption for one year when profits are made available — or retained until that period completesEuropa. Paragraph 5 extends the treatment to stakes in other Member States meeting the directive's Article 2 conditions; paragraph 7 halves the deduction to 50% where none of the requirements in subparagraphs (b) and (c) is met (both size and holding conditions sit in subparagraph (c))Europa. The authority applied the one-year test lot by lot, granting full relief only pro rata for dividends on shares held a full year.Europa

Textually, the second indent of Article 3(2) of Directive 90/435/EEC lets Member States exclude companies — not individual shares — failing to maintain a qualifying holding for up to two yearsEuropa, and the first indent of Article 4(1) attaches relief to such profits as a wholeEuropa. Systematically, status is settled under Article 3, where national law may impose the holding period, and then the Article 4(1) remedy, read with Article 5(1), follows automatically — the status criteria cannot be re-applied to scale relief down.Europa

Full neutrality and administrability support that reading: only complete deduction gives groups the intended cooperation incentive, and tracing each share lot behind each dividend would multiply compliance costs. Abuse is already contained because the qualifying block itself must be held for the full period; fleeting purchases cannot manufacture parent status, so no per-share test is needed.

Although only Portuguese companies are involved, Kokott considers the Court competent under the Dzodzi lineEuropa: Portugal supererogatorily extended the directive's double-taxation remedy to defined internal casesEuropa, the referring court expressly invoked Leur-Bloem and treated CGD as a parent entitled in principle to the Article 4(1) advantageEuropa, and the Government confirmed the equal-treatment intent. The 10%/EUR 20 million thresholds and the one-year period merely delimit the covered categories — a downward derogation Article 3 permits.

For groups topping up a long-held qualifying stake, the consequence — if the Court agrees — is that new lots' dividends are covered in full once the qualifying block has been held for the yearEuropa; CGD's own pending appeal before the Supremo Tribunal Administrativo turns on this readingEuropa. Legal basis: second indent of Article 3(2), read with the first indent of Article 4(1), of Council Directive 90/435/EEC of 23 July 1990 (the version applicable ratione temporis).