AG: German WHT on third-country dividends faces Art 63 test

Advocate General Laulhé Shaelou proposed on 5 November 2026 that Germany's definitive withholding tax on dividends paid to a Japanese parent be judged under free movement of capital, not establishmentEuropa: in her Opinion in Case C-533/25 (F Corporation v Bundeszentralamt für Steuern)Europa, on a Bundesfinanzhof reference, she concludes the 15% discharging tax under Paragraph 32(1)(2) of the Körperschaftsteuergesetz with Article 10(2) of the 1966 German-Japanese convention restricts Article 63 TFEU where Japanese exemption leaves it uncreditedEuropa, but may be saved by the Article 64(1) standstill clauseEuropa; neither balanced allocation nor double-advantage fears justify itEuropa, while tougher refund proof for third-country firms is permissibleEuropa.

F Corporation of Japan is the sole shareholder of a German GmbH, which paid dividends for 2008 to 2010, tax withheld in 2009 to 2011. A July 2008 certificate cut the rate to the treaty 15% instead of 25%; for limited taxpayers the withholding discharges the tax. Until 1 April 2009 the German tax was fully credited against Japanese corporation tax under Article 23(2) of the convention. Then Japan exempted 95% of such dividends, leaving almost no Japanese tax to absorb the German charge. In December 2013 the company sought a refund, arguing that resident parents, 95% exempt under Paragraph 8b(1) with the withholding offset and refunded, were treated better. The tax office refused, the Düsseldorf fiscal court dismissed the claim as an establishment matter unavailable to third-country firms, and the Bundesfinanzhof referred four questions.

On the applicable freedom, the Advocate General applies the centre-of-gravity test in abstracto: the German rules hit dividends irrespective of the size or significance of the holdingEuropa, so they fall under Article 63, following Emerging MarketsEuropa, where a minority stake was enough and a sole shareholding does not change the analysisEuropa, confirmed for controlling stakes by Itelcar. Third-country dividends cannot fall under Article 49 at allEuropa; a bilateral convention cannot narrow Treaty rightsEuropa; Article 63 needs no reciprocity or matching foreign frameworkEuropa; and this purely financial refund dispute is no back-door establishment claim, with no abuse or fraud alleged.

The different treatment is an Article 63 restrictionEuropa: once the source state taxes resident and non-resident companies alike, their situations are comparableEuropa, and residents offset and recover the tax while non-residents bear it definitively. Neutralisation through the convention must work in full in each case, following MiljoenEuropa, and the post-2009 Japanese exemption breaks itEuropa. Germany need not track third-country law changes, but here the disparity flows from the German rules themselvesEuropa, so a treaty fix must work under all circumstances and compliance cannot hinge on Japanese law. The restriction may still survive under the Article 64(1) standstill if, for the referring court to verify, the same legal mechanism existed continuously since 31 December 1993 and the capital movement involves direct investmentEuropa, which sole-shareholder dividends do; broad measures are covered, following X.

Neither justification works. Germany taxes all dividends while neutralising residents almost fully, so the balanced-allocation defence fails on the Commission v Germany two-stage logicEuropa, and missing reciprocity is immaterial. The double-advantage fear fails because the case law concerns double deduction of the same losses, while this double exemption flows from the two states' own choices with no artificial arrangement, and purely economic revenue aims cannot justify a restriction. But Article 63 tolerates stricter refund proof for third-country firmsEuropa, the exact non-creditable euro amount verified by the Bundeszentralamt für Steuern, including via information exchange with Japan: taxpayers face an informational asymmetry, mutual assistance does not relieve their duty to answer, and the bar is clear precise ascertainment without a probatio diabolica, following Accor.

Legal basis: Article 63 and Article 64(1) TFEU.