Judgment_paragraph 14 · European Commission v Portuguese Republic (C-105/08)

14The Commission submits that, in the present case, it cannot reasonably be maintained that resident and non-resident financial institutions are not in an objectively comparable situation. It follows from the Court’s case-law, and in particular from Case C-234/01 Gerritse [2003] ECR I-5933, paragraph 27, and Case C-345/04 Centro Equestre da Lezíria Grande [2007] ECR I-1425, paragraph 24, that, with regard to operating expenses which have a direct connection to the activity, pursued by a non-resident in a Member State, which generated taxable income in that country, residents and non-residents are placed in a comparable situation. Accordingly, those expenses must, as a rule, be taken into account in that country since residents are taxed there on their net income, that is, after the deduction of such expenses. According to the judgment in Hollmann (paragraphs 50 and 51), the principle of non-discrimination requires, moreover, that, where the same tax is applied to residents and non-residents, the income of non-residents should not be taxed at a higher rate than that applied to residents’ income and that the tax base should not be broader than that provided for residents. Non-resident financial institutions should therefore, at the very least, be allowed to deduct the amount of the interest which they have had to pay to third parties in order to obtain the capital used in the credit transactions completed in Portugal.