Cofidis v Autoridade Tributária e Aduaneira (C-340/22)

Contents

Judgment of the Court (First Chamber)21 December 2023^note(Reference for a preliminary ruling — Direct taxation — Article 49 TFEU — Freedom of establishment — Introduction of a tax on the liabilities of credit institutions for the purpose of funding the national social security system — Alleged discrimination against branches of foreign credit institutions — Directive 2014/59/EU — Framework for the recovery and resolution of credit institutions and investment firms — Scope)In Case C‑340/22,REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa – CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration), Portugal), made by decision of 24 May 2022, received at the Court on 24 May 2022, in the proceedingsCofidisvAutoridade Tributária e Aduaneira,THE COURT (First Chamber),composed of A. Arabadjiev, President of the Chamber, T. von Danwitz (Rapporteur), P.G. Xuereb, A. Kumin and I. Ziemele, Judges,Advocate General: P. Pikamäe,Registrar: L. Carrasco Marco, Administrator,having regard to the written procedure and further to the hearing on 20 April 2023,after considering the observations submitted on behalf of:– Cofidis, by P. Melcher, Rechtsanwalt, P. Núncio, D. Oda, F. Osório de Castro, A. Queiroz Martins and M. Teles, advogados,– the Portuguese Government, by P. Barros da Costa, J.P. Cardoso da Costa, A. Pimenta and A. Rodrigues, acting as Agents,– the Spanish Government, by A. Ballesteros Panizo, acting as Agent,– the European Commission, by A. Armenia, P. Caro de Sousa, A. Nijenhuis and D. Triantafyllou, acting as Agents,after hearing the Opinion of the Advocate General at the sitting on 13 July 2023,gives the following

Judgment

1This request for a preliminary ruling concerns the interpretation of Article 49 TFEU and of Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Council (OJ 2014 L 173, p. 190).

2The request has been made in proceedings between Cofidis – the Portuguese branch of Cofidis SA, a credit institution the registered office of which is in France – and the Autoridade Tributária e Aduaneira (Tax and Customs Authority, Portugal) concerning a request for reimbursement of contributions paid by that branch in respect of the adicional de solidariedade sobre o sector bancário (additional solidarity tax on the banking sector; ‘the ASSB’).

Legal context

European Union law

3Recitals 1, 5 and 103 of Directive 2014/59 state:(1) The financial crisis has shown that there is a significant lack of adequate tools at [European] Union level to deal effectively with unsound or failing credit institutions and investment firms … Such tools are needed, in particular, to prevent insolvency or, when insolvency occurs, to minimise negative repercussions by preserving the systemically important functions of the institution concerned. During the crisis, those challenges were a major factor that forced Member States to save institutions using taxpayers’ money. The objective of a credible recovery and resolution framework is to obviate the need for such action to the greatest extent possible.…(5) A regime is … needed to provide authorities with a credible set of tools to intervene sufficiently early and quickly in an unsound or failing institution so as to ensure the continuity of the institution’s critical financial and economic functions, while minimising the impact of an institution’s failure on the economy and financial system. The regime should ensure that shareholders bear losses first and that creditors bear losses after shareholders ……(103) There are circumstances when the effectiveness of the resolution tools applied may depend on the availability of short-term funding for an institution or a bridge institution, the provision of guarantees to potential purchasers, or the provision of capital to the bridge institution. Notwithstanding the role of central banks in providing liquidity to the financial system even in times of stress, it is important that Member States set up financing arrangements to avoid that the funds needed for such purposes come from the national budgets. It should be the financial industry, as a whole, that finances the stabilisation of the financial system.’

4Pursuant to Article 1(1) of Directive 2014/59, that directive lays down the rules and procedures relating to the recovery and resolution of the entities listed in that provision.

Portuguese law

5Article 18 of Lei n^o 27-A/2020, que aprova o Orçamento Suplementar para 2020 (Law No 27-A/2020 approving the supplementary budget for 2020), of 24 July 2020 (‘the Law on the 2020 supplementary budget’) and Annex VI thereto established the ASSB.

6Under Article 1(2) and Article 9 of Annex VI to the Law on the 2020 supplementary budget, the ASSB was introduced with the aim of strengthening the financing arrangements for the national social security system by allocating all of the revenue generated by that tax to the Fundo de Estabilização Financeira da Segurança Social (Social Security Financial Stabilisation Fund). According to those provisions, the creation of the ASSB is intended to offset the exemption from value added tax (VAT) enjoyed by the banking sector on most financial services, so as to bring the tax burden borne by that sector closer to that borne by other economic sectors.

7Pursuant to Article 2(1) of Annex VI to the Law on the 2020 supplementary budget, the following are taxable persons liable to the ASSB: (i) credit institutions that have their registered office in the territory of Portugal (‘resident credit institutions’), (ii) Portuguese subsidiaries of credit institutions that have their registered office in the territory of another State (‘non-resident credit institutions’), and (iii) Portuguese branches of non-resident credit institutions.

8Article 3 of Annex VI to the Law on the 2020 supplementary budget defines the material scope of the ASSB as follows:‘The ASSB is payable on:(a) liabilities calculated and approved by taxable persons after deduction, as appropriate, of liability items which form an integral part of own funds, deposits covered by the guarantee of the Deposit Guarantee Fund, the Mutual Agricultural Credit Guarantee Fund or a deposit guarantee scheme officially recognised in accordance with Article 4 of Directive 2014/49/EU [of the European Parliament and of the Council of 16 April 2014 on deposit guarantee schemes (OJ 2014 L 173, p. 149)] or considered to be equivalent pursuant to Article 156(1)(b) of the [Regime Geral das Instituições de Crédito e Sociedades Financeiras (General Rules on Credit Institutions and Financial Companies)], within the limits stipulated in the applicable legislation, and deposits placed with the Central Bank by agricultural credit banks belonging to the integrated agricultural credit scheme in accordance with Article 72 of the Legal Rules governing Mutual Agricultural Credit and Agricultural Credit Cooperatives, adopted as an annex to Decree-law No 24/91 of 11 January 1991;(b) the notional value of off-balance sheet derivative financial instruments determined by taxable persons.’

9Article 4 of that Annex VI, concerning the quantification of the basis of assessment for the ASSB, provides:(1)For the purposes of Article 3(a), “liabilities” shall mean all items entered in the balance sheet which, irrespective of their form and type, represent a debt to third parties, with the exception of the following:(a) items which, in accordance with the applicable accounting rules, are treated as own funds;(b) liabilities connected with the recognition of obligations derived from defined benefit schemes;(c) deposits covered by the Deposit Guarantee Fund and the Mutual Agricultural Credit Guarantee Fund, only to the extent that they are covered by those funds;(d) liabilities derived from the valuation of derivative financial instruments;(e) deferred revenue, disregarding any such revenue corresponding to debit transactions; and(f) liabilities in respect of assets which have not been derecognised in securitisation transactions.(2)For the purposes of Article 3(a), the following rules shall apply:(a) the value of own funds, including tier 1 and tier 2 own funds, includes the positive items which are entered in the accounts for the purposes of their calculation in accordance with Part II of Regulation (EU) No 575/2013 [of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012 (OJ 2013 L 176, p. 1)], taking into account the transitional provisions laid down in Part X of that regulation, which, at the same time, come within the concept of liabilities as defined in the previous paragraph;(b) deposits covered by the guarantee of the Deposit Guarantee Fund, the Mutual Agricultural Credit Guarantee Fund or a deposit guarantee scheme officially recognised in accordance with Article 4 of Directive 2014/49/EU, or considered to be equivalent pursuant to Article 156(1)(b) of the General Rules on Credit Institutions and Financial Companies, within the limits stipulated in the applicable legislation, shall be taken into account only up to the amount actually covered by those Funds.’

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

10The applicant in the main proceedings is a Portuguese branch of a credit institution that has its registered office in France. In its capacity as a branch it is subject to the ASSB, that is to say, a tax on the banking sector introduced by the Portuguese Republic in order to financially support the national social security system and to restore the balance between the tax burden borne by that sector, which benefits from a VAT exemption on most financial services, and that borne by all other sectors of the Portuguese economy.

11On 11 December 2020, the applicant in the main proceedings carried out a self-assessment for the ASSB in respect of the first half of 2020. On that basis it paid the sum of EUR 364 229.67. However, on 5 January 2021, it submitted to the tax authority an application for review seeking the repayment of that amount. By its decision of 21 May 2021, that authority rejected that application.

12On 23 August 2021, the applicant in the main proceedings brought an action before the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa – CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration), Portugal), the referring court, challenging that decision. In support of its action, it claimed, inter alia, that the ASSB is contrary to EU law.

13In particular, according to the applicant in the main proceedings, the creation of the ASSB is contrary to Directive 2014/59 and to the alleged tax harmonisation introduced by that directive as regards credit institutions’ resolution contributions. The applicant in the main proceedings is already taxed in the Member State in which its registered office is situated, namely in the Republic of France, in respect of that directive, and therefore the Portuguese Republic cannot impose on it a similar tax.

14In addition, the applicant in the main proceedings is of the view that the ASSB infringes Article 49 TFEU because of the discriminatory treatment to which Portuguese branches of foreign credit institutions are subject. As they do not have legal personality, those branches are unable to deduct certain own fund items from their tax base for the ASSB.

15In those circumstances, the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa – CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration)) decided to stay the proceedings and to refer the following questions for a preliminary ruling:(1) Does [Directive 2014/59] preclude the taxation in a Member State of branches of financial institutions resident in another Member State of the European Union, pursuant to legislation such as the Portuguese national rules governing the [ASSB], which is levied on the adjusted liabilities and notional value of off-balance sheet derivative financial instruments and from which the revenue collected is not allocated to national financing arrangements for resolution measures or to the financing of the Single Resolution Fund?(2) Does the freedom of establishment enshrined in Article 49 TFEU preclude national legislation such as that laid down in the Portuguese national rules governing the [ASSB], which permits the deduction from the liabilities, as determined and approved, [of] certain liability items which are taken into account for the purposes of the calculation of tier 1 and tier 2 own funds, in accordance with the provisions of Part II of [Regulation No 575/2013], taking into account the transitional provisions laid down in Part IX of that regulation, which may be issued only by entities with legal personality, in other words, which may not be issued by branches of non-resident credit institutions?’

Consideration of the questions referred

The first question

16By its first question, the referring court asks, in essence, whether Directive 2014/59 must be interpreted as precluding national legislation which introduces a tax on the liabilities of credit institutions where the method of calculating that tax is allegedly similar to the method of calculating the contributions paid by such institutions under that directive but the revenue received from that tax is not allocated to national financing arrangements for resolution measures.

Admissibility

17The Portuguese Government claims that this question is inadmissible, inasmuch as it is irrelevant to the resolution of the dispute in the main proceedings, since the ASSB has no link to the recovery and resolution of credit institutions and therefore falls outside the scope of Directive 2014/59.

18According to settled case-law, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine, in the light of the particular circumstances of the case, both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions that it submits to the Court. Consequently, where the questions referred concern the interpretation or the validity of a rule of EU law, the Court is in principle bound to give a ruling. It follows that questions referred by national courts enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court only where it appears that the interpretation sought bears no relation to the actual facts of the main action or its object, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (judgment of 16 July 2020, Facebook Ireland and Schrems, C‑311/18, EU:C:2020:559, paragraph 73 and the case-law cited).

19Here, since the applicant in the main proceedings relies on the ASSB being incompatible with Directive 2014/59 in the dispute in the main proceedings, the presumption of the relevance of the question referred cannot be called into question. Moreover, in actual fact the Portuguese Government’s argument relating to the scope of Directive 2014/59 concerns the substance of the question referred.

20The first question is therefore admissible.

Substance

21In order to answer the question referred, it should be recalled, as a preliminary point, that the interpretation of a provision of EU law requires that account be taken not only of its wording, but also of its context and the objectives and purpose pursued by the act of which it forms part (judgment of 21 September 2023, E. and Others (Diplomatic Card), C‑568/21, EU:C:2023:683, paragraph 32).

22First, pursuant to Article 1(1) of Directive 2014/59, that directive lays down the rules and procedures relating to the recovery and resolution of the entities listed in that provision.

23Second, as follows from recitals 1 and 5 of Directive 2014/59, that directive was adopted in the wake of the financial crisis, which revealed the need to provide tools to deal with the insolvency, inter alia, of credit institutions, by making their shareholders and creditors bear the related risks, and not taxpayers. In accordance with recital 103 of that directive, it is for the financial sector as a whole to finance the stabilisation of the financial system.

24Against that background, third, the contributions paid by those institutions pursuant to Directive 2014/59 do not constitute a tax but, rather, are based on an insurance-based logic (see, to that effect, judgment of 15 July 2021, Commission v Landesbank Baden-Württemberg and SRB, C‑584/20 P and C‑621/20 P, EU:C:2021:601, paragraph 113).

25Directive 2014/59 therefore in no way has the objective of harmonising the taxation of credit institutions active in the European Union.

26As a result, Directive 2014/59 cannot constitute a barrier to the establishment of a national tax, such as the ASSB, levied on the liabilities of such institutions, where the revenues of that tax are intended to fund the national social security system with no connection to the recovery and resolution of those institutions. The fact that the method of calculation of such a tax has some similarities with the method of calculation of the contributions paid under Directive 2014/59 is entirely irrelevant in that regard.

27Accordingly, the answer to the first question is that Directive 2014/59 must be interpreted as not precluding a national law introducing a tax on the liabilities of credit institutions where the method of calculating that tax is allegedly similar to the method of calculating the contributions paid by such institutions under that directive but the revenue received from that tax is not allocated to national financing arrangements for resolution measures.

The second question

28By its second question, the referring court asks, in essence, whether the freedom of establishment guaranteed by Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State introducing a tax the basis of assessment for which is the liabilities of resident credit institutions, and of subsidiaries and branches of non-resident credit institutions, in so far as that legislation makes it possible to deduct own funds and debt instruments that are comparable to own funds, which cannot be issued by entities that do not have legal personality, such as branches.

Admissibility

29The Portuguese Government is of the view that the second question is inadmissible inasmuch as it is based on the assertion of the applicant in the main proceedings that branches of non-resident credit institutions are unable to deduct own funds from their ASSB tax base. That assertion is contested by the tax authority in the case in the main proceedings and the referring court has not yet verified its veracity, with the result that the question the latter refers is purely hypothetical.

30In so far as the Portuguese Government claims that the second question has been referred prematurely, it is sufficient to recall that national courts have the widest discretion in referring matters to the Court if they consider that a case pending before them raises questions involving the interpretation of provisions of EU law, or consideration of their validity, which are necessary for the resolution of the case before them and, in particular, that they are free to exercise that discretion at whatever stage of the proceedings they consider appropriate (judgment of 16 March 2023, Beobank, C‑351/21, EU:C:2023:215, paragraph 42 and the case-law cited).

31Inasmuch as that government observes that that assertion of the applicant in the main proceedings is disputed in the case in the main proceedings, it should be borne in mind that in allocating jurisdiction between the EU Courts and the national courts, the Court must take account of the factual and regulatory context surrounding the questions referred for a preliminary ruling, as defined by the order for reference. Therefore, since the referring court has defined the factual and regulatory framework of the questions it refers, it is not for the Court to verify their accuracy (judgment of 8 June 2023, Prestige and Limousine, C‑50/21, EU:C:2023:448, paragraphs 42 and 43 and the case-law cited).

32In the present case, it is apparent from the request for a preliminary ruling that, according to the referring court, branches of non-resident credit institutions are unable to deduct from their ASSB tax base own funds or liability items that are comparable to own funds, since they are instruments that can be issued only by entities with legal personalities.

33Even though the referring court itself notes that that statement is disputed in the main proceedings by the tax authority, as the Portuguese Government claims, it follows from the case-law referred to in paragraph 31 above that the Court cannot itself define the factual and regulatory context surrounding the questions referred for a preliminary ruling.

34Accordingly, in the light of the factual and regulatory context defined by the order for reference, it cannot be found that the second question is hypothetical.

35The second question is therefore admissible.

Substance

36It should be noted at the outset that it is the company’s registered office that serves as the connecting factor with the legal system of a particular State, as nationality does in the case of natural persons. Accordingly, the application of national tax legislation, such as that at issue in the main proceedings, to a resident company, including a resident subsidiary of a non-resident company, on the one hand, and a branch of a non-resident company, on the other, involves the tax treatment of a resident company and a non-resident company, respectively (see, to that effect, judgment of 17 May 2017, X, C‑68/15, EU:C:2017:379, paragraphs 35 and 36 and the case-law cited).

37It should also be borne in mind that in accordance with the Court’s settled case-law, the freedom of establishment guaranteed by Articles 49 and 54 TFEU includes, for companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Union, the right to exercise their activity in other Member States through a subsidiary, branch or agency (judgments of 22 September 2022, W (Deductibility of final losses of a non-resident permanent establishment), C‑538/20, EU:C:2022:717, paragraph 14, and of 16 February 2023, Gallaher, C‑707/20, EU:C:2023:101, paragraph 70).

38As the second sentence of the first paragraph of Article 49 TFEU expressly leaves traders free to choose the appropriate legal form in which to pursue their activities in another Member State, that freedom of choice must not be limited by discriminatory tax provisions (judgments of 23 February 2006, CLT-UFA, C‑253/03, EU:C:2006:129, paragraph 14; of 6 September 2012, Philips Electronics UK, C‑18/11, EU:C:2012:532, paragraph 13; and of 17 May 2017, X, C‑68/15, EU:C:2017:379, paragraph 40).

39Therefore, the freedom to choose the appropriate legal form in which to pursue activities in another Member State serves, inter alia, to allow companies having their seat in a Member State to open a branch in another Member State in order to pursue their activities under the same conditions as those which apply to subsidiaries (judgments of 23 February 2006, CLT-UFA, C‑253/03, EU:C:2006:129, paragraph 15, and of 6 September 2012, Philips Electronics UK, C‑18/11, EU:C:2012:532, paragraph 14 and the case-law cited).

40In that regard, according to settled case-law, all measures which prohibit, impede or render less attractive the exercise of the freedom guaranteed by Article 49 TFEU must be regarded as restrictions on the freedom of establishment (judgment of 11 May 2023, Manitou BF and Bricolage Investissement France, C‑407/22 and C‑408/22, EU:C:2023:392, paragraph 20 and the case-law cited).

41Thus, the rules regarding equal treatment forbid not only overt discrimination based on the location of the seat of companies, but also all covert forms of discrimination which, by the application of other criteria of differentiation, lead in fact to the same result (judgment of 6 October 2022, Contship Italia, C‑433/21 and C‑434/21, EU:C:2022:760, paragraph 35 and the case-law cited).

42In particular, a compulsory levy which provides for a criterion of differentiation that is apparently objective but that disadvantages in most cases, given its features, companies that have their seat in other Member States and which are in a situation comparable to that of companies whose seat is situated in the Member State of taxation, constitutes indirect discrimination based on the location of the seat of the companies, which is prohibited under Articles 49 and 54 TFEU (judgments of 3 March 2020, Vodafone Magyarország, C‑75/18, EU:C:2020:139, paragraph 43, and of 3 March 2020, Tesco-Global Áruházak, C‑323/18, EU:C:2020:140, paragraph 63 and the case-law cited).

43In the present case, the national legislation at issue in the main proceedings applies without distinction to resident credit institutions and to Portuguese subsidiaries and branches of non-resident credit institutions. The basis of assessment for the ASSB is the liabilities of those entities, namely, pursuant to Article 4 of Annex VI to the Law on the 2020 supplementary budget, all items entered in the balance sheet which, irrespective of their form and type, represent a debt to third parties, with the exception, inter alia, of items which, in accordance with the applicable accounting rules, are treated as own funds.

44According to the information provided by the referring court, unlike resident credit institutions and subsidiaries of non-resident credit institutions, branches of non-resident credit institutions are unable, because they do not have legal personality, to deduct own funds from their ASSB tax base, since those entities legally have no own funds. In addition, such branches are unable to issue debt instruments that are comparable to own funds such as, inter alia, convertible bonds, profit-sharing bonds, redeemable preference shares and contingent convertible bonds, with the result that they are also unable to deduct such instruments from the tax base.

45It thus appears that the national legislation at issue in the main proceedings does not allow branches of non-resident credit institutions to pursue their activities under the same conditions as those which apply to subsidiaries of non-resident credit institutions, within the meaning of the case-law referred to in paragraph 39 above. Although the tax is levied without distinction on the liabilities of subsidiaries and branches of non-resident credit institutions, that regulation allows subsidiaries to reduce their tax base by deducting own funds and debt instruments comparable to own funds, while such a deduction seems to be legally inaccessible to those branches, which is a matter for the referring court to verify.

46In those circumstances, such national legislation is liable to make pursuing their activity in Portugal by means of a branch less attractive for companies that have their registered office in another Member State.

47As the Advocate General stated, in essence, in point 45 of his Opinion, a difference in treatment capable of restricting the freedom to choose the appropriate legal form for the pursuit of an activity in another Member State within the meaning of the case-law referred to in paragraph 38 above, is liable to constitute a restriction on the freedom of establishment guaranteed by Articles 49 and 54 TFEU.

48In order for such a difference in treatment to be compatible with the provisions of the FEU Treaty on the freedom of establishment, it must relate to situations which are not objectively comparable or be justified by an overriding reason in the public interest (judgment of 11 May 2023, Manitou BF and Bricolage Investissement France, C‑407/22 and C‑408/22, EU:C:2023:392, paragraph 36 and the case-law cited).

49First, it is common ground that the comparability of a cross-border situation with a situation internal to the Member State concerned must be examined in the light of the objective pursued by the national provisions at issue as well as their purpose and content (see, to that effect, judgment of 17 March 2022, AllianzGI-Fonds AEVN, C‑545/19, EU:C:2022:193, paragraph 59 and the case-law cited).

50As is apparent from the information provided by the referring court, the objective of the ASSB, which is indiscriminately applicable to the whole banking sector in Portugal, including resident credit institutions and Portuguese subsidiaries and branches of non-resident credit institutions, is to financially support the national social security system and to restore the balance between the tax burden borne by that sector, which benefits from a VAT exemption on most financial services, and that borne by all other sectors of the Portuguese economy.

51In the light of those objectives, the national provisions presented by the referring court do not indicate any distinction between resident credit institutions and subsidiaries and branches of non-resident credit institutions.

52Moreover, it is not apparent from the order for reference that the purpose and content of the national provisions at issue establish such a distinction.

53As a result, nothing seems to indicate that the situation of a non-resident credit institution pursuing its activity in Portugal through a branch is not objectively comparable to that of a resident credit institution or a subsidiary of a non-resident credit institution.

54Second, as regards justification for the difference in treatment by an overriding reason in the public interest, the Portuguese Government claimed, in its written observations, that the fiscal advantage conferred by the national legislation at issue on resident credit institutions and on subsidiaries of non-resident credit institutions is justified by the need to preserve the cohesion of the national tax system.

55However, according to settled case-law, in order for such a justification to be accepted, a direct link must be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy (see, to that effect, judgments of 12 June 2018, Bevola and Jens W. Trock, C‑650/16, EU:C:2018:424, paragraph 45, and of 27 April 2023, L Fund, C‑537/20, EU:C:2023:339, paragraph 68 and the case-law cited).

56In the present case, nothing in the file submitted to the Court indicates that the possibility to deduct own funds from the ASSB tax base is offset by a particular tax levy borne by resident credit institutions and subsidiaries of non-resident credit institutions.

57It follows that the restriction of freedom of establishment constituted by the national legislation at issue in the main proceedings cannot be justified by the need to preserve the coherence of the Portuguese tax system.

58Lastly, the European Commission submitted, at the hearing, that the difference in treatment resulting from the national legislation at issue in the main proceedings could be justified, in so far as concerns the deductibility of own funds from the ASSB tax base, by the need to maintain a balanced allocation of the power to impose taxes between the Member States. The Commission claimed in particular that excluding branches from the benefit of such deductibility prevented them from being free to choose the scope of their tax base for the ASSB by artificially linking debt instruments comparable to own funds issued by their parent companies, without those instruments necessarily having a link to their activities in Portugal.

59In that regard, it must be borne in mind that such justification may be accepted, in particular, where the system in question is designed to prevent conduct capable of jeopardising the right of a Member State to exercise its powers of taxation in relation to activities carried out in its territory (judgment of 27 April 2023, L Fund, C‑537/20, EU:C:2023:339, paragraph 76 and the case-law cited).

60Thus, the Court has held that this objective is designed inter alia to safeguard symmetry between the right to tax profits and the entitlement to deduct losses of a permanent establishment, inasmuch as acceptance that the losses of a non-resident permanent establishment might be deducted from the income of the principal company would result in allowing that company to choose freely the Member State in which it claims such losses (judgment of 4 July 2013, Argenta Spaarbank, C‑350/11, EU:C:2013:447, paragraph 54).

61Where, however, a Member State has chosen not to tax entities established in its territory, it cannot rely on the argument that there is a need to safeguard the balanced apportionment of the power to tax between the Member States in order to justify the taxation of entities established in another Member State (see, by analogy, judgments of 18 June 2009, Aberdeen Property Fininvest Alpha, C‑303/07, EU:C:2009:377, paragraph 67 and the case-law cited, and of 27 April 2023, L Fund, C‑537/20, EU:C:2023:339, paragraph 77 and the case-law cited).

62In the present case, the Portuguese Republic chose not to tax resident credit institutions and subsidiaries of non-resident credit institutions in so far as concerns debt instruments comparable to own funds.

63Consequently, that Member State cannot rely on the argument that there is a need to ensure a balanced allocation between the Member States of the power to tax in order to justify the taxation of branches of non-resident credit institutions in so far as concerns debt instruments comparable to own funds.

64It follows that the restriction of freedom of establishment constituted by the legislation at issue in the main proceedings does not appear to be justified by the need to maintain a balanced allocation of the power to impose taxes between the Member States.

65As a result, the answer to the second question is that the freedom of establishment guaranteed by Articles 49 and 54 TFEU must be interpreted as precluding legislation of a Member State introducing a tax the basis of assessment for which is the liabilities of resident credit institutions, and of subsidiaries and branches of non-resident credit institutions, in so far as that legislation makes it possible to deduct own funds and debt instruments that are comparable to own funds, which cannot be issued by entities without legal personality, such as branches.

Costs

66Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national 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.

Operative part

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

1.Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No 1093/2010 and (EU) No 648/2012, of the European Parliament and of the Councilmust be interpreted as not precluding a national law introducing a tax on the liabilities of credit institutions where the method of calculating that tax is allegedly similar to the method of calculating the contributions paid by such institutions under that directive but the revenue received from that tax is not allocated to national financing arrangements for resolution measures.

2.The freedom of establishment guaranteed by Articles 49 and 54 TFEUmust be interpreted as precluding legislation of a Member State introducing a tax the basis of assessment for which is the liabilities of credit institutions that have their registered office in the territory of that Member State, and of subsidiaries and branches of credit institutions that have their registered office in the territory of another Member State, in so far as that legislation makes it possible to deduct own funds and debt instruments that are comparable to own funds, which cannot be issued by entities without legal personality, such as branches.