Opinion of Advocate General Kokott in the case N Luxembourg 1.
(1) The answer to Questions 1 to 1.4 is that a company resident in another Member State which owns the interest-bearing claim is treated in principle as the beneficial owner within the meaning of Article 1(1) of Directive 2003/49 on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States. The situation would be different only if it was acting not in its own name and on its own account, but for and on the account of a third party.
The concept of beneficial owner must be interpreted under EU law autonomously and independently of the commentaries on Article 11 of the 1977 OECD Model Tax Convention or subsequent versions.
(2) The answer to Question 2 is that a Member State cannot rely on Article 5 of Directive 2003/49 if it has not transposed it.
(3) The answer to Question 3 is that neither Paragraph 2(2)(d) of the Danish law on corporation tax nor a rule in a double taxation agreement corresponding to Article 11 of the OECD Model Tax Convention can be treated as sufficient transposition of Article 5 of Directive 2003/49. However, that does not prevent general principles of national law whose purpose is to enable specific action to be taken against artificial arrangements or abuse by individuals from being interpreted and applied in conformity with EU law.
(4) The answer to Question 4 is that abuse must be determined from an overall examination of all the facts of the case, which it is for the national court to conduct.
(a) A wholly artificial arrangement that does not reflect economic reality or the essential aim of which is to avoid tax that would otherwise be payable based on the purpose of the law may constitute abuse under tax law. The tax authorities must demonstrate that an appropriate arrangement would have given rise to a tax liability and the taxable person must demonstrate that there are important, non-fiscal reasons for the arrangement chosen.
(b) Where tax at source is avoided on interest payments to capital funds resident in third countries, the primary issue is whether the actual interest recipients (i.e. the investors) avoid tax on their interest income. Abuse may be assumed to exist here if the corporate structure chosen is designed to take advantage of a lack of information exchange between the States involved to prevent the effective taxation of interest recipients.
(5) The answer to Question 5 is that a Member State that does not wish to recognise a company resident in a different Member State as the beneficial owner must state whom it considers to be the beneficial owner in order to assume that abuse exists. In cross-border cases, the taxable person may have an enhanced duty to assist.
(6) In light of the answers to Questions 1 and 4, there is no need to answer Questions 6 and 7.
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