On 2 April 2020, the Court of Justice of the European Union ("CJEU") rendered a decision ("Decision") in case C-458/18, ("GVC Services") in response to a request for a preliminary ruling submitted by the Administrative Court of Sofia (Bulgaria) regarding the applicability of the Parent Subsidiary Directive 2011/96/EU (PSD) 1 in order to exempt from withholding tax ("WHT") dividends paid by a company resident in the European Union (the "UE" - Bulgaria in the case hand) to a company resident in Gibraltar. This Decision could be seen as a "flip flap" of the CJEU to the well-established market practice set by the European Commission and the European Parliament (respectively the "Commission", and the "Parliament") of the EU.

In the case at hand, the CJEU ruled that a company incorporated and subject to corporation tax in Gibraltar should not be assimilated to "a company incorporated under the law of the United Kingdom and subject to corporation tax in the United Kingdom", as listed in the annex I, part A and part B of the PSD. Therefore, the WHT exemption on dividends paid by a company resident in the EU to a company resident in Gibraltar could not be based on the provisions of the PSD.

The importance of that Decision for Luxembourg relies on the fact that, Luxembourg being a well-known and reputable investment holding jurisdiction, Luxembourg vehicles may be used to structure inbound and outbound shareholding investments through Gibraltar.

This ATOZ Reports aims at (i) describing the facts and conclusions of the CJEU and (ii) analysing why this decision goes against a current market practice set by the Commission and the Parliament and what could be the concrete impacts for Luxembourg corporate taxpayers performing holding activities.


2.1. Facts

GVC Holdings PLC ("GVC"), a limited company incorporated in the Isle of Man and listed on the London Stock Exchange2 , is the parent-holding company of one of the world's largest sports betting and gaming groups which owns notably Bwin, Crystalbet and Ladbrokes. The online business of GVC is headquartered in Gibraltar3 and PGB Limited - Gibraltar ("PGB Gibraltar") is a Gibraltar intermediate holding company of GVC4 .

From 13 July 2011 to 21 April 2016, GVC Services (Bulgaria) EOOD ("GVC Bulgaria"), a company incorporated and tax resident in Bulgaria5 and held by PGB Gibraltar, distributed dividends to PGB Gibraltar without levying the Bulgarian WHT. GVC Bulgaria considered that PGB Gibraltar should be treated as an entity having its fiscal domicile in the EU6 , and as such would be entitled to benefit from the PSD as implemented by Bulgaria into its domestic tax legislation.

On 1, 7 and 22 December 2017, the Sofia tax office denied the application of the WHT exemption on the dividend so distributed and notified GVC Bulgaria of a tax adjustment in an amount of BGN 930,529.547 (i.e. principal of BGN 669,690.32 and interest for late payment of BGN 260,839.22). On 19 February 2018, following the challenge of the tax adjustment by GVC Bulgaria, the director of the Sofia tax office confirmed the non-application of the Bulgarian WHT exemption on the dividend distributed by the company to PGB Gibraltar. The Bulgarian company then brought the case before the Administrative Court of Sofia.

Although Gibraltar is not part of the United Kingdom, GVC Bulgaria argued that Gibraltar, whose foreign relationship is assumed by the United Kingdom8 , should be considered as part of the territory of the EU9 and should therefore be eligible to benefit from EU legislation10 ; 11. Indeed, Gibraltar was the only dependent territory of the United Kingdom that joined the EU as part of the Treaty of Accession in 1972 which defined notably the conditions of entry of the United Kingdom into the EU. The Treaty of Accession of 1972 excluded Gibraltar from certain areas such as the EU Customs Union and the Common Agricultural Policy but did not mention the exclusion of the legislation related to dividend distributions. Hence, GVC Bulgaria considered that PGB Gibraltar fulfilled the conditions of the PSD since PGB Gibraltar (i) is assimilated to a company incorporated in the United Kingdom and (ii) is subject to a corporation tax in Gibraltar corresponding to the corporation tax in the United Kingdom. Therefore, dividends distributed by GVC Bulgaria should be exempt from Bulgarian WHT based on the application of the PSD.

The director of the Sofia tax office considered that the list of companies based on their country of incorporation and legal form and the list of corporate taxes included in the PSD had to be considered as exhaustive and could therefore not be extended to other countries and taxes not included in these two lists12. In this context, Gibraltar not being listed as a country of incorporation and the Gibraltar corporation tax not being listed as an eligible corporation tax, the director of the Sofia tax office concluded that PGB Gibraltar should not benefit from the Bulgarian WHT exemption based on the PSD. Hence, dividends distributed by GVC Bulgaria to PGB Gibraltar should be subject to WHT in Bulgaria13.

On 12 July 2018, the Administrative Court of Sofia lodged a request for a preliminary ruling to the CJEU on the two following questions14:

  • Should article 2(a)(i) and annex I, part A, sub ab) of the PSD be interpreted as meaning that the expression "companies incorporated under the laws of the United Kingdom" also covers companies incorporated in Gibraltar?
  • Should article 2(a)(iii) and annex I, part B of the PSD be interpreted as meaning that the expression "corporation tax in the United Kingdom" also covers the corporation tax that has to be paid in Gibraltar?

The CJEU already addressed requests for preliminary rulings regarding the application of the EU legislation to Gibraltar15. However, it is the first time that the CJEU has addressed a request for a preliminary ruling on the application of the PSD to Gibraltar.

2.2. Opinion of the Advocate General and Decision of the CJEU

In a first stage, in his opinion delivered on 24 October 2019 ("Opinion"), the Advocate General analysed whether (i) the PSD is applicable to Gibraltar and if so, (ii) whether the PSD should apply to companies incorporated in Gibraltar.

The Advocate General considered that the PSD is applicable to Gibraltar, based on the grounds that the EU legislation is applicable to the European territories (e.g. Gibraltar) for whose external relations a Member State ("Member State" - i.e. the United Kingdom) is responsible16. In that context, the Advocate General (i) recalled the status of Gibraltar regarding the United Kingdom17, (ii) mentioned that this country is included in the list of the non-self-governing territories of the Charter of the United Nations on the declaration regarding non-self-governing territories18 and (iii) specified that the PSD is not included in the list of EU areas for which Gibraltar has been excluded, such as the EU Customs Union and Common Agricultural Policy.

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1. The PSD 90/435/CEE of 23 July 1990 was recast by the PSD 2011/96/EU of 30 November 2011 which was itself amended by the PSD 2015/121 of 27 January 2015.

2. See Symbol: GVC, Name: GVC Holdings PLC Ord EUR0.01.

3. See the GVC 2019 annual report and accounts (page 63/190).

4. See GVC "Notification of Transfer to a Premium Listing" page 178/193: https://gvc-plc.com/wp-content/uploads/2017/12/Premium_Listing.pdf.

5. GVC Bulgaria is a unipersonal limited liability company - see point 5 of the "Request for a preliminary ruling" dated 12 July 2018.

6. See point 6 of the "Request for a preliminary ruling".

7. EUR 475,779.75 using the BGN/EUR BCE exchange rate of 0,5113.

8. The Gibraltar Constitution Order of 14 December 2006 states that "the United Kingdom remains fully responsible for Gibraltar's external relations". See www.gibraltarlaws.gov.gi/ papers/gibraltar-constitution-order-2006-6.

9. Since 2004, the citizens of Gibraltar have participated in elections for the Parliament as part of the South West England constituency. On 23 June 2016, Gibraltar voted along with the United Kingdom in the Brexit referendum - see www.gibraltar.gov.gi/brexit.

10. Under the treaty of Utrecht signed between Spain and the United Kingdom on 13 July 1713 - in order to end the War of the Spanish Succession - Gibraltar was ceded to the United Kingdom. Since then, Gibraltar is a British Overseas Territory. The head of the State of Gibraltar is the British monarch (Queen Elizabeth II) who is represented by the Governor of Gibraltar. The Governor enacts day-to-day matters on the advice of the Gibraltar Parliament. The Governor of Gibraltar (i.e. Nick Pyle Obe) is responsible for the British government in respect of defence, foreign policy, internal security and certain functions in relation to public offices. See www.gov.uk/world/gibraltar/news.

11. Article 355-3 of the Treaty on the Functioning of the European Union ("TFEU") states that "the provisions of the Treaties shall apply to the European territories whose external relations a Member State is responsible".

12. Annex I, part A to the PSD lists the eligible companies (legal form and place of incorporation) while Annex I, part B lists the eligible corporation taxes.

13. See article 194 of the Bulgarian corporate tax law - see point 11 of the "Request for a preliminary ruling".

14. See www.curia.europa.eu, documents "Request for a preliminary ruling" and "C-458/18 - Application (OJ)" dated 7 September 2018.

15. See C-267/16 regarding the customs territory of the EU, and C-591/15 regarding the freedom to provide services.

16. See footnote 12.

17. See footnote 11.

18. See Chapter XI, article 73 of the Charter of the United Nations and the said list on www.un.org/fr/events/nonselfgoverning/nonselfgoverning.shtml.

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