Provisional text

JUDGMENT OF THE COURT (Fourth Chamber)

15 October 2026 (*)

( Reference for a preliminary ruling – Taxation – Directive 2011/96/EU – Common system of taxation applicable in the case of parent companies and subsidiaries of different Member States – Exemption from withholding tax on dividends distributed by a resident subsidiary to a non-resident parent company – Article 1(2) and (3) – Anti-abuse provision – Non-genuine arrangement – Steps of an arrangement – Chain of transactions – Objective analysis of all relevant facts and circumstances – Beneficial owner of dividends – Tax advantage – Lack of relevance of the Member State or of the stage where that advantage is obtained – Subjective element – Proof of its existence with regard to one of the participants in the chain of transactions concerned – Principle of proportionality – Bilateral convention for the avoidance of double taxation )

In Case C‑203/25,

REQUEST for a preliminary ruling under Article 267 TFEU from the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania), made by decision of 26 February 2025, received at the Court on 17 March 2025, in the proceedings

‘NEO GROUP’ UAB

Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos,

THE COURT (Fourth Chamber),

composed of I. Jarukaitis, President of the Chamber, R. Frendo (Rapporteur), N. Jääskinen, M. Condinanzi and A. Kornezov, Judges,

Advocate General: J. Kokott,

Registrar: C. Strömholm, Administrator,

having regard to the written procedure and further to the hearing on 25 February 2026,

after considering the observations submitted on behalf of:

– ‘NEO GROUP’ UAB, by P. Likša and A. Medelienė, advokatai, and A. Venius, advokato padėjėjas,

– the Lithuanian Government, by K. Dieninis and V. Kazlauskaitė-Švenčionienė, acting as Agents,

– the Spanish Government, by P. Pérez Zapico and A. Torró Molés, acting as Agents,

– the Netherlands Government, by P.P. Huurnink and J. Langer, acting as Agents,

– the European Commission, by J. Jokubauskaitė and W. Roels, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 21 May 2026,

gives the following

Judgment

1 This request for a preliminary ruling concerns the interpretation of Article 1(2) and (3) and of Article 5 of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 2011 L 345, p. 8), as amended by Council Directive (EU) 2015/121 of 27 January 2015 (OJ 2015 L 21, p. 1) (‘the Parent-Subsidiary Directive’), and the principle of proportionality.

2 The request has been made in proceedings between ‘NEO GROUP’ UAB (‘NEO’), a company incorporated under Lithuanian law, and Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos (State Tax Inspectorate under the Ministry of Finance of the Republic of Lithuania) (‘the Inspectorate’), concerning the taxation of dividends distributed by NEO to its parent company Retal Industries limited (‘Retal’), incorporated in Cyprus.

Legal context

European Union law

3 Recitals 3 to 6 of the Parent-Subsidiary Directive state:

‘(3) The objective of this Directive is to exempt dividends and other profit distributions paid by subsidiary companies to their parent companies from withholding taxes and to eliminate double taxation of such income at the level of the parent company.

(4) The grouping together of companies of different Member States may be necessary in order to create within the [European] Union conditions analogous to those of an internal market and in order thus to ensure the effective functioning of such an internal market. Such operations should not [be] hampered by restrictions, disadvantages or distortions arising in particular from the tax provisions of the Member States. It is therefore necessary, with respect to such grouping together of companies of different Member States, to provide for tax rules which are neutral from the point of view of competition, in order to allow enterprises to adapt to the requirements of the internal market, to increase their productivity and to improve their competitive strength at the international level.

(5) Such grouping together may result in the formation of groups of parent companies and subsidiaries.

(6) Before the entry into force of [Council] Directive 90/435/EEC [of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 225, p. 6)], the tax provisions governing the relations between parent companies and subsidiaries of different Member States varied appreciably from one Member State to another and were generally less advantageous than those applicable to parent companies and subsidiaries of the same Member State. Cooperation between companies of different Member States was thereby disadvantaged in comparison with cooperation between companies of the same Member State. It was necessary to eliminate that disadvantage by the introduction of a common system in order to facilitate the grouping together of companies at Union level.’

4 As set out in recitals 1, 2 and 4 to 8 of Directive 2015/121:

‘(1) Council Directive [2011/96] exempts dividends and other profit distributions paid by subsidiary companies to their parent companies from withholding taxes and eliminates double taxation of such income at the level of the parent company.

(2) It is necessary to ensure that Directive [2011/96] is not abused by taxpayers who fall within the scope of its application.

…

(4) [Domestic or agreement-based provisions aimed at tackling tax evasion, tax fraud or abusive practices in a general or in a specific way] may have different levels of severity and, in any case, they are designed to reflect the specificities of each Member State’s tax system. Moreover, some Member States do not have any domestic or agreement-based provisions for the prevention of abuse.

(5) … the inclusion of a common minimum anti-abuse rule in Directive [2011/96] would be very helpful to prevent misuse of that Directive and to ensure greater consistency in its application in different Member States.

(6) The application of anti-abuse rules should be proportionate and should serve the specific purpose of tackling an arrangement or a series of arrangements which are not genuine, that is, which do not reflect economic reality.

(7) To that end, when assessing whether an arrangement or a series of arrangements are abusive, Member States’ tax administrations should undertake an objective analysis of all relevant facts and circumstances.

(8) While Member States should use the anti-abuse clause to tackle arrangements which are, in their entirety, not genuine, there may also be cases where single steps or parts of an arrangement are, on a stand-alone basis, not genuine. Member States should be able to use the anti-abuse clause also to tackle those specific steps or parts, without prejudice to the remaining genuine steps or parts of the arrangement. That would maximise the effectiveness of the anti-abuse clause while guaranteeing its proportionality. …’

5 Article 1 of the Parent-Subsidiary Directive provides as follows:

‘1. Each Member State shall apply this Directive:

…

(b) to distributions of profits by companies of that Member State to companies of other Member States of which they are subsidiaries;

…

2. Member States shall not grant the benefits of this Directive to an arrangement or a series of arrangements which, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of this Directive, are not genuine having regard to all relevant facts and circumstances.

An arrangement may comprise more than one step or part.

3. For the purposes of paragraph 2, an arrangement or a series of arrangements shall be regarded as not genuine to the extent that they are not put into place for valid commercial reasons which reflect economic reality.

4. This Directive shall not preclude the application of domestic or agreement-based provisions required for the prevention of tax evasion, tax fraud or abuse.’

6 Article 3(1) of that directive provides:

‘For the purposes of applying this Directive:

(a) the status of parent company shall be attributed:

(i) at least to a company of a Member State which … has a minimum holding of 10% in the capital of a company of another Member State fulfilling the same conditions;

…

(b) “subsidiary” means that company the capital of which includes the holding referred to in point (a).’

7 Article 5 of that directive is worded as follows:

‘Profits which a subsidiary distributes to its parent company shall be exempt from withholding tax.’

The LT-CY Convention

8 Article 10(1) and (2) of the Convention between the Government of the Republic of Lithuania and the Government of the Republic of Cyprus for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (‘the LT-CY Convention’) of 21 June 2013 provides for the allocation of the competence for the taxation of dividends between these two contracting States.

9 Article 10(1) of that convention provides that dividends paid by a company which is a resident of a Contracting State to a resident of the other Contracting State may be taxed in that other State.

10 Article 10(2) of that convention provides that such dividends may also be taxed in the Contracting State of which the company paying those dividends is a resident and according to the laws of that State, but if the beneficial owner of those dividends is a resident of the other Contracting State, the tax so charged is not to exceed 0% of the gross amount of such dividends, where the beneficial owner is a company which holds directly at least 10% of the capital of the company paying the dividends, or 5% of the gross amount, in all other cases.

Lithuanian law

11 The Lietuvos Respublikos pelno mokesčio įstatymas n^o IX-675 (Law of the Republic of Lithuania on corporate income tax No IX-675) of 20 December 2001, in the version applicable to the facts in the main proceedings (‘the Law on corporate income tax’), defines, in Article 2(3) thereof, ‘foreign taxable entity’ (‘foreign entity’) as a foreign legal person or organisation having its registered office in a foreign State and established or otherwise organised under the laws of that foreign State, as well as any other taxable entity established, incorporated or otherwise organised abroad, including collective investment bodies.

12 Article 3(1) of that law provides that corporate income tax is to be payable by Lithuanian entities and foreign entities.

13 Under Article 4(3)(2) of the Law on corporate income tax, the tax base of a foreign entity is to be made up of income sourced in Lithuania and received by that entity in a manner other than through permanent establishments in the territory of Lithuania.

14 Under Article 4(4)(2) of that law, income sourced in Lithuania and received by a foreign entity in a manner other than through permanent establishments in the territory of that State is to include income from distributed profits.

15 Article 34(1) of the Law on corporate income tax provides that dividends received by foreign entities for the shares, portion of capital or other rights held in a Lithuanian entity shall be subject to a corporate income tax rate of 15%.

16 Article 34(2) of that law provides that dividends paid by a Lithuanian entity to a foreign entity which holds for an uninterrupted period of at least 12 months, including at the moment of distribution of the dividends, at least 10% of the shares in the Lithuanian entity are not to be subject to taxation.

17 Article 32(6) of the Lithuanian Law on corporate income tax (‘the Lithuanian anti-abuse provision’) states that the provisions relating to non-taxation of dividends contained, in particular, in Article 34(2) of that law are not to apply to an arrangement or a series of arrangements which, having been put into place with the main purpose or one of its main purposes being that of obtaining a tax advantage that defeats the object or purpose of the Parent-Subsidiary Directive, are not genuine having regard to all relevant facts and circumstances. That provision specifies that an arrangement may comprise more than one step or part and that an arrangement or series of arrangements is to be regarded as not genuine to the extent that they are not put into place for valid commercial reasons which reflect economic reality.

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

18 Since 10 August 2008 and up to the date of this request for a preliminary ruling, Retal has held 100% of NEO’s capital.

19 Retal also holds 100% of the capital of another Lithuanian company, ‘Retal Lithuania’ UAB (‘Retal LT’).

20 In 2016 and in 2017, Retal received dividends from NEO, in the amount of EUR 15 000 000, and from Retal LT, in the amount of EUR 13 485 032, that is to say, a total of EUR 28 485 032.

21 NEO considered that the dividends that it had distributed to Retal could not be subject to corporate income tax provided for in Article 34(1) of the Law on corporate income tax, since they were exempt from withholding tax on the basis of Article 34(2) of that law.

22 Following a tax inspection for the years 2016 and 2017, on 30 October 2024, the Inspectorate adopted a decision (‘the decision at issue’) finding, in essence, that there was a chain of transactions, the creation of which resulted in PG, a natural person resident in Cyprus, becoming the ‘ultimate beneficiary’ of the dividends that NEO and Retal LT had distributed to Retal, without applying the withholding tax as provided in Article 34(2) of the Law on corporate income tax. According to the Inspectorate, that chain of transactions constitutes an arrangement made with a view to obtaining the tax advantage consisting in the avoidance of corporate income tax on dividends received by Retal and therefore falls within the scope of the Lithuanian anti-abuse provision.

23 Accordingly, by the decision at issue, the Inspectorate issued a corporate tax adjustment against NEO in the amount of EUR 2 250 000, with default interest, and imposed a penalty on it.

24 NEO challenged the decision at issue before the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania), which is the referring court.

25 That court considers that, in order to determine whether the Lithuanian anti-abuse provision applies to a situation such as that before it, it is necessary to interpret the anti-abuse provision in Article 1(2) and (3) of the Parent-Subsidiary Directive (‘the anti-abuse provision of the Parent-Subsidiary Directive’).

26 That court states that the Court of Justice, in particular in the judgment of 26 February 2019, T Danmark and Y Denmark (C‑116/16 and C‑117/16, EU:C:2019:135), has already examined situations relating to non-genuine arrangements using conduit companies which transfer the profits they receive to another group company, which is the beneficial owner of those profits. However, the case before it has features which render necessary clarifications other than those provided by that judgment regarding the scope of that provision.

27 In that regard, in the first place, according to the referring court, it follows from the judgment referred to in the preceding paragraph that the fact that the company receiving dividends does not carry on any actual economic activity, but is a conduit company whose sole activity is the receipt of those dividends and their transmission to the beneficial owner or other conduit companies, is relevant to a finding of abuse.

28 In the present case, the Inspectorate did not call into question Retal’s pursuit of an actual economic activity, but based its finding of abuse on the existence of a non-genuine arrangement resulting from several pieces of evidence.

29 In particular, the referring court notes that the Inspectorate considered that the chain of transactions in which the company Clendon Holdings Inc., registered in Belize, which controlled 100% of Retal’s capital, sold all the shares in Retal to the Cypriot company PPH Polymer Products Holding Ltd (‘PPH’), which had been incorporated less than three months earlier, for the sum of EUR 310 400 000, constituted a non-genuine arrangement.

30 That court explains that, according to the Inspectorate, payment of the purchase price for Retal’s capital was deferred to 2027 and the resulting debt was assigned by Clendon Holdings to PG, who was already the beneficial owner of both Clendon Holdings and PPH. PPH’s debt to PG was thereby created. Finally, PG, as a result of the creation of all those transactions, received significant sums of money from PPH, in the form of loans and assignments of rights, the source of which was the dividends distributed by the Lithuanian companies and which were used to extinguish PPH’s debt to PG. In that context, the Inspectorate submits that those transactions reflect the existence of a non-genuine arrangement which was intended to procure a tax advantage consisting in the avoidance of the tax on those dividends in Lithuania.

31 The referring court adds that, before it, NEO claims, inter alia, that Retal, as an undertaking carrying on an actual economic activity, is the beneficial owner, within the meaning, inter alia, of the LT-CY Convention, based on the Model Convention for the avoidance of double taxation with respect to taxes on income and capital, drawn up by the Committee on Fiscal Affairs of the Organisation for Economic Co-operation and Development (OECD) (‘the OECD Model Convention’).

32 According to that court, it is necessary, in that context, to establish whether the national practice of applying the Lithuanian anti-abuse provision to dividends that, although distributed to a company which actually carries on an economic activity, are subsequently used for the purpose of effecting non-genuine transactions, is compatible with the objectives of the Parent-Subsidiary Directive.

33 In the second place, the referring court notes that, in the decision at issue, the Inspectorate emphasised that the majority of the dividends received by Retal in 2016 and in 2017 consisted of dividends distributed by NEO and Retal LT. Additionally, the Inspectorate had relied on the similarity between, on the one hand, the amounts of dividends distributed by NEO and Retal LT to Retal and, on the other hand, the amounts of dividends distributed by Retal to PPH, and on the correspondence of the amounts of the liabilities of PPH to PG with the amounts of the liabilities of PPH to Clendon Holdings.

34 Accordingly, the referring court asks whether the correspondence of the amounts of dividends transferred at different stages of a chain of transactions permits the presumption that there is a ‘chain of dividend transfer’.

35 In the third place, the referring court observes that the Inspectorate applied the Lithuanian anti-abuse provision to NEO on account of non-genuine transactions carried out outside Lithuania between natural and legal persons not residing in Lithuania.

36 That court seeks to ascertain, in essence, whether such an application of that provision is compatible with the objectives of the Parent-Subsidiary Directive and the principle of proportionality.

37 In the fourth place, the referring court recalls that one of the conditions required for the application of both the Lithuanian anti-abuse provision and the anti-abuse provision of the Parent-Subsidiary Directive is the obtaining of a tax advantage. Accordingly, it asks whether NEO may be regarded as having obtained such an advantage when, as a result of the creation of the chain of transactions in which NEO participated, it was PG, namely a natural person not resident in Lithuania, who obtained a tax advantage by using the dividends distributed by NEO.

38 In the fifth place, the referring court states that, according to the judgment of 26 February 2019, T Danmark and Y Denmark (C‑116/16 and C‑117/16, EU:C:2019:135, paragraph 101), it is an indication of the existence of an arrangement intended to obtain for an entity improper entitlement to the exemption provided for in Article 5 of the Parent-Subsidiary Directive, that all or almost all of the dividends are, very soon after their receipt, passed on by the company that has received them to entities which do not fulfil the conditions for the application of that directive.

39 Therefore, that court considers that it is necessary to determine whether, in order to establish the existence of a non-genuine arrangement, it is relevant that Retal’s dividends were passed on over a continuous period rather than immediately.

40 In the sixth and last place, the referring court notes that the Inspectorate did not assess whether NEO, as a subsidiary within a group of companies and dependent on the decisions taken by its shareholder, knew or could have known of the existence of non-genuine transactions carried out within that group. It therefore asks to what extent such knowledge has an impact on the application of the anti-abuse provision of the Parent-Subsidiary Directive to such a subsidiary.

41 In those circumstances, the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission under the Government of the Republic of Lithuania) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) In circumstances such as those in the case in the main proceedings, is it compatible with the objectives of the anti-abuse rule of [the Parent-Subsidiary Directive] for a national practice to exclude, in the State of the dividend payer, the possibility of exemption from withholding tax on dividends, where the dividends are paid to a genuine parent company operating in a different EU Member State, which, as such, is not an entity which is not genuine in so far as it carries on business, and the dividends are paid to it as the beneficial owner of the dividends, but which is recognised by the tax authorities as a participant in a chain of non-genuine transactions by reason of the payment/transfer of the dividends through it to the beneficial owner of the entire group of companies?

(2) If the answer to the first question is in the affirmative, could the transfer of dividends in a chain be based on the correspondence of the amounts of dividends (similar and identical) transferred in a chain of transactions?

(3) In circumstances such as those in the case in the main proceedings, are the objectives of the anti-abuse rule of [the Parent-Subsidiary Directive], including the principle of proportionality referred to in [the recitals of] Directive [2015/121], compatible with a national practice in which the tax authorities apply the anti-abuse rule in the State in which the dividends are paid, even though the transactions, which have led to a chain of transactions being recognised as an arrangement (which the tax authorities regard as not genuine), were carried out in another EU Member State by tax residents in that another EU Member State?

(4) Does the anti-abuse rule in the State of the dividend payer give rise to a right to withholding tax on dividends where the tax benefit arises at any stage of the chain of transactions? Can the applicant be considered to have received a tax benefit contrary to the subject or purpose of [the Parent-Subsidiary Directive] if, as a result of the creation of such a chain of transactions, a tax benefit is obtained by the ultimate beneficiary who uses the dividends paid by the applicant to earn such benefit?

(5) In circumstances such as those in the case in the main proceedings, can the provisions of Article 1(2) of [the Parent-Subsidiary Directive] be interpreted as meaning that the application of the “participation exemption” rule, which implements the provisions of Article 5 of [the Parent-Subsidiary Directive] in national law, can be excluded on the grounds of the abuse of the right due to the use of dividends received, where the receipt and use of the dividends (the subsequent distribution of the profits) took place over a continuous period?

(6) In circumstances such as those in the case in the main proceedings, is a national practice in which the effect of the tax authority is applied to a dividend payer, without assessing whether the dividend payer was and/or could have been aware of the existence of a chain of non-genuine transactions, compatible with the objectives of the anti-abuse rule laid down in [the Parent-Subsidiary Directive]?’

Consideration of the questions referred

The first question

42 By its first question, the referring court asks, in essence, whether the anti-abuse provision of the Parent-Subsidiary Directive must be interpreted as precluding a national practice whereby the tax authorities of a Member State levy withholding tax on dividends that a subsidiary resident in that Member State distributes to its parent company resident in another Member State on the ground that that parent company participates in a chain of transactions – all or some of which are not genuine – as a result of the creation of which those dividends are transferred to the natural or legal person who controls, directly or indirectly, all of the companies involved, even though that parent company actually carries on an economic activity and is therefore not a conduit company.

43 As a preliminary point, it should be borne in mind that, in accordance with recitals 3 to 6 thereof, the Parent-Subsidiary Directive pursues the objective of exempting dividends and other profit distributions paid by subsidiary companies to their parent companies from withholding taxes as well as of eliminating double taxation of such income at the level of the parent company, in order to facilitate the grouping together of companies at EU level (judgment of 24 February 2022, Viva Telecom Bulgaria, C‑257/20, EU:C:2022:125, paragraph 59).

44 That directive thus seeks to ensure the neutrality, from a tax point of view, of the distribution of profits by a company established in one Member State to its parent company established in another Member State (judgment of 24 February 2022, Viva Telecom Bulgaria, C‑257/20, EU:C:2022:125, paragraph 60).

45 To that end, Article 1(1)(b) of that directive provides that it applies to distributions of profits, in a cross-border relationship, by a subsidiary to its parent company and Article 5 of that directive provides for their exemption from withholding tax.

46 That said, there is a general principle of EU law that provisions of EU law cannot be relied on for abusive or fraudulent ends. In accordance with that principle, a Member State must refuse to apply those provisions where they are relied on not with a view to achieving the objectives of those provisions, but with the aim of benefiting from an advantage although the conditions laid down for that purpose are fulfilled only formally (see, to that effect, judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraphs 70 to 72).

47 As is apparent from recitals 1, 2 and 5 of Directive 2015/121, it was in order to ensure compliance with that principle that the EU legislature inserted the anti-abuse provision into the Parent-Subsidiary Directive.

48 Under that provision, Member States are not to grant the advantages of that directive to an arrangement or a series of arrangements which, having been put into place with the main purpose or one of its main purposes being that of obtaining a tax advantage that defeats the object or purpose of that directive, are not genuine having regard to all relevant facts and circumstances. That provision specifies that an arrangement or a series of arrangements is to be regarded as not genuine to the extent that they are not put into place for valid commercial reasons which reflect economic reality.

49 According to settled case-law, in interpreting a provision of EU law it is necessary to consider not only its wording, but also its context and the objectives pursued by the rules of which it is part (see judgments of 17 November 1983, Merck, 292/82, EU:C:1983:335, paragraph 12, and of 30 April 2025, Generalstaatsanwaltschaft Frankfurt am Main (Export of cash to Russia), C‑246/24, EU:C:2025:295, paragraph 18 and the case-law cited).

50 As regards the wording of the anti-abuse provision of the Parent-Subsidiary Directive, it follows that two conditions must be satisfied in order for the benefits of that directive to be denied. First, the arrangement in question must be non-genuine, within the meaning of that provision. Second, the arrangement must have been put into place with the main purpose or one of its main purposes being that of obtaining a tax advantage that defeats the object of that directive (judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraph 45).

51 That second condition will be examined in the context of the answers provided, first, to the third and fourth questions as well as, second, to the sixth question.

52 As regards the first condition laid down in the anti-abuse provision of the Parent-Subsidiary Directive, namely the classification of a chain of transactions as a ‘non-genuine arrangement’, the wording of that provision does not provide that it is applicable only to specific situations or types of arrangement. On the contrary, it adopts an overall perspective consisting in identifying the potential non-genuine nature of an arrangement having regard to all relevant facts and circumstances, that arrangement being characterised by the absence of valid commercial reasons which reflect economic reality (see, to that effect, judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraph 25).

53 As regards the context of the anti-abuse provision of the Parent-Subsidiary Directive and the objective of that provision, it is apparent from recitals 4 and 5 of Directive 2015/121 that that provision is very helpful, in particular in the light of the diversity of the national tax systems, in preventing misuse of the Parent-Subsidiary Directive. It should be stated that, having regard both to its position, that is to say, in the first article of that directive, and to the objective thus expressed, that provision is cross-cutting in nature, which also militates in favour of an interpretation permitting its application without limitation to certain specific circumstances. A narrower interpretation would not be consistent with the objective of preventing misuse (see, to that effect, judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraph 26).

54 Furthermore, it should be borne in mind that according to recital 7 of Directive 2015/121, Member States’ tax administrations should undertake an objective analysis of all relevant facts and circumstances when assessing whether an arrangement or a series of arrangements are abusive. That wording is reproduced, in essence, in Article 1(2) of the Parent-Subsidiary Directive, according to which the benefits of that directive are not to be granted to arrangements which are not genuine having regard to all relevant facts and circumstances (judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraph 39).

55 It follows that, in a situation in which an arrangement consists of more than one step, all relevant facts and circumstances must be taken into account in order to establish whether there are one or more steps which are not genuine. Nothing in the anti-abuse provision of the Parent-Subsidiary Directive suggests that the relevant facts and circumstances the examination of which is necessary for that purpose are confined to the situation existing as at the date of one of the steps of the arrangement in question (see, to that effect, judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraph 41).

56 It therefore follows from the literal, contextual and teleological interpretation of the anti-abuse provision of the Parent-Subsidiary Directive that that provision applies across the board to any type of non-genuine arrangement, and not solely to arrangements with specific configurations.

57 Accordingly, it is for the referring court to ascertain, in the light of all the facts at issue in the main proceedings, whether, in the present case, the constituent elements of an abusive practice are present (see, to that effect, judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraphs 30 and 40).

58 Although it is not for the Court to assess the facts in the main proceedings, it may nevertheless, when giving a preliminary ruling, specify indicia with a view to guiding the national court in the assessment of the case it has to decide (see, to that effect, judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraph 99).

59 In that regard, as a preliminary point, it should be borne in mind that, according to the case-law, the burden of proving the existence of elements constituting an abusive practice lies with the tax authority of the Member State which seeks to refuse to grant the exemption provided for in Article 5 of the Parent-Subsidiary Directive to a company that has paid dividends to a company established in another Member State. That authority cannot, however, be required to furnish evidence that would be impossible for it to provide (see, to that effect, judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraphs 117 to 118).

60 It should also be recalled, in the first place and as did the referring court, that the Court, as regards an exemption from withholding tax such as that provided for in Article 5 of the Parent-Subsidiary Directive, has indeed regarded as an artificial arrangement a group of companies which is not put into place for reasons which reflect economic reality, which has a purely formal structure and which has as its main objective or one of its principal objectives the obtaining of a tax advantage that defeats the object or purpose of tax law. It has specified that this is the case, in particular, where, on account of a conduit entity interposed in the structure of the group between the company that pays dividends and the company in the group which is their beneficial owner, payment of tax on the dividends is avoided (judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraph 100).

61 However, it cannot be inferred from those grounds that the anti-abuse provision of the Parent-Subsidiary Directive applies only to arrangements comprising conduit companies and that the situation in question in the main proceedings does not fall within that provision, in so far as it does not require the involvement of a conduit company in the chain of transactions in question. On the contrary, it is clear from paragraph 100 of the judgment of 26 February 2019, T Danmark and Y Denmark (C‑116/16 and C‑117/16, EU:C:2019:135), that the situation of a conduit company is just one example of the application of the principle of the prohibition of abuse, which is indicated by the use of the words ‘inter alia’ (see judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraph 28).

62 Consequently, the fact that, in an arrangement involving more than one step, the first transaction consists of the distribution of dividends by a subsidiary to a parent company which carries on an actual economic activity does not, in itself, support the conclusion that there is no abusive practice. To analyse only the economic activity of that parent company, without taking into account the other relevant elements, would not be consistent with the necessity of carrying out an overall examination, for the purposes of the case-law cited in paragraphs 52 to 55 of the present judgment.

63 Those other elements to be assessed include those indicated by the Inspectorate before the referring court, namely the sale of shares in a company, the conclusion of loan agreements and the assignment of debts, as is apparent from paragraphs 29 and 30 of the present judgment.

64 In the second place, as regards the LT-CY Convention, referred to by the referring court, it must be borne in mind that, admittedly, according to the case-law, the Court does not have jurisdiction to rule on a possible infringement, by a Member State, of provisions of a convention entered into by one or more other Member States designed to eliminate or to mitigate the negative effects of the coexistence of national tax regimes. Nor does the Court have jurisdiction to examine the relationship between a national measure and the provisions of a double taxation convention adopted for the avoidance of double taxation, since that question does not fall within the scope of the interpretation of EU law (judgment of 12 March 2026, Marhaux, C‑150/25, EU:C:2026:188, paragraph 22 and the case-law cited).

65 That said, in the context of the procedure provided for in Article 267 TFEU, the Court has jurisdiction to give a preliminary ruling on the interpretation of a provision of EU law in the light of the factual and legal situation described by the referring court in its request (judgment of 12 March 2026, Marhaux, C‑150/25, EU:C:2026:188, paragraph 23).

66 Thus, where a referring court mentions the existence of a convention for the avoidance of double taxation as an element of the relevant legislative context, the Court must take that convention into account and the referring court’s interpretation of it, in order to provide that court with an interpretation of EU law which will be of use to it (judgment of 12 March 2026, Marhaux, C‑150/25, EU:C:2026:188, paragraph 24 and the case-law cited).

67 In the present case, it follows from Article 10(1) and (2) of the LT-CY Convention that, where a subsidiary pays dividends to its parent company, the tax authorities of the State in which that subsidiary is resident cannot tax those dividends if that parent company is the ‘beneficial owner’.

68 In that regard, the referring court, whose task it is to interpret national law and the LT-CY Convention, considers that that convention must be interpreted in the light of the commentaries on the OECD Model Convention. It is apparent from point 12.5 of the commentaries on Article 10 of the OECD Model Convention that the fact that the recipient of dividends is considered to be the ‘beneficial owner’ of those dividends does not mean that the limitation of tax provided for in Article 10(2) of that model would be granted automatically. That limitation must not be granted in cases of abuse of the provision contained in Article 10(2) of that model.

69 In any event, it follows from the case-law that conventions between Member States, even where they have been concluded on the basis of the OECD Model Convention, cannot be relied upon to achieve a result contrary to EU law (see, to that effect, judgments of 14 December 2006, Denkavit Internationaal and Denkavit France, C‑170/05, EU:C:2006:783, paragraph 53, and of 29 July 2024, Keva and Others, C‑39/23, EU:C:2024:648, paragraph 48).

70 In the light of the foregoing, the answer to the first question is that the anti-abuse provision of the Parent-Subsidiary Directive must be interpreted as not precluding, in principle, a national practice whereby the tax authorities of a Member State levy a withholding tax on dividends that a subsidiary resident in that Member State distributes to its parent company resident in another Member State on the ground that that parent company participates in a chain of transactions – all or some of which are not genuine – as a result of the creation of which those dividends are transferred to the natural or legal person who controls, directly or indirectly, all of the companies involved, even though that parent company actually carries on an economic activity and is therefore not a conduit company.

The second and fifth questions

71 By its second and fifth questions, which should be examined together, the referring court asks, in essence, whether the anti-abuse provision of the Parent-Subsidiary Directive must be interpreted as meaning that the following facts constitute relevant indications for the tax authorities of a Member State to establish the existence of a non-genuine arrangement: first, that the amounts transferred in a chain of transactions – all or some of which are not genuine – are similar, or even identical, to the amounts of dividends distributed by a subsidiary resident in that Member State to its parent company resident in another Member State and, second, that such transfers took place not in a short period of time after the payment of those dividends, but on a continuous basis over a certain period.

72 As a preliminary point, since NEO disputes the facts as established by the referring court, it must be borne in mind that, according to the case-law, the national court alone has jurisdiction to find and assess the facts in the dispute in the main proceedings. Accordingly, the Court is empowered to rule solely on the interpretation or validity of EU law in the light of the factual and legal situation as described by the referring court, in order to provide that court with such guidance as will assist it in resolving the dispute before it. Consequently, even where the facts set out in the order for reference are disputed by a party to the main proceedings, it is on the basis of the information provided by the referring court that the questions submitted must be answered (judgment of 5 June 2025, Elektrorazpredelitelni mrezhi Zapad, C‑310/24, EU:C:2025:406, paragraph 38 and the case-law cited).

73 In the light of the elements put forward in the present request for a preliminary ruling, in the first place, it should be borne in mind that, according to the case-law, it is an indication of the existence of an arrangement intended to obtain improper entitlement to the exemption provided for in Article 5 of the Parent-Subsidiary Directive that all or almost all of the dividends which a subsidiary has distributed to the parent company are, very soon after their receipt, passed on by the company that has received them to entities which do not fulfil the conditions for the application of that directive (see to that effect, judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraphs 101 and 103).

74 Consequently, in its assessment of the existence of an abuse, the referring court may take account, as an indication of that existence, of the correspondence between the amounts of dividends received by the parent company and the amounts from which, as a result of the creation of the chain of transactions concerned, the natural or legal person controlling the companies involved in such a chain benefits.

75 However, it is important to specify, as the European Commission does, that such evidence cannot give rise to a general presumption of abuse.

76 In the second place, although the fact that the parent company passes on, within a short period of time, to other natural or legal persons the dividends that it has received from its subsidiary may also constitute a relevant indication of the existence of abuse, it does not follow that such a short period is required for such abuse to be demonstrated.

77 The fact that movements of funds within a group of companies, controlled directly or indirectly by the same natural or legal person, took place at regular intervals and for a certain period of time does not preclude the existence of a non-genuine arrangement put into place in order to enable that person to obtain a tax advantage which is contrary to the object or purpose of the Parent-Subsidiary Directive. In that regard, it should be specified that a non-genuine arrangement, the effects of which are repeated over a certain period, is no less contrary to that object or purpose than a one-off arrangement.

78 Accordingly, in order to carry out an objective analysis of all the relevant facts and circumstances, the tax authorities of the Member State in which the subsidiary distributing dividends is resident cannot be required to limit their examination to a short period. On the contrary, where the arrangement likely to result in the abuse of a right conferred by the Parent-Subsidiary Directive involves, as in the present case, a change in the structure of the group to which that subsidiary belongs and the carrying out of various legal transactions for the granting of loans, those tax authorities must include in their investigation all the elements that contribute to the possible abuse.

79 In the light of the foregoing, the answer to the second and fifth questions is that the anti-abuse provision of the Parent-Subsidiary Directive must be interpreted as meaning that the following facts constitute relevant indications for the tax authorities of a Member State to establish the existence of a non-genuine arrangement: first, that the amounts transferred in a chain of transactions – all or some of which are not genuine – are similar, or even identical, to the amounts of dividends distributed by a subsidiary resident in that Member State to its parent company resident in another Member State and, second, that such transfers took place not in a short period of time after the distribution of those dividends, but on a continuous basis over a certain period, without prejudice to the need for the tax authorities to carry out an objective analysis of all the relevant facts and circumstances in order to ascertain whether the constituent elements of an abusive practice are present.

The third and fourth questions

80 By its third and fourth questions, which it is appropriate to examine together, the referring court asks, in essence, whether the anti-abuse provision of the Parent-Subsidiary Directive, read in the light of the principle of proportionality, must be interpreted as precluding a national practice whereby the tax authorities of a Member State levy a withholding tax on dividends that a subsidiary resident in that Member State distributes to its parent company resident in another Member State, where the transactions regarded as non-genuine have not taken place in the first Member State, but were carried out by natural or legal persons not resident in that Member State, including the person who benefits from a tax advantage through the exemption of those dividends as a result of the creation of all the transactions concerned, and irrespective of the stage in the chain of transactions at which the tax advantage is obtained.

81 In that regard, in the first place, it should be noted that the Parent-Subsidiary Directive concerns cross-border situations, which invariably involve companies resident in different Member States. Accordingly, situations capable of falling within the scope of the anti-abuse provision of that directive must be subject to an overall examination including transactions taking place outside the Member State in which the tax authorities intend to establish the existence of an abuse of rights under that directive and to take action in response.

82 In the second place, according to the case-law, having regard in particular to recital 8 of Directive 2015/121, from which it follows that single steps or parts of an arrangement might, on a stand-alone basis, not be genuine and could, therefore, be covered by the anti-abuse provision of the Parent-Subsidiary Directive, it cannot be ruled out that an arrangement, initially put into place for valid commercial reasons which reflect economic reality, has to be regarded as not genuine once it is maintained despite a change in circumstances as a result of which it appears that that arrangement is no longer justified on account of those reasons (see, to that effect, judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraphs 34 to 36).

83 Therefore, the possibility of applying that provision to non-genuine steps of an arrangement must be understood as meaning that circumstances subsequent to the formation of the arrangement may be taken into account in assessing whether or not the step of the arrangement in question is genuine (see judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraph 37).

84 Consequently, as the Advocate General observed, in essence, in point 56 of her Opinion, taking into account also the fact that, as is apparent from paragraph 56 of the present judgment, the existence of abuse must be established by an objective analysis of all the relevant facts and circumstances, the tax authorities of the Member State of residence of the subsidiary must carry out an overall examination which includes transactions carried out outside that Member State, before or after the distribution of the dividends by the subsidiary to the parent company.

85 The anti-abuse provision of the Parent-Subsidiary Directive does not require proof of the existence of a tax advantage that defeats the object or purpose of that directive as regards the subsidiary which initially distributed the dividends and which sought to benefit from the exemption from withholding tax. Such an advantage may be derived by the natural person who controls the group of companies within which the chain of transactions aimed at obtaining that advantage is carried out and who resides in a Member State other than that of the subsidiary which initially distributed those dividends. In that regard, it should be noted that such undue advantages could not be eliminated if the Member State which granted a resident subsidiary the benefit of the exemption from withholding tax on those dividends could not also take account of transactions carried out, outside that Member State, using the amounts received in respect of those dividends.

86 As regards the principle of proportionality, mentioned by the referring court, it should be borne in mind that that principle, first, is referred to in recital 6 of Directive 2015/121 and, second, is a general principle of EU law, enshrined in Article 5(4) TEU. In order to comply with that principle, the measures taken by the Member States must be appropriate for attaining their objective and must not go beyond what is necessary to attain it (judgment of 20 December 2017, Deister Holding and Juhler Holding, C‑504/16 and C‑613/16, EU:C:2017:1009, paragraph 56 and the case-law cited). Therefore, the measures which the national authorities take in order to prevent fraud and abuse of the rights conferred by the Parent-Subsidiary Directive must comply with those conditions.

87 An interpretation of the anti-abuse provision of that directive whereby the existence of abuse may be established by an analysis that includes transactions carried out outside the Member State in which the subsidiary is resident is, first, clearly appropriate for attaining that objective. Second, that interpretation is essential in order to combat arrangements the abusive nature of which can be established only following such an analysis.

88 Furthermore, in so far as NEO claims that that interpretation gives rise to an unjustified restriction of the freedom of establishment and the free movement of capital, it follows from the case-law that, in view of the general principle prohibiting abuse of rights recalled in paragraph 46 of the present judgment, a company resident in a Member State cannot claim the benefit of the freedoms enshrined in the FEU Treaty in order to call into question the legislation governing the taxation of dividends paid to a company resident in another Member State, where it is established that the application of that legislation makes it possible to avoid such abuse (see, to that effect, judgment of 26 February 2019, T Danmark and Y Denmark, C‑116/16 and C‑117/16, EU:C:2019:135, paragraph 122).

89 In the light of the foregoing, the answer to the third and fourth questions is that the anti-abuse provision of the Parent-Subsidiary Directive, read in the light of the principle of proportionality, must be interpreted as not precluding a national practice whereby the tax authorities of a Member State levy a withholding tax on dividends that a subsidiary resident in that Member State distributes to its parent company resident in another Member State, where the transactions regarded as not genuine have not taken place in the first Member State, but were carried out by natural or legal persons not resident in that Member State, including the person who benefits from a tax advantage through the exemption of those dividends as a result of the creation of all the transactions concerned, and irrespective of the stage in the chain of transactions at which the tax advantage is obtained.

The sixth question

90 By its sixth question, the referring court asks, in essence, whether the anti-abuse provision of the Parent-Subsidiary Directive must be interpreted as precluding a national practice whereby the tax authorities of a Member State levy a withholding tax on dividends that a subsidiary resident in that Member State distributes to its parent company resident in another Member State, without establishing that that subsidiary was or could have been aware that that distribution was part of a chain of transactions, all or some of which were not genuine.

91 As is apparent, in essence, from paragraph 50 of the present judgment, it cannot be held that the classification of a chain of transactions as a ‘non-genuine arrangement’ is sufficient to deny the exemption from corporate income tax on the dividends received, pursuant to the anti-abuse provision of the Parent-Subsidiary Directive (see, to that effect, judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraph 49). It is also necessary for the arrangement to have been put into place for the main purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of that directive (see, to that effect, judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraph 46).

92 It should also be borne in mind that, according to settled case-law, proof of an abusive practice requires, first, a combination of objective circumstances in which, despite formal observance of the conditions laid down by the EU rules, the purpose of those rules has not been achieved and, second, a subjective element consisting in the intention to obtain an advantage from the EU rules by artificially creating the conditions laid down for obtaining it (judgment of 3 April 2025, Nordcurrent group, C‑228/24, EU:C:2025:239, paragraph 47 and the case-law cited).

93 It follows that the application of the anti-abuse provision of the Parent-Subsidiary Directive requires that the condition relating to the presence of such a subjective element be satisfied.

94 In order to determine how that condition is to be assessed, it is important to note that any distribution of dividends covered by that directive is a transaction in which at least two companies are involved.

95 In particular, in the light of the definitions of ‘parent company’ and ‘subsidiary’ in Article 3(1) of that directive, which provides that the former has a holding of at least 10% in the capital of the latter, it is possible that a distribution of dividends results from a decision of the parent company.

96 Moreover, such a decision could form part of a series of decisions taken within the group to which the subsidiary distributing the dividends and its parent company belong.

97 If the condition relating to the presence of the subjective element referred to in paragraph 92 of the present judgment had to be assessed solely at the level of that subsidiary, by ascertaining whether it was or could have been aware of the fact that the same distribution was part of a chain of transactions, all or some of which are not genuine, put into place with the main purpose or one of its main purposes being that of obtaining a tax advantage that defeats the object or purpose of the Parent-Subsidiary Directive, the effectiveness of the anti-abuse provision of that directive and the objective of that provision, which reflects the general principle of prohibition of abuse of rights recalled in paragraph 46 of the present judgment, would be undermined.

98 Consequently, it is sufficient that the existence of the subjective element consisting of the intention to obtain an advantage from the EU legislation by artificially creating the conditions laid down for obtaining it is demonstrated with regard to at least one of the companies in the group participating in that chain of transactions or to the natural person who, as a result of the creation of that chain of transactions, benefits from that advantage, without it being necessary for that subsidiary itself to have been aware of that intention.

99 In the light of the foregoing, the answer to the sixth question is that the anti-abuse provision of the Parent-Subsidiary Directive must be interpreted as not precluding a national practice whereby the tax authorities of a Member State levy a withholding tax on dividends that a subsidiary resident in that Member State distributes to its parent company resident in another Member State, without establishing that that subsidiary was or could have been aware that that distribution was part of a chain of transactions, all or some of which were not genuine, put into place with the main purpose or one of its main purposes being that of obtaining a tax advantage that defeats the object or purpose of that directive, provided that it is demonstrated that at least one of the companies in the group participating in that chain of transactions or the natural person who, as a result of the creation of that chain of transactions, benefits from that advantage, was or could have been aware of the existence of that chain of transactions.

Costs

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

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

1. Article 1(2) and (3) of Council Directive 2011/96/EU of 30 November 2011 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States, as amended by Council Directive (EU) 2015/121 of 27 January 2015,

must be interpreted as not precluding, in principle, a national practice whereby the tax authorities of a Member State levy a withholding tax on dividends that a subsidiary resident in that Member State distributes to its parent company resident in another Member State on the ground that that parent company participates in a chain of transactions – all or some of which are not genuine – as a result of the creation of which those dividends are transferred to the natural or legal person who controls, directly or indirectly, all of the companies involved, even though that parent company actually carries on an economic activity and is therefore not a conduit company.

2. Article 1(2) and (3) of Directive 2011/96, as amended by Directive 2015/121,

must be interpreted as meaning that the following facts constitute relevant indications for the tax authorities of a Member State to establish the existence of a non-genuine arrangement: first, that the amounts transferred in a chain of transactions – all or some of which are not genuine – are similar, or even identical, to the amounts of dividends distributed by a subsidiary resident in that Member State to its parent company resident in another Member State and, second, that such transfers took place not in a short period of time after the distribution of those dividends, but on a continuous basis over a certain period, without prejudice to the need for the tax authorities to carry out an objective analysis of all the relevant facts and circumstances in order to ascertain whether the constituent elements of an abusive practice are present.

3. Article 1(2) and (3) of Directive 2011/96, as amended by Directive 2015/121, read in the light of the principle of proportionality,

must be interpreted as not precluding a national practice whereby the tax authorities of a Member State levy a withholding tax on dividends that a subsidiary resident in that Member State distributes to its parent company resident in another Member State, where the transactions regarded as not genuine have not taken place in the first Member State, but were carried out by natural or legal persons not resident in that Member State, including the person who benefits from a tax advantage through the exemption of those dividends as a result of the creation of all the transactions concerned, and irrespective of the stage in the chain of transactions at which the tax advantage is obtained.

4. Article 1(2) and (3) of Directive 2011/96, as amended by Directive 2015/121,

must be interpreted as not precluding a national practice whereby the tax authorities of a Member State levy a withholding tax on dividends that a subsidiary resident in that Member State distributes to its parent company resident in another Member State, without establishing that that subsidiary was or could have been aware that that distribution was part of a chain of transactions, all or some of which were not genuine, put into place with the main purpose or one of its main purposes being that of obtaining a tax advantage that defeats the object or purpose of Directive 2011/96, as amended, provided that it is demonstrated that at least one of the companies in the group participating in that chain of transactions or the natural person who, as a result of the creation of that chain of transactions, benefits from that advantage, was or could have been aware of the existence of that chain of transactions.

[Signatures]

* Language of the case: Lithuanian.