Free movement of capital – Restrictions
(EC Treaty, Arts 73b and 73d (now Arts 56 EC and 58 EC))
Article 73b of the Treaty (now Article 56 EC), in conjunction with Article 73d of the Treaty (now Article 58 EC), must be interpreted as precluding a Member State which exempts from corporation tax rental income received in its territory by charitable foundations which, in principle, have unlimited tax liability if they are established in that Member State, from refusing to grant the same exemption in respect of similar income to a charitable foundation established under private law solely on the ground that, as it is established in another Member State, that foundation has only limited tax liability in its territory.
It is not a requirement under Community law for Member States automatically to confer on foreign foundations recognised as having charitable status in their Member State of origin the same status in their own territory. However, where a foundation recognised as having charitable status in one Member State also satisfies the requirements imposed for that purpose by the law of another Member State and where its object is to promote the very same interests of the general public, which it is a matter for the national authorities of that other State, including its courts, to determine, the authorities of that Member State cannot deny that foundation the right to equal treatment solely on the ground that it is not established in its territory.
Such a difference in treatment cannot be justified by the pursuit of objects connected with the promotion at national level of culture and high-level training where the national legislation in question is not based on the premiss that the activities pursued by charitable foundations must benefit the national general public.
Moreover, such legislation cannot be justified by the need to ensure effective fiscal supervision. Admittedly, before granting a foundation a tax exemption, a Member State is authorised to apply measures enabling it to ascertain in a clear and precise manner whether the foundation meets the conditions imposed by national law in order to be entitled to the exemption and to monitor its effective management. However, while it may prove more difficult to carry out the necessary checks where foundations are established in other Member States, these are disadvantages of a purely administrative nature which are not sufficient to justify a refusal on the part of the authorities of the State concerned to grant such foundations the same tax exemptions as are granted to foundations of the same kind, which, in principle, have unlimited tax liability in that State.
Furthermore, where there is no direct link between a tax advantage consisting of exemption from tax of rental income and the offsetting of that advantage by a particular tax levy, the restriction in question cannot be justified by the need to protect the cohesion of the tax system.
The same applies with regard to the need to protect the basis of tax revenue, since reduction in tax revenue cannot be regarded an overriding reason in the public interest which would justify a measure which is, in principle, contrary to a fundamental freedom.
As regards the fight against crime, the fact that a foundation is established in another Member State cannot give rise to a general assumption of criminal activity. Moreover, to preclude such foundations from entitlement to a tax exemption when a number of measures are available to monitor their accounts and activities may be considered to be a measure which goes beyond what is necessary to combat crime.
(see paras 39-40, 45, 47-48, 55-56, 58-62, operative part)