Keywords
Summary

Keywords

Free movement of capital - Restrictions - Income tax exemption on dividends on shares paid to natural persons - Limited to shares in companies whose seat is on national territory - Not permissible - Justification - None

(Council Directive 88/361, Art. 1(1))

Summary

$$Article 1(1) of Directive 88/361 for the implementation of Article 67 of the Treaty precludes a legislative provision of a Member State which makes the grant of an exemption from the income tax payable on dividends paid to natural persons who are shareholders subject to the condition that those dividends are paid by a company whose seat is in that Member State.

Such a provision has the effect of dissuading Community nationals residing in the Member State concerned from investing their capital in companies which have their seat in another Member State and also has a restrictive effect as regards such companies in that it constitutes an obstacle to the raising of capital in the Member State concerned; the restriction cannot be justified by any overriding reason in the general interest such as the need to preserve the cohesion of the tax system.

The position is not in any way changed by the fact that the taxpayer applying for such a tax exemption is an ordinary shareholder or an employee who holds shares giving rise to the payment of dividends under an employees' savings plan.

( see paras 34-35, 56, 62, 67 and operative part )