Keywords
Summary

Keywords

1. Free movement of capital – Provisions of the Treaty

(Arts 56(1) EC, 57(1) EC and 58 EC)

2. Free movement of capital – Restrictions

(Art. 56(1) EC)

3. Free movement of capital – Restrictions on movements of capital to and from third countries

(Art. 57(1) EC)

4. Free movement of capital – Restrictions – Tax legislation – Income tax

(Arts 56 EC and 58 EC)

Summary

1. As regards the movement of capital between Member and non-member States, Article 56(1) EC, in conjunction with Articles 57 EC and 58 EC, may be relied on before national courts and may render national rules that are inconsistent with it inapplicable, irrespective of the category of capital movement in question. Article 56(1) EC has direct effect, without a distinction needing to be drawn between the categories of capital movement which are covered by Article 57(1) EC and those which are not, the exception provided for in Article 57(1) EC not precluding Article 56(1) EC from conferring rights on individuals which they can rely on before the courts.

(see paras 26-27)

2. The concept of restrictions on movement of capital must be interpreted in the same manner with regard to relations between Member States and third countries as it is with regard to relations between Member States. Even if the liberalisation of the movement of capital with third countries may pursue objectives other than that of establishing the internal market, such as, in particular, that of ensuring the credibility of the single Community currency on world financial markets and maintaining financial centres with a world-wide dimension within the Member States, it is clear that, when the principle of free movement of capital was extended, pursuant to Article 56(1) EC, to movement of capital between third countries and the Member States, the latter chose to enshrine that principle in that article and in the same terms for movements of capital taking place within the Community and those relating to relations with third countries. Moreover, all the provisions introduced in the Treaty in the chapter concerning capital and payments show that, in order to take account of the fact that the objective and the legal context of the liberalisation of the movement of capital differ according to whether relations between the Member States and third countries or the free movement of capital between the Member States is in issue, the latter considered it necessary to provide safeguard clauses and derogations which apply specifically to the movement of capital to or from third countries.

(see paras 31-32, 38)

3. The words ‘restrictions which exist on 31 December 1993’ in Article 57(1) EC presuppose that the legal provision relating to the restriction in question have formed part of the legal order of the Member State concerned continuously since that date. In that regard, a national measure adopted after that date is not, by that fact alone, automatically excluded from the derogation laid down by that paragraph, that possibility having to be understood as encompassing provisions which, in substance, are identical to previous legislation or which are limited to reducing or eliminating an obstacle to the exercise of Community rights and freedoms in the earlier legislation. By contrast, provisions based on an approach which differs from that of the previous law and establishes new procedures are excluded from that derogation. Provisions which, whilst in substance identical to legislation which existed on 31 December 1993, reintroduced an obstacle to the free movement of capital which, following the repeal of the earlier legislation, no longer existed, are thus unaffected.

(see paras 48-49)

4. Articles 56 EC and 58 EC are to be interpreted as not precluding the legislation of a Member State which provides that exemption from income tax in respect of dividends distributed in the form of shares in a subsidiary may be granted only if the distributing company is established in a State within the European Economic Area (EEA) or a State with which a taxation convention providing for the exchange of information has been concluded by the Member State imposing the tax, where that exemption is subject to conditions compliance with which can be verified by the competent authorities of that Member State only by obtaining information from the State of establishment of the distributing company.

Although such legislation entails a restriction of the movement of capital between Member States and third countries, in that it discourages taxpayers residing in the Member State concerned from investing their capital in companies established outside the EEA, it may nevertheless be justified by the need to guarantee the effectiveness of fiscal supervision subject to compliance with the principle of proportionality, in that it must be appropriate for securing the attainment of the objective it pursues and must not go beyond what is necessary to attain it. It is true that a Member State cannot rely on the fact that it may be impossible to seek cooperation from another Member State in conducting inquiries or collecting information in order to justify a refusal to grant a tax advantage. However, that principle, which relates to restrictions on the exercise of freedom of movement within the Community, cannot be transposed in its entirety to movements of capital between Member States and third countries, since such movements take place in a different legal context from that of movements of capital between Member States. Therefore, where the legislation of a Member State makes the grant of a tax advantage dependent on satisfying requirements, compliance with which can be verified only by obtaining information from the competent authorities of a third country, it is, in principle, legitimate for that Member State to refuse to grant that advantage if, in particular, because that third country is not under any contractual obligation to provide information, it proves impossible to obtain such information from that country.

(see paras 42-43, 55-56, 58, 60, 63, 67, operative part)