Provisional text
OPINION OF ADVOCATE GENERAL
LAULHÉ SHAELOU
delivered on 5 November 2026 (1)
Case C‑533/25
F Corporation
v
Bundeszentralamt für Steuern
(Request for a preliminary ruling from the Bundesfinanzhof (Federal Fiscal Court, Germany))
( Reference for a preliminary ruling – Freedom of establishment – Free movement of capital – Articles 49 and 65 TFEU – Agreement between the Federal Republic of Germany and Japan for the avoidance of double taxation with respect to taxes on income and to certain other taxes – Withholding of capital gains tax – Restriction – Justification – Overriding reasons of public interest – Refund – Burden of proof )
I. Introduction
1. Under EU internal market law, the Court of Justice typically applies a centre of gravity (or preponderance) test to rule on cases where a single national measure restricts multiple fundamental freedoms. By applying that test, the Court isolates the dominant freedom as the primary – and often exclusive – analytical lens for assessing the measure’s compatibility with EU internal market law. Consequently, any effect that such a measure may have on another fundamental freedom is generally considered incidental, subordinate or merely the unavoidable consequence of the restriction placed on the predominant freedom. In such instances, those secondary restrictions generally do not warrant independent examination.(2) The Court will only assess a measure under multiple freedoms – considered together or in turn – if no single freedom predominates, or if the measure produces distinct, unrelated effects. (3)
2. That approach has been widely discussed within the Court (4) and in academic works. (5) It is now enshrined in a line of settled case-law. (6)
3. Such an approach is justified not only by considerations of judicial economy and proportionality, but also by the internal logic and systemic coherence of internal market law. On the one hand, if a national measure is found to be incompatible with the fundamental freedom which is most affected, compliance with a secondary freedom will not ‘cure’ the underlying incompatibility with EU law. On the other hand, if a national measure is found to be compatible with the predominant freedom, then, save proof to the contrary, it must be presumed that any effect on the secondary freedoms will be either negligible or justified.
4. If a national measure does not restrict trade in relation to the predominant freedom, it may be assumed that any incidental effect on secondary freedoms is, at most, too remote, indirect or uncertain to warrant legal significance.(7) Conversely, if the restrictive effects on the primary freedom are justified by an overriding reason in the public interest, any inevitable ancillary or spillover effects on other freedoms should be deemed permissible. (8) To hold otherwise would effectively undermine the protection of the general public interest at stake.
5. It follows from the foregoing that, when a national measure is alleged to affect two or more freedoms, the identification of the predominant freedom constitutes, usually, a crucial step in the legal assessment carried out by the national courts or EU Courts.
6. That said, it should also be noted that, notwithstanding the fact that the wording of the Treaty provisions on the four freedoms varies, the Court’s interpretation of each of those freedoms is broadly similar. In particular, the examination of whether the measure constitutes a restriction on trade and, if so, whether it can be justified is, at least in the abstract, equivalent. Indeed, those provisions constitute, first and foremost, a manifestation of the EU principle of non-discrimination based on nationality. (9) They aim to break down national barriers, guarantee equal market access across Member States and create a single, integrated European market characterised by a free flow of products and factors of production. (10) An obvious consequence of their common fabric is that, when a national measure is assessed against those freedoms, the analysis will frequently yield an identical legal outcome, regardless of the specific freedom considered. (11)
7. Exceptions to such equivalence, however, do exist, and the final outcome of that assessment can occasionally vary depending on the freedom concerned. In particular, divergences may occur when the Treaty provisions on free movement of capital are applicable. In fact, those provisions are, in principle, applicable to both intra-EU movements and movements between the Member States and third countries, unlike those on free movement of goods, services and workers. In particular, Article 63(1) TFEU provides that ‘… all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited’. (12)
8. The present case offers an example of the situations where the application of the provisions relating to one or another fundamental freedom may lead to a different assessment of the compatibility of a national measure with EU internal market law. In its request for a preliminary ruling, the Bundesfinanzhof (Federal Fiscal Court, Germany) has referred four questions to the Court of Justice with a view to determining whether national legislation introducing a definitive withholding tax on dividends paid by a company established in that Member State to companies incorporated in a third country is compatible with EU rules on the freedom of establishment and/or the free movement of capital.
II. Legal framework
A. European Union law
9. Article 5(1) 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, (13) as amended, provided:
‘Profits which a subsidiary distributed to its parent company shall, at least where the latter holds a minimum of 25% of the capital of the subsidiary, be exempt from withholding tax.’
B. German law
10. In its request for a preliminary ruling, the referring court refers, in particular, to the following provisions of the Körperschaftsteuergesetz (Law on Corporation Tax; ‘the KStG’): Paragraph 2, entitled ‘Limited tax liability’; Paragraph 8b, entitled ‘Shareholding in other companies and associations’; Paragraph 31, entitled ‘Obligation to declare income, assessment and levying of corporation tax’; and Paragraph 32, entitled ‘Special provisions for the deduction of tax’.
11. The referring court also refers to the following provisions of the Einkommensteuergesetz (Law on Income Tax; ‘the EStG’): Paragraph 20, entitled ‘Capital gains’; Paragraph 36, entitled ‘Creation and repayment of income tax’; Paragraph 43, entitled ‘Capital gains with deduction of tax’; Paragraph 43a, entitled ‘Calculation of tax on capital gains’; Paragraph 43b, entitled ‘Calculation of tax on capital gains for certain companies’; Paragraph 44, entitled ‘Payment of tax on capital gains’; Paragraph 49, entitled ‘Income subject to limited tax liability’; and Paragraph 50d, entitled ‘Special features in the case of double taxation conventions’.
1. International law
12. Article 10 of the Convention between the Federal Republic of Germany and Japan for the avoidance of double taxation in the taxation of income and certain other taxes of 22 April 1966 (‘the 1966 Convention’) provides:
‘1. Dividends from a company resident in one contracting State to a person resident in the other contracting State are taxable in the latter State.
2. However, such dividends may also be taxed in the Contracting State of which the company paying the dividends is a resident, and according to the laws of that State, but the tax so charged shall not exceed 15% of the gross amount of the dividends.’
13. Article 23(2) of the 1966 Convention states:
‘Taking into consideration the provisions of the Japanese law on the offsetting of taxes payable abroad to Japanese tax, the German tax which is to be paid directly or by withholding at source in accordance with this convention shall be offset against the Japanese tax.’
III. Facts, procedure and the questions referred
14. The applicant in the main proceedings, F Corporation (‘the applicant’), is a company established in Japan. It is the sole shareholder of a limited liability company (‘the GmbH’) established in the Federal Republic of Germany.
15. On the basis of shareholder resolutions to that effect, the GmbH paid dividends to the applicant for the financial years 2008, 2009 and 2010.
16. The applicant had previously been granted a partial exemption certificate by the Bundeszentralamt für Steuern (Federal Central Tax Office; ‘the BZSt’), which is both the defendant at first instance and the respondent at second instance in the main proceedings, pursuant to the first sentence of Paragraph 50d(2) of the EStG, on 7 July 2008. Due to a restriction on the withholding tax on capital gains laid down in Article 10(2) of the 1966 Convention, the German tax on capital gains was to be withheld on the dividends of the GmbH at a rate of 15%, instead of 25%.
17. The GmbH therefore withheld the corresponding amount of tax on capital gains for the years 2009, 2010 and 2011. It declared and paid those amounts to the relevant Finanzamt (tax office; ‘the FA’). In accordance with Paragraph 32(1)(2) of the KStG, the withheld capital gains tax had the effect of discharging the corporation tax liability of the applicant, who is subject to limited taxation, in respect of the dividends received.
18. In accordance with Article 23(2) of the 1966 Convention, in conjunction with Article 69 of the Japanese Law on Corporation Tax, the German tax on capital gains levied on dividends as corporation tax was in principle eligible to be offset against the Japanese corporation tax.
19. The German tax on capital gains levied pursuant to Article 10(2) of the 1966 Convention as corporation tax for distributions prior to 1 April 2009 was fully eligible to be offset against the Japanese corporation tax that applied to the dividends received from the GmbH.
20. From 1 April 2009, the relevant Japanese legislation was amended. Under the new provisions, the applicant’s dividends for the years at issue were covered by a tax exemption: 5% of the dividend amount continued to be included in the applicant’s income subject to corporation tax; the remaining 95% was exempted from that tax. As from that time, due to the tax exemption, almost no Japanese corporation tax liability accrued on the dividends, resulting in it being impossible to offset the amounts paid as capital gains tax against the Japanese corporation tax, as provided for in Article 23(2) of the 1966 Convention.
21. On 20 December 2013, the applicant made an application to the FA for a certificate of exemption, in order to obtain the refund of the capital gains tax withheld. The applicant claimed that the definitive withholding of the German tax on capital gains in respect of dividends of the GmbH as from 1 April 2009 infringed the free movement of capital, as it could no longer offset the German tax on capital gains, due to changes in Japanese tax law. It claimed that it was disadvantaged compared to resident parent corporations, for which, in accordance with Paragraph 8b(1) of the KStG, the dividend is also 95% tax exempt, but the tax on capital gains can be offset against the corporation tax and refunded.
22. The FA rejected the applicant’s initial application and its appeal.
23. Next, the applicant brought an action before the Finanzgericht Düsseldorf (Fiscal Court, Düsseldorf, Germany). That court dismissed the action on the ground, inter alia, that, in the case at hand, the principle of free movement of capital was superseded by the overriding freedom of establishment, which the applicant could not invoke since it was established in a third country.
24. The applicant lodged an appeal on a point of law (‘Revision’) at second and final instance before the Bundesfinanzhof (Federal Fiscal Court, Germany). In those proceedings, it argued, inter alia, that the final levying of tax on capital gains pursuant to Paragraph 32(1)(2) of the KStG, in conjunction with Article 10(2) of the 1966 Convention, is an unjustified restriction of the free movement of capital.
25. The Bundesfinanzhof (Federal Fiscal Court), harbouring doubts as to the proper interpretation of the relevant provisions of EU law, decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) Does the freedom of establishment in Article 49 TFEU supersede the free movement of capital in Article 63 TFEU as the assessment criterion of Paragraph 32(1)(2) of the [KStG] in conjunction with Article 10(2) of the [1966 Convention], since[:]
[(a)] on the one hand – [those] governance arrangements set out a final (definitive) withholding of German capital gains tax of 15% on the dividends of the [GmbH] irrespective of the size of the shareholding of a Japanese parent corporation[;]
[(b)] but – on the other hand – the restriction claimed by the applicant arising from the withholding tax on capital gains can only occur because the applicant holds at least 25% of the distributing GmbH and is claiming a full refund of the German capital gains tax in addition to claiming a Japanese tax exemption amounting to 95% of the dividends[;]
so that the applicant consequently seeks full relief on dividends for the merger with the GmbH, similar to that in the internal market, as within the scope of Article 5 of [Directive 90/435]?
(2) If the free movement of capital is not displaced as the assessment criterion:
Does the final levying of German capital gains tax on the dividends pursuant to Paragraph 32(1)(2) of the KStG in conjunction with Article 10(2) of the [1966 Convention] in the circumstances of the case constitute a restriction of the applicant’s free movement of capital caused by the Federal Republic of Germany, if
[(a)] on the one hand – the German tax on capital gains levied on the dividend can also be offset and refunded in the tax assessment of resident parent companies from 1 April 2009 onwards[;] and
[(b)] on the other hand – the applicant was able to fully offset the German tax on capital gains on the dividends against the Japanese [corporation] tax prior to 1 April 2009 in accordance with Article 23(2) of the [1966 Convention;]
but since 1 April 2009 this has been unsuccessful solely because the applicant’s dividends from the GmbH are 95% tax-exempt due to a newly introduced Japanese tax exemption?
(3) If a restriction on the free movement of capital is to be assumed:
(a) Can the definitive levying of the German capital gains tax pursuant to Paragraph 32(1)(2) of the KStG in conjunction with Article 10(2) of the [1966 Convention] be justified by overriding reasons of public interest in the form of an allocation of taxation rights for the dividend in accordance with Article 10(2) of the [1966 Convention]?
(b) Can the definitive levying of the German capital gains tax be justified by the fact that the applicant cannot claim an exemption from withholding tax on capital gains in addition to the tax exemption on the dividends in Japan, by way of a double tax benefit?
(4) If the definitive levying of the German capital gains tax constitutes an inadmissible and unjustified restriction on the free movement of capital:
Is it compatible with Article 63 TFEU if the refund of the capital gains tax to the applicant is made dependent upon the conditions that
[(a)] in addition to the presentation of a German tax certificate regarding the withholding of capital gains tax, the applicant must also specify in euro the amount of German capital gains tax that cannot be offset against Japanese [corporation] tax in Japan in the reference year of the dividends at issue, so that the refund can only be granted if the details from the applicant have been verified by the [BZSt] or if these details have been confirmed by the BZSt by means of an exchange of information with the Japanese tax authorities,
[(b)] whereas a resident parent company, for the purpose of offsetting the capital gain tax in the German corporate income tax assessment, need only present a certificate from the German tax authorities concerning the withholding and payment of the capital gains tax?’
26. Written observations have been submitted by the applicant, the German, Spanish, French, Italian and Polish Governments, and the European Commission.
IV. Analysis
27. The present case concerns national legislation providing for a definitive withholding tax on dividends paid by a company established in that Member State to companies incorporated in a third country (‘the national legislation at issue’). The referring court is seised of a dispute between a foreign company and the national tax authorities, in which the former contests the compatibility of the national legislation at issue with the EU internal market rules.
28. By its four questions, the referring court essentially seeks clarification in respect of four areas of contention between the parties: the internal market freedom applicable in the case (first question); the restrictive nature of the national legislation at issue (second question); the justification for the restriction (third question); and, last, the standard of proof required for the refund of amounts unduly paid (fourth question).
29. I will deal with those issues in turn.
A. First question
30. By its first question, the referring court asks, in essence, whether national legislation under which dividends paid by a resident company to its parent company established in a third country are subject to a definitive withholding tax should be assessed in the light of the freedom of establishment guaranteed by Article 49 TFEU or of the free movement of capital guaranteed by Article 63 TFEU.
31. At the outset, I should point out that, in general, the distinction between those two freedoms is rather clear.
32. The concept of ‘establishment’ allows nationals of a Member State to participate, on a stable and continuous basis, in the economic life of a Member State other than their State of origin and to profit therefrom. That concept thus involves the actual pursuit of an economic activity through a fixed establishment in the host Member State for an indefinite period. Consequently, it presupposes actual establishment of the operator concerned in that Member State and the pursuit of a genuine economic activity there. In particular, the freedom of establishment covers the situation where nationals of a Member State acquire a holding in the capital of a company established in another Member State, allowing them to exert a definite influence on that company’s decisions and to determine its activities. (14)
33. By contrast, the rules on free movement of capital apply to all forms of capital movement and payments. They apply, in particular, to investments carried out with a view to making a financial investment, without any intention of influencing the management and control of the undertaking. In other words, they concern cross-border movement of money and investments for financial return. (15)
34. That said, it is common ground that national legislation governing taxation of dividends paid by subsidiaries to their parent company can, potentially, affect both the establishment of companies in the Member State in question and financial investments by foreign companies in local companies. Indeed, the Court has consistently stated that ‘the tax treatment of dividends may fall within the scope of Article 49 TFEU on freedom of establishment and Article 63 TFEU on the free movement of capital’. (16)
35. Yet, as explained in the introduction to the present Opinion, only the free movement of capital has a global reach, since it applies to both movements within the European Union and movements between Member States and third countries. Freedom of establishment is, instead, an ‘intra-EU’ freedom, as it applies only to movements across Member States. As the referring court points out in its request for a preliminary ruling, that is why – since the applicant is a company established outside the European Union – the dispute before it may hinge on the identification of the internal market freedom against which the national legislation at issue is to be assessed.
36. The applicant in the main proceedings, being established in Japan, can rely on the EU rules on free movement of capital, but not on those on freedom of establishment. Therefore, the present case is an example of a situation in which, in accordance with the legal framework set out in the introduction to the present Opinion, it is essential to identify the predominant freedom – if there is one.
37. With respect to measures such as that at issue, which concern the taxation of the payment of dividends, the Court has – given the homogeneous and unidimensional nature of those measures and of their effects on the companies affected – invariably applied the centre of gravity test. Two different approaches to applying that test have thus far emerged in the relevant case-law.
38. The first approach involved an in concreto review of the matter, focused on the specific facts of the case. The second approach, by contrast, required an in abstracto review of the scope, object and aim of that legislation. For some time, however, the precise boundaries between the two approaches appeared unclear to many observers. (17)
39. The Court has, however, progressively clarified the applicable legal framework. It has held that, in principle, it is the purpose of the national legislation concerning the tax treatment of dividends that must be examined in order to establish whether that legislation falls within the scope of Article 49 TFEU on freedom of establishment and/or of Article 63 TFEU on the free movement of capital. In particular, with reference to its previous case-law, in Test Claimants in the FII Group Litigation, the Court held that national legislation intended to apply only to shareholdings which enable the holder to exert a definite influence on a company’s decisions, and to determine its activities, falls within the scope of the freedom of establishment. By contrast, national legislation which applies to shareholdings acquired solely with the intention of making a financial investment without any intention of influencing the management and control of the undertaking must be examined exclusively in the light of the free movement of capital. (18)
40. Accordingly, the analysis in abstracto should normally prevail. The approach in concreto is applicable only ‘in the case of legislation from whose purpose it cannot be determined whether it falls predominantly within the scope of Article 49 TFEU or Article 63 TFEU’. In such situations of uncertainty, the Court has held that, in so far as the national legislation relates to dividends which originate in a Member State, ‘account should be taken of the facts of the case in point in order to determine whether the situation to which the dispute in the main proceedings relates falls within the scope of Article 49 TFEU [and/or] of Article 63 TFEU’. That is not the case, however, in situations involving the tax treatment of dividends originating in a third country. In those situations, it is sufficient to examine the purpose of national legislation in order to determine whether the tax treatment of such dividends falls within the scope of the provisions on the free movement of capital, as national legislation relating to the tax treatment of dividends originating in third countries cannot fall within the scope of Article 49 TFEU. (19)
41. Those principles have been confirmed and refined in subsequent case-law, including in the judgment in Emerging Markets. (20) In that case, the reference to the Court originated from a dispute between an investment fund with its registered office in a third country (in casu, the United States) and the Polish tax authorities. The dispute concerned the refusal by those authorities to recognise and refund an overpayment of corporation tax payable at a flat rate on the dividends distributed to the applicant by companies with their registered office in Poland. In its judgment, the Court stated, unambiguously, that ‘national rules relating to the tax treatment of dividends from a third country which do not apply exclusively to situations in which the parent company exercises decisive influence over the company paying the dividends must be assessed in the light of Article 63 TFEU. A company established in a Member State may therefore rely on that provision in order to call into question the legality of such rules, irrespective of the size of its investment in the company paying dividends established in a third country’. The Court then went on to add that ‘that assessment of the tax treatment of dividends paid by a company of a non-Member country to a person established in a Member State is equally applicable to the situation in which dividends are paid by a company established in a Member State to one of its shareholders established in a non-Member country’. (21)
42. It is true – as noted by the German Government – that, in that case, the applicant only held a minority shareholding in the resident companies, as opposed to the present case where the applicant is the sole shareholder of the resident company. However, that judgment makes it abundantly clear that such a factor was not the decisive one in the eyes of the Court. The passages referred to in the preceding point are explicit in that regard. In addition, the Court found, in the judgment in Itelcar, that the free movement of capital may also be applicable in situations where a company has significant powers of control over another, going beyond those normally flowing from its shareholding. (22)
43. Subject to confirmation by the referring court, the same conclusion should be reached in respect of national legislation such as that at issue in the present proceedings. The wording and context of the relevant provisions of national law (in particular, Paragraph 32(1)(2) of the KStG) indicate – if my understanding is correct – that the definitive withholding tax imposed on outgoing dividends is by no means linked to a specific size of (or powers flowing from) the shareholding held by the foreign company in the resident company. Those provisions, thus, have a horizontal scope, applying to both situations in which the foreign company exercises some form of control over the local company, and those in which the investment has a purely passive character.
44. I would note, in passing, that – as I understand it – the above is also true of the provisions of the 1966 Convention, and in particular Article 10(2) thereof. Those provisions, too, have a horizontal character, being applicable irrespective of the size or significance of the shareholding. In any event, the provisions of a bilateral agreement such as the 1966 Convention cannot have the effect of limiting the scope of a right which stems directly from the EU Treaties. (23)
45. As the Court has consistently stated, in the absence of any unifying or harmonising measures at EU level, the Member States retain the power to define, by conventions or unilaterally, the criteria for allocating their powers of taxation, particularly with a view to eliminating double taxation. In that context, Member States may establish, either unilaterally or by conventions concluded with other Member States, procedures intended to prevent or mitigate such economic double taxation or series of charges to tax. Nevertheless, by doing that, Member States are not entitled to impose measures that contravene the freedoms of movement guaranteed by the EU Treaties. (24)
46. Accordingly, if my reading of the national legislation at issue is accurate – a task that, naturally, belongs to the referring court – the internal market provisions relevant in the present case, in line with the case-law discussed in points 39 to 41 above, are those on the free movement of capital.
47. Admittedly, the Court has consistently stated that those provisions cannot be interpreted in a manner that would ‘enable economic operators who do not fall within the limits of the territorial scope of freedom of establishment to profit from that freedom’. (25) That means that companies established in a third country cannot rely on the ‘free movement of capital’ as a back door in order to establish themselves in the internal market.
48. That is clearly not the case here. The national legislation at issue concerns the tax treatment of dividends in general and, as far as I can see, is by no means intended to govern access, by foreign companies, to the national market. In addition, the dispute at issue too seems to be of a purely financial nature, being limited to the repayment of taxes levied in alleged breach of EU law. There is no indication in the case file that the dispute might also concern the attempt, by the applicant, to rely on the free movement of capital in order to circumvent or render ineffective the legislation of a Member State governing specific conditions under which some type of economic activity may be provided, and the market may be accessed, in that Member State.(26)
49. The mere fact that, with regard to the payment of dividends, foreign companies would receive, in that Member State, treatment largely equivalent to that enjoyed by EU-based companies pursuant to Directive 90/435 (27) is, in itself, insufficient to call that conclusion into question. That fact is a consequence, first and foremost, of the choice made by the national legislature on this matter. The possibility for an operator, who claims to be suffering discrimination, to rely on the relevant Treaty rules on free movement of capital cannot be made dependent on such contingent factors, which relate to the choices made by the national legislatures.
50. It would, naturally, be different if the tax authorities were to establish that the companies in question (the foreign parent company and/or the local subsidiary) have engaged in abusive or fraudulent practices. (28) Nevertheless, there is nothing in the case file to suggest any such practices.
51. Last, in response to some of the arguments put forward by certain Member States who submitted observations, I would point out that the applicability of Article 63 TFEU does not require, and cannot be made conditional upon, reciprocity from the third countries in question. (29) Nor is the application of that provision based on the existence, in the third country, of a similar legal framework. (30)
52. In the light of the above, I take the view that national legislation under which dividends paid by a company resident in a Member State to its parent company established in a third country are subject to a definitive withholding tax must be assessed in the light of the free movement of capital guaranteed by Article 63 TFEU, where that legislation applies irrespective of the size or legal significance of the shareholding held by the latter.
B. Second question
53. By its second question, the referring court asks, in essence, whether national legislation providing for a withholding tax with discharging effect on dividends paid by resident companies to companies established in a third country, which is not applicable to dividends paid by resident companies to other resident companies, constitutes a restriction on the free movement of capital which is, in principle, prohibited by Article 63(1) TFEU.
54. In order to give a complete answer to that question, two issues must be examined. First, it is necessary to consider the wording of the question referred itself and to establish whether the national legislation at issue gives rise to a restriction. If that is so, a second, follow-up question arises, which has not been expressly asked by the referring court, but was discussed by some of the parties in their submissions: whether such a restriction is lawful since it falls within the scope of the so-called standstill clause set out in Article 64(1) TFEU.
1. Existence of a restriction for the purposes of Article 63 TFEU
55. Article 63 TFEU – which prohibits all restrictions on the movement of capital and payments between Member States and between Member States and third countries – has a broad scope. It protects all forms of capital movement and payments, including portfolio investments (such as buying shares), and direct investments (such as acquiring control of companies), and acquisition of real estate. (31) In particular, the Court has held that national legislation which is liable to discourage non-residents from making investments in a Member State or to discourage that Member State’s residents from doing so in other States constitutes a restriction on the free movement of capital. (32)
56. In the present case, it follows from the order for reference that the applicant, whose registered office is in Japan, is subject to limited tax liability in Germany in respect of its income from dividends received from its German subsidiary. Although the rate of the tax levied on dividends is, under German law, generally set at 25%, that rate is, in the present case, reduced to 15% pursuant to the 1966 Convention.
57. The tax in question is levied by way of a withholding tax. In this instance, since the beneficiary company is incorporated in a third country, the withholding tax has the effect of discharging the tax liability, that is to say, it is definitive. Unlike resident companies, which are subject to unlimited tax liability, companies subject to limited tax liability, such as the applicant, cannot offset the withholding tax on capital income against German corporation tax, nor can they benefit from the possibility of obtaining a tax refund on capital income provided for under national law.
58. In my view, legislation such as that at issue may have the effect of discouraging companies established outside the European Union from making investments in Germany. For tax purposes, those companies are not treated like resident companies: the withholding tax on dividends is definitive and cannot be offset or refunded as in the case of resident companies. Foreign companies are clearly worse off than resident companies, despite being, in that respect, in a comparable situation.
59. The Court has already found that, where a Member State, either unilaterally or by way of a convention, imposes a charge to tax on the income not only of resident companies but also of non-resident companies from dividends which they receive from a resident company, the situation of those non-resident companies becomes comparable to that of resident companies. (33)
60. The Court has found that it is solely because of the exercise by that State of its power of taxation that, irrespective of any taxation in another Member State, a risk of a series of charges to tax or economic double taxation may arise. In such a case, in order for non‑resident companies receiving dividends not to be subject to a restriction prohibited in principle by Article 63 TFEU, the State in which the company making the distribution is resident is obliged to ensure that, under its relevant national law, non-resident companies are subject to the same treatment as resident companies. (34) That is of course true – I should add – regardless of whether the non-resident company is established in another Member State or in a State outside the European Union. (35)
61. However, the German Government argues that, in situations such as that at issue, any difference in treatment between resident and non-resident companies would be neutralised by the provisions of the 1966 Convention. In accordance with Article 23(2) of that convention, the withholding tax is to be offset against the Japanese tax. The German Government adds that that is what happened up to 1 April 2009, when a tax exoneration was introduced in Japanese law which, de facto, rendered that provision of the 1966 Convention ineffective. Yet, the German Government contends that it cannot be required to amend its rules in order to reflect a change in the laws of a third country.
62. That argument fails to convince me.
63. The Court has accepted that ‘a Member State might succeed in ensuring compliance with its obligations under the Treaty by concluding a convention for the avoidance of double taxation with another Member State’. However, it emphasised that ‘it is necessary for that purpose that application of such a convention should allow the effects of the difference in treatment under national legislation to be compensated for.’ (36)
64. In particular, the Court made clear that ‘the difference in treatment between dividends distributed to companies established in other Member States and those distributed to resident companies does not disappear unless the tax withheld at source under national legislation can be set off against the tax due in the other Member State in the full amount of the difference in treatment arising under the national legislation’. The Court stresses that, in order to attain the objective of neutralisation, ‘the application of the method of deduction should enable the tax on dividends levied by the Member State from which the dividends are paid to be deducted in its entirety from the tax due in the Member State of residence of the taxpayer receiving those dividends in such a way that, if those dividends are ultimately taxed more heavily than the dividends paid to taxpayers residing in the Member State from which those dividends are paid, that heavier tax burden may no longer be attributed to that Member State, but to the State of residence of the recipient taxpayer which exercised its power to impose taxes’. (37)
65. Once again, those principles are also clearly applicable to a situation such as that at issue, in which the double taxation convention concerns a Member State and a third country. (38) Against that background, the national legislation at issue, applied in conjunction with the 1966 Convention, falls short of meeting the requirement laid down in the Court’s case-law on Article 63 TFEU.
66. In fact – as the situation of the applicant in the main proceedings illustrates – those rules do not ensure that, in each case, the restriction on the free movement of capital is fully neutralised. Where the tax payable by the companies in their country of residence is non-existent or insufficient to allow for the withholding tax to be offset in full, the withholding tax paid in Germany is not neutralised. This means that, in those situations, a non-resident company is in a less favourable position than a resident company.
67. As a matter of principle, Member States are under no obligation to adapt their domestic rules to accommodate regulatory changes in other jurisdictions – including third countries – solely to mitigate systemic disparities arising from the interaction between different national tax systems. (39) However, in the present case the disparity in the tax treatment of resident and non-resident companies flows from the very text of the German rules. Where such a disparity inherently conflicts with Article 63 TFEU, any attempt by a Member State to neutralise that restriction through a bilateral treaty requires that State to ensure that that treaty achieves its objective under all circumstances. (40) Compliance with the EU rules on free movement of capital cannot be made contingent on the domestic legislation of a third country.(41)
68. It follows from the foregoing that national legislation such as that at issue gives rise to a restriction on the free movement of capital under Article 63 TFEU. As the Court has consistently held, less favourable treatment by a Member State of dividends paid to non-resident companies, compared to the treatment of dividends paid to resident companies, is liable to deter companies established in other States from undertaking investments in that Member State. (42)
69. That said, the German Government argues that, were the Court to conclude that the national legislation at issue gives rise to a restriction on the free movement of capital, such a restriction would nonetheless be compatible with EU law in so far as it falls within the scope of the ‘standstill’ (or ‘grandfathering’) clause set out in Article 64(1) TFEU.
2. The standstill clause set out in Article 64(1) TFEU
70. In accordance with Article 64(1) TFEU, ‘the provisions of Article 63 shall be without prejudice to the application to third countries of any restrictions which exist on 31 December 1993 under national or Union law adopted in respect of the movement of capital to or from third countries involving direct investment – including in real estate – establishment, the provision of financial services or the admission of securities to capital markets. …’
71. That provision was introduced by the Maastricht Treaty, when the drafters of the Treaties decided to give, in principle, erga omnes effect to the rules on free movement of capital, and to do so without requiring reciprocity from third countries. The standstill clause was designed to act as a sort of ‘safety valve’ for the system, allowing the Member States and the European Union to preserve existing protections in relation to certain transactions or sectors of the market. At the same time, however, it is clear that that provision also enshrines a ‘roll-back’ principle: once a restriction is removed, it cannot be reintroduced. (43)
72. The application of Article 64(1) TFEU requires two cumulative conditions to be satisfied: one of a temporal nature and one of a substantive nature.
73. As regards, first, the temporal condition, Article 64(1) TFEU requires the restriction to ‘exist on 31 December 1993 under national or Union law’. This means, clearly, that ‘the legal provisions relating to the restriction in question have formed part of the legal order of the Member State concerned continuously since that date’. (44)
74. In the light of the very wording of Article 64(1) TFEU – which refers to ‘restrictions’, rather than to ‘measures’ or ‘legislation’ (45) – the Court has rejected a narrow and overly formalistic reading of that provision. It has thus held that a ‘national measure adopted after that date is not, by that fact alone, automatically excluded from the derogation laid down in the EU measure in question. … restrictions laid down in provisions adopted after that date which, in essence, are identical to previous legislation or which are limited to reducing or eliminating an obstacle to the exercise of rights and freedoms of movement in previous legislation can be treated as equivalent to [existing restrictions]. By contrast, legislation based on an approach which differs from that of the previous law and establishes new procedures cannot be treated as legislation existing on that date’. (46)
75. In the present case, it is for the referring court to determine whether the restriction at issue has existed – in the national legislation currently in force and/or in previous legislation essentially equivalent to it – since 31 December 1993 without interruption. (47) I hardly need to point out that the assessment to be made by the referring court in that regard should focus exclusively on the object and effect of the relevant national legislation, and how that legislation has, or may have, changed over time. The crucial element in that regard is not simply whether, throughout that period, foreign companies such as the applicant were treated less favourably than local companies. The question is whether the legal mechanism that gave rise to the restriction at issue remained unaltered. I would only add that, for the reasons explained above, the possible impact caused by amendments to Japanese tax laws on the situation of one or more taxpayers is immaterial in this context.
76. Second, as regards the substantive condition, it must be recalled that Article 64(1) TFEU sets out an exhaustive list of capital movements to which Article 63 TFEU is liable not to apply. As a derogation from the fundamental principle of the free movement of capital, that list must be interpreted strictly. (48) However, as follows from the term ‘involving’ in Article 64(1), it is not necessary that the restrictive national measure pursue the aim of restricting capital movement in one or more of the categories listed in that provision. It is, in fact, sufficient that the national measure has a restrictive effect on the capital movement in question. (49)
77. The list set out in Article 64(1) TFEU includes capital movements involving ‘direct investment’. Since the term ‘direct investment’ is not defined in the Treaties, the Court has defined that concept by reference to the nomenclature of the capital movements set out in Annex I to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty. (50)
78. In the light of that instrument, the Court has consistently held that the concept of ‘direct investment’ in EU law ‘concerns investments of any kind undertaken by natural or legal persons and which serve to establish or maintain lasting and direct links between the persons providing the capital and the undertakings to which that capital is made available in order to carry out an economic activity’. It has also held that, as regards shareholdings in new or existing undertakings, ‘the objective of establishing or maintaining lasting economic links presupposes that the shares held by the shareholder enable [it], either pursuant to the provisions of the national laws relating to companies limited by shares or in some other way, to participate effectively in the management of that company or in its control’. (51)
79. Having clarified this, a question that could arise as regards the material scope of Article 64(1) TFEU is whether that provision requires some form of specificity of the national legislation in question. Indeed, in legal academic writing, there have been discussions as to whether the standstill clause applies (i) only to national measures that specifically and exclusively concern one or more forms of capital movement listed in Article 64(1) TFEU, or (ii) also to national measures with a broad scope, encompassing various forms of capital movement, not all of which are listed in that provision. (52)
80. Admittedly, the arguments put forward in support of a requirement of specificity within Article 64(1) TFEU may have some merit. In particular, the argument based on the terms used in that provision (‘restrictions … adopted in respect of the movement of capital … involving …’ (53)) does not appear unreasonable.
81. Nevertheless, given the nature of the national measures which generally give rise to restrictions in that field, that interpretation would significantly reduce the material scope of the standstill clause. For example, in the field of taxation, Article 64(1) TFEU would seldom apply. If that provision were introduced in the Treaties with the objective of, inter alia, avoiding a possibly disruptive impact on existing EU legislation or on Member States’ legislation, or on their international commitments or ongoing trade negotiations, a restrictive reading thereof would deprive it of its effectiveness in part.
82. The Court has ruled that measures with a broad scope can also fall within the ambit of the standstill clause. In its judgment in X, the Court explained that ‘an interpretation according to which Article 64(1) TFEU applies only where the national legislation at issue relates solely to the movements of capital referred to in that article would undermine the practical effectiveness of that provision. … such an interpretation would have had the consequence of compelling all the Member States, in order to be able to apply the restrictions set out in Article 64(1) TFEU, to revise their national legislation and adapt it very precisely to the scope of that provision before the deadline of 1 January 1994’. (54)
83. On that basis, it seems clear to me – subject to confirmation by the referring court – that the restriction at issue in the main proceedings may fall within the material scope of Article 64(1) TFEU inasmuch as it relates to the taxation of dividends paid to a parent company established outside the European Union by a fully owned subsidiary established in Germany.
84. In the light of the foregoing, I take the view that national legislation providing for a withholding tax with discharging effect on dividends paid by resident companies to companies established in a third country, which is not applied to dividends paid by resident companies to other resident companies, constitutes a restriction on the free movement of capital for the purposes of Article 63(1) TFEU. However, such a restriction is compatible with EU law under Article 64(1) TFEU provided that it has existed, continuously, since 31 December 1993, and in so far as it affects movement of capital involving direct investment.
C. Third question
85. By its third question, the referring court asks whether a withholding tax with discharging effect such as that at issue, if found to constitute a restriction, is justified by overriding reasons of public interest, such as the preservation of the balanced allocation of powers of taxation between Member States and third countries, or the need to prevent the benefit of a double tax advantage.
86. At the outset, it should be recalled that, in accordance with settled case-law, national legislation restricting the free movement of capital may be justified, inter alia, by overriding reasons of public interest, provided, first, that there is no harmonising measure of EU law providing for measures necessary to ensure the protection of those interests and, second, that they are appropriate to secure the attainment of the objective which they pursue, and do not go beyond what is necessary in order to attain it. (55)
87. Next, I will assess the two grounds of justification raised by the referring court below; however, before doing so, I wish to point out that, in this field, there is no EU harmonising legislation.
1. The need to preserve a balanced allocation of powers of taxation
88. According to settled case-law, the need to preserve a balanced allocation of powers of taxation between States may constitute an overriding reason of public interest. (56) That follows from the fact that, in the absence of any unifying or harmonising measures of the European Union, the Member States retain the power to define, by treaty or unilaterally, the criteria for allocating their powers of taxation, particularly with a view to eliminating double taxation, and that preservation of that allocation is a legitimate objective recognised by the Court. (57)
89. Such a justification may be accepted, in particular, where national legislation is intended to prevent conduct capable of jeopardising the right of a Member State to exercise its powers of taxation in relation to activities carried on in its territory. (58) For example, that is the case where the taxable persons organise their business in a way that artificially erodes the Member State’s tax base, affecting the allocation of the power to impose taxes resulting from a tax convention. (59) The justification may also be accepted where the taxable persons attempt to use the EU freedoms for arbitrary forum shopping, thereby undermining the symmetry between the right to tax profits and the right to deduct losses. (60)
90. In that respect, the Court has already found that, where a Member State has chosen not to tax companies receiving dividends established within its territory in respect of that type of income, it cannot rely on such a ground to justify the taxation of companies receiving dividends established in another Member State. (61) As I see it, there is no principled reason why such findings should not be applicable in a situation where the contested taxation concerns companies in receipt of dividends established outside the European Union.
91. In the present case, it appears that the Federal Republic of Germany has chosen to exercise its powers of taxation in respect of all dividend distributions by resident companies. However, whilst dividends distributed to resident companies are subject to a withholding tax which is offset in full, with the exception of a 5% share, against their corporation tax, dividends such as those paid to companies established outside the European Union are subject to a definitive withholding tax. In the latter case, the local tax system does not permit any offsetting or reimbursement.
92. Accordingly, the national legislation at issue is not intended to prevent conduct capable of jeopardising the Federal Republic of Germany’s right to exercise its powers of taxation in relation to activities carried on in its territory.
93. In its order for reference, however, the referring court points to the specific mechanism through which the taxation of dividends operates in Germany. Taxation occurs under a two-stage procedure: first, at the level of the company distributing the dividends and, second, at the level of the shareholders.
94. In that regard, the referring court makes reference to some passages of the judgment in Commission v Germany, in which the German Government criticised the Commission for examining the national measure concerned in isolation from its legal context. In particular, that government emphasised that the national legislation concerned divided the taxation of dividends into two stages: ‘in the first stage of that partial taxation, the company distributing the dividends is subject to a definitive non-deductible corporation tax … while in the second stage of partial taxation the final shareholder receiving the dividend is taxed in such a way that full taxation of the profit distributed is obtained by adding that tax to the partial taxation in the first stage. Consequently, a single whole charge to tax is obtained by means of two partial charges to tax, and the interposed shareholding companies are exempted in order to avoid over-taxation’. (62)
95. However, after examining the functioning of the system and its effects, the Court rejected that argument. The Court noted that the second stage of taxation would have taken place only if the profit had been distributed to the shareholders in the form of dividends. Indeed, the aim of the measure was to make the accumulation of profits within the company more advantageous in tax terms than their distribution to shareholders. The Court thus ruled out that ‘the advantage consisting in an exemption from withholding tax on dividends distributed to a resident company [could be considered] in all cases compensated by the taxation of those profits in so far as they constitute income of the shareholders of the recipient company’. (63)
96. Once again, that finding is fully applicable in the present case. The lack of reciprocity with the third country in question and the fact that the territory of that country is not part of the internal market are immaterial in this context, for the reasons set out above. (64)
97. Accordingly, I find the argument concerning the need to ensure a balanced allocation of powers of taxation between Member States and third countries to be unpersuasive. (65)
2. The need to prevent the benefit of a double tax advantage
98. In its case-law, the Court has recognised that, in some cases, the objective of preventing the benefit of a double tax advantage may constitute an overriding reason of public interest capable of justifying a restriction on the freedoms of movement. (66)
99. However, it is relatively clear from the relevant judgments of the Court – including those referred to in the order for reference or by the German Government – that that finding related to a double deduction of the same expenses or losses. (67) As the Commission noted in its observations, those cases thus concerned a possible erosion of the tax base through a double deduction. (68)
100. By contrast, there is no such double deduction in the present case. The applicant is merely seeking, in Germany, tax treatment of dividends equivalent to that afforded to resident companies, which benefit from an almost complete neutralisation of the withholding tax paid in that country. The fact that Japan decided, with effect as from 2009, to grant an almost complete exemption from tax on dividends received by a resident company, which may lead to a situation of double exemption, did not affect Germany’s tax jurisdiction or the allocation of powers of taxation provided for in the 1966 Convention.
101. The double tax advantage alleged by the German Government is not the product of some artificial arrangement – put in place by the taxable persons in question – which does not reflect economic reality. It is simply the result of the manner in which the States claiming tax jurisdiction on the operations at issue have exercised that jurisdiction. The mere existence of a tax advantage for a third-country undertaking, and the corresponding loss of tax revenue for the Member State in question, is not, by itself, valid justification for restricting a Treaty freedom. (69) In accordance with settled case-law, an objective of a purely economic nature cannot justify a restriction on a fundamental freedom guaranteed by the Treaty. (70)
102. Accordingly, in a situation such as that at issue in the main proceedings, a Member State is not justified in relying on an alleged need to prevent the benefit of a double tax advantage to treat resident and non-resident taxpayers differently.
103. In the light of the foregoing, I take the view that national legislation providing for a definitive withholding tax on dividends paid by a company established in that Member State to companies incorporated in a third country cannot be justified by overriding reasons of public interest, such as the preservation of a balanced allocation of powers of taxation between Member States and third countries, or the need to prevent the benefit of a double tax advantage, on the ground of lack of reciprocity by, or of a comparable tax burden or similar fiscal framework in, the third country.
D. Fourth question
104. By its fourth question, the referring court asks, in essence, whether, in the event that the national legislation at issue were found to be incompatible with EU law, Article 63 TFEU permits stricter tax refund rules for non-resident taxpayers than for residents. In that respect, the referring court indicates that, in situations such as that at issue in the main proceedings, the non-resident taxpayer must prove exactly how much German capital gains tax cannot be credited against Japanese corporation tax. By contrast, resident dividend recipients need only submit a standard German withholding tax certificate.
105. At the outset, it may be useful to recall that, according to settled case-law, the right to a refund of charges levied in a Member State in breach of rules of EU law is the consequence and complement of the rights conferred on individuals by provisions of EU law. (71) In particular, individuals are entitled to reimbursement not only of the tax unduly levied but also of the amounts paid to that State or retained by it which relate directly to that tax. (72)
106. In principle, in the absence of EU rules on the recovery of national taxes unduly levied, it is for the domestic legal system of each Member State, in accordance with the principle of the procedural autonomy of the Member States, to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions at law for safeguarding the rights which taxpayers derive from EU law. The Member States nonetheless have responsibility for ensuring that those rights are effectively protected in each case. (73)
107. The detailed procedural rules governing actions for safeguarding a taxpayer’s rights under EU law must be no less favourable than those governing similar domestic actions (principle of equivalence) and must not be framed in such a way as to render impossible in practice or excessively difficult the exercise of rights conferred by EU law (principle of effectiveness). (74)
108. More specifically, the Court has acknowledged that, in situations where the national tax authorities have to take into account tax paid (or not paid) in another country, resident companies and non-resident companies are not necessarily in a similar situation. That is a fortiori true where the situation involves companies established in third countries. The Court’s case-law concerning restrictions on the internal market freedoms 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’. (75)
109. It should be pointed out, in particular, that the tax authorities of the Member State in question have access to all relevant information regarding resident companies but are unlikely to have any similar access to information regarding non-resident companies. As a result, an informational asymmetry exists between the two categories of taxpayers and, accordingly, they are not comparable in this respect. Consequently, there is no breach of the principle of equivalence if national legislation allows the national tax authorities to request the companies in question to provide all the necessary information. (76)
110. Naturally, the national tax authorities may – and, where appropriate, should – make use of the mechanisms of administrative cooperation and mutual assistance available with other States. (77) However, as the Court has held, the existence of such mechanisms does not relieve the companies concerned of their obligation to respond to legitimate requests for information made by those authorities. (78)
111. As regards compliance with the principle of effectiveness, the Court found that the evidence that may be required from the companies concerned should ‘enable the tax authorities of the Member State of taxation to ascertain, clearly and precisely, whether the conditions for obtaining a tax advantage are met, but it does not need to take any particular form and the assessment must not be conducted too formalistically’. At the same time, however, the burden of proof on those companies cannot be disproportionate in relation to the objective pursued, let alone amount to a probatio diabolica. That would be the case where the Member States concerned require them to produce documents which may ‘prove virtually impossible or excessively difficult to obtain, in particular in the light of the legislation of [another State].’ (79)
112. In the light of the above, it is my view that Article 63 TFEU must be interpreted as not precluding national legislation that, in a situation such as that at issue in the main proceedings, permits the tax authorities to require a company established in a third country to prove exactly how much capital gains tax levied in that Member State cannot be credited against the corporation tax payable in its country of establishment.
V. Conclusion
113. In conclusion, I propose that the Court answer the questions referred for a preliminary ruling by the Bundesfinanzhof (Federal Fiscal Court, Germany) as follows:
– National legislation under which dividends paid by a company resident in a Member State to its parent company established in a third country are subject to a definitive withholding tax must be assessed in the light of the free movement of capital guaranteed by Article 63 TFEU, where that legislation applies irrespective of the size or legal significance of the shareholding held by the latter.
– National legislation providing for a withholding tax with discharging effect on dividends paid by resident companies to companies established in a third country, which is not applied to dividends paid by resident companies to other resident companies, constitutes a restriction on the free movement of capital for the purposes of Article 63(1) TFEU. However, such a restriction is compatible with EU law under Article 64(1) TFEU provided that it has existed, continuously, since 31 December 1993, and in so far as it affects movement of capital involving direct investment.
– National legislation providing for a definitive withholding tax on dividends paid by a company established in that Member State to companies incorporated in a third country cannot be justified by overriding reasons of public interest, such as the preservation of a balanced allocation of powers of taxation between Member States and third countries, or the need to prevent the benefit of a double tax advantage, on the ground of lack of reciprocity by, or of a comparable tax burden or similar fiscal framework in, the third country.
– Article 63 TFEU must be interpreted as not precluding national legislation that, in a situation such as that at issue in the main proceedings, permits the tax authorities to require a company established in a third country to prove exactly how much capital gains tax levied in that Member State cannot be credited against the corporation tax payable in its country of establishment.
1 Original language: English.
2 See, inter alia, judgment of 7 September 2022, Cilevičs and Others (C‑391/20, EU:C:2022:638, paragraphs 50 and 51), and, more recently, judgment of 10 July 2025, INTERZERO and Others (C‑254/23, EU:C:2025:569, paragraph 166 and the case-law cited).
3 See, for example, judgments of 8 March 2001, Gourmet International Products (C‑405/98, EU:C:2001:135, paragraphs 13 and 35), and of 22 January 2002, Canal Satélite Digital (C‑390/99, EU:C:2002:34, paragraph 29).
4 See, inter alia, Opinion of Advocate General Szpunar in Joined Cases X and Visser (C‑360/15 and C‑31/16, EU:C:2017:397, points 89 to 95).
5 See, inter alia, Hindelang, S., The Free Movement of Capital and Foreign Direct Investment: The Scope of Protection in EU Law, Oxford University Press, 2009, pp. 81 to 114, and Nic Shuibhne, N., The Coherence of EU Free Movement Law – Constitutional Responsibility and the Court of Justice, Oxford University Press, 2013, pp. 32 to 113.
6 See footnote 2 above. For earlier formulations of the test, see, for example, judgment of 25 March 2004, Karner (C‑71/02, EU:C:2004:181, paragraph 46 and the case-law cited), and of 3 October 2006, Fidium Finanz (C‑452/04, EU:C:2006:631, paragraphs 34 and the case-law cited).
7 See, inter alia, judgments of 7 March 1990, Krantz (C‑69/88, EU:C:1990:97, paragraph 11); of 14 July 1994, Peralta (C‑379/92, EU:C:1994:296, paragraph 24); and of 26 May 2005, Burmanjer and Others (C‑20/03, EU:C:2005:307, paragraph 31).
8 See, to that effect, judgment of 4 October 2024, Staatssecretaris van Financiën (Interest in respect of an intra-group loan) (C‑585/22, EU:C:2024:822, paragraph 30 and the case-law cited).
9 See, in particular, judgment of 2 February 1989, Cowan (186/87, EU:C:1989:47, paragraph 14). With a focus on free movement of capital, see Opinion of Advocate General Kokott in Bouanich (C‑265/04, EU:C:2005:479, points 30 and 31).
10 Similarly, Opinion of Advocate General Szpunar in Joined Cases X and Visser (C‑360/15 and C‑31/16, EU:C:2017:397, point 1).
11 See, extensively, Opinion of Advocate General Lenz in Bosman (C‑415/93, EU:C:1995:293, points 200 and 201).
12 Emphasis added. The same language appears in Article 63(2) TFEU with regard to ‘payments’.
13 (OJ 1990 L 225, p. 6). That directive has in the meantime been repealed by 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).
14 See, for example, judgment of 12 February 2026, Vilniaus tarptautinė mokykla (C‑48/24, EU:C:2026:83, paragraphs 31 to 33 and the case-law cited).
15 See, to that effect, judgment of 7 April 2022, Veronsaajien oikeudenvalvontayksikkö (Exemption of contractual investment funds) (C‑342/20, EU:C:2022:276, paragraph 47 and the case-law cited).
16 See, inter alia, judgment of 10 April 2014, Emerging Markets Series of DFA Investment Trust Company (C‑190/12, ‘the judgment in Emerging Markets’, EU:C:2014:249, paragraph 25 and the case-law cited). Emphasis added.
17 See, inter alia, Opinions of Advocate General Alber in Baars (C‑251/98, EU:C:1999:502, points 12 to 30), and of Advocate General Geelhoed in Test Claimants in the FII Group Litigation (C‑446/04, EU:C:2006:240, points 31 to 34). In academic writing, see, for example, Hemels, S.J.C. et al., ‘Freedom of establishment or free movement of capital: Is there an order of priority? Conflicting visions of national courts and the ECJ’, EC Tax Review, Vol. 19, Issue 1, 2010, pp. 19 to 31.
18 Judgment of 13 November 2012 (C‑35/11, EU:C:2012:707, paragraphs 89 to 92 and the case-law cited).
19 See judgment of 11 September 2014, Kronos International (C‑47/12, EU:C:2014:2200, paragraphs 36 to 38). Emphasis added.
20 See paragraph 30 of the judgment in Emerging Markets.
21 The judgment in Emerging Markets, paragraphs 30 and 32 (emphasis added). On this matter, see also judgment of 24 November 2016, SECIL (C‑464/14, EU:C:2016:896, paragraphs 35, 39 and 41).
22 Judgment of 3 October 2013 (C‑282/12, EU:C:2013:629, paragraphs 15, 22 and 23).
23 See, to that effect, judgment of 21 September 1999, Saint-Gobain ZN (C‑307/97, EU:C:1999:438, paragraphs 56 and 57).
24 See, to that effect, judgment of 24 October 2018, Sauvage and Lejeune (C‑602/17, EU:C:2018:856, paragraphs 22 and 24). See also, by analogy, judgment of 20 October 2011, Commission v Germany (C‑284/09, ‘the judgment in Commission v Germany’, EU:C:2011:670, paragraphs 46 and 48 and the case-law cited).
25 See the judgment in Emerging Markets, paragraph 31. As the Court found as early as 1981, ‘freedom to move certain types of capital is, in practice, a precondition for the effective exercise of other freedoms guaranteed by the Treaty, in particular the right of establishment’. See judgment of 11 November 1981, Casati (203/80, EU:C:1981:261, paragraph 8). Thus, a broad application of the rules on free movement of capital alongside those on other freedoms could lead to an undue extension of the territorial scope of those other freedoms. See Barnard, C., The Substantive Law of the EU – The Four Freedoms, 8th edition, Oxford University Press, 2025, pp. 557 and 558.
26 See, to that effect, judgment of 3 October 2006, Fidium Finanz (C‑452/04, EU:C:2006:631, paragraphs 46 and 48).
27 See above, point 9 of the present Opinion.
28 See, by analogy, judgment of 26 February 2019, T Danmark and Y Denmark (C‑116/16 and C‑117/16, EU:C:2019:135, paragraphs 70 to 92).
29 See, to that effect, judgment of 10 February 2011, Haribo Lakritzen Hans Riegel and Österreichische Salinen (C‑436/08 and C‑437/08, EU:C:2011:61, paragraphs 127 and 128), and the judgment in Emerging Markets, paragraph 100.
30 See, to that effect, the judgment in Commission v Germany, paragraph 71.
31 See, for example, judgments of 23 October 2007, Commission v Germany (C‑112/05, EU:C:2007:623, paragraphs 17 and 18), and of 21 May 2019, Commission v Hungary (Usufruct over agricultural land) (C‑235/17, EU:C:2019:432, paragraphs 54 and 55). On the broad interpretation of the concept of ‘restriction’ under Article 63 TFEU, see, inter alia, Flynn, L., ‘Coming of age: The free movement of capital case law 1993-2002’, Common Market Law Review, Vol. 39, Issue 4, 2002, pp. 773 to 805, at pp. 778 to 785.
32 See, inter alia, judgment of 16 June 2022, ACC Silicones (C‑572/20, EU:C:2022:469, paragraph 31 and the case-law cited).
33 See, in particular, the judgment in Commission v Germany, paragraph 56 and the case-law cited. See also judgment of 14 December 2006, Denkavit Internationaal and Denkavit France (C‑170/05, EU:C:2006:783, paragraphs 35 and 36).
34 See the judgment in Commission v Germany, paragraph 57 and the case-law cited.
35 See, to that effect, judgment of 26 February 2019, X (Controlled companies established in third countries) (C‑135/17, EU:C:2019:136, paragraph 68).
36 See judgment of 17 September 2015, Miljoen and Others (C‑10/14, C‑14/14 and C‑17/14, EU:C:2015:608, paragraphs 78 and 79).
37 Ibid., paragraphs 79 and 80. Emphasis added.
38 See above, point 60 of the present Opinion.
39 See, by analogy, judgment of 10 November 2022, VP CAPITAL (C‑414/21, EU:C:2022:871, paragraph 19 and the case-law cited).
40 See, to that effect, Opinion of Advocate General Geelhoed in Denkavit Internationaal and Denkavit France (C‑170/05, EU:C:2006:266, points 40 to 43).
41 See above, points 63 and 64 of the present Opinion.
42 See, to that effect, the judgment in Commission v Germany, paragraphs 72 and 73, and judgment of 19 December 2024, Credit Suisse Securities (Europe) (C‑601/23, EU:C:2024:1048, paragraph 31).
43 Generally, on this matter, see, inter alia, Smit, D.S. and Kiekebeld, B.J., EC free movement of capital, income taxation and third countries: Four selected issues, Kluwer, 2008, pp. 45 to 69; Panayi, C.H.J.I., ‘European Union: The fundamental freedoms and third countries: Recent perspectives’, European Taxation, Vol. 48, No 11, 2008, pp. 577 and 578; and Hindelang, S., footnote 5, op. cit., pp. 275 to 299.
44 See judgment of 13 November 2019, College Pension Plan of British Columbia (C‑641/17, ‘the judgment in College Pension Plan’, EU:C:2019:960, paragraph 93). Emphasis added.
45 See, in that regard, Opinion of Advocate General Mengozzi in X (Controlled companies established in third countries) (C‑135/17, EU:C:2018:389, points 38 and 39).
46 See the judgment in College Pension Plan, paragraph 94. Emphasis added.
47 To that effect, see the judgment in College Pension Plan, paragraphs 92 and 98.
48 See, inter alia, judgment of 21 May 2015, Wagner-Raith (C‑560/13, EU:C:2015:347, paragraph 21).
49 See, for example, judgment of 15 February 2017, X (C‑317/15, EU:C:2017:119, paragraph 21).
50 OJ 1988 L 178, p. 5.
51 Judgment of 24 November 2016, SECIL (C‑464/14, EU:C:2016:896, paragraphs 75 and 76 and the case-law cited).
52 See, for example, Cordewener, A. et al., ‘Free movement of capital, third country relationships and national tax law: An emerging issue before the ECJ’, European Taxation, Vol. 47, No 3, 2007, pp. 107 to 117, and Smit, D.S. and Kiekebeld, B.J., footnote 43, op. cit., pp. 63 to 65.
53 Emphasis added.
54 Judgment of 15 February 2017 (C‑317/15, EU:C:2017:119, paragraph 24). See also Opinion of Advocate General Mengozzi in X (Controlled companies established in third countries) (C‑135/17, EU:C:2018:389, points 60 to 63).
55 See, for example, judgment of 25 October 2012, Commission v Belgium (C‑387/11, EU:C:2012:670, paragraph 74 and the case-law cited).
56 See, for example, judgment of 17 July 2014, Nordea Bank Danmark (C‑48/13, EU:C:2014:2087, paragraph 26 and the case-law cited).
57 Ibid., paragraph 27 and the case-law cited. See also Opinion of Advocate General Kokott in AURES Holdings (C‑405/18, EU:C:2019:879, point 34 and the case-law cited).
58 See, inter alia, the judgment in Emerging Markets, paragraph 98, and judgment of 19 December 2024, Credit Suisse Securities (Europe) (C‑601/23, EU:C:2024:1048, paragraph 71 and the case-law cited).
59 See, to that effect, judgment of 17 July 2014, Nordea Bank Danmark (C‑48/13, EU:C:2014:2087, paragraphs 29 and 30).
60 See, to that effect, judgment of 17 December 2015, Timac Agro Deutschland (C‑388/14, EU:C:2015:829, paragraphs 34 and 35).
61 See, to that effect, the judgment in Commission v Germany, paragraph 78 and the case-law cited.
62 Paragraph 33 of the judgment in Commission v Germany.
63 Ibid., paragraphs 87 to 93.
64 See above, points 51 and 60 of the present Opinion.
65 See also, to that effect, judgment of 14 December 2006, Denkavit Internationaal and Denkavit France (C‑170/05, EU:C:2006:783, paragraphs 32 and 37 to 39).
66 See, for example, judgment of 7 November 2024, XX (Unit-linked contracts) (C‑782/22, EU:C:2024:932, paragraphs 66 and 71).
67 See judgments of 13 December 2005, Marks & Spencer (C‑446/03, EU:C:2005:763, paragraph 47, referring to ‘losses [that] would be used twice’); of 15 May 2008, Lidl Belgium (C‑414/06, EU:C:2008:278, paragraph 35, referring to ‘losses … taken into account twice’); of 4 July 2018, NN (C‑28/17, EU:C:2018:526, paragraphs 42 and 48, referring to ‘losses being taken into account twice’ and ‘exploiting the same loss twice’); and of 7 November 2024, XX (Unit-linked contracts) (C‑782/22, EU:C:2024:932, paragraphs 71 and 72, referring to ‘double deduction of expenses’).
68 See, to that effect, judgment of 21 February 2013, A (C‑123/11, EU:C:2013:84, paragraphs 43 to 46).
69 Among many, see, to that effect, judgment of 12 December 2002, de Groot (C‑385/00, EU:C:2002:750, paragraph 103), and the judgment in Emerging Markets, paragraphs 101 to 103.
70 See, inter alia, judgment of 9 September 2021, Real Vida Seguros (C‑449/20, EU:C:2021:721, paragraph 39 and the case-law cited).
71 See, inter alia, judgment of 15 September 2011, Accor (C‑310/09, ‘the judgment in Accor’, EU:C:2011:581, paragraph 71 and the case-law cited).
72 See, in particular, judgment of 12 December 2006, Test Claimants in the FII Group Litigation (C‑446/04, EU:C:2006:774, paragraph 205).
73 See, inter alia, judgment of 12 December 2013, Test Claimants in the Franked Investment Income Group Litigation (C‑362/12, EU:C:2013:834, paragraph 31).
74 Ibid., paragraph 32.
75 See judgment of 16 June 2022, ACC Silicones (C‑572/20, EU:C:2022:469, paragraph 26 and the case-law cited).
76 See, to that effect, the judgment in Accor, paragraphs 92 to 95.
77 See, to that effect, judgment of 26 February 2019, X (Controlled companies established in third countries) (C‑135/17, EU:C:2019:136, paragraphs 94 and 95).
78 See, to that effect, the judgment in Accor, paragraphs 97 and 98.
79 See the judgment in Accor, paragraphs 99 and 100.