The European Court of Justice clarifies rules regarding free movement of capital between Member States and third countries
- Sweden
- 01/02/2008
- Roschier, Attorneys Ltd. - Sweden
The European Court of Justice (“ECJ”) has clarified rules regarding the free movement of capital between Member States and third countries. The ruling concerns Swedish legislation which grants taxpayers resident in Sweden, a tax exemption from dividends which are distributed in the form of shares in a subsidiary by a limited liability company established in Sweden or in the EEA. The exemption is, however, not granted if the distributing company is established in a third country outside the EEA, unless that country has concluded a convention providing for the exchange of information with Sweden. The ECJ stated that the Swedish legislation does entail a restriction on the free movement of capital between Member States and third countries. However, the need to guarantee the effectiveness of fiscal supervision constitutes an overriding requirement of general interest capable of justifying such a restriction. The ECJ finally concluded that where a Member State makes a tax advantage conditional upon satisfying conditions, compliance with which can be verified only by obtaining information from a third country, it is, in principle, legitimate for that Member State to refuse to grant the advantage if it proves impossible to obtain such information from that country.
Source: European Court of Justice Press Release 18/12/2007
