# C_2008037EN.01001702.xml

| 9.2.2008 | EN | Official Journal of the European Union | C 37/17 |
| --- | --- | --- | --- |

9.2.2008

EN

Official Journal of the European Union

C 37/17

---

Action brought on 30 November 2007 — Commission of the European Communities v Italian Republic

(Case C-540/07)

(2008/C 37/24)

Language of the case: Italian

Parties

Applicant: Commission of the European Communities (represented by: R. Lyal and A. Aresu, acting as Agents)

Applicant:

Defendant: Italian Republic

Defendant:

Form of order sought

The applicant claims that the Court should:

| — | declare that, by keeping in force a tax system which is more onerous for dividends distributed to companies established in the other Member States and in the States Party to the Agreement on the European Economic Area compared to that applied to domestic dividends, the Italian Republic has failed to fulfil its obligations under Articles 56 EC and 40 of the Agreement on the European Economic Area concerning the free movement of capital between the Member States and that between the States Party to the agreement in question, as well as its obligations under Article 33 of that agreement in relation to the freedom of establishment between the States Party to that agreement; |
| --- | --- |

—

declare that, by keeping in force a tax system which is more onerous for dividends distributed to companies established in the other Member States and in the States Party to the Agreement on the European Economic Area compared to that applied to domestic dividends, the Italian Republic has failed to fulfil its obligations under Articles 56 EC and 40 of the Agreement on the European Economic Area concerning the free movement of capital between the Member States and that between the States Party to the agreement in question, as well as its obligations under Article 33 of that agreement in relation to the freedom of establishment between the States Party to that agreement;

| — | order the Italian Republic to pay the costs. |
| --- | --- |

—

order the Italian Republic to pay the costs.

Pleas in law and main arguments

The European Commission refers to the Italian legislation in force in the matter, also that under the Treaty, which subjects the distribution of dividends to non-Italian companies (outgoing dividends) to tax treatment which is significantly less favourable than that applied to the distribution of dividends to Italian companies (domestic dividends).

The European Commission submits that such legislation, which, however, the Italian Government is about to amend, is contrary to the principle of the free movement of capital, since it has a negative effect on the profits and investment decisions of non-resident shareholders in Italian companies, making it, at the same time, more difficult for the same Italian companies to raise capital abroad. It should therefore be declared to be a clear infringement of Article 56 EC, which prohibits any restriction on the free movement of capital between the Member States, and of Article 40 of the Agreement on the European Economic Area (EEA Agreement), which governs in a similar manner the same free movement between the States Party to that agreement.

Moreover, in the European Commission's submission, such legislation may also conflict with the right of establishment as laid down by Article 31 of the EEA Agreement, since it is applicable also to controlling shareholdings in Italian companies owned by companies established in the States Party to that agreement, shareholdings for which their tax system harmonised to Community Directive 90/435/EEC (1) does not apply.

1

In the course of the procedure for infringement, the European Commission has had the opportunity of examining the Italian Republic's arguments in defence justifying the legislation in question, but considers that they do not do so. Recently however the Italian Government announced its own intention to amend the said legislation by making it compliant with the Community directive. This action may accelerate such process of reform.

---

(1)  OJ 1990 L 225, p. 6.

1

---