Opinion of the Advocate General — ECLI:EU:C:1999:329
Date: 1999-06-24
Based on: Merger Treaty (1965)
Subject matter: Anti-discrimination;Non-discrimination on grounds of nationality
Procedure: Reference for a preliminary ruling
Origin: Netherlands

summary of the solutions adopted for mitigating the 
effects of double taxation and an examination of the issues 
involved, see S.-O. Lodin, The imputation systems and 
cross-border dividends — the need for new solutions, in EC 
Tax Review, 1998, p. 229, and K. Ståhl, Dividend taxation 
in a free capital market, in EC Tax Review, 1997, p. 227. 
9 — Equivalent to approximately 1 060 euros. 
I - 4076 
VERKOOIJEN 
but that no taxes were levied in the 
Netherlands other than, as we will see 
below, that assessed against Mr Verkooijen 
himself. Mr Verkooijen had included the 
dividends in question in his statement of 
income for the 1991 tax year. In assessing 
Mr Verkooijen's income tax, the tax office 
assessed his taxable income without apply­
ing the exemption under Article 47b in 
respect of the dividends paid by Petrofina. 
The tax authorities considered that Mr Ver­
kooijen was not entitled to the benefit of 
that exemption inasmuch as it relates only 
to share dividends in respect of which the 
(Netherlands) dividend tax has already 
been levied. In substance, instead of asses­
sing Mr Verkooijen on the basis of a 
taxable income of NLG 164 697, the tax 
authorities raised that amount to NLG 
166 697. 10 
6. After unsuccessfully objecting to the 
assessment, Mr Verkooijen challenged 
before the Gerechtshof te 's-Gravenhage 
the tax authorities' decision confirming 
that assessment. By judgment of 10 April 
1996, the Gerechtshof found in favour of 
Mr Verkooijen, reducing his taxable 
income by the sum of NLG 2 000 on the 
ground that the Netherlands tax legislation 
restricted the movement of capital and 
freedom of establishment. The Staatssecre­
taris van Financiën 11 applied for review of 
the judgment of the Gerechtshof to the 
Hoge Raad which referred the abovemen-
tioned questions to the Court for a pre­
liminary ruling. I shall examine the sub­
stance of those questions by reference to 
the national legal framework outlined 
above. Where necessary, I will set out the 
arguments put forward in these proceed­
ings by the defendant and by the govern­
ments of the Member States which have 
submitted observations in this case. 
V — The substance 
A — Question 1 
7. By its first question, the national court is 
essentially asking whether a national pro­
vision which partially exempts natural 
persons from income tax on share divi­
dends provided the dividends are paid in 
respect of a company established in the 
Member State concerned is compatible 
with the Directive. 
10 — For married persons like Mr Verkooijen, the exemption in 
question is limited to an amount of NLG 2 000 (about 910 
euros) in taxable income. Originally, the exemption in 
respect of dividends applied to an amount of NLG 500 
(about 227 euros); by law of 6 September 1985 (Staats­
blad 504) that amount was increased to NLG 1 000 
(about 454 euros), or to NLG 2 000 in the case of married 
couples taxed jointly. 
11 —The State Secretary for Finance (hereinafter 'the State 
Secretary'). 
I - 4077 
OPINION OF MR LA PERGOLA — CASE C-35/98 
(1) The Community legal order and direct 
taxation 
8. Contrary to the position adopted by 
Mr Verkooijen, the United Kingdom Gov­
ernment and the Commission, the Italian 
Government submits by way of introduc­
tion that the provision in question does not 
restrict free movement of capital since 
direct taxation has not been harmonised 
at Community level: therefore, each Mem­
ber State is free to determine its own 
arrangements for taxing income. I cannot 
share that view. The Court has consistently 
held that 'although direct taxation falls 
within their competence, the Member 
States must none the less exercise that 
competence consistently with Community 
law'. 12 
9. Following essentially the same argument 
as the Italian Government, the Netherlands 
Government points out that, in 1975, the 
Commission had submitted a proposal for 
a Council directive concerning the harmo­
nisation of systems of company taxation 
and of withholding taxes on dividends, 13 
only to withdraw it in 1990. 14 The Com­
mission justified the withdrawal of that 
proposal on the ground that the measures it 
proposed were outdated both in terms of 
general concept 15 and of specific detail. 16 
Unlike the Netherlands Government, I 
believe that the very existence of that 
proposal and the concerns reiterated by 
the Commission when it was withdrawn in 
1990 show the significance at Community 
level of the effects of direct taxation of the 
movement of capital. It is not by chance 
that, in withdrawing the proposal, the 
Commission acknowledged the need for 
the Council to adopt without delay two 
proposals for directives (already before it 
for examination) designed to harmonise 
certain aspects of the national taxation 
systems. 17 
10. According to the Netherlands Govern­
ment, it is, moreover, legitimate for Mem­
ber States to regard provisions such as 
those at issue as compatible with Arti­
cle 1(1) of the Directive. When the Direc­
tive came into force, the Commission did 
12 — Case C-246/89 Commission v United Kingdom [1991] 
ECR I-4585, paragraph 12; Case C-279/93 Schumacker 
[1995] ECR I-225, paragraph 2 1 ; Case C-80/94 Wiebckx 
[1995] ECR I-2493, paragraph 16; Case C-107/94 Asscher 
[1996] ECR I-3089, paragraph 36; Case C-250/95 Futura 
Participations and Singer [1997] ECR I-2471, para­
graph 19; Case C-118/96 Safir [1998] ECR I-1897, para­
g r a p h 2 1 ; see a l s o Case C - 2 6 4 / 9 6 ICI [1998] 
(ECR I-4695, paragraph 19; and Case C-311/97 Royal 
Bank of Scotland [1999] ECR I-2651, paragraph 19. 
13 — OJ 1975 C 253, p. 2 (hereinafter 'the proposal'). 
14 — See Notice of the Commission to the Parliament and the 
Council, document SEC(90) 601 final of 20 April-18 May 
1990 (hereinafter 'the Notice'). 
15 — Namely, a centralised concept of fiscal harmonisation and 
of economic and monetary union, rather than an approach 
emphasising the coordination and approximation of 
national policies, taking into account also the principle 
of subsidiarity (see the Notice, p. 10). 
16 — The 1975 proposal, which the Council and the European 
Parliament had not debated further, no longer satisfied the 
requirements of the Community in the nineties (ibidem). 
17 — Those proposals are now Council Directives 90/434/EEC 
of 23 July 1990 on the common system of taxation 
applicable to mergers, divisions, transfers of assets and 
exchanges of shares concerning companies of different 
Member States (OJ 1990 L 225, p. 1) and 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 (OJ 1990 L 255, p. 6); see the 
Notice, p. 13. 
I - 4078 
VERKOOIJEN 
not warn the Netherlands Government that 
the provisions at issue might be inconsistent 
with Community law. That is all the more 
significant because the Kingdom of the 
Netherlands is not the only Member State 
to provide in its tax system for a mechan­
ism mitigating the effects of double taxa­
tion, which is limited to 'internal relation­
ships' in order to encourage investment in 
national securities. 18 However, that obser­
vation of the Kingdom of the Netherlands 
is irrelevant in the context of proceedings 
brought before the Court pursuant to 
subparagraph (a) of the first paragraph of 
Article 177 of the EC Treaty (now subpar­
agraph (a) of the first paragraph of Arti­
cle 234 EC) which relates exclusively to the 
interpretation of Community law. Deci­
sions handed down by the Court pursuant 
to Article 177 of the Treaty are based on an 
'objective' jurisdiction and it is not neces­
sary to take into consideration the subjec­
tive circumstances (for example, good 
faith) of the subject required to apply the 
rule to be interpreted. The subjective ele­
ment can, if need be, enter into account in 
proceedings brought before the Court for 
non-compliance with the Treaty or second­
ary legislation. 19 
(2) Does the possible restriction concern the 
movement of capital? 
11. Referring to the rule in Bachmann, 20 
the United Kingdom and French Govern­
ments argue that Article 67 of the Treaty is 
not relevant since it is secondary to the 
provisions guaranteeing other fundamental 
freedoms. In Bachmann, the Court stated 
that 'Article 67 does not prohibit restric­
tions which do not relate to the movement 
of capital but which result indirectly from 
restrictions on other fundamental free­
doms'. 21 In other words, Article 67 comes 
into play only where a transfer of assets 
does not constitute a payment connected 
with trade in goods or services. 22 However, 
the Governments which have submitted 
observations in this case have not indicated 
which other fundamental freedoms are 
more directly restricted by the provision 
at issue. That aside, reasoning in accor­
dance with the aforecited case-law, I believe 
that this is clearly a case where Article 67 is 
not of a residual nature. In acquiring the 
Petrofina shares, 23 Mr Verkooijen cer­
tainly did not effect a payment in consid­
eration for a service. It was a genuine 
financial transaction undertaken for the 
purpose of investing a specific sum in the 
shares of a company established in another 
Member State: namely, a genuine cross-
border movement of capital. In Veronica 
18 — See to that effect D. Servais, Un espace financier européen, 
Office for Official Publications of the European Commu­
nities, Luxembourg, 1995, 3rd Edition, p. 57, point 3.1.3.; 
see also Lodin, cited above, and Ståhl, cited above. 
19 — See Case 26/69 Commission v france [1970] ECR 565, in 
which the Court rejected as not sufficiently well-founded 
the Commission's infringement claim in proceedings under 
Article 169 of the EC Treaty (now Article 226 EC), 
holding that the error on the part of the Member State 
concerned was excusable in view of the 'equivocal nature' 
of the legal situation (paragraph 32). 
20 — Case C-204/90 Bachmann [1992] ECR I-249. 
21 — Paragraph 34 of the judgment (the italics are mine). 
22 — See Joined Cases C-358/93 and C-416/93 Bordessa and 
Others [1995] ECR I-361, paragraphs 13 and 14. Also see 
Joined Cases 286/82 and 26/83 Luisi and Carbone [1984] 
ECR 377 in which the Court held in interpreting Arti­
cle 67 that 'movements of capital are financial operations 
essentially concerned with the investment of the funds in 
question rather than remuneration for a service' (para­
graph 21). Concerning the notion of subsidiarity under 
Article 67 as applied in the case-law of the Court, see the 
Opinion of Advocate General Tesauro in Safir (points 9 to 
18). 
23 — This transaction constitutes the very premiss for the receipt 
by Mr Verkooijen of the dividends at issue here (on this 
point, see point 13 below). 
I - 4079 
OPINION OF MR LA PERGOLA — CASE C-35/98 
Omroep Organisatie, 24 where the national 
measure at issue restricted the participa­
tion, permitted under national legislation, 
by a broadcasting station in the capital of 
another broadcasting station established, 
or to be established, in another Member 
State, the Court considered as already 
decided the question whether the purchase 
of such participations constituted a move­
ment of capital within the meaning of 
Article 67 and proceeded directly to exam­
ining the merits. The Court thus clearly 
established the relevance of that article for 
the purposes of the case before it. In any 
event, in the present case, it is for the 
national court to assess the relevance of the 
question referred for a preliminary ruling in 
connection with capital movements. 25 
(3) Does the national measure restrict the 
movement of capital? 
12. All the governments which submitted 
observations deny the existence of any 
restriction whatsoever contrary to Arti­
cle 1(1) of the Directive, essentially on the 
basis of two types of considerations: 
(a) the link between the provision at issue 
(which only affects dividends) and free 
movement of capital is too tenuous and 
indirect for Article 47b to fall within the 
scope of the Directive; 
(b) neither the acquisition of shares in 
companies established in a Member State 
other than the Netherlands nor the distri­
bution of dividends as a result of participa­
tions in foreign companies is, as such and 
per se, hindered or restricted in the present 
case. 
13. As regards point (a), there is a link 
between the Netherlands measure and 
movement of capital and that link is not 
so indirect as to exclude this case from the 
scope of the Directive. It is true that 
dividend payments are not directly classi­
fied as 'capital movements' under the 
Nomenclature. 26 However, the accrual of 
24 — Case C-148/91 Veronica Omroep Organisatie [1993] 
ECR I-487. 
25 — See Case 53/79 Damiani [1980] ECR 273, paragraph 5, in 
which the Court stated that 'it is not for this Court to 
pronounce on the expediency of the request for a 
preliminary ruling. As regards the division of jurisdiction 
between national courts and the Court of Justice under 
Article 177 of the Treaty it is for the national court, which 
is alone in having a direct knowledge of the facts of the 
case and of the arguments put forward by the parties, and 
which will have to give judgment in the case, to appreciate, 
with full knowledge of the matter before it, the relevance 
of the question of law raised by the dispute before it and 
the necessity for a preliminary ruling so as to enable it to 
give judgment'. See also, inter alia, Case 86/78 Peureux 
[1979] ECR 897, paragraph 6; C-127/92 Enderby [1993] 
ECR I-5535, paragraph 10; Case 125/94 Aprile [1995] 
ECR I-2919, paragraph 16; Joined Cases C-320/94, 
C-328/94, C-329/94 and C-337/94 to C-339/94 RTI and 
Others [19961 ECR I-6471, paragraphs 20 and 21. 
26 — I do not believe that omission justifies the conclusions 
drawn by the Governments concerned. The Nomenclature 
is merely illustrative, not exhaustive: see Case C-222/97 
Trummer and Mayer [1999] ECR I-1661, paragraph 21, 
as well as the introduction to the Nomenclature itself 
('[t]his Nomenclature is not an exhaustive list for the 
notion of capital movements'}. 
I - 4080 
VERKOOIJEN 
a dividend necessarily presupposes 'partici­
pation in undertakings' or the 'acquisition 
of securities' and these most certainly are 
capital movements within the meaning of 
Article 67. 27 That is sufficient, in my view, 
to bring the provision at issue within the 
scope of the Directive. What is more, the 
movement of capital consisting in invest­
ment in shares in companies is often 
prompted by the intention of collecting 
the dividends to which the shareholder is 
entitled on the ground of that participation. 
The Court recently stated that, for a 
restriction or an obstacle to a particular 
transaction to be covered by Article 73b of 
the EC Treaty (now Article 56 EC), that 
transaction need only be 'inextricably 
linked' to a movement of capital, 28 that is 
to say constitute a prerequisite thereof. 29 
The Court has also for a long time held that 
the concept of capital movement restric­
tions must be interpreted broadly. 30 There­
fore, neither the nature nor the subject-
matter of the national measure at issue is 
decisive for the purpose of applying Arti­
cle 67. What is decisive is its possible effect 
on capital movements. I believe that such 
an approach is fully consistent with the 
wording of Article 1(1) of the Directive (in 
force at the material time) and of Arti­
cle 73b of the Treaty (currently in force) 
which, by prohibiting without reserve all 
restrictions on the free movement of capi­
tal, 'enshrines' and, as it were, 'constitu-
27 — The Nomenclature provides for the case of '[participation 
Ín new or existing undertakings with a view to establishing 
or maintaining lasting economic links' (Heading I(2), 
referred to in the first question) and '[a]cquisition by 
residents of foreign securities dealt in on a stock exchange' 
(Heading III(A)(2); Petrofina is a company quoted on the 
Brussels and Antwerp stock exchanges). Also see Veronica, 
referred to in paragraph 11 of this Opinion. 
28 — See Trummer and Mayer, paragraph 24. 
29 — See point 9 of my Opinion in Trummer and Mayer. 
Whereas that case related to a national measure concern­
ing the prerequisite (the creation of a mortgage) of a 
capital movement (the liquidation of a real estate invest­
ment), in this case Article 47b involves the product of such 
a movement. In any event, in both cases the national 
measure in question concerns an operation (the creation of 
a mortgage) or a payment (the dividends) which is 
inextricably linked to a movement of capital. 
30 — As long ago as Case 157/85 Brugnoni and Ruffinengo 
[1986] ECR 2013, the Court stated that, although not 
taking the form of exchange authorisations or affecting the 
acquisition of foreign securities, administrative obstacles 
such as the compulsory deposit of foreign securities with a 
bank nonetheless constitute a hindrance to the 'widest 
liberalisation' of capital movements (see paragraph 22). In 
Case C-484/93 Svensson and Gustavsson [1995] 
ECR I-3955, the Court ruled that a national provision 
requiring a bank to be established in a Member State in 
order for recipients of loans residing in the same Member 
State to obtain an interest rate subsidy from the State out 
of public funds was incompatible with Article 67 (see 
paragraph 10 of the judgment), underscoring the fact that, 
for Article 67 to apply, it ís not necessary for a national 
rule directly to concern a capital movement as such and per 
se (in our case an investment in shares, in Svensson a bank 
loan) but that it need only involve one element having a 
close link to such a movement (in our case the dividends, in 
Svensson the bank, or rather the 'nationality' of the bank 
granting the loan). 
I - 4081 
OPINION OF MR LA PERGOLA — CASE C-35/98 
tionalises' the principle already laid down 
in the Directive. 31 
14. As regards the contention that capital 
movements are neither hindered nor 
restricted (see paragraph 12(b) above), I 
would observe that, as the corresponding 
legislative history clearly shows, the pur­
pose of Article 47b was to introduce 'pre­
ferential' tax treatment for those looking to 
the Netherlands stock market, thus 
encouraging them to invest their capital in 
the Netherlands. Considering its wording, 
the provision at issue is certainly direct and 
suitable for the required purpose. Not even 
the Netherlands Government denies that. If 
that is indeed the case, I would be inclined 
to define it as a measure based on a 
'protectionist' policy. It can be argued 
that — insofar as it applies to the dividends 
distributed by Netherlands companies to 
taxpayers resident in the Netherlands — 
Article 47b does not ipso facto prohibit 
either investment in shares in companies 
established in another Member State or the 
distribution of dividends on such shares. I 
believe, however, that the possibility cannot 
be ruled out that such a measure is at least 
liable to deter or discourage taxpayers 
resident in the Netherlands from investing 
their capital abroad. Indeed, depending on 
where the capital is invested, the provision 
at issue can have a distorting effect on the 
relationship between the economic profit­
ability of an investment and its return after 
tax to the investor. Contrary to the view of 
the governments which have submitted 
observations, that distorting effect is not 
so secondary as to have no impact on the 
legal analysis. 32 As the Commission 
observed a few years ago, 33 with the 
completion of the single market, the phy­
sical and technical obstacles to the exercise 
of the fundamental freedoms have been 
eliminated. As a result, differences between 
the taxation systems of the Member States 
are accentuated and exert considerable 
influence precisely on investment decisions. 
Moreover, I must add that dividend taxa­
tion is becoming an increasingly important 
factor in investment decisions as a result of 
the implementation of economic and mone­
tary union (the next stage after 1992 in the 
progress towards a fully-integrated single 
market) and with the disappearance from 
1 January 1999 of exchange risks within 
eleven Member States. It follows that the 
31 — In the text I indicate the reasons, drawn from the Court's 
case-law, why I consider that the provision at issue 
produces a sufficiently direct effect on capital movements. 
It must be observed — using the analogies between the 
fundamental freedoms outlined in point 17, the list of 
which is certainly not exhaustive (see, for example, 
footnote 84, in fine) — that applying to capital move­
ments the principles enunciated in Case 8/74 Dassonville 
[1974] ECR 837, paragraph 5, in respect of free move­
ment of goods leads to the conclusion that even an indirect 
obstacle to capital movements as such is incompatible (see, 
a contrario, Bachmann, paragraph 34, and supra, point 11 
of the Opinion) with Article 1(1) of the Directive (and, 
today, with Article 56 EC). Moreover, the Court held that 
a national rule limiting the grant of a tax benefit to 
publishers who have their books printed in the Member 
State concerned is incompatible with Article 30 of the EC 
Treaty (now, after amendment, Article 28 EC) (Case 18/84 
Commission v France [1985] ECR 1339). See also the 
Opinion of Advocate General Cosmas (Case C-412/97 ED 
[19991 ECR I-3845), where it is stated that 'indirect' 
restrictions on free movement of goods and capital are in 
principle permissible (points 23 and 24). 
32 — 'The link between free movement of capital and taxation is 
clear. Capital moves in response to two elements: the rate 
of remuneration and the rate of taxation', P. Julliard, 
Lecture critique des articles 73 B, 73 C et 73 D du traité 
de la Communauté européens in A. Weber (ed.), Währung 
und Wirtschaft, Festschrift für Prof. Dr. Hugo J. Hahn 
zum 70. Geburtstag, Nomos Verlagsgesellschaft, Baden-
Baden, 1997, p. 177, in particular p. 184 (the translation is 
my own). Also see the conclusions of the Report of the 
Committee of independent experts on company taxation, 
issued by the Commission on 18 March 1992, Office for 
Official Publications of the European Communities, Lux­
embourg, 1992 (hereinafter the 'Ruding Report'), also 
published in European Taxation, 1992, p. 105. 
33 — See the Notice, p. 10. 
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VERKOOIJEN 
obstacle in the form of tax treatment 
differences must be considered from that 
point of view. The shares of a growing 
number of large European companies are 
quoted on the stock exchange and can even 
be purchased via internet, regardless of the 
Member State in which the issuing com­
pany is established. In such a context, 
obstacles to free movement are greatly 
diminished and taxation differences based 
on the 'nationality' of the securities, which 
cannot fail to influence investment deci­
sions, must be strictly controlled in the light 
of Community law. 
15. Again on the basis of the elements of 
the national legislation emerging from the 
case file, there is a second aspect of 
Article 47b which is relevant for the pur­
poses of Article 67 and Article 1(1) of the 
Directive. The 'geographical' limit of the 
exemption certainly has a restrictive and 
dissuasive effect even on companies estab­
lished in other Member States in that it 
constitutes an obstacle to the raising of 
capital: those companies are dissuaded 
from placing their own shares in the 
Netherlands since their shares are less 
attractive to investors in view of the fact 
that the dividends paid to the shareholders 
of such companies receive less favourable 
tax treatment than dividends distributed by 
companies established in the Member State 
concerned. 34 
16. In view of the foregoing, I consider that 
Article 47b constitutes a restriction within 
the meaning of Article 1(1) of the Directive 
introduced by the Community legislature to 
ensure the full liberalisation of capital 
movements. 35 Moreover, the Court has 
consistently held that for a national mea­
sure to qualify as a restriction or an 
obstacle to a fundamental freedom it suf­
fices that it 'discourage' or 'dissuade' the 
persons concerned from exercising a right 
34 — According to Servais, op. cit. 'fiscal regimes designed to 
develop certain forms of investment, [inducing] the 
acquisition of national securities... are discriminatory vis 
à vis foreign securities' (see p. 57). The Court has already 
had occasion to consider a restriction producing restrictive 
effects on two levels: see Case C-410/96 Ambry [1998] 
ECR I-7875, paragraphs 28 and 29, concerning a national 
rule requiring a guarantor providing financial guarantees 
in favour of a bank or insurance company established in 
another Member State to enter into an additional agree­
ment with a bank or an insurance company established on 
national territory. The Court observed that such a rule has 
a restrictive or dissuasive effect (a) on financial institutions 
established in other Member States since it prevents them 
from offering the required guarantees directly to residents 
of the Member State concerned in the same way as a 
guarantor established on national territory and (b) on 
residents of the Member State concerned who are discour­
aged from turning to financial institutions established in 
another Member State since the obligation for such 
financial institutions to enter into another guarantee 
agreement with a bank or an insurance company estab­
lished in that Member State is likely to entail additional 
costs which are normally passed on to the consumer in the 
fee charged for issuing the guarantee. 
35 — See Bordessa, paragraph 17. Chronologically, it must be 
observed that the facts of the case, involving a tax 
declaration for the 1991 fiscal year, are subsequent to the 
date of full liberalisation provided for in Article 6(1) of the 
Directive, namely 1 July 1990. 
I - 4083 
OPINION OF MR LA PERGOLA — CASE C-35/98 
or an option which is a component of such 
a freedom. 36 
17. According to the governments which 
have submitted observations, and the Uni­
ted Kingdom Government in particular, the 
provision at issue complies with Arti­
cle 1(1) of the Directive by virtue of a sort 
of de minimis rule: those governments 
contend that the measure in question has 
too tenuous an effect on capital move­
ments. 3 7 I would like to make a few 
comments in that regard. The allegedly 
tenuous nature of the effects of the provi­
sion at issue clearly depends on the sum to 
be invested and on the resources of the 
investor. For a small investor who necessa­
rily invests only limited sums, the exemp­
tion under Article 47b probably consti­
tutes, contrary to the view of the United 
Kingdom Government, a significant factor 
in the decision as to where to invest his 
capital. 38 In any event, the argument put 
forward by the governments which sub­
mitted observations runs counter to the 
case-law since the Court has ruled that even 
national rules which merely constitute a 
'hindrance' to capital movements are con­
trary to the directives for the implementa­
tion of Article 67. 39 I believe that that 
case-law can be placed on a par with the 
case-law concerning free movement of 
goods, 40 in which the Court has ruled that 
'a national measure does not fall outside 
the scope of the prohibition in Article 30 
merely because the hindrance to imports 
which it creates is slight'.4142 There is 
similar case-law with regard to freedom of 
movement for persons43 and freedom to 
provide services:44 '[a]s the Court has 
decided on various occasions, the articles 
of the EEC Treaty concerning the free 
movement of goods, persons, services and 
capital are fundamental Community provi-
36 — See, for example, Trummer and Mayer, paragraph 26 ; 
Ambry, paragraphs 28 and 29; Safir, paragraph 30; Case 
C-19/92 Kraus [1993] ECR I-1663, paragraph 32; Svens­
son, pa ragraph 10; Case C-55/94 Gebhard [1995] 
ECR 1-4165, paragraph 37; Bachmann, paragraph 31. 
37 — The United Kingdom Government stressed the following 
elements: (i) there are instances where an investment in 
foreign shares does not involve any capital movement 
whatsoever, if the shares are traded between Netherlands 
residents; (ii) given the low amount of the de qua 
exemption, it seems unlikely that that exemption would 
actually influence an investor's decision to acquire foreign 
securities since investors will often already hold shares 
yielding at least NLG 2000 and are generally more 
sensitive to the profitability outlook of companies in 
whose shares they intend to invest; and (iii) the exemption 
itself applies only to natural persons and not to legal 
persons, so that it makes no difference to the latter where 
the funds are invested. 
38 — See the statement of the State Secretary cited in footnote 8. 
39 — See Brugnoni and Ruffinengo, paragraph 22. 
40 — The analogy is all the more fitting — and I see no reason 
for regarding restrictions on one fundamental freedom any 
differently from restrictions on another (see Gebhard, 
paragraph 37) — because both Article 30 of the Treaty 
(see Dassonville, paragraph 5) and Article 1(1) of the 
Directive (now Article 56 EC) do not merely require the 
elimination of national measures which are discriminatory 
in nature but prohibit all restrictions. 
41 — Case 103/84 Commission v Italy [1986] ECR 1759, 
paragraph 18. 
42 — Joined Cases 177/82 and 178/82 Van de Haar [1984] 
ECR 1797, paragraph 13. 
43 — See, for example, Kraus, paragraph 32; in the context of 
freedom of establishment, see Avoir Fiscal (Case 270/83 
Commission v France [1986] ECR 273, paragraph 21) in 
which the Court stated that Article 52 [of the Treaty] 
prohibits all discrimination, 'even if only of a limited 
nature' regardless of 'the extent of the disadvantages... 
¡suffered] as a result'. 
44 — 'Article 59 of the [EC] Treaty [now, after amendment, 
Article 49 EC] requires not only the elimination of all 
discrimination against a person providing services on the 
ground of his nationality but also the abolition of any 
restriction', Case C-76/90 Säger [1991] ECR I-4221, 
paragraph 12; to the same effect, see Case C-275/92 
Schindler [1994] ECR I-1039, paragraph 43 . 
I - 4084 
VERKOOIJEN 
sions and any restriction, even minor, of 
that freedom is prohibited'. 45 
(4) Is the national measure applicable in a 
discriminatory manner? 
18. The parties which submitted observa­
tions in this case focused their attention on 
whether or not free movement of capital is 
restricted. However, consideration must 
also be given to the compatibility of 
Article 47b with Community provisions 
on free movement of capital. That observa­
tion is inspired by the wording of Arti­
cle 67(1) (fully implemented by Arti­
cle 1(1) of the Directive) which requires 
Member States to abolish any 'discrimina­
tion based on... the place where such 
capital is invested'. The Directive brought 
about the 'maturity' of the single market in 
respect of capital movements as well. The 
very notion of fully-guaranteed free move­
ment should mean that the national legis­
lature cannot consider the place of origin or 
of destination of the capital — namely, the 
place where the capital is invested — as 
being a legitimate basis for distinction for 
the purposes of legislation in that area. 
More specifically: a rule of national law 
treating capital movements differently 
solely on the ground of the place where 
they are located should, I believe, be 
regarded as incompatible with the Treaty 
even without assessing how far the national 
measure restricts the freedom concerned. 46 
Any discrimination automatically entails a 
restriction, unless of course the measures 
adopted by the national legislature are 
justified by a relevant ground for interven­
tion under Community law. 47 In Svensson 
and Gustavsson, 48 the Court held that a 
national measure concerning tax credits on 
mortgage interest which introduced a dis­
tinction according to the Member State in 
which the lending bank was located was 
discriminatory (and, what is more, unjusti­
fied). That case concerns the movement of 
capital and is clearly similar to the case at 
hand. It makes no difference that in Svens­
son and Gustavsson the national measure 
provided for different treatment depending 
on the Member State from which the 
capital originated (restriction on imports) 
rather than the Member State to which the 
capital was transferred (restriction on 
exports) as in the present case. In view of 
the foregoing, there is no doubt that 
Article 47b constitutes a measure which is 
applicable in a discriminatory manner 
according to the place where the capital 
yielding a return for taxpayers of the 
Member State in question is invested and 
that, as a consequence, and on the same 
ground, the contested provision is incom­
patible with Article 1(1) of the Directive. 
45 — Case C-49/89 Corsica Ferries France [1989] ECR 4441, 
paragraph 8 (the italics are mine). 
46 — See Avoir Fiscal, paragraph 21. 
47 — Among those who argue that a 'distinction' in treatment 
per se on the sole ground of the place where capita] is 
invested is unlawful, see A.P. Dourado, Free movement of 
capital and capital income taxation within the European 
Union, in EC Tax Review, 1994, p. 176, pp. 184 and 185 
in particular; J.-H. Hauptmann, Comments on Article 73b 
in Traité sur l'Union européene - Commentaire article par 
article, under the direction of V. Constantinesco, J.-P. Jac-
qué, R. Kovar and D. Simon, Economica, Paris, 1995, 
p. 176, point 6; P. Julliard, Comments on Article 67, in 
Traité instituant la CEE — Commentaire article par 
article, under the direction of V. Contantinesco, J-P 
Jacqué, R. Kovar and D. Simon, Economica, Paris, 1992, 
p. 353, point 5(b); S. Mohamed, Community rules on the 
Free Movement of Capital, Stockholm University, 1997, 
pp. 36 to 38; Ståhl, op. cit., p. 232; W. Vermeend, Tax 
policy in Europe, in EC Tax Review, 1998, p. 151, in 
particular p. 152. The Ruding Report, op. cit., moreover, 
stresses the fact that discrimination on the sole ground of 
the place where capital is invested tends to fragment 
capita] markets within the Community (see Section HI, 
Chapters 4 and 10). 
48 — See footnote 30. 
I - 4085 
OPINION OF MR LA PERGOLA — CASE C-35/98 
That has significant consequences as 
regards the permissible justifications in this 
case: it is not possible to rely upon an 
imperative requirement in the general inter­
est not contemplated by the Treaty in order 
to justify a difference in treatment that is in 
principle incompatible with Article 1(1) of 
the Directive (and with Article 67(1)). It is 
settled case-law that only express deroga­
tions (such as Articles 36, 48(3) and 56(1) 
of the EC Treaty (now, after amendment, 
Articles 30 EC, 39(3) EC and 46(1) EC 
respectively) and Article 66 of the EC 
Treaty (now Article 55 EC)) can bring such 
discrimination into line with Community 
law. 49 
(5) Is the national measure justified? 
19. It must now be determined whether, in 
the light of the foregoing, Article 47b runs 
counter to the criteria set out in the case-
law according to which, in order not to be 
contrary to Community law, in addition to 
being suitable and proportionate to the 
objective pursued by the authority which 
adopts them, measures of this type must be 
justified by express derogations, if they are 
applicable in a discriminatory manner, and 
also by overriding reasons in the general 
interest, if they are applicable in a non­
discriminatory manner. 50 
20. Firstly, I would observe that none of the 
governments which submitted observa­
tions, much less the Netherlands Govern­
ment, relied upon the derogating provisions 
set out in the Directive — the only ones in 
force at the material time 51 — to justify the 
difference of treatment introduced by the 
legislation in question. Strictly speaking, 
therefore, the obstacle to capital move­
ments created by Article 47b should be 
regarded as neither justified nor justifiable 
tout court. The governments which sub­
mitted observations nevertheless maintain 
that the provision at issue warrants an 
exception for two sets of reasons, the first 
based on the Court's case-law on overriding 
reasons in the general interest and the 
second on a specific derogating provision 
which was expressly introduced into the EC 
49 — See, most recently, Royal Bank of Scotland, paragraph 32; 
see also Svensson ana Gustavsson, paragraph 15; Schind­
ler (on Question 6); Case C-288/89 Couda [1991] 
ECR I-4007, paragraph 11; Case C-353/89 Commission 
v Netherlands Collectieve Antennevoorziening [1991] 
ECR I-4069, paragraph 15; Case 352/85 Bond van Adver­
teerders [1988] ECR 2085, paragraphs 32 and 33. See 
Bachmann, however, where tne Court held that a discri­
minatory national measure was justified by an overriding 
reason in the general interest not provided for in the 
Treaty. 
50 — The Court has now extended the application of those 
principles, which were originally developed in the context 
of free movement of goods, to all the freedoms (see, for 
example, Gebhard, paragraph 37). 
51 — Those derogating provisions include the protective mea­
sures which a Member State is authorised to take where 
short-term capital movements of exceptional magnitude 
impose severe strains on foreign-exchange markets and 
lead to serious disturbances in the conduct of that Member 
State's monetary and exchange rate policies (see Arti­
cle 3(1)), as well as the right of Member States to take the 
requisite measures to prevent infringements of their laws 
and regulations, inter alia in the field of taxation and 
prudential supervision of financial institutions (see Arti­
cle 4, first paragraph). 
I - 4086 
VERKOOIJEN 
Treaty by the EU Treaty and came into 
force after the facts in the main proceed­
ings, namely Article 73d(1)(a) of the EC 
Treaty (now, after amendment, Arti­
cle 58(1)(a) EC). 
(6) Overriding reasons in the general interest 
21. The Member States which have sub­
mitted observations in these proceedings 
contend that the provision at issue must be 
regarded as objectively justified for two 
reasons: the intention to promote the 
economy of the country by encouraging 
investment of savings in shares of compa­
nies established in the' Member State con­
cerned, and the intention of mitigating the 
effects of the double taxation of share 
dividends distributed by Netherlands com­
panies resulting from the levying both of 
dividend tax and of income tax borne by 
natural persons receiving the dividends. 
The second reason, they maintain, is 
strictly connected with the aim of preser­
ving the cohesion of the Netherlands tax 
system. The exemption is limited to 
'national' dividends because only the divi­
dends distributed by companies established 
in the Netherlands are subject to the 
corresponding tax in that country. If the 
exemption were extended to the dividends 
distributed by companies established in 
other Member States, which are therefore 
not required to make a deduction at source 
on dividends for the Netherlands tax 
authorities, the cohesion of the tax system 
would be undermined and the Netherlands 
Government would be obliged to forego 
tax entirely on part of the dividends (of 
foreign origin) paid to shareholders resi­
dent for tax purposes in the Netherlands. 
'Extending' the application of the exemp­
tion would mean foregoing all taxation on 
a portion of the income of natural persons 
and, the governments which have submit­
ted observations maintain, there is no 
provision of Community law imposing 
such a result. In short, they rely on the 
strict correlation between the possibility of 
exempting dividends from income tax 
levied on natural persons and the applica­
tion of dividend tax to those dividends. 
22. The Court has repeatedly stated that 
aims of a purely economic nature, such as, 
certainly, the intention to promote the 
economy of a country, cannot constitute 
an overriding reason in the general interest 
justifying a restriction of a fundamental 
freedom guaranteed by the Treaty. 52 Nor, 
in the absence of an express derogating 
provision, can such an aim justify a 
national measure which is applicable in a 
discriminatory manner. What is more, as 
Advocate General Elmer observed in Svens­
son and Gustavsson, '[n]ational provisions 
of law may give the immediate appearance 
of being justified from the strict point of 
view of the national economy but never­
theless be contrary to Community rules'. 53 
Moreover, a national measure that is 
inspired by such an aim and simultaneously 
has the effect of restricting free movement 
52— See, for example, Case 216/84 Commission v France 
[1988] ECR 793, paragraph 12; C-398/95 SETTG [1997] 
ECR I-3091, paragraph 23, and Collectieve Antennevoor­
ziening Gouda, paragraph 14. 
53 — See paragraph 28 of the Opinion. 
I - 4087 
OPINION OF MR LA PERGOLA — CASE C-35/98 
must certainly be characterised as protec­
tionist and is, therefore, contrary to the 
fundamental requirement of bringing about 
a single market. The Court has consistently 
held that protectionist measures are incom­
patible with the Treaty. 54 For the foregoing 
reasons, I am confident that the first 
justification put forward in connection 
with Article 47b by the governments which 
have submitted observations must be 
rejected as inadmissible. 
23. It must now be determined whether the 
national governments were justified in 
putting forward the need to preserve the 
cohesion of the tax system concerned. 
Despite the discriminatory nature of the 
provision at issue (see paragraph 18 
above), the substance of that justification 
must be examined in the light of certain 
case-law of the Court according to which 
even national measures applicable in a 
discriminatory manner (in this case, based 
on the place where the capital is invested) 
can be excepted — solely on the basis of 
that overriding reason in the general inter­
est — on grounds not provided for in an 
express derogating clause. In two judg­
ments of the same date concerning one and 
the same national measure which was 
found to be contrary to Articles 48 and 
59 of the Treaty (now, after amendment, 
Articles 39 EC and 49 EC), the Court for 
the first time — in the case of a measure 
applicable in a discriminatory manner — 
accepted the justification, not contempla­
ted by the Treaty, of the need to ensure the 
cohesion of the tax system. 55 That case-
law, which because of its obscure reasoning 
runs counter to the line of decided cases 
concerning the four fundamental freedoms, 
seems to have been confirmed in other 
judgments of the Court concerning the 
fundamental freedoms. In Svensson and 
Gustavsson 56 and in ICI, 57 for example, 
the Court examined, ruling that they were 
contrary to the Treaty, national measures 
(in ICI, of a fiscal nature) applicable in a 
discriminatory manner 58 where a compa­
ny's place of business (or rather, the Mem­
ber State in which a company was estab­
lished) was the discretionary criterion for 
the grant or withholding of advantages to 
certain parties. 59 In considering national 
measures of that kind the Court explicitly 
confirmed the general principle that over­
riding reasons in the general interest which 
are not recognised by the Treaty 60 cannot 
be relied upon to justify a difference in 
54 — See the measures encouraging the public to buy goods 
produced in the Member State concerned; for example, 
Case C-243/89 Commission v Denmark [1993] 
ECR I-3353, paragraph 23, where the Court stated that 
the use of a 'buy Danish clause' in the context of a public 
works tender is contrary to Articles 30, 48 and 59 of the 
EC Treaty (now, after amendment, Articles 28 EC, 39 EC 
and 49 EC). The tax measures favouring national products 
over imports which the Court held to be contrary to 
Article 95 of the EC Treaty (now, after amendment, 
Article 90 EC) in view of their protectionist effects also 
come to mind (see, for example, Case 112/84 Humblot 
[1985] ECR 1367; Case C-132/88 Commission v Greece 
[1990] ECR I-1567; Case C-113/94 Casarin [1995] 
ECR I-4203). 
55 — See Bachmann and Case C-300/90 Commission v Belgium 
[1992] ECR I-305. 
56 — Cited in footnote 30. 
57 — Cited in footnote 12. 
58 — For the Court's express findings: in Svensson and Gus­
tavsson, see paragraph 12 on the 'services' aspect and, in 
ICI, see paragraph 24. It should be noted that concerning 
the 'capital' aspect, in Svensson and Gustavsson the Court 
does not make any express statement on the question 
whether or not the measure at issue is applicable in a 
discriminatory manner; in that respect, see point 18 of this 
Opinion. 
59 — Regarding the facts of Svensson and Gustavsson, see 
footnote 30 and point 25 of this Opinion. In ICI, the 
United Kingdom legislature used the place of business of 
controlled companies as a criterion for applying different 
tax treatment to companies of a consortium established in 
the Member State concerned; in particular, that measure 
granted the advantage of group tax relief exclusively to 
companies controlling, solely or mainly, subsidiaries 
established on the national territory (see paragraph 23 of 
the judgment). 
60 — The only exceptions in the case of freedom of establish­
ment ICI) are set out in Article 56(1) of the Treaty; the 
exceptions concerning freedom to provide services [Svens­
son and Gustavsson) are limited to the circumstances 
mentioned in Article 66 of the Treaty (now, after amend­
ment, Article 55 EC) which refers back to Article 56 (now, 
after amendment, Article 46 EC). 
I - 4088 
VERKOOIJEN 
treatment that is in principle contrary to 
Articles 52 and 59 of the Treaty 61 and 
cited on each occasion the rules in Bach­
mann and Commission v Belgium, but il 
nonetheless examined the substance — 
instead of dismissing it as inadmissible — 
of the justification based on the need to 
preserve the cohesion of the tax system in 
question. 62 The Court thus seems to have 
confirmed — once again with very succinct 
reasons — that the overriding reasons in 
the general interest which could be relied 
upon to justify national measures restrict­
ing the fundamental freedoms included one 
which was more overriding', so to speak, 
than the others because it could be validly 
relied upon even in the case of national 
legislation applicable in a discriminatory 
manner. 63 
24. In this case, the United Kingdom and 
Netherlands Governments are relying on 
the requirement based on the need to 
ensure the cohesion of the tax system 
concerned, less with reference to the 'posi­
tive' material scope of the disputed measure 
(namely, the cases to which that measure 
applies) than with reference to its 'negative' 
material scope (namely, the cases to which 
it cannot apply). In other words, it is 
precisely on the ground of the need to 
safeguard fiscal cohesion that, having pro­
vided for the exemption at issue, 64 the 
Netherlands legislature did not extend it to 
cover dividends distributed by a company 
established in another Member State. 
25. According to the case-law of the Court, 
the need to preserve the cohesion of the tax 
system can only justify a restriction of a 
fundamental freedom where there is a 
direct link between tax relief (namely, a 
loss of tax revenue for the administration) 
and a tax levy. 65 Such a link exists, for 
example, where the deductibility of insur­
ance contributions from taxable income is 
made subject to the condition that the 
insurer is also established in the Member 
State concerned so as to ensure that that 
Member State can effectively tax the capital 
paid out when the risk is realised, namely 
when the insurance policy is redeemed. 66 
Such a tax system allows one and the same 
individual to defer, but not to avoid, 
taxation. Where, by contrast, policyholders 
are allowed to deduct contributions paid to 
a company established in another Member 
State, the tax authority of the Member 
State concerned would suffer a loss of 
revenue if the policyholder had returned 
61 — See Svensson and Gustavsson, paragraph 15, and ICI, 
paragraph 28. 
62 — See Svensson and Gustavsson, paragraph 18, and ICI, 
paragraph 29. However, it must be observed that in ICI, 
while on the one hand reiterating the general principle that 
overriding reasons in the general interest cannot be relied 
upon to justify national measures applicable in a discrimi­
natory manner and on the other examining the merits of 
the argument based on the need to ensure the cohesion of 
the tax system, the Court nonetheless applied that 
principle correctly and rejected as inadmissible another 
reason put forward by the Member State concerned, 
namely the need to prevent a loss of tax revenue (see 
paragraph 28 of the judgment). 
63 — To the same effect, see Asscher (freedom of establishment) 
and Schumacker (freedom of movement for workers) 
where the Court, recalling the Bachmann case, went on 
to consider the merits of the justification relating to the 
need to ensure fiscal cohesion (at paragraphs 58 to 60 and 
39 to 42 respectively) after establishing that the national 
measure in question was discriminatory (at paragraphs 48 
and 49, and 27 to 38 respectively). 
64 — As both the Commission and Mr Verkooijen pointed out, 
the tax system applicable in the Netherlands prior to 1981, 
when Article 47b was adopted, was already distinguished 
by a certain degree of cohesion insofar as that system did 
not provide for exceptions eliminating or mitigating the 
economic consequences of the double taxation of divi­
dends distributed to Netherlands taxpayers by companies 
established in the Netherlands. 
6-5 — See ICI, paragraph 29; Asscher, paragraphs 58 to 60; 
Svensson and Gustavsson, paragraph 18; Bachmann, 
paragraphs 22 and 23, and Commission v Belgium, 
paragraphs 14 to 16. 
66 — See Bachmann and Commission v Belgium. 
I - 4089 
OPINION OF MR LA PERGOLA — CASE C-35/98 
to his Member State of origin at the time of 
repayment or settlement. The Court has 
held, therefore, that in such a tax system 
there is a link between the deductibility and 
the subsequent taxation, and that that link 
is direct since the two measures concern 
one and the same taxpayer at different 
moments in his life. By contrast, it cannot 
be maintained that there is a direct link 
between the grant of an interest rate 
subsidy to borrowers, on the one hand, 
and its financing by means of the profit tax 
on financial establishments, on the other, 67 
since 'it is by no means certain that the 
... credit institutions will generate taxable 
funds as a result of the interest rate subsidy 
scheme. There is in fact a basis of assess­
ment only if the operations of the relevant 
credit institution as a whole produce a 
surplus, which is not necessarily the case 
since the result of operations may be 
negatively affected by other factors, for 
example losses on loans or exchange losses 
on holdings of securities'. 68 
26. According to the principles which can 
be inferred from the case-law of the Court, 
extending the exemption of dividends re­
ferred to in Article 47b to Mr Verkooijen 
would, I believe, have the effect of dama­
ging the link between the possibility of 
exempting dividends from income tax and 
their subjection to dividend tax. The King­
dom of the Netherlands introduced the tax 
relief at issue solely on the premiss that its 
tax system could in any event have an 
impact on the income concerned by the 
exemption. That is true for dividends 
distributed by Netherlands companies, 
which are the only dividend subject to 
Netherlands dividend tax, the very premiss 
of the exemption. Applying the exemption 
to dividends distributed by a company 
established in another Member State would 
have an adverse effect on the revenue from 
the tax in question: on the one hand, the 
Member State which has adopted the 
system concerned would be unable to levy 
dividend tax while, on the other hand, it 
would be obliged to grant the taxpayer an 
exemption (even only partial) from the tax 
on income which is subject only to that tax, 
the only tax that can be levied in connec­
tion with one component of his income, 
namely dividends originating from abroad. 
27. Moreover, in my view, the link between 
the exemption referred to in Article 47b 
and the levy of the dividend tax is direct. As 
is clear from the legislative history of the 
provision at issue by which the Netherlands 
legislature sought to mitigate the effects of 
double taxation, 69 from the economic 
point of view, the dividend tax and the 
income tax payable by natural persons 
referred to in the order for reference affect 
one and the same taxpayer (the recipient of 
the dividends). By contrast, in Svensson and 
Gustavsson, where the Court held that the 
cohesion of the Luxembourg tax system 
was not at risk, the tax credit and the tax 
(which were allegedly linked) did not 
67 — See Svensson and Gustavsson, paragraph 18. 
68 — See point 31 of the Opinion of Advocate General Elmer in 
Svensson and Gustavsson. 69 — See point 4 above. 
I - 4090 
VERKOOIJEN 
concern one and the same taxpayer but 
different taxpayers, 70 namely borrowers 
and financial establishments. 71 That is 
not all. Whereas in circumstances such as 
those in Bachmann, several years can lapse 
between the deductibility of contributions 
and the levy of tax on social security 
benefits, in the present case, by contrast, 
the levy of dividend tax and the application 
of the exemption take place practically 
simultaneously, when taxable income is 
assessed for a given tax year. 72 
(7) Is the national measure suitable and 
proportionate? 
28. According to case-law, for national 
measures which are liable to restrict or 
make less attractive the exercise of funda­
mental freedoms guaranteed by the Treaty 
to qualify as being effectively justified by 
overriding reasons in the general interest, 
they must be suitable for securing the 
attainment of the objective which they 
pursue and they must not go beyond what 
is necessary in order to attain it. 73 
29. I do not believe that there are any 
doubts concerning the suitability of the 
provision at issue for mitigating, at least 
partially, the effects on the recipient share­
holder of the double taxation of dividends 
in the Netherlands, and none of the parties 
which have submitted observations in this 
case has raised any in that regard. As 
regards the proportionality of the provision 
at issue to the aim pursued by the Nether­
lands legislature, it is for the national court, 
by reason of the division of jurisdiction 
provided for in Article 177 of the Treaty, to 
determine whether or not the restriction of 
a fundamental freedom arising from a 
national measure could have been avoided 
or reduced without jeopardising the aims 
pursued by that measure. 74 In this regard, 
the only alternative put forward in the 
70 — See point 30 of the Opinion of Advocate General Elmer. 
71 — More recently and, essentially, to the same effect, see ICI, 
paragraph 29, and points 26 to 28 of the Opinion of 
Advocate General Tesauro. 
72 — Again from the perspective of the cohesion of its tax 
system, and in particular the need to avoid effects that 
were not intended by the national legislature, the Nether­
lands Government also pointed out that a general applica­
tion of the exemption would have the effect of favouring 
shareholders of companies established in Member States 
where the tax rules offsetting the effects of double taxation 
of dividends apply at source, namely on dividend tax, over 
shareholders of Netherlands companies. According to the 
Netherlands Government, shareholders investing in shares 
of foreign companies would thus benefit more from the 
mitigation of double taxation than shareholders of Nether­
lands companies: that would go beyond the intended 
purpose of the exemption and would have the added effect, 
if I understand correctly, of hindering the second aim of the 
tax measure in question, namely supporting the national 
economy. The reasoning of the Netherlands Government is 
not convincing. Firstly, Community law does not prevent 
Member States from treating purely internal cases less 
favourably than those dealt with by the Treaty. Secondly, I 
would recall that the Court has already had occasion to 
rebut the argument that certain disadvantages (in this case, 
the fact of not benefiting from the exemption) can be 
justified because they are offset by advantages for the 
persons concerned in another Member State (in the 
situation outlined by the Netherlands, a 'reduction' 
applied to dividend tax, a measure unknown in the 
Netherlands tax system): see Case C-330/91 Commerz­
bank [1993] ECR I-4017, paragraphs 18 and 19, and 
Avoir fiscal (paragraph 21; see also point 7 of the Opinion 
of Advocate General Mancini). 
73 — See, inter alia, Gebhard, paragraph 37, and Kraus, para­
graph 32. 
74 — Case 222/84 Johnston [1986] ECR 1651, paragraph 39. 
I - 4091 
OPINION OF MR LA PERGOLA — CASE C-35/98 
course of these proceedings (by the Com­
mission during the oral procedure because 
of its supposedly less restrictive effects on 
capital movements), namely the application 
of an exemption or tax credit in respect of 
dividends originating in another Member 
State, is not consistent — in this case and 
considering the relevant national provisions 
described in points 3 and 4 above — with 
the aim of preserving fiscal cohesion since, 
in the absence of any agreements with other 
States for that purpose, 75 such a measure 
clearly cannot fail to affect the Netherlands 
tax revenue without any consideration or 
readjustment. 
(8) The derogation under Article 73d(1)(a) 
30. Apart from the justifications based on 
overriding reasons in the general interest 
that emerge from the case-law of the Court, 
all the governments which have submitted 
observations argue that Article 47b must in 
any event be excepted under the derogation 
in Article 73d(1)(a) of the Treaty 76 since, 
even though that provision came into force 
only in 1994 (subsequent to the facts of this 
case), it essentially reproduces the earlier 
legislation. 77 
31. Although the questions referred for a 
preliminary ruling do not in this case 
concern the provisions introduced by the 
EU Treaty, the above-mentioned line of 
reasoning is nonetheless clearly relevant. Its 
interest derives from the fact that the 
governments which have submitted obser­
vations are not claiming that it is a 'new' 
derogation valid retroactively, but merely 
that it 'constitutionalises' in the Treaty a 
principle that was previously in force and 
which therefore applies to the facts of the 
main proceedings. The national court itself 
dwelt at some length on this point in the 
findings section of the order for reference. 
75 — On this subject, see points 46 to 56 below, and para­
graph 54 in particular. 
76 — Article 73d of the Treaty provides: 
'1. The provisions of Article 73b shall be without 
prejudice to the right of Member States: 
(a) to apply the relevant provisions of their tax law which 
distinguish between tax-payers who are not in the same 
situation with regard to their place of residence or with 
regard to the place where their capital is invested; 
(b) to take all requisite measures to prevent infringements 
of national law and regulations, in particular in the field of 
taxation and the prudential supervision of financial 
institutions... 
2. The provisions of this chapter shall be without prejudice 
to the applicability of restrictions on the right of establish­
ment which are compatible with this Treaty. 
3. The measures and procedures referred to in paragraphs 
1 and 2 shall not constitute a means of arbitrary 
discrimination or a disguised restriction on the free 
movement of capital and payments as defined in Arti­
cle 73b'. 
Article 73b(1) of the Treaty states: 'Within the framework 
of the provisions set out in this chapter, all restrictions on 
the movement of capital between Member States and 
between Member States and third countries shall be 
prohibited'. 
77 — Regarding the troubled history of the Treaty's provisions 
on capital movements, see footnote 1 above; Arti­
cle 73d(1)(a) introduces, in particular, a derogation (here­
inafter referred to as 'the derogation') to the freedom in 
question, that was not explicitly provided for in the 
previously applicable provisions of the Treaty or in the 
directive. 
I - 4092 
VERKOOIJEN 
The derogation is thus relied on to demon­
strate that under the provisions previously 
in force, the Member States already had the 
power to apply tax rules discriminating 
between taxpayers in different situations 
based on the place where their capital was 
invested. Moreover, it would seem that the 
governments which have submitted obser­
vations rely on the specificity of tax legisla­
tion: in view of the nature of the subject 
matter concerned, that power is virtually 
unconditional. As a result, according to 
those governments, the derogation is not 
subject to the limitations laid down in 
Article 73d(3) of the Treaty, corresponding 
to the last sentence of Article 36 of the 
Treaty. That conclusion is essentially based 
on a literal interpretation of the article 
itself. 78 Thus, the power in question is 
unconditional: it is not subject to judicial 
review either as regards the merits of the 
overriding reasons in the general interest 
that purportedly justify different treatment 
based on the place where the capital is 
invested, or as regards the proportionality 
of the measure to the objectives pursued. 
32. I can agree with that reasoning up to a 
point. On the one hand, I am convinced 
that the derogation does not constitute a 
step backwards in the acquis communau­
taire. It can reasonably be said to antedate 
the provisions in force before 1 January 
1994. 79 It is true that, in its case-law, the 
Court has allowed Member States to main­
tain certain distinctions (based, for exam­
ple, on the taxpayers' place of residence) in 
their taxation rules, provided such distinc­
tions are based on situations that are not 
objectively comparable 80 or, in the case of 
rules applicable in a discriminatory man­
ner, that they are justified by overriding 
reasons in the general interest. 81 
33. On the other hand, I reject the argu­
ment that different tax treatment based on 
the place where capital is invested — which 
78 — The governments which submitted observations empha­
sise, in particular, the fact that Article 73d(3) mentions 
only 'measures' and 'procedures' and therefore refers solely 
to the literal wording of Article 73d(1)(b) and (2), whereas 
Article 73d(1)(a) refers to 'provisions'. 
79 — With few exceptions, legal writers agree that Arti­
cle 73d(1)(a) of the Treaty is not at all a step backwards, 
in seeming contradiction with the letter of Article 67(1) 
(prohibiting discrimination based on the place where 
capital is invested), but must be read in harmony with 
the pre-existing system as interpreted in case-law (see, inter 
alia, Dourado, op. cit., p. 180, 181 and 184; P. Farmer and 
R. Lyal, EC Tax Law, Clarendon Press, Oxford, 1994, 
p. 334; J-M. Hauptmann, 'Commentaire sur l'art. 73 D', 
in Traité sur l'Union européene, op. cit., p. 184; Lodin, op. 
cit., p. 231; Mohamed, op. cit., pp. 134 to 135; M. Peters, 
'Capital movements and taxation in the EC', in EC Tax 
Review, 1998, p. 1, and especially pp. 10 and 11; Servais, 
op. cit. p. 64, note 58; R. Smits, 'Freedom of payments and 
capital movements under EMU' in A. Weber (ed.) Wäh­
rung und Wirtschaft, op. cit., pp. 245, 262 and 263; Ståhl, 
op. cit., pp. 229 and 231; J.A. Usher, The Law of Money 
and Financial Services in the European Community, 
Clarendon Press, Oxford, 1994, p. 32 et seq.; S. van 
Thiel, 'The Prohibition of Income Tax Discrimination.in 
the European Union: What Does it Mean?', in European 
Taxation, 1994, p. 303, and especially p. 309; P. Vigneron 
and P. Steinfeld, 'La Communauté européene et la libre 
circulation des capitaux: les nouvelles dispositions et leurs 
implications', in CDE, 1996, p. 401, especially pp. 411, 
432 and 433). 
80 — As regards the importance that the Court places on 
'substance' in establishing whether or not two distinct 
situations are comparable, without going into distinctions 
of a more 'formal' nature (such as that between resident 
and non-resident) that are frequently found in national 
legislation, see Schumacker, paragraph 34 (where the 
reasoning would appear to hinge on the term 'situation', 
already employed in paragraphs 24 and 31), and points 35 
to 38 of the Opinion of Advocate General Léger (see also 
the latter's Opinion in Wielockx, point 21); the term 
'situation' is also used in Article 73d(1)(a) of the Treaty. 
See, moreover, Royal Bank of Scotland, paragraphs 27 to 
31; Asscher, paragraph 42; Wielockx, paragraphs 18 to 
22, and Avoir fiscal, paragraph 19. 
81 — See the judgments in Bachmann and Commission v 
Belgium. 
I - 4093 
OPINION OF MR LA PERGOLA — CASE C-35/98 
is permitted since the Treaty provides for 
the possibility of a derogation — must 
always be regarded as justified. Firstly, 
according to the case-law of the Court 
itself — to which I have just referred — any 
distinction 82 rooted in the tax legislation of 
a Member State must be based on objective 
factors 83, or in any event be justified, and 
must thus pass the proportionality test; 
otherwise, the assertion — which I believe 
constitutes the cornerstone of the observa­
tions submitted by the governments and 
which I support — that the derogation 
must be understood and applied in accor­
dance with the case-law of the Court would 
be deprived of all meaning. It follows that 
the limitations set out in Article 73d(3) of 
the Treaty also apply to the derogation 
referred to in paragraph 1(a) of the same 
article which, contrary to the opinion of the 
governments which have submitted obser­
vations, must be read as a whole. 84 Sec­
ondly, to consider — as an absolute pre­
sumption — that all the situations covered 
by the derogation are justified per se would 
mean attributing to the derogation itself the 
specific capacity, not contemplated by the 
Treaty, of distinguishing — for reasons I 
cannot see — the cases concerned by this 
derogation from all other exceptional 
cases — set out expressis verbis in the 
Treaty — which are such as to justify 
restrictions of the fundamental freedoms. 
34. If we apply to the present case the 
derogation set out in Article 73d(1)(a) of 
the Treaty and adopt the above-mentioned 
criteria for interpretation, the result is 
substantially comparable to the result 
obtained on the basis of the provisions 
previously in force. Considered as such, 
Article 47b provides for differentiated 
treatment based solely on the place where 
the Dutch taxpayer's capital is invested, 
and that provision does not avoid the 
prohibition under Article 73b of the Treaty. 
The fact that such difference in treatment, 
set out in a provision of tax law, may be 
justified by an overriding reason in the 
general interest recognised by the Court 
simply means that the national measure in 
question is liable — again, in principle, 
since it is not arbitrarily discriminatory in 
nature — to fall within the scope of the 
derogation. The discrimination introduced 
by the Netherlands tax legislation can be 
regarded as justified and effectively covered 
by the derogation only if it has satisfied in 
concreto the requirement of proportional­
ity according to the canons of interpreta­
tion traditionally applied by the Court even 
before the new rules on the movement of 
capital came into force. 85 
82 — Including, therefore, the distinction based on the place 
where capital is invested. 
83 — See Schumacker, paragraph 37. 
84 — This is the view of all the writers who consider that the 
derogation is not 'new' but simply the expression of 
principles already established by the Court (see foot­
note 79 above); also see S. Kollia, in the 'Capital' chapter, 
in Repertoire de droit communautaire, Dalloz, Paris, 
volume I, paragraph 92. Considering the close structural 
similarity between Article 36 and Article 73d of the 
Treaty, the above reconstruction seems to accord with 
the case-law which draws analogies with the general 
system guaranteeing the fundamental freedoms (see Geb-
hard, paragraph 37). 
85 — See Bachmann, paragraph 27, and Commission v Belgium, 
paragraph 20. 
I - 4094 
VERKOOIJEN 
35. In conclusion, a measure limiting the 
benefit of an exemption from income tax 
solely to dividends distributed by compa­
nies established in the Member State con­
cerned constitutes an obstacle contrary to 
Article 1(1) of the Directive. However, the 
refusal to apply that exemption also to 
dividends distributed by companies estab­
lished in other Member States is in princi­
ple justified by the need to preserve the 
cohesion of the tax system in question. My 
opinion, based on the provisions of Com­
munity law in force at the material time, is 
not affected by the derogation contained in 
Article 73d(1)(a) of the Treaty. In adopting 
the derogating provision in question, the 
Community legislature was not introducing 
a new principle into the provisions on 
capital movements; on the contrary, it 
merely made explicit in the text of the 
Treaty a pre-existing rule which is thus part 
of the system I described in my analysis of 
the provision at issue. 
B — Question 2 
36. If the first question is answered in the 
negative, the Hoge Raad asks the Court 
whether Articles 6 and/or 52 of the Treaty 
preclude a national measure such as Arti­
cle 47b. 
37. I agree with the governments which 
have submitted observations. Article 6 of 
the Treaty, which enshrines the principle 
prohibiting discrimination on the ground of 
nationality, is not relevant here since it is a 
general rule designed to apply to situations 
governed by Community law which are not 
covered by any specific non-discrimination 
rules 86 such as, precisely, Article 52 of the 
Treaty which, in the case of undertakings, 
must be read in conjunction with Arti­
cle 58. That provision grants freedom of 
establishment to nationals of another 
Member State, allowing them to set up 
and manage undertakings and companies 
under the conditions laid down for its own 
nationals by the law of the Member State of 
establishment. 
38. As a preliminary point, the United 
Kingdom and Netherlands Governments 
submitted that Article 52 of the Treaty is 
not applicable to the present case since it is 
a general provision as opposed to the more 
specific rules on free movement of capital 
which must be applied by way of excep­
tion. As we have seen, those governments 
defend the provision at issue, maintaining 
that it is compatible with Community rules 
guaranteeing free movement of capital. If 
my understanding is correct, those govern­
ments argue that Article 52 of the Treaty 
does not preclude the provision at issue 
86 — See, inter alia, Case 305/87 Commission v Greece [1989] 
ECR 1461, paragraphs 12 and 13; Case C-18/93 Corsica 
Ferries [1994] ECR I-1783, paragraph 19; Case C-1/93 
Halliburton Services [1994] ECR I-1137, paragraph 12; 
and Case C-193/94 Skanavi and Chryssanthakopoulos 
[19961 ECR I-929, paragraphs 20 and 21. 
I - 4095 
OPINION OF MR LA PERGOLA — CASE C-35/98 
which is consistent with Article 1(1) of the 
Directive. In my view, that argument is not 
relevant here. It is admittedly true that the 
second paragraph of Article 52 of the 
Treaty enshrines the principle of national 
treatment with regard to the establishment 
of undertakings in another Member State 
'subject to the provisions of the chapter 
relating to capital'; 87 however, that provi­
sion merely expresses the concern of the 
draftsmen of the Treaty not to superimpose 
provisions on freedom of establishment and 
free movement of capital, in other words, 
to avoid applying two sets of provisions to 
one and the same restriction. On the other 
hand, it is quite possible for one and the 
same provision of a Member State's legisla­
tion to contain several distinct aspects, all 
of which are relevant to the Treaty, as in the 
case of a national measure restricting more 
than one fundamental freedom simulta­
neously and to an equal degree. In Svensson 
and Gustavsson, the Court held that one 
and the same measure was contrary to both 
Article 59 and Article 67 of the Treaty. 
More recently, Advocate General Tesauro 
acknowledged that, in principle, 'it 
would... be possible for [two] sets of 
provisions to apply together, but only in 
relation to the provisions restricting simul­
taneously, although from different angles, 
[two distinct fundamental freedoms]', 
including movement of capital. 88 In that 
regard, I would point out that in Veronica 
Omroep Organisatie, where the Court held 
that the national measure at issue (see 
point 11 above) was compatible with both 
the provisions on freedom to provide 
services and those on free movement of 
capital, it simultaneously examined the 
case in the light of two distinct sets of rules 
and did not at all rule out the relevance of 
the 'services' aspect, despite the fact that 
the national measure was compatible with 
the Treaty from the 'capital' angle. 
39. As regards the substance of Arti­
cle 47b, I must first observe that, even 
from the — different — perspective of the 
provisions on freedom of establishment (for 
undertakings), that provision is applicable 
in a discriminatory manner (as Mr Ver-
kooijen did not fail to point out), since it 
distinguishes between dividends distributed 
by Netherlands companies and those dis­
tributed by companies established in other 
Member States. Unless the distinction 
under Netherlands tax legislation is based 
on situations that are objectively not com­
parable or is justified by a relevant over­
riding reason in the general interest (see the 
end of point 32 above), this observation 
alone is sufficient for Article 47b to be 
regarded as contrary to Article 52 of the 
Treaty: 'Article 52 prohibits all discrimina­
tion, even if only of a limited nature'. 89 
40. Moreover, as for whether or not there 
is a restriction under Article 52 of the 
87 — Correspondingly, in its present version, Article 73d(2) of 
the Treaty is worded analogously as regards capital 
movements: 'the provisions of this Chapter shall be 
without prejudice to the applicability of restrictions on 
the right of establishment which are compatible with this 
Treaty'. 
88 — See point 17 of the Opinion in Safir. 89 — See Avoir fiscal, paragraph 21. 
I - 4096 
VERKOOIJEN 
Treaty, it may seem, at first sight, that the 
provision at issue only 'indirectly' concerns 
the issuing companies: Article 47b is not, 
strictly speaking, part of the tax system for 
companies, since it affects the benefits 
enjoyed by shareholders who are natural 
persons (the exemption applies only in 
respect of income tax on natural persons, 
see point 3 above) after corporation tax has 
been assessed on the profit from company 
activities (which has given rise to the 
dividends distributed). However, as we 
shall see below, the tax regime applicable 
to dividends originating in another Mem­
ber State cannot — under aspects other 
than those examined in the section on 
Question 1 — fail to influence 90 certain 
decisions which companies established on 
Community territory (including in the 
Netherlands, therefore) must take as 
regards their principal or secondary place 
of business. 
41. There are many situations in which a 
national measure such as Article 47b 
restricts — to a greater or lesser extent — 
freedom of establishment: 
(a) as Mr Verkooijen has observed, a 
company that has its principal place of 
business in another Member State and 
plans to set up a secondary place of 
business 91 in the Netherlands will be 
dissuaded from doing so in any form other 
than a company if it intends to turn to the 
capital market in that Member State in 
order to raise the capital needed to manage 
an undertaking. 92 The provision at issue 
essentially encourages preference to be 
given to establishment in the form of a 
subsidiary, which is legally independent of 
the parent company by which it is con­
trolled, rather than the alternative of a 
branch, defined as part of a de facto whole 
or simply as a limb of the company, 
allowing a measure of decentralisation. 93 
In Centros, the Court recently confirmed 
that freedom of establishment includes the 
right for a company to set up a secondary 
place of business in another Member State 
and to carry on its business in the form it 
considers most appropriate:94 all restric­
tions on that freedom of choice must thus 
be regarded as contrary to Article 52 of the 
Treaty. 
90 — See point lá and the case-law of the Court cited in 
footnote 36. 
91 — Article 52 of the Treaty does not merely guarantee free­
dom of establishment on a primary basis: under the first 
paragraph of Article 52 and the first paragraph of 
Article 58 of the Treaty, freedom of establishment includes 
the right of companies formed in accordance with the law 
of a Member State and having their registered office, 
central administration or principal place of business within 
the Community to pursue their activities in another 
Member State through a branch or agency. On this 
substantive question, see Case C-334/94 Commission v 
France [1996] ECR I-1307, paragraph 19, and Case 
C-212/97 Centros [1999] ECR I-1459, paragraph 21. On 
a more general level, see Case C-106/91 Ramrath [1992] 
ECR I-3351, paragraph 20; Gebhard, paragraph 24, and 
Case C-53/95 Kemmler [1996] ECR I-703, paragraph 10. 
92 — The right of establishment includes the right to 'manage 
undertakings' (see the second paragraph of Article 52 of 
the Treaty and Gebhard, paragraph 23: 'the right of 
establishment... allows all types of self-employed activity 
to be taken up and pursued on the territory of any other 
Member State, undertakings to be formed and operated...'; 
the italics are mine). 
93 — See point 15 of my Opinion in Centros. 
94 — See paragraphs 20 to 22 of the judgment, and the case-law 
references to the same effect. Among these, see Avoir fiscal 
where the Court stated that 'the second sentence of the first 
paragraph of Article 52 expressly leaves traders free to 
choose the appropriate legal form in which to pursue their 
activities in another Member State' (paragraph 22; the 
italics are mine). 
I - 4097 
OPINION OF MR LA PERGOLA — CASE C-35/98 
(b) a company established in the Nether­
lands whose shareholders (though not 
necessarily all of them) are natural persons 
resident there for tax purposes and which 
intends to set up a principal place of 
business in another Member State (by 
transferring its registered office and thus 
acquiring the status of a company of the 
host Member State) 95 will be dissuaded 
from doing so, since its Netherlands share­
holders would automatically forgo the 
advantage provided for in Article 47b 
because their dividends would no longer 
be distributed by a 'Netherlands' company. 
(c) I believe that Article 47b also plays a 
role in the case of a merger involving a 
company established in the Netherlands 
whose shareholders are natural persons 
resident in the Netherlands. As in the case 
under (b) above, those shareholders lose the 
advantage under the provision at issue (i) in 
the case of a merger by incorporation, 
where the incorporating company does not 
have its registered office in the Nether­
lands, and (ii) in the case of a true merger, 
where the ensuing, newly-formed company 
does not have its registered office in the 
Netherlands. 96 In both cases, the dividends 
paid to Netherlands taxpayers following 
such mergers will no longer originate from 
a company established in the Netherlands. 
42. The aspects I have just indicated by 
way of example specifically concern Arti­
cle 52 of the Treaty. In (a), (b) and (c), the 
exercise of the freedom of establishment 
which is restricted (discouraged or influ­
enced) by the provision at issue concerns 
certain management decisions concerning 
undertakings in the form of a company (the 
form of the decentralisation of activities, 
the location of the registered office, merger 
with other undertakings, respectively) that 
do not involve (directly at least) capital 
movements within the meaning of Arti­
cle 67 of the Directive, such as that effected 
by Mr Verkooijen when he acquired the 
Petrofina shares. 
43. Moreover, as regards the view of the 
governments which have submitted obser­
vations that the effects of Article 47b on 
freedom of establishment are too tenuous, I 
would point out that the Court has con­
sistently held that Article 52 of the Treaty 
prohibits 'any restriction, even minor, of 
that freedom' (see the end of point 17). 97 
44. Assuming that, under certain aspects, 
the provision at issue is inconsistent with 
Article 52 of the Treaty, we must now 95 See, a contrario, Case 81/87 Daily Mail and General Trust 
[1988] ECR 5483, paragraphs 24 and 25, where the Court 
held that 'Articles 52 and 58 of the Treaty cannot be 
interpreted as conferring on companies incorporated under 
the law of a Member State a right to transfer their central 
management and control and their central administration 
to another Member State while retaining their status as 
companies incorporated under the legislation of the first 
Member State' (the italics are mine). 
96 — These operations entail the 'transfer' of the company's 
registered office to another Member State (see situation 
(b)) and a different strategy in terms of the location of the 
management of the undertaking. 
97 — The Ruding Report shows that, in the case of 48% of 
Community undertakings, tax considerations are nearly 
always crucial in deciding where to establish a production 
unit (see Chapter 10, Section II, on the impact of differ­
ences in taxation between the Member States); on the other 
hand, the percentages are 38% in the case of a sales point, 
41% for a research and development centre, 57% for a 
coordination centre and 78% for a finance centre. 
I - 4098 
VERKOOIJEN 
determine whether it can be regarded as 
justified, suitable for attaining the objective 
pursued by the legislature, and proportion­
ate. Despite the various aspects under 
which Article 47b can be deemed incom­
patible with Treaty provisions on freedom 
of establishment, I believe that — as 
regards the determination and existence of 
a justification and the appropriateness and 
proportionality of the national measure — 
the line of reasoning followed in the section 
on Question 1 (see points 19 to 29) also 
applies here: the provision at issue is the 
same (within the same tax system) and the 
fact that it is also applicable in a discrimi­
natory manner from the 'exercise of free­
dom of establishment' point of view has the 
consequences already described (see 
point 23) in respect of the determination 
of the causes which may justify that 
measure. 
45. To conclude, I believe that a national 
measure such as the one at issue here is 
inconsistent with Article 52 of the Treaty 
under several aspects but that, in principle, 
it must nevertheless be regarded as justified 
by the need to ensure the cohesion of the 
tax system of the Member State concerned. 
C — Questions 1 and 2: a comprehensive 
approach 
46. In the foregoing examination of the 
first two questions referred for a prelimin­
ary ruling, I have concentrated on the 
elements that emerge clearly from the case 
file. I believe it is now worthwhile con­
sidering certain other elements which are 
relevant, in my view, for the purpose of 
giving a proper answer to the questions 
referred, namely, for the reasons set out 
below, the provisions of the bilateral Dou­
ble-Taxation Convention concluded 
between the Kingdom of Belgium and the 
Kingdom of the Netherlands 98 (that is, the 
Member State where Petrofina has its 
registered office and the dividends at issue 
in the main proceedings originated, and the 
Member State where Mr Verkooijen is 
resident, respectively). Admittedly, the fact 
that both the order for reference and the 
observations submitted in the course of the 
proceedings before the Court 99 barely refer 
to the Convention could at once raise 
doubts on the proper formulation of the 
question referred by the Hoge Raad: by 
failing to consider the Convention (even if 
only to dismiss it as irrelevant to the 
proceedings), the order for reference does 
not appear to provide a sufficiently precise 
description of the legal background to the 
questions at issue. Moreover, as Advocate 
General Léger rightly observed in Wie-
lockx, 100 'double-taxation conventions... 
are an integral part of national tax law', 
and they must therefore be duly taken into 
account, in any event, in order to have a 
complete picture of the ins and outs in tax 
cases involving a cross-border element. 
98 — Convention signed in Brussels on 19 October 1970 (see 
Moniteur Beige-Belgisch Staatsblad of 25 September 1971, 
No 187, p. 11096), hereinafter 'the Convention'. 
99 — See, however, the passage referring to tax agreements in the 
observations submitted by the Netherlands Government 
(paragraph 14). 
100 — Point 54 of the Opinion. 
I - 4099 
OPINION OF MR LA PERGOLA — CASE C-35/98 
47. Nevertheless, to fulfil the obligations of 
judicial cooperation under Article 177 of 
the Treaty, I believe that it is for the Court 
to take into consideration all relevant 
elements of which it is aware, in order to 
provide the national court with a useful 
answer. In that regard, I would recall that 
the Court has already had several occasions 
to dwell (more or less at length) on these 
conventions, even where they were not the 
object of the questions referred for a 
preliminary ruling. 101 Therefore, it is 
necessary (or at least appropriate) here 
not to disregard 102 the provisions of a 
bilateral convention, such as that conclu­
ded between the Kingdom of Belgium and 
the Kingdom of the Netherlands, which the 
Court has already considered at length 103 
and which contains provisions that specifi­
cally and directly concern the case at 
issue. 104 
48. By way of a further preliminary com­
ment, I would observe that in preliminary 
rulings the Court has already had occasion 
to rely upon ambivalent wording in order 
to cover all possible alternative legal frame­
works. In Naranjo Arjona and Others, 105 
the Court interpreted Community law by 
referring first to the provisions of national 
law indicated by the national court (para­
graphs 15 to 24 and the operative part of 
the judgment) and then broadening its 
analysis to encompass an international 
convention (cited by the Commission but 
not mentioned in the order for reference), 
101 — See Wielockx, the operative part of the judgment and 
paragraphs 24 to 27, and Bachmann (paragraph 26), 
where absolutely no reference was made to international 
conventions either in the arguments of the parties before 
the Court or in the Opinion of Advocate General Mischo 
(for a description of that case, see paragraph 25 of this 
Opinion). 
According to V. Petrella (Il principio di non discrimina­
zione nell'imposizione del reddito transnazionale. Analisi 
del principio nel contesto giuridico comunitario, doctoral 
thesis, Università degli Studi 'Federico II', Naples, 1999, 
Chapter IV, Section 5): '[if fiscal cohesion is understood] 
as preserving the macro-economic balances underlying 
any tax system... the judgment [Bachmann] is open to 
censure in that it disregards the system introduced by 
bilateral agreement by failing to note that the provisions 
of the [double taxation) agreement produce a macroeco­
nomic equilibrium, if only at bilateral level. The conven­
tion concluded between the Kingdom of Belgium and the 
Federal Republic of Germany distributes the fiscal power 
of the two countries by conferring on the Federal 
Republic of Germany the exclusive power to tax insur­
ance sums paid to taxpayers residing in Germany at the 
time of payment, regardless of where the premiums were 
paid and the system to which they were subject' (on the 
basis of her interpretation of paragraph 26 of the 
judgment, the author in essence believes that, in Bach­
mann, the Court held that the conclusion of bilateral 
treaties establishing taxation rules for insurance contracts 
involving a cross-border element — such as those at 
issue — was irrelevant on the ground that, because they 
are bilateral, such treaties cannot uniformly regulate 
transactions within the Community). To the same effect, 
see B. Knobbe-Keuk, 'Restrictions on the Fundamental 
Freedoms Enshrined in the EC Treaty by Discriminatory 
Tax Provisions — Ban and Justification', in EC Tax 
Review, 1994, p. 74, especially p. 80. 
Thereinafter, in Wielockx, case-law evolved considerably 
in terms of the importance that the Court attaches to 
bilateral tax agreements for the proper resolution of the 
questions referred to it: 'In Wielockx, the Court notes the 
anomaly [of the result in Bachmann] and, overturning its 
conclusions in Bachmann, holds that fiscal cohesion must 
be appraised in the context of a State's overall taxation 
system, including also the system set up by bilateral 
agreements' (Petrella, ibidem; the italics are mine). 
Also see Royal Bank of Scotland (paragraph 31) where, 
although the French Government referred to the double 
taxation agreement between Greece and the United 
Kingdom (the two Member States concerned by the facts 
in the main proceedings), that agreement was the object 
neither of the question referred to the Court for a 
preliminary ruling, since the referring court was uncertain 
as to compatibility with Community law solely as regards 
internal national law, nor of the description of the legal 
context presented in Judge-Rapporteur Wathelet's Report 
for the Hearing. 
102 — Less, here, to ascertain the merits of a justification (fiscal 
cohesion) of a measure applicable in a discriminatory 
manner (see Bachmann and Wielockx where, as I have 
already pointed out, the Court did not follow the same 
line of reasoning), than to decide, as we will see further 
on (points 52 to 56), whether or not a national law is 
applicable in a discriminatory manner, or whether it 
constitutes a restriction on a fundamental freedom. 
103 — See Wielockx, paragraphs 24 and 25, as well as point 54 
and footnote 41 of the Opinion of Advocate General 
Léger. 
104 — See Avoir Fiscal, paragraph 26, where the Court rejected 
the argument of the French Government — which relied 
upon double-taxation agreements to justify the national 
measure concerned — on the ground that those agree­
ments did not deal with the cases at issue. 
105 — Joined Cases C-31/96 to C-33/96 Naranjo Arjona and 
Others [19971 ECR I-5501. 
I - 4100 
VERKOOIJEN 
in the event that that convention were to be 
deemed applicable 'in practice' (para­
graphs 25 to 29 and the operative part of 
the judgment). In that case, the Court 
stated that '[i]t is therefore for the national 
court to verify whether application of that 
convention would in practice be [relevant]' 
(paragraph 29) before indicating in the 
operative part of the judgment the solution 
to the questions raised by the national court 
both for the case where only the national 
law of the Member State concerned was 
applicable and for the case where the 
national court considered it more appro­
priate to rule on the basis of the interna­
tional convention. 106 Similarly, for the 
reasons already indicated, I believe that in 
the case at issue in the main proceedings 
before the Hoge Raad, it is necessary to 
consider, in the alternative, a legal frame­
work incorporating the Convention, in 
addition to the rules of national law 
indicated in the order for reference. 
(1) The Double-Taxation Convention 
between Belgium and the Netherlands 
49. Let me now consider specifically this 
convention, but only in so far as it has a 
bearing on this case. My comments may, 
however, also apply in cases other than this 
one, since the provisions on 'cross-border' 
dividends between Belgium and the Nether­
lands are modelled (like practically all 
comparable conventions concluded 
between the Member States of the Com­
munity) 107 on the Model Double-Taxation 
Convention proposed by the OECD. 108 I 
would also point out that my Opinion 
based solely on the national legislation of 
the Netherlands remains unchanged in the 
non-hypothetical 109 case where national 
legislation is not coupled with a double-
taxation convention containing provisions 
such as those examined below. 
50. Article 10(1) of the Convention estab­
lishes the basic principle that the Contract­
ing State where the shareholder is resident 
is entitled to charge tax on dividends 
originating in the other Contracting 
State. 110 Article 10(2) of the Convention 
also entitles the State of origin of the 
dividends (namely, the country where the 
distributing company is established) to 
charge tax on them (as a rule, by deduction 
at source, in addition to tax on company 
106 — The operative part of the judgment in Naranjo Arjona 
and Others essentially reflects my Opinion where I 
outlined the two (alternative) answers which I proposed 
should be given to the questions referred for a prelimin­
ary ruling. 
107 — See Case C-336/96 Cilly [1998] ECR I-2793, para­
graph 24. 
108 — Organisation for Economic Cooperation and Develop­
ment. 
109 — As late as 1992, the Ruding Report identified a number of 
cases where Member States had not concluded bilateral 
double-taxation agreements with each other (see Chap­
ters 3 and 10, Section III, on tax agreements). 
110 — Under Article 10(1) of the Convention (whose content, 
like that of paragraph 2, reflects that of Article 10 of the 
OECD Model Convention): 'Dividends paid by a com­
pany which is a resident of a Contracting State to a 
resident of the other Contracting State may be taxed in 
that other State'. 
I - 4101 
OPINION OF MR LA PERGOLA — CASE C-35/98 
profits) below a maximum limit. 1 11 More­
over, under Article 24 of the Conven­
tion, 112 the Netherlands must award a 
tax credit in order to avoid double taxation 
of the dividends paid to its taxpayers 
holding shares in companies established in 
Belgium, provided that, and to the extent 
that, a deduction at source such as that 
provided for in Article 10(2) of the Con­
vention has already been made from those 
dividends in Belgium. 113 In essence, in the 
case of a Netherlands taxpayer receiving 
dividends from a Belgian company, the 
Convention provides for a mechanism 
which is quite common in practice and is 
designed less to mitigate than to avoid the 
effects of double taxation. 
51. Considering the whole framework of 
relevant provisions — both national and 
international — the Netherlands tax sys­
tem — which seeks to eliminate, or at least 
mitigate, the effects of double taxation 
both in purely 'internal' cases and in 
'cross-border' cases — is therefore charac­
terised by the consistent nature of the 
treatment applied to different circum­
stances. I would observe, moreover, that 
by applying a tax credit to dividends 
distributed by Belgian companies, the 
Netherlands apparently achieves a more 
effective result than that attained — in 
respect of dividends distributed by Nether­
lands companies — by means of the partial 
exemption granted under Article 47b. As I 
have just pointed out, in the case of 'cross-
border' dividends, it is more appropriate to 
speak of the elimination rather than the 
mitigation of double taxation. 
(2) Capital movements 
52. That being said, let us now consider the 
circumstances underlying the first question. 
Take the case of a Netherlands taxpayer 
who, like .Mr Verkooijen, has invested in 
shares of a company established in Belgium 
111 — Article 10(2) of the Convention states: 'However, such 
dividends may also be taxed in the 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: (1) 5% of the gross amount of the dividends if the 
beneficial owner is a company (other than a partnership) 
which holds directly at least 25% of the capital of the 
company paying the dividends; (2) 15% of the gross 
amount of the dividends in all other cases...'. Moreover, 
under the last part of that same paragraph, those limits 
do not affect the taxation of the company in respect of the 
profits out of which the dividends are paid. 
Although the Convention establishes the reciprocal 
obligation for Contracting States to apply — in the case 
of dividends paid to a shareholder resident in the 
Contracting State — a dividend tax not exceeding 15%, 
Mr Verkooijen claims that a withholding tax of 25% had 
already been deducted in Belgium in respect of the 
dividends he received. 
112 — Which corresponds to Article 23 of the OECD Model 
Convention. 
113 — Article 24(1) of the Convention provides that 'as regards 
residents of the Netherlands, double taxation shall be 
avoided as follows: (1) In assessing tax, the Netherlands 
may include in the taxable amount elements of income or 
private assets which are taxable in Belgium in accordance 
with this Convention;... (3) The Netherlands shall grant... 
a reduction in the tax thus assessed in respect of such 
elements of income as are taxable in Belgium pursuant to 
Article 10(2) and are included in the basis of assessment 
referred to in (1). That reduction shall be equal to the 
lower of: (a) an amount equal to the tax charged in 
Belgium; (b) an amount equal to the fraction of the 
Netherlands tax calculated in accordance with (1), which 
corresponds to the relationship between the amount of 
such elements of income and the taxable amount referred 
to in (1)....' As for Belgium, Article 24(2) requires — as a 
rule — Belgium to exempt its taxpayers in respect of 
income on which tax has already been charged in the 
Netherlands. 'Exemption' and 'tax credit' are the two 
basic methods for avoiding double taxation indicated in 
Article 23 of the OECD Model Convention. 
In the present case, it cannot be established from the file 
whether the Netherlands tax authorities applied — in 
accordance with Article 24(1) of the Convention — to 
the dividends paid by Petrofina to Mr Verkooijen the tax 
credit in respect of the dividend tax already deducted in 
Belgium or whether Mr Verkooijen never applied for that 
advantage, designed to avoid double taxation. 
I - 4102 
VERKOOIJEN 
and has thus received a tax credit in 
accordance with Article 24(1) of the Con­
vention. What if that taxpayer also asks to 
benefit from the exemption under Arti­
cle 47b? Although he may justify his 
request on the ground of the principle of 
equal treatment of capital invested in 
different places, not only is that taxpayer 
actually seeking more favourable treatment 
than those who are resident for tax pur­
poses in the Netherlands and have invested 
in Netherlands shares, he is essentially 
seeking — despite the fact that he is in 
principle entitled to a tax credit under the 
Convention (thus already avoiding the 
effects of double taxation) — to avoid 
income tax, at least in respect of a taxable 
income of NLG 2 000. Such a result is 
inconsistent with the aims of the Treaty 
(and of the Directive) and unjustifiably 
interferes with the taxation power of the 
Member State concerned. Community rules 
on capital movements are not designed to 
create incentives for those movements but 
to remove all obstacles by requiring Mem­
ber States to treat Community situations no 
less favourably than purely internal situa­
tions. In this case we are dealing with a 
Member State that has already concluded 
and implemented in its national legal 
system a convention designed to avoid 
double taxation of 'cross-border' divi­
dends, a convention which certainly does 
not hinder free movement of capital 
according to Article 1(1) of the Directive 
(or Article 73b of the Treaty). I do not see 
on what basis Community law could 
require that Member State also to apply 
to those dividends the tax treatment 
reserved for 'national' dividends. That 
obligation would be tantamount to for­
going tax revenue and, what is more, it 
would be purely unilateral since there is no 
reciprocal obligation on the part of another 
Member State. Therefore, in my view, the 
national provisions are not open to criti­
cism since they generally display a form of 
cohesion which goes beyond the purely 
national level. That point is important and 
warrants two additional observations. 
53. Firstly, the foregoing observations do 
not refer to cohesion as a means for 
offsetting the disadvantage arising from 
the national measure (namely, the fact that 
the taxpayer does not benefit from a certain 
tax exemption) with an advantage of 
another kind, in another Member State: in 
its case-law, the Court has held that such 
broad cohesion cannot effectively justify 
taxation. 114 The case at issue is different. 
Cross-border investment and domestic 
investment are subject to different rules 
and regulations of the national legislature, 
some deriving from conventions, some 
arising autonomously from the national 
legal system. The distinguishing feature in 
the present case is the linkage between the 
fiscal advantages and disadvantages provi­
ded for in the legal system, considered as a 
whole, of one and the same Member State. 
The Netherlands does not extend the 
exemption provided for in Article 47b to 
dividends originating from Belgium 
because in the Netherlands those dividends 
have the advantage of a tax credit in 
accordance with Article 24(1) of the Con­
vention. 
114 — See end of footnote 72. 
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OPINION OF MR LA PERGOLA — CASE C-35/98 
54. I would observe, moreover, that the 
fact that the Netherlands grants a tax credit 
corresponding to the deduction at source 
made in Belgium does not adversely affect 
the cohesion of the tax system concerned. 
From that point of view, fiscal cohesion is 
no longer claimed within the system of 
taxation itself, or on the basis of a strict 
correlation between the exemption from 
income tax and the subjection of the 
dividends to a corresponding tax, but 
rather by virtue of a different macro-
economic balance, which is international 
and results from the bilateral regulation of 
the interests of the Contracting States as 
governed by conventions: '[f]iscal cohe­
sion... is shifted to another level, that of 
the reciprocity of the rules applicable in the 
Contracting States'. 115 Although it is true 
that the obligation to grant a tax credit in 
respect of the deduction at source made by 
the other contracting State (Article 24(1) of 
the Convention) reduces the tax revenue of 
the Netherlands, it is equally true that that 
State is entitled to made a deduction at 
source from the dividends paid by Nether­
lands companies to shareholders residing in 
Belgium (Article 10(2) of the Convention). 
55. That being said, it is now easier to 
see — taking into consideration all relevant 
provisions of the legal system in question, 
including the provisions of the aforesaid 
bilateral convention — how to classify the 
provision at issue in the main proceedings. I 
have already stated that Article 47b con­
stitutes an obstacle to capital movements 
and is contrary to Article 1(1) of the 
Directive. However, that conclusion was 
based solely on the provisions of national 
law indicated by the Hoge Raad in its order 
for reference to the Court and the argu­
ments submitted by the parties in the 
present proceedings. If, however, we take 
into consideration the conventions which 
specifically concern the circumstances in 
Mr Verkooijen's case, the national measure 
limiting the exemption under Article 47b to 
dividends distributed by Netherlands com­
panies is no longer, in the eyes of Commu­
nity law, a measure having the effect of 
dissuading Netherlands taxpayers from 
investing their capital in Belgium. For those 
who invest in shares in companies estab­
lished in that State, the tax system of the 
Netherlands, considered as a whole, pro­
vides an even more effective solution than 
that introduced (ten years after the Con­
vention was concluded) in the 'internal' 
case; moreover, Community law does not 
prohibit Member States from treating 
purely internal situations less favour­
ably. 116 The Netherlands taxpayer wishing 
to invest his capital in shares with a view to 
collecting the corresponding dividends may 
thus choose between shares in companies 
established in Belgium (in which case he is 
assured so-called fiscal neutrality under the 
Convention, avoiding double taxation 
entirely) and shares in companies estab­
lished in the Netherlands (in which case the 
effects of double taxation are simply miti­
115 — Wielockx, paragraph 24. The Ruding Report also held 
such reciprocity to be essential for imposing on Commu­
nity Member States the obligation to grant to 'cross-
border' dividends the advantages applicable to dividends 
of 'national origin. 
116 — See, for example, Case C-112/91 Werner [1993] 
ECR I-429 where the Court held that tax legalisation 
treating national citizens less favourably than foreigners 
(reverse discrimination) was compatible with Commu­
nity law. See, more recently, Asscher, where the Court 
confirmed the compatibility with Community law of 
reverse discrimination measures, stating that, although 
the rules on freedom of establishment cannot be applied 
to situations which are purely internal, a Member State 
cannot interpret those rules in such a way as to exclude 
its own nationals from the benefit of Community law 
where those nationals are in an equivalent situation to 
that of other Community nationals enjoying the rights 
and liberties guaranteed by the Treaty (see para­
graph 32). 
I - 4104 
VERKOOIJEN 
gated, to a limited degree). In essence, 
therefore, the tax system of the Netherlands 
is distinguished by a sort of fiscal neutrality 
as regards investments in shares in Belgian 
and Netherlands companies. Considering 
the relevant legal framework in its entirety, 
I believe we can also rule out the aspect of 
discrimination referred to in point 18 
above. The fact that the advantage provi­
ded for in Article 47b does not apply in 
respect of dividends distributed by compa­
nies established in another Member State is 
accounted for by the fact that the Conven­
tion establishes a particular system for that 
category of dividends: the two categories of 
dividends ('national' and 'cross-border') 
are not, therefore, in a comparable situa­
tion and the two advantages, concerning 
different situations, cannot be aggre­
gated. 117 
(3) Freedom of establishment 
56. In points 36 to 45, I explained the 
reasons why, in my view, in the light of 
national provisions alone, the provision at 
issue must be regarded as compatible with 
Article 52 of the Treaty. As for capital 
movements, however, a more comprehen­
sive analysis encompassing the provisions 
of conventions described above leads me to 
reconsider my opinion on freedom of 
establishment. As I said, the 'cohesion' 
distinguishing the Netherlands tax system 
as a whole makes it 'neutral' in respect of 
the taxation of dividends for shareholders 
who are natural persons. It follows that 
such cohesion, or neutrality, also rules out 
the existence of any discrimination or 
restriction from the angle of freedom of 
establishment. Moreover, the fact that, as 
we have seen, 'cross-border' dividends 
enjoy truly privileged treatment compared 
with 'national' dividends has the effect of 
encouraging both capital movements 
between Member States and the exercise, 
in certain cases at least (see point 41(b) and 
(c)), of the right of establishment. 
D — Question 3 
57. By its third and last question, the Hoge 
Raad asks whether the answers to the first 
117 — My conclusions concerning the classification of the 
provision at issue are supported by those of the 1992 
Ruding Repon (already cited in footnote 32). That repon 
recommends that Member States whose legal order 
provides for a form of tax advantage in respect of 
dividends paid by companies established in the Member 
State in question to those who are resident for tax 
purposes grant, on a reciprocal basis, an equivalent 
advantage in respect of dividends distributed by compa­
nies established in another Member State (see Chap­
ter 10, Section III, in the part devoted to company tax 
regimes). In the absence of Community harmonisation, 
the Ruding Report claims that such a solution has the 
advantage of reducing to a minimum possible distortions. 
In the context of its bilateral relations with Belgium, the 
Netherlands grants an advantage on 'cross-border' divi­
dends which is not equal to, but greater than that on 
'national' dividends. Let me add that the provisions of the 
Convention are fully in line with the Commission's 
recommendations advocating a measure with less restric­
tive effects on capital movements, namely a tax credit for 
dividends originating in another Member State (see 
paragraph 29). 
I - 4105 
OPINION OF MR LA PERGOLA — CASE C-35/98 
two questions are likely to differ if the 
investor is an employee of a company 
controlled by the issuing company, who 
holds the shares giving rise to the dividends 
in the context of an employees' savings 
plan. 
58. The parties which have submitted 
observations in these proceedings generally 
agree that that question must be answered 
in the negative, considering also that Arti­
cle 47b does not lay down different rules 
depending on the type of taxpayer holding 
shares. That article does not distinguish 
between third-party investors and investors 
holding shares in the context of an employ­
ees' savings plan. As regards the first 
question for a preliminary ruling, which I 
have already considered, I share the posi­
tion of the parties: the Treaty and the 
Directive guarantee the widest possible 
freedom as regards capital movements, 118 
without any other conditions or distinc­
tions based on the nature or characteristics 
of the person undertaking such a move­
ment. The freedom in question must be 
understood as being guaranteed to all 
persons under the same conditions. 
59. However, Mr Verkooijen submits an 
additional line of reasoning, concerning 
more specifically the object of the second 
question. He essentially takes the view that 
the limit introduced by Article 47b for the 
cases subject to the exemption has a 
negative influence on the professional 
mobility of employees, precisely because 
that provision excludes the application of 
the exemption to dividends distributed by 
the foreign companies employing them. 
That makes it more difficult for foreign 
companies to attract employees to the 
Netherlands. Foreign companies would be 
obliged to set up employees' participation 
schemes or employees' savings plans com­
parable to those which only companies 
established in the Netherlands can offer, 
and this would contribute to increasing the 
costs for a foreign company establishing a 
place of business in the Netherlands. While 
it is not my purpose to ignore the case-law 
of the Court according to which all restric­
tions, even minor, on freedom of establish­
ment are contrary to Article 52 of the 
Treaty, 119 I believe, however, that the link 
between the provision at issue and the 
exercise of freedom of establishment in the 
Netherlands of companies with employees' 
savings plans comparable to that of Petro­
fina is too tenuous and indirect to have any 
intrinsic importance for the purposes of 
Article 52 of the Treaty. Even assuming it 
were sufficient to qualify as a restriction 
contrary to the article concerned, that link 
is not such as to alter my opinion on the 
second question, particularly as regards the 
existence of a valid justification for 
the restriction. Moreover, any restriction 
118 — See Bordessa, paragraph 17, and Brugnoni and Ruffi-
nego, paragraph 22 (although the latter judgment con­
cerns a time when only certain capital movements had 
been liberalised, the findings of the Court concerning 
those capital movements are now generally applicable 
since the Directive brought about full liberalisation in this 
field). 
119 — See the case-law referred to in point 17, especially in 
footnote 43. 
I - 4106 
VERKOOIJEN 
would disappear in any event if the overall 
legal framework of reference also included 
provisions of conventions such as Arti­
cles 10 and 24 of the Double-Taxation 
Convention between Belgium and the 
Netherlands. 
VI — Conclusion 
60. In the light of the foregoing, I propose that the Court give the following 
answers to the questions submitted by the Hoge Raad: 
(1) Article 1(1) of Council Directive 88/361/EEC of 24 June 1988 for the 
implementation of Article 67 of the Treaty and Article 52 of the EC Treaty 
(now, after amendment, Article 43 EC) must be interpreted as precluding the 
legislation of a Member State which makes the grant of an exemption from 
the income tax payable on dividends from shares subject to the condition that 
those dividends are paid by a company established in that Member State, 
unless the legislation in question is necessary to ensure the cohesion of the tax 
system. It is for the national court to establish whether that legislation goes 
further than is necessary to ensure the cohesion of the tax system. 
However, where the Member State concerned has concluded a double-
taxation convention containing provisions such as those in Articles 10 and 24 
of the Convention concluded on 19 October 1990 between the Kingdom of 
Belgium and the Kingdom of the Netherlands, Article 1(1) of Directive 
88/361 and Article 52 of the Treaty must be interpreted, solely as regards 
I - 4107 
OPINION OF MR LA PERGOLA — CASE C-35/98 
capital movements and the exercise of freedom of establishment between 
contracting Member States, as not precluding national legislation such as that 
presently at issue. 
(2) The answer under (1) is not affected by the fact that the recipient of the 
dividends is an employee of a company controlled by the issuing company, 
who acquired the shares in question in the context of an employees' savings 
plan set up by the company controlling the subsidiary. 
I - 4108