Judgment;Summary — ECLI:EU:C:2023:771
Date: 2023-10-12
Language of the case: Portuguese
Court formation: Sixth Chamber
Subject matter: Taxation;Free movement of capital;Approximation of laws
Procedure: Reference for a preliminary ruling
Origin: Portugal

Summary Case C-312/22 – 1 
Case C-312/22 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
10 May 2022 
Referring court: 
Supremo Tribunal Administrativo (Portugal) 
Date of the decision to refer: 
7 April 2022 
Appellant: 
FL 
Respondent: 
Autoridade Tributária e Aduaneira 
  
Subject matter of the main proceedings 
Appeal to determine whether the mandatory aggregation of income from interest 
paid by institutions that are not resident for tax purposes on bonds and fixed-term 
deposits issued by foreign institutions, and the taxation of that interest at the 
progressive rates established in the Código do Imposto sobre o Rendimento das 
Pessoas Singulares (Personal Income Tax Code), which gives rise to a rate of tax 
that is far higher than the rate (levy) that would apply if the income in question 
were paid by resident institutions, breaches the provisions of EU law governing 
the free movement of capital or any agreement between the European Union and 
the Swiss Confederation. 
Subject matter and legal basis of the request 
Interpretation of EU law, in particular Article 56 TEC (now Article 63 TFEU) in 
conjunction with Article 2(4) of the Agreement between the European Community 
and the Swiss Confederation providing for measures equivalent to those laid down 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-312/22 
 
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in Council Directive 2003/48/EC on taxation of savings income in the form of 
interest payments; Article 267 TFEU, subparagraphs (a) and (b). 
Question referred for a preliminary ruling 
Is it compatible with EU law for income in the form of interest on bonds and debt 
instruments paid by a non-resident Swiss bank to the appellant in 2005 to be 
subject to income aggregation and therefore to be taxed at the same rate of income 
tax as other income, meaning that the applicable rate of tax is far higher than the 
rate (levy) that would apply had the income in question been paid by a bank 
resident in national territory? 
Provisions of European Union law relied on 
Article 56 TEC (now Article 63 TFEU) and Article 49 TEC (now Article 56 
TFEU) 
Article 2(4) of the Agreement between the European Community and the Swiss 
Confederation providing for measures equivalent to those laid down in Council 
Directive 2003/48/EC on taxation of savings income in the form of interest 
payments 
Provisions of national law relied on 
Article 22(1) and (3), Article 71(1), Article 71(3)(a) and (b) and Article 101(2)(b) 
of the Código do Imposto sobre o Rendimento das Pessoas Singulares (Personal 
Income Tax Code; ‘the CIRS’), as in force at the time of the facts 
Provisions of international law relied on 
Articles 40 and 41 of the Agreement on the European Economic Area 
Succinct presentation of the facts and procedure in the main proceedings 
1 In 2005, FL obtained income in the form of interest on bonds and debt instruments 
paid by a Swiss bank based in the Swiss Confederation. In May 2006, FL filed his 
income tax return for the 2005 tax year and declared income of EUR 120 333.00 
by way of income on capital. That income was subject to income aggregation and 
was taxed at the maximum rate of 40%. 
2 Based on the tax return, it was calculated that the amount of tax due was 
EUR 45 317.27. 
3 On 31 July 2008, FL submitted an application for a review by the tax authorities 
of the income tax calculation for 2005. In a written reply dated 5 May 2009, the 
AUTORIDADE TRIBUTÁRIA E ADUANEIRA 
 
3 
Personal Income Tax Services Directorate informed FL that his application had 
been rejected. FL submitted arguments in the course of a preliminary hearing. 
4 In a written reply dated 12 October 2009, FL was notified that his application for a 
review had been dismissed. 
5 On 11 January 2010, FL lodged an action in administrative proceedings with the 
Tribunal Administrativo e Fiscal de Sintra (Administrative and Finance Court, 
Sintra) seeking the cancellation of the tax calculation. 
6 By judgment of 1 November 2020, the action was declared inadmissible in its 
entirety. FL appealed against that judgment to the Supremo Tribunal 
Administrativo (Supreme Administrative Court), which is the referring court. 
7 The Supreme Administrative Court is asked whether the mandatory aggregation of 
income from interest paid by institutions that are not resident for tax purposes on 
bonds and fixed-term deposits issued by foreign institutions, and the taxation of 
that interest at the progressive rates established in the CIRS, breaches the principle 
of the free movement of capital and the freedom to provide services or the 
agreement concluded between the European Community and the Swiss 
Confederation which provides for measures equivalent to those laid down in 
Council Directive 2003/48. 
The essential arguments of the parties in the main proceedings 
FL’s arguments 
8 According to FL, these proceedings are concerned solely with the illegal nature of 
the taxation arising from the interpretation of the rules in the CIRS in force at the 
time of the facts, which applied to the income he received in 2005 and from which 
three conclusions can be drawn: (i) interest on bonds and fixed-term deposits 
issued by Portuguese institutions is subject to a levy at a rate of 20% 
[Article 71(1), Article 71(3)(a) and (b) and Article 22(3) of the CIRS]; (ii) interest 
on bonds and fixed-term deposits issued by foreign institutions paid by institutions 
that are resident for tax purposes in Portugal is also subject to the 20% levy 
[Article 71, Article 101(2)(b) and Article 22(3) of the CIRS]; (iii) interest on 
bonds and fixed-term deposits issued by foreign institutions paid by institutions 
that are resident for tax purposes outside Portugal is subject to mandatory income 
aggregation and is taxed at the progressive rates established in the CIRS 
(Article 22(1) of the CIRS). 
9 He therefore believes that this situation is contrary to Portuguese law, because it 
infringes the principle of equality enshrined in the Portuguese Constitution, which 
derives from the ability to pay principle, also established in the constitution, and 
because taxation of income in the form of interest on bonds and fixed-term 
deposits paid to taxpayers resident in Portugal is based entirely on a formalistic 
criterion, namely that of the payer’s tax residence. Where this form of income is 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-312/22 
 
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paid by institutions resident outside Portugal, it is taxed at progressive rates (in 
this case, at a rate of 40%) rather than at the fixed rate of 20% (which applies 
where the interest is paid by Portuguese institutions). 
10 According to FL, this criterion is discriminatory in that it ignores the requirement 
for ‘equal treatment for equal situations’, because it results in different tax 
treatment for identical factual situations, that is to say, situations in which: (i) the 
income is the same – interest on bonds and fixed-term deposits; (ii) the debtor is 
the same – a financial institution (bank) which pays out that income; and (iii) the 
creditor is the same – a taxpayer who receives the income in the form of interest 
on bonds and fixed-term deposits. The legal and fiscal relationship is the same, in 
that: (i) the tax creditor is the same, namely the Tax Authorities; (ii) the same type 
of taxpayer is involved, namely a natural person resident in Portugal; and (iii) the 
subject matter is the same, namely interest on bonds and fixed-term deposits. 
11 On the one hand, this discrimination between resident and non-resident paying 
agents also breaches the proportionality principle and the prohibition of excess 
principle, which has three elements: appropriateness, necessity or need and 
proportionality in the narrow sense. It is also unacceptable and unjustifiable. 
Indeed, the Portuguese legislature rectified the situation described above, and 
interest from bonds and fixed-term deposits is now taxed at the same rate, 
irrespective whether the investments are held with Portuguese or foreign credit 
institutions and whether the interest is paid by agents established in Portugal or 
abroad. 
12 The tax calculation should be declared void because it also breaches the essential 
content of the fundamental right to private property or, at least, in the alternative, 
this court should order the cancellation of the income tax calculation at issue. 
13 FL also argues that EU law has been infringed, firstly due to breach of the 
principle of the free movement of capital and freedom to provide services 
[Article 56 TEC (now Article 63 TFEU) and Article 49 TEC (now Article 56 
TFEU]. There has been a breach of the principle developed by the Court of Justice 
of the primacy of EU law over national law. 
14 FL asserts that the taxpayer’s choice of investment is conditioned by the 
difference in the applicable rates, which is dependent on whether or not the 
institution paying the income in question has a paying agent resident in Portugal, 
and that this is an obstacle to the movement of capital. 
15 FL cites the case-law of the Court of Justice on different treatment of similar 
situations, in particular the judgment of 29 April 1999 (C-311/97, 
EU:C:1999:216). 
16 FL also refers to the case-law of the Court of Justice in proceedings similar to the 
present case, in particular the judgment of 6 June 2000 (C-35/98, 
EU:C:2000:294), issued in proceedings between a Dutch national and the Dutch 
tax authorities concerning the refusal of the latter to permit a tax exemption for 
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dividends received from a company established in another Member State, and the 
judgment of 11 October 2007 (C-443/06, EU:C:2007:600, paragraph 39), in which 
the Court of Justice stated that ‘the effect of national legislation such as that in 
dispute in the case in the main proceedings is to make the transfer of capital less 
attractive for non-residents by deterring them from making investments in 
immovable property in Portugal and, [as] a result, from carrying out transactions 
related to those investments such as selling immovable property’. 
17 In this context, FL refers to the judgment of the Court of Justice of 4 March 2004 
(C-334/02, EU:C:2004:129), which examined French legislation which imposed a 
levy deducted at source that was lower than the marginal rate of tax resulting from 
the application of the progressive rates of income tax and which applied only 
where the debtor was resident or established in France. The Court of Justice 
considered that there was a restriction on the freedom to provide services and on 
the free movement of capital. 
18 FL believes that the judgments cited above can be extrapolated to the present case, 
since the Tax Authorities are seeking to apply a different tax regime to the same 
type of income, depending on whether or not the institution making the payment 
has a paying agent in Portugal, and this constitutes discrimination or a restriction 
based on the place of establishment of the service provider which may hamper its 
cross-border activity and is contrary to the principle of the free movement of 
capital. 
19 FL therefore considers that interest on bonds and fixed-term deposits paid by 
institutions resident inside or outside the European Union (such as in Switzerland) 
should receive the same tax treatment as interest on bonds and deposits paid by 
institutions with paying agents in Portuguese territory. 
20  FL also argues that EU law has been infringed, due to failure to comply with 
Directive 2003/48, ‘the Savings Directive’), which was implemented in 
Portuguese law by Legislative Decree No 62/2005 of 11 March 2005. FL cites the 
Agreement between the European Community and the Swiss Confederation 
providing for measures equivalent to those laid down in Council Directive 
2003/48. 
21 FL argues that, since the Portuguese State is a signatory to that agreement, it 
cannot impose a higher rate of tax on income paid through Swiss banks than 
would apply in Portugal were the income to be paid through national banks. 
22 FL also argues that international law has been infringed, in so far as there has been 
a breach of the principle of free movement of capital and the principle of freedom 
to provide services, since, under Articles 40 and 41 of the EEA Agreement, those 
principles also apply to Switzerland as the State of residence of the institution 
paying the income in question. 
23 Those principles are identical in all respects to the guiding principles of the 
European Union, and have been interpreted by the EFTA Court in the same way 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-312/22 
 
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as the Court of Justice. In this regard, FL cites the judgment of the EFTA Court of 
23 November 2004 (Case E-1/04, Fokus Bank ASA v The Norwegian State), 
which examined the compatibility of Norwegian legislation with the principle of 
free movement of capital, since the legislation established more favourable tax 
treatment for residents of Norway (which, like Switzerland, is a member of EFTA 
but not of the European Union) than for non-residents. The Court found that the 
Norwegian law introduced a restriction on that principle, which is enshrined in the 
EEA Agreement (to which Portugal and Switzerland are contracting parties). 
24 Consequently, the judgment under appeal is vitiated by an error of assessment, 
due to breach of the principles of free movement of capital and freedom to provide 
services, enshrined respectively in Article 56 TEC (now Article 63 TFEU) and 
Article 49 TEC (now Article 56 TFEU). It must therefore be overturned and 
replaced by another judgment which declares the tax void or, at least, cancels the 
disputed calculation of income tax for the 2005 tax year, and also orders the Tax 
Authorities to pay late-payment interest. 
Succinct presentation of the reasoning in the request for a preliminary ruling 
25 The Supreme Administrative Court considers that, in order to decide the appeal 
before it, it is necessary to determine whether the mandatory aggregation of 
income from interest paid by institutions that are resident for tax purposes outside 
national territory on bonds and fixed-term deposits issued by foreign institutions, 
and the taxation of that interest at the progressive rates established in the CIRS, 
breaches the provisions of EU law on the free movement of capital and the 
aforementioned agreement between the European Union and the Swiss 
Confederation. 
26 The provisions of the CIRS relevant to the present case are Article 22(1) and (3), 
Article 71(1), Article 71(3)(a) and (b), and Article 101(2)(b). At the time the 
events took place, these articles did not provide for the income in question to be 
subject to the levy of 20%, providing instead for it to be taxed at the progressive 
rates of income tax. 
27 The question that arises is whether or not, at the time when FL received the 
income at issue from the Swiss Confederation (2005), the applicable Portuguese 
legislation infringed the provisions of EU law on free movement of capital, in 
particular the provisions in Article 56 TEC (now Article 63 TFEU), in conjunction 
with Article 2(4) of the agreement between the European Union and the Swiss 
Confederation. The legislation did not provide for such income from capital to be 
subject to levies, whereas it did make such provision where the same income was 
obtained in national territory or paid by resident institutions or by non-resident 
institutions to which the payment in question could be attributed. 
28 The Supreme Administrative Court has therefore decided to refer the question set 
out above to the Court of Justice for a preliminary ruling and to stay the appeal 
proceedings.