Opinion of the Advocate General — ECLI:EU:C:2005:479
Date: 2005-07-14
Language of the case: Swedish
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Free movement of capital
Procedure: Reference for a preliminary ruling
Origin: Sweden

Summary of the Judgment 1. Free movement of capital – Restrictions (Arts 56 EC and 58 EC) 2. Free movement of capital – Restrictions (Arts 56 EC and 58 EC) 1. Articles 56 EC and 58 EC must be interpreted as precluding national legislation which provides that a payment in respect of a share repurchase to a non-resident shareholder in connection with a reduction in share capital is taxed as a dividend without there being a right to deduct the cost of acquisition of those shares, whereas the same payment made to a resident shareholder is taxed as a capital gain with a right to deduct the cost of acquisition. The effect of such legislation is to make cross-frontier transfer of capital less attractive both by deterring investors who are not resident in that Member State from buying shares in companies resident in that Member State and also, consequently, by restricting the opportunities available to such companies to raise capital from investors who are not resident in that Member State. Since the cost of acquisition is directly linked to the payment made on the occasion of a share repurchase, there is no objective difference between the situations of residents and non-residents such as to justify different treatment on this point. (see paras 34, 40, 43, operative part 1) 2. Articles 56 EC and 58 EC must be interpreted as precluding national legislation deriving from a double taxation agreement which fixes a lower ceiling on the taxation of dividends for non-resident shareholders than for resident shareholders, and, by interpreting that agreement in the light of the commentaries of the OECD on its applicable model convention in the context of the taxation of a share repurchase payment in connection with a reduction in share capital, permits the nominal value of such shares to be deducted from the share repurchase payment, whereas a resident shareholder is permitted to deduct the cost of acquisition of shares, except where, under such national legislation, non-resident shareholders are not treated less favourably than resident shareholders. It is for the national court to determine whether that is the case. (see paras 53, 56, operative part 2)