Articles 49 TFEU, 63 TFEU and 65 TFEU must be interpreted as precluding legislation of a Member State under which, where a resident of that Member State who is a shareholder of a company established in another Member State receives dividends taxed in the two Member States and the double taxation is regulated by the imputation in the Member State of residence of a tax credit of an amount corresponding to the tax paid in the State of the distributing company, a mechanism capping various direct taxes at a certain percentage of income received during a year does not take into account, or takes only partially into account, the tax paid in the State of the distributing company.

First, because of the difference in treatment it imposes between resident taxpayers depending on whether they receive dividends from a company established in the national territory or from a company established in another Member State, such tax legislation is liable to discourage natural persons subject to income tax mainly in their Member State of residence from investing their capital in companies established in another Member State and constitutes a restriction on the free movement of capital prohibited, in principle, by Article 63 TFEU.

Second, such a difference in tax treatment is liable to constitute a restriction of freedom of establishment, prohibited in principle by Article 49 TFEU, in that it makes it less attractive for the national of that Member State to establish himself in another Member State.

Such a restriction cannot be justified either by the need to safeguard the coherence of the national tax system or by the need to safeguard the allocation of powers of taxation between the Member States.

In so far as concerns the need to safeguard the coherence of the national tax system, for an argument based on such justification to succeed, a direct link needs to be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy, the direct nature of this link being assessed in the light of the objective of the legislation in question. However, there is no link between the tax advantage in the form of the restitution of tax which the tax capping mechanism may give rise to for the benefit of the taxpayer and the offsetting of that advantage by a particular levy. The amount of tax refunded as a result of the tax capping mechanism depends on the total amount of direct taxes paid by the taxpayer and on whether that amount exceeds the threshold laid down in the legislation. Thus, the tax advantage at issue is not granted in correlation to a specific tax levied but is granted only if the total tax paid exceeds a certain percentage of taxpayers’ income for the year. It follows that no direct link can be established between the tax advantage concerned and a particular tax levied.

In so far as concerns the need to safeguard the allocation of powers of taxation between the Member States, such a tax capping mechanism does not affect the possibility of the Member State concerned to tax the activities carried on in its territory, nor does it restrict the possibility of that Member State to tax income acquired in another Member State. Therefore, as regards the conditions for the application of that tax provision, the question of any allocation of powers of taxation between Member States does not arise.

(see paras 55, 56, 59, 69, 72, 74, 85-88, operative part)