A Member State fails to comply with its obligations under Articles 21 TFEU, 45 TFEU and 49 TFEU and Articles 28 and 31 of the Agreement on the European Economic Area if it adopts and maintains in force legislation according to which, for a taxable person who loses his status as a resident in the national territory, for taxation purposes for the year of such loss of residence status, the amount which, under that legislation, was not taxed when the shares were exchanged is to be reckoned as a capital gain. The obligation of that taxpayer to pay the capital gains tax immediately on the exchange of the shares creates a difference in treatment in relation to taxpayers who continue to reside in the national territory and who are therefore entitled to a deferral of tax on the said capital gains resulting from the exchange of the shares until the subsequent transfer of the shares received at the exchange. This difference in treatment with regard to the time of taxation of the capital gains in question constitutes a cash-flow disadvantage for the taxpayer who wishes to transfer his residence outside the national territory in relation to a taxpayer who maintains his residence in that territory.

In this connection, the exclusion of a cash-flow advantage in a cross-border situation where it is available in an equivalent domestic situation is a restriction on the free movement of workers and the freedom of establishment.

That restriction cannot be justified by the need to ensure a balanced allocation of the power to impose taxes.

It is true that the national legislation at issue is capable of ensuring the preservation of the distribution of the power to impose taxes between the Member States concerned. The final settlement tax levied at the time of the transfer of a residence is intended to subject the unrealised capital gains — which arose within the ambit of that State’s power of taxation before the transfer of that residence — to the Member State of origin’s tax on profits. Capital gains realised after that transfer of the residence are taxed exclusively in the host Member State in which they have arisen, thus avoiding double taxation.

However, that legislation goes beyond what is necessary in order to achieve that objective insofar as that legislation does not leave the choice to the taxable person who transfers his residence from the national territory to another Member State to opt between, on the one hand, the immediate payment of the amount of the tax on capital gains resulting from an exchange of shares and, on the other hand, the deferred payment of that amount, which necessarily involves an administrative burden for the taxable person, in connection with tracing the transferred assets, and accompanied by a bank guarantee.

As regards, the justification based on the need to maintain the cohesion of a national tax system, this constitutes an overriding reason in the public interest. In order for an argument based on such a justification to succeed, the existence of a direct link must be established between the tax advantage concerned and the offsetting of that advantage by a particular tax levy.

Although, in a cross-border situation, the tax advantage granted is offset by a tax levy, since the amount of the tax due is necessarily recovered at the time of transfer of the taxable person’s residence outside of the national territory, this is not the case when the situation is purely internal, since the recovery of the tax on capital gains resulting from an exchange of shares takes place only in the eventuality of a definitive disposal of the shares received during that exchange, that alleged link between the tax advantage granted to the taxable person and tax treatment of that advantage is not certain.

(see paras 43-45, 56, 57, 60, 62, 64, 65, 94, operative part 1)