European Commission v United Kingdom of Great Britain and Northern Ireland.
Date: 2014-11-13
16. It must be observed, as a preliminary point, that section 13 of the TCGA applies where a participator resident in the United Kingdom holds more than 10% of the shares of the non-resident close company in question. It can therefore apply both to holdings enabling their holder to exert a definite influence over the decisions of that company and determine its activities and to holdings acquired for investment purposes. It thus cannot be ruled out that that section may affect both freedom of establishment and free movement of capital (see, to that effect, judgment in Commission  v Belgium , C‑387/11, EU:C:2012:670, paragraphs 34 and 35 and the case-law cited). Accordingly, that section could be examined, first, in the light of Article 49 TFEU and Article 31 of the EEA Agreement and, secondly, in the light of Article 63 TFEU and Article 40 of the EEA Agreement.
18. According to settled case-law of the Court, the measures prohibited by Article 63(1) TFEU as restrictions on the movement of capital include those that are such as to discourage non-residents from making investments in a Member State or to discourage that Member State’s residents from doing so in other States (see, inter alia, judgment in Commission  v Finland , C‑342/10, EU:C:2012:688, paragraph 28 and the case-law cited).
23. According to settled case-law of the Court, the free movement of capital may be limited by national legislation only if it is justified by one of the reasons mentioned in Article 65 TFEU or by overriding reasons in the public interest as defined in the Court’s case-law, to the extent that there are no harmonising measures at European Union level ensuring the protection of those interests (see, inter alia, judgments in Commission  v Germany , C‑112/05, EU:C:2007:623, paragraph 72 and the case-law cited, and Commission  v Portugal , C‑20/09, EU:C:2011:214, paragraph 59 and the case-law cited).
24. Thus the Court has repeatedly held that the objectives of combating tax evasion and tax avoidance may justify a restriction of the free movement of capital. That restriction must, however, be appropriate for attaining those objectives and not go beyond what is necessary for attaining them (see, inter alia, judgment in Commission  v Portugal , EU:C:2011:214, paragraphs 60 and 61 and the case-law cited).
25. A national measure restricting the free movement of capital may thus be justified where it specifically targets wholly artificial arrangements which do not reflect economic reality and whose sole purpose is to avoid the tax normally payable on the profits generated by activities carried out on national territory (judgment in Itelcar , C‑282/12, EU:C:2013:629, paragraph 34 and the case-law cited).
30. In addition, since it is common ground that section 13 of the TCGA applies also to companies resident in a Member State of EFTA which is party to the EEA Agreement, and in so far as the provisions of Article 40 of the EEA Agreement have the same legal scope as the substantially identical provisions of Article 63 TFEU (judgments in Commission  v Belgium , EU:C:2012:670, paragraph 88 and the case-law cited, and Commission  v Finland , EU:C:2012:688, paragraph 53 and the case-law cited), all the foregoing considerations may, in circumstances such as those in the present case, be transposed mutatis mutandis  to Article 40 of the EEA Agreement.