In the marriage of EU law and bilateral treaty obligations, the ECJ fails to sign the pre-nup 

On November 19, 2009, the European Court of Justice (“ECJ”) rendered its decision in the Commission v Italy case. The ECJ decided that the Italian system of taxation at source on outgoing dividends infringes free capital movement insofar as dividends are issued to companies in other EU Member States. However, there is no infringement of the free movement of capital with regard to dividend distributions to companies in EU countries or in third countries. The relevant factor in this is that the ECJ deems the obligations or even possibilities for information exchange to be minimal in these countries.

The authors investigated this decision, also in light of Article 26 of the OECD Model Tax Convention and the information exchange between the Member States and the EU and third countries through bilateral tax treaties. Their research concluded that the information exchange of Article 26 of the OECD Model Tax Convention does stipulate an obligation to provide information. The ECJ’s decision on dividend distributions to companies in the EU or third countries is therefore incorrect, and the Italian taxation at source infringes the free movement of capital under European law.

Original title: Huwelijk EU-recht en bilaterale verdragen; HvJ EU voorziet niet in een gemengde boedel!