The freedom of establishment as it emerges from European Court of Justice case law and its impact on the fiscal sovereignty of the EU member states

Abstract

The aim of this research is to examine the role played by the ECJ rulings on freedom of establishment in the context of direct fiscal legislation. The ECJ has held that domestic tax provisions can also be an obstacle to the freedom of establishment guaranteed in the Treaty. Consequently, Member States are bound to limit themselves to what is allowed by European Union law, even though fiscal laws do not fall within the competence of the European Union. This has had notable impact on a number of areas that fall within the concern of national tax authorities, of which we examine cross-border losses, exit taxes, thin capitalization rules and abuse. The ultimate effect of the ECJ rulings is on national legislation, irrespective of whether the Member State was involved in the litigation. This is particularly relevant for Malta which was never involved in ECJ direct tax proceedings so far but which has to abide to the rulings.