The compatibility of Malta's imputation system with the European fundamental freedoms in the light of the case law of the European Court of Justice

Abstract

As the world becomes increasingly integrated, International tax practices that developed in a more segregated economic environment are being reconsidered. No more is this so than with the international operation of dividend imputation systems. From the point of view of economic efficiency, tax systems should be neutral. However, certain systems of company taxation tend to favour domestic investment as under imputation systems. The European Court of Justice has many a time ruled that not extending the imputation tax credit to non-resident shareholders constitutes a breach to EC Law, and not withstanding the Member States sovereignty in direct tax matters, such States had to modify their direct tax systems. Accordingly, this thesis aims at investigating the current imputation system with reference to the Decisions of the European Court of Justice that have been made on imputation systems in Member States, so as to arrive at an opinion as to whether Malta's imputation system is compatible with the European Law acquis or not.