Court of Justice of the European Union

Judgment of 13 July 2016

Case C-18/15

In the Judgment in question, rendered in the context of a reference for a preliminary ruling, the Court of Justice of the European Union states that Article 49 EC does not preclude a national legislation under which a procedure for withholding tax is applied to the income of non-resident financial institutions in the Member State in which the services are provided, whereas the income received by financial institutions resident in that Member State is not subject to such withholding tax, provided that the application of the withholding tax to the non-resident financial institutions is justified by an overriding reason of general interest and does not go beyond what is necessary to attain the objective pursued.

However, the Court of Justice of the European Union states that it is a restriction to the freedom to provide services a national legislation that taxes non-resident financial institutions on the interest income received within the Member State concerned without giving them the opportunity to deduct business expenses directly related to the activity in question, whereas such an opportunity is given to resident financial institutions. In this context, the Court of Justice of the European Union also states that it is for the national court to assess which business expenses may be regarded as being directly related to the activity in question.