Austrian provisions exempted domestic dividend income regardless of the size of the holding but only give an unconditional exemption in cross border situations if the holding was at least 10%. Below that level dividends from EU/EEA portfolio holdings could still qualify for an exemption if the shareholder could show that the foreign income has been subject to a comparable tax at a comparable rate and that it was not exempt in the other Member State. Otherwise the portfolio income was eligible for a tax credit for underlying tax subject to proving a number of facts, such as the corporation tax rate, the corporation tax actually paid and the amount of corporation tax that should be credited in Austria.
Haribo, who held portfolio holdings through a domestic investment fund, submitted that it was impossible or unduly difficult for it to provide this information and that the Austrian law therefore breached the free movement of capital provisions in article 56 EC.
In her opinion AG Kokott encourages the court to reject that argument. A Member State is entitled to request all the necessary proof and if the taxpayer cannot adduce the proof, it is just tough luck, even where it was in fact impossible to obtain the information. In her view it should be in the interest of foreign companies and of domestic investment funds to make all the necessary information available to the tax payer in order to encourage investment in their companies. Such an approach would not seem consistent with the Court's reliance on the Mutual Assistance Directives in the Marks and Spencer case and others.
However in relation to the dividend taxation issues referred back to the ECJ in the FII case, her opinion is supportive of the taxpayer. In her opinion while an exemption and an imputation system are in principle equivalent, it would be unlawful to impose the credit method on inbound dividend income where in domestic situations there is no real link between the amount of tax actually paid by the subsidiary and exempting its dividends from tax in the hands of the parent. This accords with the taxpayers' construction of the relevant sections of the FII judgment and which would lead to the conclusion that taxing DV income under the previous UK system was contrary to community law.