NGI BV made an unrealised currency exchange profit of NLG 22m prior to the transfer of its effective place of management to the UK. Under Dutch law, this profit was deemed to be realised at the time of the transfer and NGI was assessed to tax. The taxpayer argued that this ‘exit tax’ was contrary to the freedom of establishment and contravened EU law.

In her opinion, AG Kokott, agreed with the taxpayer. She found that the tax should have been postponed until the time at which the gain was realised and have been capable of taking into account later losses. Such taxes may only be justified in circumstances where it is not reasonably possible for the Member State to track the hidden reserves following transfer, which she found was not the case here.

This opinion closely follows the AG’s earlier opinion in the case of N. Judgment is expected early next year.