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Taxation: Commission refers the UK to the European Court of Justice over the taxation of assets abroad

Recently, the European Commission decided to refer the United Kingdom to the EU Court of Justice (ECJ) for its regime concerning the taxation of transfers of assets abroad. UK legislation provides for a difference in treatment between domestic and cross-border transactions.

If a UK resident invests capital in a UK company, the company will employ the capital to generate income. In this situation, the company will be taxable on the income generated, but the investor will not be taxed until the company makes a distribution to him/her, for example by way of a dividend.

However, if a UK resident invests capital in a company in another Member State, the company is liable to be taxed in that Member State on the income it generates. In this scenario the investor would be subject to UK income tax on that income, even though the income has not been distributed to him/her.

The Commission is of the opinion that this restriction is disproportionate, in the sense that it goes beyond what is reasonably necessary in order to prevent abuse or tax avoidance.

The referral to the Court of Justice is the last step in the infringement procedure.


The UK legislation (Income Tax Act 2007) concerning taxation of transfers of assets abroad provides for a difference in tax treatment between domestic and cross-border transactions and poses a restriction of the freedom of establishment and the free movement of capital which is contrary to EU rules (Articles 49 and 63 of the TFEU and Articles 31 and 40 of the EEA Agreement). In February 2011 the Commission sent a reasoned opinion formally demanding UK authorities to amend this discriminatory tax regime (see IP/11/158).

The Commission's case reference number is 2009/4130.

For press releases on infringement cases in the taxation or customs field see:

For the latest general information on infringement measures against Member States see:

On the October infringement package decisions: MEMO/12/794

On the general infringement procedure: MEMO/12/12

Contacts :

Emer Traynor (+32 2 292 15 48)

Natasja Bohez Rubiano (+32 2 296 64 70)

Additional Information


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