European Union tax: ECJ Ruled in Commission v. Italy

The ECJ ruled in Commission v. Italy that, by making dividends distributed to companies established in other EU Member States subject to a less favorable tax regime than that applied to dividends distributed to resident companies, Italy has failed to fulfill its obligations under the EU Treaty (i.e. the free movement of capital). However, the ECJ decided that the Italian rules did not breach the equivalent free movement of capital and freedom of establishment articles in the EEA Agreement.

The legislation was held to be justified in relation to EEA countries because of the overriding importance in the public interest of countering tax evasion, and because it was proportionate in that context.