Bouanich; TFEU precludes French tax provisions that fail to fully take into account taxes on foreign dividends already paid in another EU Member State

The Court of Justice ruled the French rules concerning the calculation of the tax cap on direct taxes levied (‘the tax shield’) contrary to the freedom of establishment and the freedom of capital. The tax shield does not take into account, or takes only partially into account, taxes paid abroad on foreign source income items taxable in France, whereas taxes paid in France are taken into account in full. The case involves a French resident taxpayer individual who received taxable dividend income from a company established in Sweden. She was not eligible to include the Swedish dividend tax in calculating the right to restitution of taxes levied in excess of the tax cap under the tax shield, as the dividend tax was not a tax paid in France. The Court observed that the rules concerning the calculation of the tax cap discouraged French resident taxpayers individuals from investing in companies established in Member States other than France. The tax measure infringes the freedoms as its application systematically produces a higher tax burden in the cross-border scenario relative to the equivalent domestic scenario, for which no justification can be found.