Luxembourg, 27/09/2000 (Agence Europe) - The Court of Justice of the European Communities has confirmed that a Member State cannot prohibit persons residing on its territory from subscribing to financial products on other capital markets without being in breach of the principle of free movement of capital.
With its ruling, on 26 September, in the case C-478/98, which opposes the European Commission and Belgium, the Court notes that the ban imposed by the Belgian royal decree of 4 October 1994 runs counter to the principle of free movement. This decision banned Belgian residents from subscribing to a public loan of DM 1 billion on the euro-bond market quoted on the Frankfurt Exchange. The Belgian government justified this measure by the need to fight tax evasion in so far as the loan lifted in Germany was not subject to land tax in Belgium. The Court considers that restrictions of this kind must be indispensable and that a general presumption of tax evasion or tax fraud cannot justify a tax measure to the detriment of the aims of the free movement of capital. It stresses that Belgian residents hoping to invest in loans issued on the euro-bond market by other issuers should not be subject to land tax either, foreseen for loans issued on the national market. This measure does not appear to it to be fully justified by the aim pursued or proportionate to the aim.