In this article, the author discusses the scope of the freedom of capital movements between Member States of the European Union and third countries. According to the ECJ, restrictions of the freedom of capital movements between Member States and third countries can be justified to ensure 'the effectiveness of fiscal supervision'. Based on case law of the ECJ, the author discusses the relevant questions to adopt this justification as suitable and proportionate.
An important factor in adopting the justification 'effectiveness of fiscal supervision' is the degree to which the Member State implementing the restriction has the opportunity to exchange information with the third country. The author, therefore, discusses the possibilities available for Member States to exchange information under EC law, bilateral tax treaties, TIEAs, etc. In the author's opinion, the Member States will - given the recent extended possibilities to exchange information - no longer be able to hide behind this justification.EC Tax Review