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ECJ clarifies rules on third country investments in FII GLO decision

21 November 2012

The European Court of Justice’s (ECJ) second judgment in the Franked Investment Income Group Litigation (FII GLO) clarifies when EU taxpayers can rely on free movement of capital for outward investments into non-EU jurisdictions. It also highlights the need for an answer regarding inward investment from non-EU taxpayers.

Philippe Freund (pictured below), of Dorsey & Whitney, who instructed the claimants in the case, analyses the implications for taxpayers.

The November 13 judgment addressed a number of issues arising out of the ECJ's previous ruling in December 2006.

In its first judgment (FII 1 (C-446/04)) the court was asked to answer a large number of preliminary questions dealing with the EU law compatibility of certain features of the UK's advance corporation tax and dividend tax legislation.

When the matter came back before the UK courts it became clear that a number of further questions arising out of the ECJ's judgment would need to be referred back to the ECJ.

The UK High Court referred five questions back to the ECJ in December 2010. Three questions concerned the advance corporation tax system which was abolished in 1999. The answers to those questions are unlikely to be of...

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