The compatibility of corporate exit taxation with European law

Abstract

In National Grid the CJEU confirmed that exit taxes on unrealised capital gains of corporations upon emigration to another Member State constitute a restriction on the freedom of establishment. The Court found that these exit taxes could be justified, however, and set out the conditions upon which this could be possible. This article begins by briefly summarising the ambiguity that had surrounded this matter before this decision and then summarises the arguments of the Court, highlighting the circumstances under which such taxation might be compatible with EU law. Lastly, the commentary discusses the conformity of the Court's findings with international tax law and European internal market law as well as the implications of the judgement on the Commission Communication on Exit Taxation, on cross-border mergers and on company seat transfers