Court of Justice (Fifth Chamber) 11 March 2004, C-9/02 (Hughes de Lasteyrie du Saillant v Ministère de l'Économie, des Finances et de l'Industrie.)

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The Court of Justice of the European Communities held that Article 52 of the EC Treaty (now Article 43 EC) precludes a Member State from imposing immediate taxation on latent, unrealised capital gains on company shares solely because a taxpayer transfers their tax residence to another Member State. Such a mechanism constitutes a restriction on the freedom of establishment that cannot be justified by the objective of preventing tax avoidance, as a transfer of residence does not inherently imply an intention to evade tax. The Court further determined that the restrictive effects of the measure, including the non-automatic suspension of payment and the requirement for financial guarantees, were disproportionate to the aim of ensuring fiscal coherence or effective tax collection.AI