CJEU Case Law in Direct Taxation: Territoriality and Fundamental Freedoms

S. 903. Compatibility of National Law with the Fundamental Freedoms

3.1. Restriction

3.1.1. Discrimination and Obstacle-based Approach

In Chapter 1.3.2.3., it was recalled that restrictions can be classified either as discrimination or as other obstacle to the internal market. The classification as discrimination requires a comparison of situations while obstacles are every barrier to the fundamental freedoms without a distinction being necessary.

The application of the obstacle-based approach in direct tax case law has been controversially debated in literature. Particularly, the case law in the 1990s outside direct taxation is understood as being in support of an obstacle-based approach. Conversely, in current direct tax case law, the CJEU appears to be S. 91less open towards a prohibition of obstacles applying without distinction. This manifests from the fact that the CJEU explicitly refers to a pair of comparison in almost all direct tax cases and, in a few cases, even rejects an obstacle-based approach. In several decisions, the CJEU held that “a restriction is permissible only if it relates to situations which are not objectively comparable or if it is justified by an overriding reason in ...