The Contents of Highlights & Insights on European Taxation, Issue 10 2026

Please find below a selection of articles published this month (October 2026) in Highlights & Insights on European Taxation, plus one freely accessible article.

Highlights & Insights on European Taxation (H&I) is a publication by Wolters Kluwer Nederland BV.

The journal offers extensive information on all recent developments in European Taxation in the area of direct taxation and state aid, VAT, customs and excises, and environmental taxes.

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Year 2026, no. 10      

TABLE OF CONTENTS 

GENERAL TOPICS

– Commission CBAM Guidance No. 5a-5f: Sectors pecific guidance (comments by Tatiana Falcão) (H&I 2026/267)

– Commission CBAM Guidance No. 4: Calculation of the free allocation adjustment (comments by Tatiana Falcão) (H&I 2026/266)

– Commission CBAM Guidance No. 3: Calculation of embedded emissions (comments by Tatiana Falcão) (H&I 2026/265)

– Commission CBAM Guidance No. 2: Quick guide for non-EU operators (comments by Tatiana Falcão) (H&I 2026/264)

– Commission CBAM Guidance No. 1: Introduction to CBAM concepts (comments by Tatiana Falcão) (H&I 2026/263)

DIRECT TAXATION, CASE LAW

– Iceland Revenue and Customs v ADVEL Attorneys (E-28/25). Lawyer-client confidentiality must be respected in tax information requests. EFTA Court (comments by Edwin Thomas) (H&I 2026/270)

– Commission v Belgium (Directive 2016/1164 – Double imposition) (C-524/23). Belgium failed to implement mandatory CFC tax credit provision. ATAD. Court of Justice (comments by Daniel Blum) (H&I 2026/262)

– Finanzamt Siegburg (Déduction des frais de ménage) (C-223/25). Germany must extend household service tax relief to frontier workers with homes in Switzerland. Court of Justice(comments by Edwin Thomas) (H&I 2026/260)

INDIRECT TAXATION, CASE LAW

– Nekilnojamojo turto valdymas (C-544/24). Mandatory default interest on VAT arrears compatible with EU law. Court of Justice (comments by Marta Papis-Almansa) (H&I 2026/284)

– Trading 4 (T-614/25). Excise duty suspension and triangular transaction do not in themselves justify VAT exemption for first supply in chain transaction. General Court (comments by Kevin van Abswoude) (H&I 2026/274)

– Versãofast (T-657/24). VAT exemption for credit negotiation extends to intermediaries without decision-making power. General Court

(comments by Diogo Feio & Pedro Costa Monteiro) (H&I 2026/269)

– Sampension Livsforsikring (T-268/25). Limits to conditions for VAT group formation. General Court (comments by Dennis Ramsdahl Jensen) (H&I 2026/268)

– Veronsaajien oikeudenvalvontayksikkö (Exonérations – gestion de crédits effectuée par celui qui les a octroyés) (T-184/25). VAT exemptions for credit management after transfer. General Court (comments by Philippe Gamito) (H&I 2026/258)

CUSTOMS AND EXCISE

– Prestige Rijwielen (T-529/25). Staggered imports of e-bike parts may be classified as complete bicycles. General Court (comments by Giorgio Emanuele Degani) (H&I 2026/273)

– FF Skagen (C-406/25). Objective condition of fish determines customs classification. Court of Justice (comments by Giorgio Emanuele Degani) (H&I 2026/259)

ECHR

– Kuijt v the Netherlands (19365/19). No objectively justified doubts about impartiality of Dutch supreme court panel. European Court of Human Rights

(comments by Edwin Thomas) (H&I 2026/261)

FREE ARTICLE

– Commission v Belgium (Directive 2016/1164 – Double imposition) (C-524/23). Belgium failed to implement mandatory CFC tax credit provision. ATAD. Court of Justice (comments by Daniel Blum) (H&I 2026/262)

Why the decision matters

The Court of Justice of the European Union (‘CJ’) decision in the Commission v Belgium case, according to which Belgium has violated its obligation under Article 288 of the Treaty on the Functioning of the European Union (‘TFEU’) to sufficiently transpose Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market OJ L 193 (the ‘ATAD’) CFC rules into its domestic law, is remarkable for several reasons. Although the CJ left unanswered the fundamental question of whether Article 115 TFEU can serve as a valid legal basis for the adoption of the ATAD in the first place – a matter AG Kokott had contested in substance (see Opinion of AG Kokott, C‑524/23, paras 26 et seq.) – the Court’s decision contains groundbreaking insights. The judgment marks the first occasion on which the CJ had to interpret the ATAD and examine its object and purpose in order to clarify the limits within which Member States may exercise their discretion when transposing the Directive. It therefore promises to provide greater clarity as to the implications of the ATAD’s role as an instrument of minimum harmonization and its interaction with the requirements of EU primary law, in particular the fundamental freedoms and the fundamental rights enshrined in the Charter of Fundamental Rights of the European Union (‘CFREU’).

Moreover, it touches upon the relationship between the specific rules of the ATAD (interest limitation rule, exit taxation, CFC rules, hybrid mismatches) with the General Anti-Abuse Rule (‘GAAR’) stipulated in Article 6 ATAD. The Court’s findings hence have potentially implications reaching far beyond the subject matter of this case. Finally, the decision shares light on the CJ’s understanding of the technical operation and nature of CFC rules as enshrined in the ATAD. Against this background it appears surprisingly how little attention the decision has received in academic literature so far (see for exceptions: P. Wouters, Anti-Avoidance without Overtaxation: Mandatory Foreign Tax Credit under CFC Rules, 66 European Taxation 5 (2026), 1; D. Fehlig/W. Staats, Die Hinzurechnungsbesteuerung, die ATAD-Richtlinie und der EuGH: Anmerkungen zu C‑524/23, IStR 2026, 449 et seq.; T. Sendke, Anmerkung zu C‑524/23, ISR 2026, 279 et seq.). The comments below attempt to address selected key aspects of the decision and discuss their potential implications.

Technical operation and nature of CFC income inclusion

At an abstract level and as evidenced in the more than sixty years of legislative practice around the world, CFC rules can be designed in different ways (deemed distribution vs. piercing the corporate veil; see in detail Blum, Controlled Foreign Companies: Selected Policy Issues – or the Missing Elements of BEPS Action 3 and the Anti-Tax Avoidance Directive, 46 Intertax 4 (2018), 296 et seq.). At least with respect to the ATAD, the nature of the CFC rules is now clearly stated by the CJ. They are a means to allocate, i.e., attribute, income. This finding also finds support in recital 12 of the ATAD, which states: that ‘Controlled foreign company (CFC) rules have the effect of re-attributing the income of a low-taxed controlled subsidiary to its parent company’ (see Council Directive 2016/1164, recital 12). In other words, irrespective of the domestic income attribution doctrine applicable, CFC income as defined in the rules transposing Article 7 ATAD, are – if all criteria are met – seen as being attributable to the controlling shareholder and not to the CFC, without changing the nature of the underlying income. This characterization as an income attribution rule arguably has a significant impact on the discussion as to whether CFC rules interfere with the allocation of taxing rights foreseen by tax treaties modelled after the OECD MC (see Conseil d‘Etat, 28 June 2002, Société Schneider Electric, Case 232.276; see for further details: M. Lang, CFC Regulations and Double Taxation Treaties, 57 Bull. Int’l Tax’n 2 (2003), 51 et seq.; B. Kuzniacki, Tax Treaty Interpretation by Supreme Courts: Case Study of CFC Rules, 7 Revista Dereito Tributario International 1 (2017), 165 et seq.).

This harmonized income attribution rule stipulated by the ATAD, according to the CJ, however, only binds the residence state of the controlling shareholder and neither the source state nor the state of residence of the CFC itself. Hence, the risk of diverging attribution results is an inherent feature of applying Article 7 ATAD, which in turn makes it necessary to mitigate the thus created economic double taxation by offering a credit pursuant to Article 8(7) ATAD. The CJ interestingly found this to hold true irrespective of the CFC income definition chosen by the Member State, i.e., both in case of Article 7(2)(a) and Article 7(2)(b) ATAD. The reliance on the non-genuineness of the arrangement for defining the scope of the included CFC income under Option B – according to the CJ – does not change the nature of the CFC rule as an income attribution rule exclusively binding the controlling shareholder’s residence state, albeit being obviously inspired by the concepts and language found in Article 6 ATAD. The CJ thus rejected AG Kokott’s argument according to which Article 7(2)(a) and 7(2)(b) ATAD serve different purposes and have different legal consequences. As an anti-abuse provision attempting to fight non-genuine arrangements in the sense of Article 6 ATAD, Article 7(2)(b) – according to the AG – is a mere iteration of the more general concept of abuse under Article 6 (see Opinion of AG Kokott, C‑524/23, 49 et seq.). Pursuant to the latter, abuse is prevented by negating the non-genuine arrangement for tax purposes. If the CFC and the controlling shareholder are residents of an EU Member State, this rationale binds both states and hence avoids attribution of income conflicts thus making granting a credit superfluous.

By rejecting the argument that Article 7(2)(b) serves a different purpose and leads to different legal consequences than Article 7(2)(a) ATAD, the CJ clarifies that, notwithstanding its reference to the concepts of abuse and non-genuineness, Article 7(2)(b) serves the same function as Article 7(2)(a) ATAD and cannot therefore be regarded merely as a particular manifestation of the general anti-abuse concept laid down in Article 6 ATAD. As the CJ holds with regard to Article 7(2)(b): ‘That specific mechanism differs from the general anti-abuse rule referred to in Article 6’ (see C‑524/23, para 81).

Both lines of argumentation have their merit, without one necessarily being more persuasive than the other. While the CJ’s decision preserves the systematic coherence of the CFC rules insofar as it acknowledges that the ATAD’s CFC regime leads to the same legal consequences irrespective of which definition of CFC income applies (Option A vs option B), it also begs the question of the conceptual compellingness of Article 7(2)(b) ATAD. After all – as the CJ understands the rule – it employs the abuse concept as found in Article 6 ATAD but attaches a different legal consequence to it. The discussion, hence, suggests that Article 7(2)(b) ATAD was inherently flawed from the very beginning. Either – as found by the CJ – it has a meaning independent from Article 6 ATAD and, hence, bears the same legal consequences as its legislative non-identical ‘twin sibling’, i.e., Article 7(2)(a) ATAD, thus preserving the conceptual integrity of Article 7 ATAD as such, or – were one to follow AG Kokott’s reasoning – it is ultimately superfluous, because it fully overlaps with Article 6 without offering any additional normative value. The Commission in the meantime seems to have come to the conclusion that the latter is the case since it suggests the abolition of Article 7(2)(b) in the recently published proposal for the Tax Omnibus Directive (see Proposal for a Council Directive amending Directives 2003/49/EC, 2009/133/EC, 2011/96/EU, (EU) 2016/1164, EU 2017/1852, EU 2025/50 as regards the simplification of the Union framework on direct taxation and supporting growth and competitiveness of the EU, COM (2026) 560 final, June 24, 2026).

Relationship between specific and general anti avoidance rules in EU Secondary Law

Closely connected to the question discussed above of the precise role of Article 7(2)(b) ATAD within the ATAD’s CFC regime, is the question of the relationship between Articles 7 and 8 and Article 6 ATAD. In arguing why Belgium was not free in its decision whether or not to transpose Article 8(7), the CJ clarified that the general anti-abuse rule of Article 6 is a subsidiary means of preventing tax avoidance with the more specific rules of Article 7 and 8 taking precedence over it (see C‑524/23, para 81). The general anti-abuse rule fills in gaps by tackling abusive tax practices that have not been dealt with by specific provisions but does not therefore affect the applicability of specific anti-abuse rules. Thus, with regard to the scope of the transposition obligation, the failure to fully transpose the more specific clause cannot be compensated by reference to the enactment of the GAAR pursuant to Article 6 ATAD.

While this general finding is, in principle, persuasive, it gives rise to a number of further questions. In particular, how should cases be dealt with in which the specific provision serves not merely to counteract abusive practices, but also pursues other policy objectives? In other words, can the CJ’s finding with regard to the relationship between Article 7(2)(b) and Article 6 ATAD, be transposed unreservedly to all specific rules foreseen in the ATAD, i.e., the interest limitation rule, both options available for defining the CFC income under the Article 7 ATAD, the exit taxation and the anti-hybrid mismatch rules? While the answer should be in the positive for those rules which primarily and ostensibly fulfil an anti-avoidance function, e.g., the anti-hybrid mismatch rules, the relationship appears less clear with regard to other ATAD rules. Even with regard to CFC rules, their primary nature as an anti-abuse rule is far from undisputed (see Fehling/Staats, IStR 2026, 451). Historically and conceptually, they are first and foremost an anti-deferral tool (see e.g., H. D. Rosenbloom, From the Bottom Up: Taxing the Income of Foreign Controlled Corporations, 26 Brook. J. Int’l L. (2001), 1525 et seq.). Deferral can, but does not necessarily have to, be seen as a matter of tax avoidance, but could also simply be understood as a risk to the coherence of the traditional two-tier corporate income tax system (see Blum, Intertax 2018, 297 et seq.).

The somewhat ambiguous nature of the ATAD’s rules as specific anti-abuse rules, becomes even more apparent when looking at Article 4. The interest limitation rule under Article 4 ATAD operates in a rather mechanical and formalistic manner, while its constituent elements appear insufficiently equipped to identify, on the basis of objective criteria, any underlying tax-avoidance motive on the part of the taxpayer concerned. The deductibility of net interest expense is completely detached from the question of the corresponding taxation in the hands of the recipient and the relationship between the two parties. It hence deviates substantially from the ATAD’s CFC and the anti-hybrid mismatch rules, both of which require low or non-taxation and an affiliation between the parties, as a prerequisite for their application. It may therefore be questioned whether the primary objective of the interest limitation rule is indeed to prevent tax avoidance, or rather to discourage thin capitalization. In a similar vein, the primary nature of the ATAD’s exit tax rules as anti-avoidance measures could be questioned. After all, the CJ consistently justifies exit taxation based on the need to ensure a balanced allocation of taxing rights rather than with the need prevent tax abuse (see CJ 7 September 2006, C‑470/04 N, ECLI:EU:C:2006:525, para 42; CJ 29 November 2011, C‑371/10 National Grid Indus, ECLI:EU:C:2011:785, para 45; CJ 23 January 2014, C‑164/12 DMC Beteiligungsgesellschaft, ECLI:EU:C:2014:20, para 46 and CJ 21 May 2015, C‑657/13 Verder LabTec, ECLI:EU:C:2015:331, para 47). This shows that understanding all rules of the ATAD merely as specific anti-avoidance rules fails to adequately capture their nature and effect. The exact relationship between them and the GAAR of Article 6 thus has to be assessed on a case-by-case, or better rule-by-rule, basis.

Although the CJ did address the relationship between Article 7(2)(b) and Article 6 ATAD, with the former being qualified as the lex specialis, it did not answer the question whether passing muster under the former renders the application of the latter mute. The Court was not required to resolve this issue, because qualifying the CFC income inclusion as the more specific rule sufficed to show that the mere existence of the general rule did not relieve the Member State from the obligation to transpose the specific rule into its domestic law. If one, however, accepts the CJ’s position that the more specific clause, here Articles 7 and 8, prevails over the general rule, here Article 6 ATAD, then the applicability of the former should also preclude the cumulative application of the latter. In other words, if a taxpayer for example, passes muster under Article 7(2) ATAD – irrespective of whether Option A or B was adopted by a Member State – then the thus reached result, i.e., no income inclusion, should not be ‘overturned’ by applying the GAAR. After all, once the specific anti-avoidance rule has been successfully applied, no residual gap remains that would warrant recourse to the GAAR.

Member States’ Discretion in Transposing ATAD and the Role of Article 3 ATAD – or the Pivotal Relevance of the Directive’s Goals

Belgium had argued that it was under no obligation to transpose Article 8(7) ATAD into its domestic law, because Article 3 ATAD gave Member States the right to go beyond the minimum standard set by the Directive and establish rules that offer a ‘higher level of protection for domestic corporate tax bases.’ The CJ dismissed this argument holding that both the purpose of the Directive as well as primary law sets boundaries to the Member States’ discretion to make use of this right (see C‑524/23, para 87 et seq.). Key to defining the limits of the ‘minimum level of harmonization’ is hence the identification of the Directive’s objectives. The compatibility of a stricter domestic rule with the Member States’ prerogative to exceed the minimum standard should be assessed in light of whether such a rule risks undermining the attainment of the Directive’s objectives. By reference to recital 5 of the ATAD, the CJ held that the CFC rules of Article 5 ATAD serve two (arguably three) objectives of equal relevance and pedigree: Preventing base erosion and profits shifting on the one side and avoiding the creation of obstacles to the internal market such as double taxation on the other (see C‑524/23, para 93). Given that the non-transposition of Article 8(7) ATAD could lead to economic double taxation, because the same income is taxed both in the hands of the controlling shareholder and the CFC, the CJ held it to be an inadmissible violation of Belgium’s obligations under Article 288 TFEU.

The CJ has hence clarified that the ATAD’s objectives not only encompass the prevention of tax avoidance but also the avoidance of double taxation. AG Kokott in her Opinion had contested this position and argued that deriving the ATADs’ objectives only by reference to recital 5 would exaggerate the relevance of avoiding double taxation (see Opinion of AG Kokott, C‑524/23, para 91). The Directive’s name and all recitals viewed together would give a clear prevalence to the fight against tax avoidance. By drawing on an analogy to the CJ’s case law in the field of consumer protection, she argued that the non-transposition of rules of a Directive is permissible if it leads to a better attainment of the Directive’s goal (see Opinion of AG Kokott, C‑524/23, paras 94-96). She hence equated consumer protection with the protection of the Member States tax base – a rather questionable analogy already at the outset. In deterring taxpayers from entering into non-genuine arrangements in order to artificially divert income to low taxed subsidiaries, the non-transposition of Article 8(7) was justified and proportionate even if creating double taxation (see Opinion of AG Kokott, C‑524/23, para 91).

The CJ was not persuaded. In contrast to AG Kokott, the Court instead inferred from its established case law regarding the fundamental freedoms that even if justifiable, restrictions have to be proportionate and transposed this reasoning to the interpretation of the ATAD. It is important to note that the CJ did not declare the non-transposition of Article 8(7) ATAD by Belgium as a violation of the fundamental freedoms. However, it took recourse to the proportionality reasoning found in its established case law in order to strike a balance between the two somewhat antagonistic goals of the ATAD when interpreting what exactly the ATAD requires the Member States to do. Creating double taxation as the result of implementing the Directive thus goes beyond what is necessary to fight avoidance as long as single taxation due to the CFC income inclusion is ensured and hence the advantage of engaging in the tax planning scheme is taken away.

If followed through to its logical conclusion, this absolute statement that in transposing the ATAD Member States always have to balance preventing tax avoidance while also ensuring that the risk of double taxation it mitigated, could have consequences well beyond Articles 7 and 8 ATAD. After all, recital 5 of the ATAD refers to all measures established therein, hence also to the interest limitation rule, exit taxation, the anti-hybrid mismatch rules and the GAAR of Article 6. These rules, however, differ substantially not only with regard to their constitutive elements and mechanics but also with regard to their systematic function.

A more nuanced approach hence arguably has to be taken. The interest limitation rule, for example, inherently creates economic double taxation, because it applies irrespective of the tax treatment of the interest payment in the hands of the recipient. If net interest expense exceeding the 30% EBITDA threshold is non-deductible in the hands of the payor, this interest nevertheless will likely be fully taxable in the hands of the recipient. Hence, economic double taxation occurs, comparable to a situation in which a primary transfer pricing adjustment is not followed by a corresponding adjustment in the residence state of the affiliated taxpayer. Does the CJ’s decision in Commission v Belgium mean that options provided for in Article 4 ATAD have to be exercised by the Member States in such a manner that the rule’s scope is restricted as far as possible in order to reduce the risk of economic double taxation in order to comport with the demands of the Directive’s intent and – even more importantly with the general principle of equality (see below under the sixth paragraph). Moreover, it is not entirely clear whether the Court’s reasoning only encompasses economic double taxation or also juridical double taxation. From an internal market perspective, the latter arguably is even more distortive. Hence, it remains to be seen, whether this line of argumentation will be maintained in future case law, or if it remains relevant only in this specific circumstance.

The limits of the CJ’s Kerckhaert Morres-doctrine

In a laudable move, the CJ has dismissed both Belgium’s argument that its Kerckhaert Morres-doctrine would render the double taxation created by the non-transposition of Article 8(7) permissible (see C‑524/23, para 100). According to this jurisprudence double taxation stemming from unaligned domestic tax systems that operate in a non-discriminatory way, is not an infringement of the fundamental freedoms (see CJ 14 November 2006, C‑513/04 Kerckhaert and Morres, ECLI:EU:C:2006:713, paras 22-24; CJ 16 July 2009, C‑128/08 Damseaux, ECLI:EU:C:2009:471, para 33 and CJ 6 December 2007, C‑298/05 Columbus Container, ECLI:EU:C:2007:754, para 45; see also W. Schön, Neutrality and Territoriality – Competing or Converging Concepts in European Tax Law?, 69 Bull. Int’l Taxn 4/5 (2015), 271, 275). First, the Kerckhaert Morres and Damseaux cases concerned juridical double taxation and not economic double taxation. More importantly, however, this doctrine in premised on the finding that the fundamental freedoms are ill equipped to resolve double taxation and particularly to assign the obligation to do so to one of the two Member States if no harmonized set of rules for allocating taxing rights in the specific scenario exists (Schön, BIT 2015, 275). As the CJ correctly pointed out in Commission v Belgium, the ATAD, however, creates exactly such a harmonized framework. Articles 7 and 8 allocate taxing rights – or better obligations – to the residence state of the controlling shareholder and simultaneously make that state responsible for alleviating any double taxation that might arise as a consequence thereof. Hence, the options available to the Member States in transposing the Directive have to be exercised in such a manner that double taxation is avoided.

Although not explicitly declared by the CJ, this reasoning, in my opinion, also means that juridical (and potentially also economic) double taxation arising in the application of a fully harmonized rule set, violates the fundamental freedoms (see Blum, Normativity in International Tax Law (2023), 499 et seq.). Hence, the Directives in matters of direct taxation have to be interpreted in such a manner, that the application and interaction of the rules stipulated therein do not lead to juridical double taxation. In an outbound situation for example, CFC income inclusion pursuant to Articles 7 and 8 ATAD and the interest limitation rule of Article 4 ATAD could overlap and lead to juridical double taxation. The same interest is in a first step denied the deduction but simultaneously subjected to CFC income inclusion in the hands of the same taxpayer, i.e., the controlling shareholder making the interest payments to its low taxed subsidiary. The CJ’s decision in Commission v Belgium has to be read to declare such a result as contrary to EU primary law, hence requiring finding an interpretation that resolves the problem.

The Role of the General Principle of Equality

The last element of the decision, this comment wants to address, pertains to the Court’s deliberations regarding the effect of primary law on the interpretation of the Article 7 and 8 ATAD. While only drawing on its case law regarding the fundamental freedoms to better explain its proportionality considerations without outright benchmarking the Directive or Belgium’s domestic law against the requirement of the fundamental freedoms, the Court argues that the transposition of Article 8(7) ATAD is a demand of the general principle of equality (see C‑524/23, para 104). It does not cite Article 20 of the Charter of the Fundamental Rights of the European Union (CFREU) as the legal basis for this argument, but refers to paras 24 et seq. of the CJ’s decision in Belgian Association of Tax Lawyers and Others, C‑623/22 in its support, in which the Court clearly bases its deliberations on Article 20 CFREU (see CJ 29 July 2024, C‑623/22 Belgium Association of Tax Lawyers, ECLI:EU:C:2024:639). Given that Article 20 CFREU in substantive and not procedural questions of tax law has not played a relevant role so far in the Court’s case law, this is a remarkable development (see CJ 8 December 2022, C‑694/20 Orde van Vlaamse Balies, ECLI:EU:C:2022:693).

Even more revolutionary, however, is the result reached on this basis. According to the CJ, the general principle of equality requires the equal treatment of comparable situations unless the difference can be justified and is proportionate.

So far so good. The Court then continues and explicitly holds that taxpayers, who are resident in one Member State – in light of the criteria set out in the ATAD’s CFC rules – find themselves in a situation comparable to taxpayers being subject to residence-based worldwide income taxation in another Member State. Were it within the discretion of the Member State to decide not to foresee a credit for the taxes paid at the level of the CFC, a taxpayer could be subject to a different treatment resulting in economic double taxation, depending on the state in which they are a resident of. This difference in treatment of comparable situations – according to the Court – cannot be justified by the objectives of the Directive, since one of its equally relevant goals is the prevention of double taxation (see C‑524/23, para 104). The Court hence does not rely on the traditional canon of justification grounds developed in the Court’s case law regarding the fundamental freedoms but instead, follows the path known from case law regarding fundamental rights (see for example, CJ 8 April 2014, C‑293/12 and C‑594/12 Digital Rights Ireland ua; CJ 6 October 2020, C‑245/19 and C‑246/19 Luxemburg; ECtHR 16 June 2015, C‑694/20Orde van Vlaamse Balies; ECtHR 16 June 2015, Bsw 75292/10 Othymia Investments BV v Netherlands; see also Austrian Constitutional Court (Verfassungsgerichtshof) VfGH 9 March 2023, E 2097/2021).

First, this is a totally novel understanding of comparability in the realm of direct taxation, since it goes not only beyond the traditional vertical but also the less commonly accepted horizontal comparability (see Lang, There is Life in the Old Dog Yet: Horizontal Comparability and the Establishment of the Internal Market, in Avi-Yonah/Lang (eds.), Comparative Fiscal Federalism (2016), 27 et seq.). It compares residents of two different Member States and finds them to be in a comparable situation. So far, the CJ – with regard to the fundamental freedoms – has consistently held that residents and non-residents – seen from the perspective of one single Member State – are not comparable with each other (see CJ 12 March 2026, C‑119/24 Chefquet, ECLI:EU:C:2026:189, para 49; CJ 20 March 2022, C‑60/21 Commission v Belgium, ECLI:EU:C:2022:172, para 19).

This novel approach to interpreting a Directive and the obligations of Member States in transposing it based on an extensive understanding of the concept of comparability for purposes of Article 20 CFREU obviously could have far reaching consequences. This pertains particularly to the manifold options foreseen in the Directive. After all, in making use of their discretion granted by the Directive, Member States nevertheless are bound by EU primary law encompassing both the fundamental freedoms and fundamental rights. Based on the Court’s findings in para 102 et seq. of the decision in Commission v Belgium, it could be argued that Member States are, for example, not entirely free to decide whether or not to transpose the optional safe harbour in Article 4(3)(a) ATAD according to which, borrowing costs up to EUR 3 million per year remain fully deductible irrespective of whether the 30% EBITDA threshold is exceeded.

They would have to consider what other Member States have done in order to avoid their residents from being treated differently to the residents of another Member State. After all, the fundamental right to equal treatment binds the European legislature and domestic legislatures alike. Whenever the risk arises that economic (or juridical double) taxation arises as a consequence of making use of an option granted by the ATAD, arguably an unjustifiable detrimental treatment is caused. This, of course, would drastically change the current understanding of the role and function of Directives in the realm of direct taxation as well as their interplay with EU primary law. At the same time, due to the Court’s reliance on the objectives set out in the Directive – and not on the canon of reasons of public interest found in its fundamental freedoms case law – for purposes of assessing the justifiability of any different treatment stemming from the exercise of the options provided by the Directive, the EU legislature would arguably have it in its own hands to ‘manipulate’ the result of the justifiability assessment. This would lead to the strange result, that by ‘properly’ defining the goals of its piece of secondary legislation the EU legislature could insulate the hierarchically lower level of EU law against the demands of superior primary law. It will be highly interesting to see whether the decision in Commission v Belgium marks the beginning of a broader role for Article 20 CFREU in the CJ’s case law on substantive direct tax matters, thereby opening yet another chapter of EU tax law.

Prof. Daniel Blum