European Law Monitor

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Free Movement of Capital

This is pretty straightforward in that all restrictions on the movement of capital and payments between Member States and between Member States and non EU countries is prohibited. There are some, limited, derogations to this basic principle.

The application of this general principle is without prejudice to the application to non EU countries of any restrictions which existed on 31 December 1993 under national or EU law adopted in respect
of the movement of capital to or from third countries involving

  • direct investment — including in property
  • establishment,
  • the provision of financial services or
  • the admission of securities to capital markets.

Despite the free movement of capital rules, Member States retain the right to

  • apply the relevant provisions of their tax law which distinguish between taxpayers who are not in the same situation with regard to their place of residence or with regard to the place where their capital is invested;
  • to take all requisite measures to prevent infringements of national law and regulations, in particular in the field of taxation and the prudential supervision of financial institutions, or to lay down procedures for the declaration of capital movements for purposes of administrative or statistical information, or to take measures which are justified on grounds of public policy or public security. These national provisions must not constitute a means of arbitrary discrimination or a disguised restriction on the free movement of capital and payments.