Category Archives: Movement of capital and goods into the EU

Anything to declare ? Bringing cash into the EU

Judgment
C-17/16
04.05.2017
PartiesJurisdictionFormationJudge RapporteurAdvocate GeneralSubject-matter
Reference for preliminary rulingOussama El Dakkak
v
Administration des douanes et des droits indirects
CJEU1st Ch.R. Silva de LapuertaP. MengozziTransfer of funds
KeywordsReference for a preliminary ruling — Regulation (EC) No 1889/2005 — Controls of cash entering or leaving the European Union — Article 3(1) — Natural person entering or leaving the European Union — Obligation to declare — International transit area of a Member State’s airport
Significant pointsThe CJ was asked by the French Cour de cassation whether the obligation laid down in Regulation (EC) No 1889/2005 on controls of cash entering or leaving the Community to declare any sum greater than €10,000 transported in cash applied to a passenger merely transiting from one non-EU State to another non-EU State via an European airport. The CJ answered in the affirmative and stated that the obligation to declare any cash sum over €10,000 was indistinctively applicable to every person entering or leaving the EU, including international transit areas of airports located in the territory of EU Member States.

In the case, Mr El Dakkak was ordered by the Benin company Intercontinental to transport by aeroplane American dollars (USD) from Cotonou (Benin) to Beirut (Lebanon) via the French airport Roissy-Charles de Gaulle where customs officials checked him and found $1,607,650 (approximately €1,511,545) and €3,900 in cash in his possession, which he had not declared.

Regarding the notion of “entering the EU”, the CJ judged that it entailed in movement of a natural person from a non-EU territory to a territory which is part of the EU. Due to the fact that neither the Regulation (EC) No 1889/2005 nor any provision of the treaties exclude the international transit areas of European airports from the EU territory or even provide any exceptions, Mr El Dekkak was judged to have entered the EU and was therefore subject to the obligation to declare.

In this respect, the CJ referred not only to the usual meaning of a ‘natural person entering or leaving’ the EU, and to the notion of EU territory within the Treaties (which is, as a general rule, of relevance for the interpretation of the scope of an act of secondary legislation) but also to the objective pursued by the Regulation (EC) N° 1889/2005, its international context (recommendations of the FATF) and its practical effect. Notably, the CJ emphasized that the applicability of the obligation at issue was consistent with the objective pursued by Regulation (EC) No 1889/2005, i.e. the discouragement and avoidance of the introduction of illicit money into the financial system and its investment after laundering. In order to guarantee the effectiveness of the control system for cash entering or leaving the EU, the notion of a “natural person entering or leaving” the EU had to be interpreted in a broad manner.
NoteworthyThe free movement of capital and goods within the EU, along with the abolition of systematic internal border checks facilitate significantly the circulation of cash. Accordingly, some legal constraints had to be adopted in order to fight against money laundering and financing of terrorism. The unfortunate recent terrorist attacks which have occurred since the delivery of this judgment are unlikely to soften such an approach.

TFEU and EEA Agreement

Judgment

C-112/14

13.11.2014

Parties

Jurisdiction

Formation

Judge Rapporteur

Advocate General

Subject-matter

Appeal

European Commission v United Kingdom of Great Britain and Norhern Ireland

CJEU

8th Chamber

E. Jarašiūnas

P. Mengozzi

TFEU and EEA Agreement – Action for failure to fulfil obligations

Key-words

Free movement of capital — Articles 49 TFEU and 63 TFEU – Articles 31 and 40 of the EEA Agreement – National tax legislation — Attribution of gains to participators in close companies — Different treatment of resident and non-resident companies — Wholly artificial constructions — Proportionality

Summary

 In so far as that legislation is such as, first, to discourage residents of the United Kingdom, whether natural or legal persons, from contributing their capital to non-resident close companies and, secondly, to impede the possibility of such a company attracting capital from the United Kingdom, it constitutes a restriction of the free movement of capital, which is prohibited in principle by Article 63 TFEU.A national measure restricting the free movement of capital may thus be justified where it specifically targets wholly artificial arrangements which do not reflect economic reality and whose sole purpose is to avoid the tax normally payable on the profits generated by activities carried out on national territory (judgment in Itelcar, C‑282/12, EU:C:2013:629, paragraph 34 and the case-law cited).

It is clear, however, that the legislation at hand is not confined specifically to targeting wholly artificial arrangements which do not reflect economic reality and are carried out for tax purposes alone, but also affects conduct whose economic reality cannot be disputed. Furthermore, it does not allow the taxpayer concerned to provide evidence to show the economic reality of his participation in the company in question.

In addition, since it is common ground that the legislation at hand applies also to companies resident in a Member State of EFTA which is party to the EEA Agreement, and in so far as the provisions of Article 40 of the EEA Agreement have the same legal scope as the substantially identical provisions of Article 63 TFEU (judgments in Commission v Belgium, EU:C:2012:670, paragraph 88 and the case-law cited, and Commission v Finland, EU:C:2012:688, paragraph 53 and the case-law cited), all the foregoing considerations may, in circumstances such as those in the present case, be transposed mutatis mutandis to Article 40 of the EEA Agreement.

Noteworthy