The European Court of Justice (ECJ) ruled on 6 June 2013 in Commission v Belgium (C-383/10) that Belgium had failed to fulfill its responsibilities under Article 5 of the Treaty on the Functioning of the European Union (TFEU) and Article 36 of the agreement on the European Economic Area (EEA) by continuing a system of taxation of interest payments by non-resident banks to individuals. Article 56 TFEU prohibits restrictions on the provision of services by nationals of other EU member states, and Article 36 of the EEA agreement also provides for the freedom to provide services.

The Commission suggested that the tax provisions had the effect of discouraging Belgian residents from using the services of banks established in other EU/EEA member states for the management of savings accounts. Belgium had stated in its defense that no formal complaint had been made by the financial sector about the arrangements, but the Commission maintained that this was irrelevant given that the judgment on whether a member state had fulfilled its obligations was objective in nature.

With regard to the argument that the provision was necessary to ensure fiscal supervision and to prevent tax avoidance, the Commission conceded that supervision may in some circumstances be difficult and it may sometimes be necessary to restrict the freedom of movement of services on the grounds of prevention of tax abuse. The ECJ rejected the justification of the failure to exempt interest payments by foreign banks on the grounds that that the measures for exchange of information were inadequate.

The justification of a measure on the grounds of the need to prevent tax evasion can only be applied where the objective is to prevent wholly artificial arrangements aiming to circumvent tax laws.