European Union Tax Law

Mon, 06 Jul 2026 00:00:00 +0000

Sources and Limits of EU Tax Competence

The European Union possesses no general competence to legislate in direct taxation. Under the principle of conferral, direct taxation remains within the fiscal sovereignty of the member states. The EU’s role in direct taxation arises indirectly through the fundamental freedoms enshrined in the Treaty on the Functioning of the European Union (TFEU) — the free movement of goods, persons, services, and capital — and through the prohibition of state aid under Article 107 TFEU. National tax measures that discriminate against cross-border activity or restrict the exercise of Treaty freedoms are prohibited unless justified by overriding reasons in the public interest and proportionate. In indirect taxation, the EU possesses direct legislative competence under Articles 110–113 TFEU to harmonise VAT, excise duties, and other turnover taxes. The Court of Justice of the European Union (CJEU) has developed an extensive body of tax jurisprudence, applying the fundamental freedoms to national tax rules and elaborating the justifications for restrictive measures, including the coherence of the tax system (Bachmann, C-204/90), the balanced allocation of taxing rights (Marks & Spencer, C-446/03), and effective fiscal supervision.

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European Union Tax Law

Sources and Limits of EU Tax Competence