The referral decision indicates that, according to the German regulations at issue in the main proceedings, specialized resident real estate investment funds are exempt from corporate income tax, while non-residents do not enjoy this exemption. This results in unfavorable treatment for non-resident specialized real estate investment funds, which constitutes a restriction on the free movement of capital under article 63 of the Treaty on the Functioning of the European Union (TFEU).
The German government’s justification based on the need to preserve the coherence of the national tax system and a balanced distribution of taxing powers among the Member States cannot justify this restriction. Therefore, article 63 TFEU precludes a regulation that subjects non-resident specialized real estate investment funds to corporate income tax on the real estate income they receive in the territory of that Member State, while resident specialized real estate investment funds are exempt from corporate income tax.
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