SWI 2018, 217
Tax sparing provisions in tax treaties can result in different treatment of cross-border dividend, interest, or royalty payments. Tax sparing credits that depend on certain conditions and therefore are not granted to all companies covered by a tax treaty represent an illegal European state aid. However, tax sparing credits that apply to all companies covered by a tax treaty, as well as tax matching credits, can be justified by the nature of the tax system and thus do not represent an illegal European state aid.
SWI 2018, 173
Different taxation of cross-border dividend, interest, or royalty payments basically falls within the scope of the European fundamental freedoms. Sebastian Leitsch and Franziska Sixdorf show that tax sparing credits do not violate the European fundamental freedoms. The reason is that they can neither be detached from the overall treaty equilibrium, nor is the situation of taxable entities, which are treated differently in terms of tax sparing within a single tax treaty, comparable.