EU Tax News

EU Tax News
Issue 2015 – nr. 004
May – June 2015
This EU Tax Newsletter is prepared by members of PwC’s international EU Direct Tax
Group (EUDTG). If you would like to receive future editions of this newsletter free of
charge, or wish to read previous editions, please refer to: www.pwc.com/eudtg.
Newsletter Editorial Board Members: Bob van der Made and Vassilis Dafnomilis, PwC
Netherlands and Peter Cussons, PwC United Kingdom
Contents
CJEU Cases
France
Germany
Germany
Netherlands
Sweden
AG Opinion on cross-border distributions of profits
and non-deductible charges relating to the holding:
Groupe Steria SCA
CJEU Judgment on the tax treatment of participations
in “black funds”: Wagner-Raith
CJEU Judgment on exit taxation in case of transfer of
assets from a German partnership to its Dutch PE:
Verder LabTec
AG Opinion on possible discriminatory treatment of
foreign shareholders receiving dividends from a Dutch
source: Miljoen, X and Société Générale
CJEU Judgment on deductibility of FOREX losses in
cross-border situations: X AB
National Developments
Finland
Germany
PwC EU Tax News
Recent developments with respect to Finnish Fokus
Bank claims for non-UCITS SICAVs
Final Fiscal Court judgment on the DMC case
1
Italy
Italy
United Kingdom
United Kingdom
Provincial Tax Court rules that withholding tax levied
on dividends distributed to a US pension fund is
incompatible with EU law, orders refund
Supreme Court allows Tax Court appeals regarding the
denial of access to the EU Arbitration Convention
Court of Appeal allows compound interest claim in
relation to overpaid VAT
Clawback of UK shale aggregate waste relief
EU Developments
EU
EU
EU
EU
EU
European Commission presents Action Plan for
fundamental reforms of business taxation in the EU
6-monthly ECOFIN Report to the European Council on
Tax Issues
Luxembourg EU Council Presidency tax priorities for
July-December 2015
June ECOFIN Council debates on mandatory AEOI /
tax rulings and recast of Interest & Royalties Directive
Mandate of EU Parliament’s TAXE special committee
on tax rulings extended
Fiscal State aid
Belgium
EU
PwC EU Tax News
European Commission publishes non-confidential
version of its decision to investigate the Belgian excess
profit regime
European Commission takes next step in its EU-wide
State aid review of tax ruling practices
2
CJEU Cases
France – AG Opinion on cross-border distributions of profits and nondeductible charges relating to the holding: Groupe Steria SCA
On 11 June 2015, in the Groupe Steria SCA case (C-386/14), AG Kokott advised the
CJEU to rule that the freedom of establishment precludes legislation of a Member State
which under a special rule on group taxation, available only to domestic companies, has
the effect of allowing group companies to fully deduct the charges relating to holdings in
other group companies.
Under the French Tax Code, dividends received by a parent company from an affiliate
are exempt from taxation, following the provisions of the Parent Subsidiary Directive.
However, 5% of the amount of dividends is reincorporated in the taxable base as a lump
sum representing expenses deducted from the taxable base for the management of the
participation. When there is a French tax grouping 95% or more, the 5% of the amount
of dividends is neutralized and therefore does not affect the taxable income of the group
leading to a 100% exemption of intragroup dividends. On 13 August 2014 the
Administrative Court of Appeal of Versailles asked the CJEU whether the 100%
participation exemption which is available only to French companies forming a single
tax group is in line with the freedom of establishment.
According to AG Kokott, the disadvantageous treatment of a parent company with
holdings in companies resident in another Member State compared to a parent company
with holdings in domestic companies restricts the freedom of establishment.
Furthermore, the AG rejected the justification on the grounds of the balanced allocation
of taxing powers and coherence of the tax system, especially with respect to the
neutralisation of transactions internal to the group and the overall relationship between
all advantages and disadvantages. In light of the above, the AG concluded that the rule is
not compatible with EU law.
The AG Opinion provides an important indication on how the CJEU may decide on the
consistent application of the 5% proportion rule, as provided in Article 4 par. 3 of the
Parent Subsidiary Directive. Should the CJEU follow the AG Opinion, the case may also
have an impact on other benefits, which are granted to group companies and which may
be discriminatory when only granted to domestic companies which are allowed to form a
tax group. It should be noted that similar regimes exist within the EU and that a CJEU
Judgment in line with the AG Opinion could impact several Member States.
--Emmanuel
Raingeard
de
la
[email protected]
PwC EU Tax News
Blétière,
PwC
France;
3
Germany – CJEU Judgment on the tax treatment of participations in “black
funds”: Wagner-Raith
On 21 May 2015, the CJEU rendered its judgment in the Wagner-Raith case (C-560/13)
on the compatibility of paragraph 18(3) of the German Foreign Investment Company Act
(FICA - Auslandsinvestmentgesetz) with the free movement of capital.
Based on the German legislation in place up to 2004, if a foreign fund did not fulfil
specific publication requirements enumerated in paragraph 17(3) FICA, it was treated as
a “black fund” and its domestic investors were taxed on a “flat rate” basis pursuant to
paragraph 18(3) FICA. In a purely domestic situation, the Tax Authorities had the right
to calculate the income of investors pursuant to sec. 162 General Tax Code if the fund
has not provided the relevant information. The taxation at investor level was essentially
higher in case of foreign black funds.
Since Paragraph 18(3) FICA was already in force on 31 December 1993 and remained
essentially unchanged until its abolition in 2004, the referring German Federal Fiscal
Court posed the question whether the legislation was in the scope of the stand-still
clause of Art. 64 TFEU. The referring court questioned whether Paragraph 18(3) FICA
falls within the scope of the stand-still clause since only regulations aiming at the
provider of those services may fall within its scope, whereas Paragraph 18(3) FICA aims
at the taxation of the investor.
AG Mengozzi in his Opinion dated 18 December 2014 concluded that paragraph 18(3)
FICA falls within the scope of legislation dealing with the “movement of capital involving
the provision of financial services” and should therefore be covered by the stand-still
clause of Art. 64 TFEU. In the case at hand, the AG made a distinction between a
straight-forward investment in shares in a stock corporation and shares in an investment
fund.
The CJEU essentially confirmed the AG Opinion and held that if it would be necessary
for legislation to fall within the scope of the stand-still clause to aim at the provider of
financial services, this “would effectively call into question the demarcation between the
[….] freedom to provide services and […] the free movement of capital”. The decisive
criterion of the application of the stand-still-clause is the existence of a causal link
between the movement of capital and the provision of financial services and not the
personal scope of the national measure. Since the investor of a foreign fund relies on the
free movement of capital because the foreign fund is providing financial services,
paragraph 18(3) FICA is covered by the stand-still-clause.
Since the stand-still clause applies in a third country context, the compatibility of
paragraph 18(3) FICA with EU law can still be challenged in EU/EEA situations.
-- Ronald Gebhardt and Jürgen Lüdicke, PwC Germany; [email protected]
PwC EU Tax News
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Germany – CJEU Judgment on exit taxation in case of transfer of assets
from a German partnership to its Dutch PE: Verder LabTec
On 21 May 2015, the CJEU rendered its judgment in the Verder LabTec case (C-657/13),
which deals with the application of exit taxes on transfer of assets from a German
partnership to its Dutch permanent establishment (PE). Due to the transfer of various
intangibles from a German partnership to its Dutch PE, the German tax authorities
assumed a realization of built-in gains of the transferred assets. The tax authorities
allowed a payment of the exit tax in ten equal instalments over ten years.
With reference to its judgment in the DMC case (C-164/12), where the CJEU held that
the payment of an exit tax in five instalments over a period of five years is in line with EU
law, the CJEU decided that the same should apply with respect to exit tax payments in
ten equal annual instalments. The CJEU considered this proportionate to attain the
objective of preserving the balanced allocation of taxing powers.
-- Ronald Gebhardt and Jürgen Lüdicke, PwC Germany; [email protected]
Netherlands – AG Opinion on possible discriminatory treatment of foreign
shareholders receiving dividends from a Dutch source: Miljoen, X and
Société Générale
On 25 June 2015, AG Jääskinen rendered his Opinion in the Miljoen, X and Société
Générale case (Joined Cases C-10/14, C-14/14 and C-17/14) concerning the possibly
discriminatory tax treatment of foreign shareholders receiving dividends from a Dutch
source. Although two of the three cases (C-10/14 and C-14/14) concern Belgian
individual shareholders and the other concerns a French corporate shareholder (C17/14), the cases have similar fact patterns: foreign shareholders receive dividends from
a Dutch source and bear Dutch dividend withholding tax. Dividend distributions to
resident shareholders would also have been subject to Dutch dividend withholding tax,
but those shareholders would, in the end, have been subject to personal or corporate
income tax, in which case the withholding tax is no more than a pre-levy.
The AG first argued that EU law does not preclude Member States from applying
different techniques to taxing foreign shareholders (withholding tax) and resident
shareholders (income tax). Although different taxing techniques may be used, the tax
borne in the end by a foreign shareholder may not be more burdensome than the tax that
would have been borne by a resident shareholder.
In comparing the tax burden of foreign and resident individual shareholders,
complications arise as resident shareholders are not taxed on dividends as such, but on a
notional yield calculated on the basis of the value of their shares. Nevertheless, the AG
dismissed the idea of segregating from the resident shareholders’ broader tax burden the
part relating to the dividends received. A tax-free sum that resident shareholders enjoy,
however, should be taken into account in the comparison.
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5
In his Opinion, the AG also discusses how the corporate income tax should be calculated
that hypothetically would have been borne by the French corporate shareholder (a trader
in financial instruments). In the AG’s view, this comes down to calculating the amount of
corporate tax that would have been payable on the net amount of the dividends received
less the expenses directly linked – not only economically – to the holding of the Dutch
shares and that also would have been deductible by a resident shareholder. In the case at
hand, the AG referred to the financing costs of the temporary holding of the shares and
the transaction and maintenance costs of the shares; i.e. costs that are inevitably linked
with the activity through which the related taxable income is obtained.
The AG also addressed the possibility of a Dutch discriminatory treatment being
neutralised by a tax credit in Belgium or France; although, in the cases at hand, the
Netherlands-Belgium Double Tax Treaty enabled the Belgian shareholders only to
deduct the Dutch dividend withholding tax as expenses in their Belgian tax returns and
under the Netherlands-France Double Tax Treaty, the French trader was only able to
obtain a tax credit in its French return for seven of the eight years (in the eighth year it
was not able to effectuate a tax credit due to its being in a loss-making position). The AG
first argues that only a full tax credit agreed bilaterally in the tax treaty can remove the
discrimination created by the source State. He then adds, and this seems new, that the
source State does not seem to be required to grant a refund if the Residence State has
factually removed the discrimination by granting a tax credit on the basis of a tax treaty.
In the cases at hand, in the absence of a tax credit under the Netherlands-Belgium
Double Tax Treaty and the tax credit under the Netherlands-France Double Tax Treaty
being capped at the amount of French tax payable, there was no sufficient neutralisation.
The AG’s Opinion supports our view that the Dutch dividend withholding tax levied on
foreign shareholders may be in breach of EU law.
-- Martin Vink, Mark van Graafeiland and Frederik Boulogne, PwC Netherlands;
[email protected]
Sweden – CJEU Judgment on deductibility of FOREX losses in cross-border
situations: X AB
On 10 June 2015, the CJEU rendered its judgment in the X AB case (C-686/13) deciding
that the freedom of establishment does not oblige Sweden to allow a deduction of
FOREX losses that are incurred upon the alienation of foreign subsidiaries. A Swedish
taxpayer (X AB) held a UK subsidiary, of which the capital was issued in USD. X AB
planned the cessation of the activities of its UK subsidiary, which was regarded as an
alienation under Swedish law. As a result, X AB would incur a FOREX loss (SEK v USD).
In her Opinion of 22 January 2015, AG Kokott had concluded that EU law does not
preclude the Member State of residence of the parent company to disallow a FOREX loss
deduction included in a capital loss derived from shares in a subsidiary resident in
another Member State, where the Member State of residence of the parent company
PwC EU Tax News
6
does not take capital gains and capital losses from such shares into account for the
calculation of the tax base (here: the Swedish participation exemption).
The CJEU essentially followed AG Kokott’s Opinion and held that the freedom of
establishment does not require Member States to adjust their own tax rules in order to
remove all possible restrictions on free movement. In the context of FOREX results, this
means, according to the CJEU, that a Member State does not have to allow the deduction
of FOREX losses incurred upon the alienation of shares in a foreign company simply
because the Member State of the subsidiary has a different currency than the Member
State of the parent company.
A crucial consideration in the CJEU’s decision is where the Court makes a distinction
between the Swedish case and the Deutsche Shell case (C-293/06), in which it held that
Germany was obliged to allow the deduction of FOREX loss incurred with the alienation
of an Italian PE. According to the CJEU, Deutsche Shell was decided “in a different legal
context”. The German rules in that case provided that currency gains were taxed and, at
the same time, currency losses were deductible, unless a Double Tax Treaty stipulated
otherwise. This, according to the CJEU, is different in the Swedish case, as Sweden has
chosen, as a general rule, not to exercise its powers of taxation with respect to results
from qualifying subsidiaries. On this point, it seems that the CJEU does not distinguish
between results realised by the foreign subsidiaries themselves (taxable in the Member
State of the subsidiary only) and results on the shares in the foreign subsidiaries (which
by their nature materialise only in Sweden).
The CJEU’s reasoning seems to leave little to no room for arguing that FOREX losses
incurred upon the alienation of foreign subsidiaries should still be deductible on the
basis of EU law. Some Member States, such as the Netherlands, which had already
adopted ‘repair measures’ in anticipation of the CJEU deciding that FOREX losses
should be deductible, now seem to have done so unnecessarily.
-- Gunnar Andersson and Fredrik Ohlsson, PwC Sweden and Frederik Boulogne, PwC
Netherlands; [email protected]
Back to top
National Developments
Finland – Recent developments with respect to Finnish Fokus Bank claims
for non-UCITS SICAVs
The Finnish Central Tax Board (CTB) published in May 2015 a decision (CTB 13/2015,
30 April 2015) on the taxation of dividends received by a Maltese SICAV from Finnish
listed companies. In its decision the CTB discussed the characteristics of the SICAV in
question and considered it to be mainly comparable to a Finnish limited liability
company with investment activities. Accordingly and as the Maltese SICAV in question
PwC EU Tax News
7
did not hold at least 10 % of the capital of the listed companies distributing the
dividends, a precondition for tax exemption in a purely domestic comparable situation
where a listed company distributes dividends to a non-listed company, the withholding
tax levied to the Maltese SICAV was not contrary to Art. 63 TFEU.
According to the CTB, the SICAV in question had a different series of shares which may
form separate sub-funds therein. The Maltese SICAV in question was both non-listed
and non-UCITS. As noted above, the SICAV was considered mainly comparable to a
Finnish limited liability company even though the CTB also discussed the SICAV’s
characteristics and the comparability to a Finnish investment fund (tax exempt).
However and unlike the SICAV in question, a Finnish investment fund is not a legal
entity.
In the Finnish tax practice, non-listed UCITS SICAVs from Luxembourg have also been
considered comparable to a Finnish limited liability company. With respect to the
aforementioned comparability, the withholding tax levied on dividends received by such
SICAVs from Finnish listed companies is not discriminatory, since such dividend income
would also be taxed in the case of a (not listed) Finnish limited liability company.
The decision of the CTB has been appealed and the Finnish Supreme Administrative
Court (SAC) will have to take a final decision.
-- Jarno Laaksonen, PwC Finland; [email protected]
Germany – Final Fiscal Court judgment on the DMC case
On 15 April 2015, the Fiscal Court of Hamburg rendered its final decision (2 K 66/14) on
the DMC case (C-164/12) regarding the compatibility of the former version of section 20
paragraph 3 of the German Reorganisation Tax Act (RTA) with EU law. The Fiscal Court
held that the prerequisite of section 20 para. 3 RTA infringes the free movement of
capital (Art. 63 TFEU) since Germany can still tax the hidden reserves in the contributed
assets at the level of the receiving German corporation.
In the case at hand, two Austrian corporations contributed their interests in a German
partnership to a German corporation and received in return new shares in the
transferee. Sec. 20 para. 3 RTA prescribed that a continuation of the book value of the
partnership's assets at the level of the transferee was only possible if the received shares
were taxable in Germany. However, due to the Double Taxation Treaty concluded with
Austria, Germany had no right to tax the disposal of the new shares. Therefore the
transferor was forced to pay tax on the hidden reserves included in the contributed
assets. The question was whether this was compatible with EU law and whether another
rule, which allowed for a payment of the tax in five equal instalments without interest
over a five year period, was proportionate.
The CJEU applied the free movement of capital (Art. 63 TFEU) rather than the freedom
of establishment (Art. 49 TFEU), because the applicability of sec. 20 RTA in its view was
PwC EU Tax News
8
not dependent on whether the transferor owned a controlling interest in the receiving
corporation.
The CJEU held that the German rule constituted a restriction on Art. 63 TFEU but could
be justified by the balanced allocation of taxing rights provided that Germany had no
right to tax the hidden reserves in the contributed assets at the level of the receiving
corporation. The CJEU left it up to the referring German court to determine if this was
the case. Furthermore, the CJEU decided that an interest-free deferral of the tax
payment over a five-year period is proportionate.
The Fiscal Court decided that Germany was in fact able to exercise its taxing right at the
level of the acquiring company. Therefore, the question that had been left open after
DMC was answered in favour of the taxpayer.
--Ronald
Gebhardt
and
Juergen
Luedicke,
PwC
Germany;
[email protected]
Italy – Provincial Tax Court rules that withholding tax levied on dividends
distributed to a US pension fund is incompatible with EU law, orders refund
On 12 March 2015, the Provincial Tax Court (court of first instance) of Pescara in its
judgment n. 204 upheld the refund claim submitted by a U.S. pension fund with regard
to dividend withholding tax levied in Italy.
In 2008, claimant received dividends from Italian companies. Upon the distribution of
those dividends it incurred a 27% withholding tax, whereas, Italian pension funds were
subject to an 11% substitute tax applied to the global annual result of the pension funds
(not on dividends received). The U.S. pension fund considered that such difference in
treatment amounted to a breach of the free movement of capital and thus submitted a
claim asking for a refund of the difference between the withholding tax actually suffered
and the tax that an Italian pension fund would have suffered.
The Provincial Tax Court ruled that the claimant was comparable to an Italian pension
fund and had been discriminated against. The Court, therefore, concluded that the U.S.
pension fund was entitled to a refund of the higher tax paid.
-- Claudio Valz and Gabriele Colombaioni, PwC Italy; [email protected]
PwC EU Tax News
9
Italy – Supreme Court allows Tax Court appeals regarding the denial of
access to the EU Arbitration Convention
The Italian Supreme Court recently issued an Order ruling that a taxpayer may lodge an
appeal to the Tax Court, when the Tax Authorities deny them access to the EU
Arbitration Convention.
In the case at hand, an Italian taxpayer received a notice of a tax assessment challenging
the transfer pricing applied by the taxpayer making, consequently, the relevant Transfer
Pricing adjustment. In order to obtain a relief from the double taxation arising from such
Transfer Pricing adjustment, the taxpayer submitted a request to the Italian Competent
Authority pursuant to Art. 6 of the EU Arbitration Convention (90/436/CEE). Since the
access to the EU Arbitration Convention was denied by the Tax Authorities, the taxpayer
lodged an appeal before the Tax Court. The Ministry of Finance, acting as defendant,
argued that the Tax Court had no jurisdiction and the case was thus referred to the
Supreme Court.
The Supreme Court rejected the Ministry of Finance’s plea arguing that: (i) the
submission of a Mutual Agreement Procedure request is a wholly domestic matter which
exclusively concerns the taxpayer and the Competent Authority; and (ii) all the
administrative acts related to access to the EU Arbitration Convention fall within the Tax
Courts’ jurisdiction, since they are related to double taxation issues. According to the
Supreme Court, even if the domestic law which lists the acts that may be appealed, does
not explicitly refer to the denial of access to the EU Arbitration Convention, it shall
include every act of the Tax Authorities relevant to tax claims.
Given the above, the Supreme Court concluded that, since the act of denial of access to
the EU Arbitration Convention results in double taxation for the taxpayer, the latter may
rightfully appeal the denial before a Tax Court.
--Claudio
Valz
and
Luca
la
Pietra,
PwC
Italy;
[email protected];
[email protected]
United Kingdom – Court of Appeal allows compound interest claim in
relation to overpaid VAT
Following the CJEU Judgment in Littlewoods Retail Ltd and others v HMRC (C591/10), the Court of Appeal has effectively allowed Littlewood's compound interest
claim in relation to overpaid VAT. The case concerned whether compound interest is
necessary to provide adequate indemnity in circumstances where tax has been levied
unlawfully and the Court of Appeal handed down its judgment (Littlewoods Limited and
PwC EU Tax News
10
others v HMRC[2015] EWCA Civ 515) concluding in favour of the tax payer and
dismissing HMRC's appeal.
This judgment deals with the application of the CJEU decision in the UK and how this
should be given effect. In particular, it tackles the question of how the disapplication of
the offending UK provisions should be effected. The argument that the relevant
legislation (which provided only access to simple interest) could be given a compliant
construction was rejected.
HMRC have since put forward the position that the facts in Littlewoods are specific to
that case and the judgment does not have wider ramifications for other claimants. They
maintain that the relevant provisions of the VAT Act 1994 giving simple interest is an
adequate and exhaustive statutory scheme which will provide adequate interest in many
cases. HMRC is also seeking leave to appeal to the Supreme Court, although it may be
some time until it is know whether the appeal has been allowed. HMRC will seek to have
all other court claims stayed and appeals to the First Tier Tribunal stood over until the
Littlewoods litigation is exhausted. In the interim, any taxpayers with similar claims
should seek advice on how to proceed.
-- Juliet Trent and Jonathan Hare, PwC United Kingdom; [email protected]
United Kingdom – Clawback of UK shale aggregate waste relief
In August 2013 the European Commission notified the UK Government that it had
decided to open a formal investigation into whether certain exemptions from the
aggregates levy (AGL), which was introduced in 2002, were compliant with EU State aid
rules. The Government suspended the exemptions pending the Commission's decision.
In March 2015 the Commission announced its decision. It found that the AGL, and all
exemptions from the AGL other than the exception of shale aggregate in specific
circumstances, were lawful. Therefore the UK Finance Bill published in July 2015 will,
once enacted, reinstate all the exemptions from the aggregate levy besides those
applicable to shale.
The Commission ordered the Government to recover the unlawful aid from businesses
which produced certain types of shale aggregate between 2002 and 2014. This is the first
example of UK fiscal State aid recovery, HMRC has indicated that although it has
sympathy for those struggling to repay the State aid, it will not be possible to avoid
compliance with the recovery order.
-- Juliet Trent and Jonathan Hare, PwC United Kingdom; [email protected]
Back to top
PwC EU Tax News
11
EU Developments
EU – European Commission presents Action Plan for fundamental reforms
of business taxation in the EU
On 17 June 2015, the European Commission presented its Action Plan for Fair and
Efficient Corporate Taxation in the EU setting out a new approach to business taxation
and to effectively tackle corporate tax avoidance. The stated objectives are:
●
●
●
●
Re-establishing the link between taxation and where economic activity takes place.
Ensuring that Member States can correctly value corporate activity in their
jurisdiction.
Creating a competitive and growth-friendly corporate tax environment for the EU.
Protecting the Single Market and securing a strong EU approach to corporate tax
issues, incl. on implementing OECD BEPS, dealing with non-cooperative tax
jurisdictions and increasing tax transparency.
This Action Plan identifies 5 key areas for action to meet the above objectives:
1. Re-launch of the CCCTB:
A new legislative proposal for a mandatory (at least for MNCs) CCCTB will be presented
in 2016. Implementation in two stages: first a common tax base (CCTB), with
consolidation to follow at a later stage. If unanimity is not achieved, it is possible that a
CCTB could proceed for selected Member States under enhanced cooperation.
2. Ensuring effective taxation where profits are generated
(a) Aligning profit generation and taxation
Consensus on aspects of the common base which are linked to BEPS, such as adjusting
the definition of PE and improving CFC rules, should be achieved within 12 months and
made legally binding before an agreement is reached on the revised CCCTB. Other
measures include amending the Interest & Royalties Directive so that benefits will not be
granted to interest and royalty payments unless they are effectively taxed elsewhere in
the EU. As a second step, the Parent-Subsidiary Directive could be aligned with the
Interest & Royalties Directive.
(b) EU transfer pricing (TP) framework
The Commission will build on BEPS Transfer Pricing recommendations and develop
coordinated implementation within the EU, e.g. guidance to tax administrations on the
use of information provided under recent OECD and EU proposals.
(c) Preferential regimes
The Commission will provide guidance and monitor implementation of IP/patent box
regimes in line with the modified nexus approach. If it finds Members States are not
applying the new approach consistently it will introduce binding legislation to ensure
proper implementation. The introduction of binding legislation would require
unanimity.
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3. Tax environment for business
(a) Cross border loss offset
Temporary cross-border loss relief will be introduced in advance of a full CCCTB. Losses
would be recaptured once an entity becomes profit-making. This would again require
unanimity.
(b) Dispute resolution
The Commission will propose improvements to current mechanisms to resolve double
tax disputes in the EU by summer 2016, including whether the Arbitration Convention’s
scope should be extended, or introduction of an EU “instrument” e.g. a Directive.
4. Tax Transparency
(a) Non-EU non-cooperative tax jurisdictions
The Commission has published a Commission 'blacklist' of 30 non-EU non-cooperative
tax jurisdictions, to be updated periodically and used to develop a common EU strategy
to deal with them as a second stage, via coordinated counter measures.
(b) Additional disclosure of tax information
The Commission has launched a public consultation on whether all MNCs should have to
publicly disclose certain tax information, including CBCR. The consultation ends on 9
September 2015 - work is to be concluded in Q1 of 2016.
5. EU tools for coordination
(a) Coordination on tax audits
The Commission will promote greater cooperation between Member States, and launch a
discussion with Member States to find a more strategic approach to controlling and
auditing cross-border companies, including joint tax audits.
(b) Code of Conduct for Business Taxation / Platform on Tax Good Governance
The Commission will make a proposal to reform the Code of Conduct Group to enable it
to react more efficiently to cases of harmful tax competition. The Commission will
prolong the mandate, extend the scope and enhance working methods of the Platform
(Member States, business, NGOs), to help deliver the Action Plan, facilitate discussions
on tax rulings in the light of the proposed new information exchange rules, and provide
feedback on new anti-avoidance initiatives.
-- Bob van der Made, PwC Netherlands, and Peter Cussons and Chloe Paterson, PwC
United Kingdom; [email protected]
EU – 6-monthly ECOFIN Report to the European Council on Tax Issues
The Council (ECOFIN) was invited to report back to the European Council on various tax
issues mentioned, in particular, in its Conclusions of March and June 2012 and of 22
May 2013. On 19 June 2015, ECOFIN endorsed the report and agreed to forward it to the
European Council of 25 and 26 June 2015. The EU Presidency report covers the
following legislative and non-legislative tax issues:
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A. Legislative (direct tax) dossiers

Amendment to the Parent-Subsidiaries Directive

Interest and Royalties Directive

Increasing Tax Transparency
a) Cross-border tax rulings
b) Repeal of the Savings Taxation Directive

Common Consolidated Corporate Tax Base

Savings Negotiations with European third countries

The common system of Financial Transaction Tax
B. Tax Policy Coordination
a) Code of Conduct Group (Business taxation)
b) Code of Conduct Group – anti-abuse: Subgroup on hybrid mismatches
c) Other tax coordination issues
i) EU/OECD: Base Erosion and Profit Shifting (BEPS)
ii) International developments: G7
iii) Tax in non-tax dossiers
Annexed to the report: EU-BEPS PRESIDENCY ROADMAP
I. Short term work
A. Interest and Royalties Directive
B. Transparency of tax rulings
C. CCCTB proposal
D. Hybrid mismatches
E. Patent boxes
F. Code of Conduct Group (business taxation)
II. Medium term work
A. Country-by-country reporting on transfer pricing agreements
B. Beneficial ownership of non-transparent entities
C. Outbound payments
D. Transfer Pricing
III. Long term work
A. Conditions and rules for the issuance of tax rulings
B. Definition of an effective level of taxation
C. Residency rules
-- Bob van der Made, PwC Netherlands; [email protected]
EU – Luxembourg EU Council Presidency tax priorities for July-December
2015
Luxembourg intends to place the fight against tax fraud and tax evasion in a global
context and ensure fair competition:

The EU must conceive its action in connection with the G20 and OECD decisions.
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
Transparency and the creation of a ‘level playing field’ at a global level are the preconditions for the effectiveness of this fight.

The expected progress within the context of the OECD’s work on BEPS will add
impetus to the EU’s approach in the second semester of 2015.

Whilst ensuring respect for EU law concerning, in particular, free movement of
capital and freedom of establishment, the Luxembourg Presidency aims to
successfully conclude negotiations on the proposal on transparency and exchange of
information regarding tax rulings. The Presidency also hopes to make progress with
work on the directive on the CCCTB.

Luxembourg will discuss the reinforcement of the mandate of the Code of Conduct
for Business Taxation in the Council, taking into account the current status of the
file.

The Action Plan for Fair and Efficient Corporate Taxation in the EU, as proposed by
the Commission on 17 June 2015, will serve as a starting point for the Luxembourg
Presidency in its work on taxation.
Click here for more background.
-- Bob van der Made, PwC Netherlands; [email protected]
EU – June ECOFIN Council debates on mandatory AEOI / tax rulings and
recast of Interest & Royalties Directive
1. Proposal for mandatory automatic exchange of information (AEOI) with regard to
tax rulings (“DAC3”)
Selected issues discussed:
● The scope and timing of information to be exchanged, and further alignment with
work carried out by the OECD;
● The Exemption of bilateral and multilateral advance pricing arrangements with
third countries;
● The Commission's role in the new mechanism on AEOI.
A number of Finance Ministers intervened: The Netherlands, Ireland, France, Poland,
Spain, Germany, the UK, Malta, Slovakia, Sweden, Luxembourg and Slovenia.
Luxemburg said it is an absolute priority for the Luxembourg EU Council Presidency to
adopt this proposal before the end of its presidency term (31 December 2015).
2. Recast of the Proposal Interest and Royalty Directive
In order to make progress on this 2011 Recast Proposal, the Latvian Presidency proposed
to split up the proposal in order to focus first on incorporating a GAAR clause, similar to
the one added in January 2015 to the EU's Parent-Subsidiary Directive (i.e. acting as a
"de minimis" rule), whilst Council work would continue meanwhile on other remaining
elements of the Directive, including:
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15

a minimum effective level of taxation (not foreseen in the Commission's original
proposal).

a requirement for Member States to inform each other in the event of the GAAR
being invoked.
The Latvian EU presidency suggested that the above elements should be dealt with as
part of the Recast Proposal, but it found no real traction on this during the ECOFIN
meeting. Germany, France, Austria, Czech Republic, Greece and Italy insisted during the
meeting that discussions in the Council should continue on the Interest and Royalty
Directive Recast Proposal as a whole.
-- Bob van der Made, PwC Netherlands; [email protected]
EU – Mandate of EU Parliament’s TAXE special committee on tax rulings
extended
The mandate of the European Parliament's special TAXE Committee on Rulings and
Other Measures Similar in Nature or Effect was extended from 12 August until the end of
November. The following draft calendar for the preparation and adoption of the TAXE
report was endorsed by European Parliament leaders on 21 May 2015:
Milestone
Date
Circulation of draft fact-finding report
including legislative recommendations
17 July 2015
Presentation of draft report
7 September 2015
Exchange of views on the draft report
17 September 2015
Deadline for amendments
22 September 2015
Vote in TAXE committee
15 October 2015
Vote in Plenary session
24 November 2015
-- Bob van der Made, PwC Netherlands; [email protected]
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Fiscal State aid
Belgium – European Commission publishes non-confidential version of its
decision to investigate the Belgian excess profit regime
The non-confidential version of the European Commission’s opening decision
announcing the formal investigation into the Belgian Excess Profit regime was published
in the EU’s Official Journal on 5 June 2015.
The Commission’s investigation relates to the Belgian tax provision of Article 185, §2, b
of the Belgian Income Tax Code, which introduced the “arm’s length” principle in 2004.
It considers cross-border intra-group relations in order to assess corporate income tax
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on an arm’s length basis. Based on this article the taxable basis of Belgian companies can
be:

increased to the extent it is lower than an at arm’s length profit.

exempt to the extent the taxable basis exceeds an arm’s length profit.
The Commission has indicated that it has a number of concerns which require further
investigation, namely that:

this provision is ring-fenced, i.e. available only to a limited number of foreign
multinational companies and not to stand-alone Belgian based companies;

depending on the case, this provision may result in the exemption of a significant
part of the income of a Belgian company; and

the provision requires an upfront ruling issued in Belgium. The Commission notes
that these rulings have often been granted to companies that have relocated a
substantial part of their activities to Belgium or that have made significant
investments in Belgium.
In line with EU State aid procedures, the beneficiaries of excess profit rulings in Belgium
were given one month (until 6 July 2015) to submit their comments. More specifically,
they needed to provide the Commission with further details on:

the transfer prices applied in their specific case; and

how the exempted profits in Belgium have been treated from an accounting and tax
point of view.
This investigation follows the investigation by the Commission of the tax ruling practice
of Member States in view of the EU State aid rules. In December 2014, the Commission
issued a State aid information inquiry with regard to rulings to all 28 Member States.
--Pieter Deré,
Patrick
[email protected]
Boone
and
Philippe
Vanclooster,
PwC
Belgium;
EU – European Commission takes next step in its EU-wide State aid review
of tax ruling practices
On 17 December 2014, the European Commission decided to extend its enquiry into tax
ruling practices in the EU under EU State aid rules to cover all EU Member States.
Under the review, the Commission has asked all EU Member States to provide
information about their tax ruling practice, in particular to confirm whether they provide
tax rulings, and, if they do, send a list to the Commission of all companies that have
received a tax ruling from 2010 to 2013.
On 8 June 2015, the European Commission announced its next steps in its EU-wide
State aid review of Member States’ tax ruling practices. The Commission stated in its
press release that:

Estonia and Poland had refused to respond in full detail to the information
request per the December 2014 enquiry. Therefore, the Commission has
decided to issue an information injunction to both Member States, which were
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17
given one month to provide the missing information. Both countries are under a
legal obligation to respond.

as part of its State aid review which started in June 2013, the Commission
already asked 7 Member States (Belgium, Cyprus, Ireland, Luxemburg, Malta,
Netherlands and the UK) at an earlier stage to share further information on
their respective ruling practices.
In addition to the above announcement regarding Estonia and Poland, on the basis of
the information it has received, the Commission decided to ask 15 Member States
(Austria, Belgium, the Czech Republic, Denmark, Finland, France, Germany, Hungary,
Italy, Lithuania, Portugal, Romania, Slovakia, Spain and Sweden) to provide a
substantial number of individual rulings. This brings the total to 21 (out of 28) Member
States that have already received a request for detailed information.
Requesting these rulings does not prejudge whether this will lead to individual State aid
investigations concerning the recipients of these tax rulings.
On the basis of the additional information, the Commission wishes to assess whether
Member States operate tax rulings to grant companies selective tax advantages that
breach EU State aid rules.
The Commission stated that tax rulings, which are comfort letters issued by tax
authorities to an individual company, are not a problem per se under EU State aid rules
where they grant upfront legal certainty to companies. However, the Commission is
reviewing whether such tax rulings result in Member States’ granting selective
advantages to specific companies or groups of companies. The advantages granted can
be selective and distort competition in the Single Market in breach of EU State aid rules.
The Commission’s information request to Member States follows the Commission’s
agenda to fight against tax avoidance and harmful tax competition. In view of this, the
Commission launched a proposal in March 2015 to require Member States to
automatically exchange information on tax rulings with each other and the Commission.
-- Pieter Deré, PwC Belgium, Bob van der Made and Sjoerd Douma, PwC Netherlands;
[email protected]
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PwC EU Tax News
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About the EUDTG
The EUDTG is PwC’s pan-European network of EU law experts. We specialise in all
areas of direct tax: the fundamental freedoms, EU directives, fiscal State Aid rules, and
all the rest. You will be only too well aware that EU direct tax law is moving quickly, and
it’s difficult to keep up. But, this provides plenty of opportunities to taxpayers with an
EU or EEA presence.
So how do we help you?
● Through our Technical Committee we constantly develop new and innovative EU Law
positions and solutions for practical application by clients.
● We combine EU Law expertise and the specific industry knowledge in our Financial
Services and Real Estate sector networks.
● We have set up client-facing expert working groups to address specific key topics
such as EU State Aid & BEPS and CCCTB.
● We closely follow EU developments on the ground in Brussels as well as OECD
developments.
● Daily EU tax news service provided by our centralised EUDTG Secretariat in
Amsterdam.
And what specific experience can we offer for instance?
● We have assisted clients before the CJEU and the EFTA Court in a number of highprofile cases such as Marks & Spencer (C-446/03), Aberdeen (C-303/07), X Holding
BV (C-337/08), Gielen (C-440/08), X NV (C-498/10), A Oy (C-123/11), Arcade
Drilling (E-15/11) and SCA Group Holding (C-39/13).
● Together with our Financial Services colleagues, we have assisted foreign pension
funds, insurance companies and investment funds with their dividend withholding
tax refund claims.
● We have carried out a number of tax studies for the European Commission.
More information
Please visit www.pwc.com/eudtg or contact the EUDTG’s Network Driver Bob van der
Made (Telephone: +31 6 130 96 296, E-mail: [email protected]; or one of
the contacts listed on the next page.
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EUDTG KEY CONTACTS:
Chair:
Stef van Weeghel
[email protected]
Chair State Aid WG,
Member EU Law Technical Committee:
Sjoerd Douma
[email protected]
Network Driver, EU Public Affairs
Brussels, Member State Aid WG, CCCTB
WG, EU Law Technical Committee:
Bob van der Made
[email protected]
Chair EU Law Technical Committee:
Juergen Luedicke
[email protected]
Chair of CCCTB WG, Member EU Law
Technical Committee and State Aid WG:
Jonathan Hare
[email protected]
EUDTG COUNTRY LEADERS:
Austria
Richard Jerabek
Belgium
Patrice Delacroix
Bulgaria
Krasimir Merdzhov
Croatia
Lana Brlek
Cyprus
Marios Andreou
Czech Rep.
Peter Chrenko
Denmark
Soren Jesper Hansen
Estonia
Iren Lipre
Finland
Jarno Laaksonen
France
Emmanuel Raingeard
Germany
Juergen Luedicke
Gibraltar
Edgar Lavarello
Greece
Vassilios Vizas
Hungary
Gergely Júhasz
Iceland
Fridgeir Sigurdsson
Ireland
Carmel O’Connor
Italy
Claudio Valz
Latvia
Zlata Elksnina
Lithuania
Kristina Krisciunaite
Luxembourg
Julien Lamotte
Malta
Edward Attard
Netherlands
Sjoerd Douma
Norway
Steinar Hareide
Poland
Camiel van der Meij
Portugal
Leendert Verschoor
Romania
Mihaela Mitroi
Slovakia
Todd Bradshaw
Slovenia
Nana Sumrada
Spain
Carlos Concha
Sweden
Gunnar Andersson
Switzerland
Armin Marti
UK
Jonathan Hare
PwC EU Tax News
Chair of FS-EUDTG WG:
Patrice Delacroix
[email protected]
Chair of Real Estate-EUDTG WG:
Jeroen Elink Schuurman
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
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