EU Tax News

EU Tax News
Issue 2015 – nr. 002
January – February 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.
Contents
CJEU Cases
Belgium
Belgium
Germany
Germany
Netherlands
Sweden
United Kingdom
CJEU referral regarding Belgian fairness tax
CJEU referral regarding interest withholding tax
CJEU judgment on German rules disallowing nonresidents to deduct annuities linked to an anticipated
succession inter vivos: Grünewald
AG opinion on exit taxation in case of cross-border
transfer of assets from a partnership to a PE: Verder
LabTec
CJEU judgment on the 150 kilometre distance
requirement in the Dutch 30% ruling for foreign
employees with specific expertise: Sopora
AG opinion on deduction of FOREX losses in crossborder situations
CJEU judgment regarding cross-border loss relief:
Commission v UK
National Developments
Belgium
Belgium
PwC EU Tax News
Antwerp Court of Appeal decision regarding Fokus
Bank claims
Constitutional Court annulment of tax on conversion of
bearer securities
1
Belgium
Constitutional Court annulment of retroactive increase
of net asset tax rate
Finland
Supreme
Administrative
Court
decisions
on
withholding taxation on Finnish sourced dividends
from publicly quoted companies received by two
different types of US RICs
The Hague Court of Appeal decision on deduction of
FOREX losses in cross-border situations
Prudential (CFC & Dividend GLO) further High Court
decision
Court of Appeal decision on overcharging VAT on
investment management fees: HMRC v Investment
Trust Companies
Netherlands
UK
UK
EU Developments
EU
EU
EU
EU
Spain
Sweden
European Parliament ups the ante on tax transparency
and rulings
ECOFIN Council meeting of 27 January 2015
Code of Conduct Group meeting of 4 February 2015
Council High Level Working Party (Taxation) meeting
of 5 February 2015
European Commission launches investigation into
regulations imposing the obligation to declare certain
assets located out of Spain
Swedish Government disagrees with the European
Commission on interest deduction limitations
Fiscal State aid
Belgium
Luxemburg
Hungary
Spain
Spain
PwC EU Tax News
European Commission announces investigation into the
Belgian excess profit ruling system
European Commission publishes non-confidential
version of opening decision in Amazon State aid case
European
Commission
announces
in-depth
investigation into Advertisement Tax and suspension
injunction
European Commission appeals General Court decisions
on Spanish financial goodwill amortisation before the
CJEU
European Commission requests Spain to amend or
abolish regional taxes on large retail establishments
2
CJEU Cases
Belgium – CJEU referral regarding Belgian fairness tax
The Belgian Constitutional Court (‘BCC’) has referred to the CJEU for a preliminary
ruling in respect of the fairness tax. The fairness tax was introduced by the Act of 30 July
2013 and is applicable as of assessment year 2014 (financial years ending 31 December
2013 up to and including 30 December 2014). It is a separate assessment in the Belgian
corporate income tax at a rate of 5.15% on dividends distributed by large Belgian
companies or Belgian branches of foreign companies. The fairness tax applies if notional
interest deduction and/or tax losses carried forward are offset against the taxable basis
for the respective taxable period. In January 2014, a complaint was launched against the
fairness tax with the BCC, arguing that the tax would infringe Belgian constitutional law,
the TFEU and the EU’s Parent-Subsidiary Directive.
The BCC has asked the CJEU to rule on whether or not the fairness tax violates EU law,
taking into account the following:

A foreign company with a Belgian PE could be subject to the fairness tax when
distributing a dividend, whereas a foreign company with a Belgian subsidiary
will not be subject to the fairness tax when distributing a dividend.

A foreign company with a Belgian PE could be subject to the fairness tax even if
the Belgian profits are fully reserved, but a Belgian subsidiary of which the
reserves are fully reserved and hence which does not distribute any Belgian
profits, could not be subject to the fairness tax.

Does the fairness tax constitute a withholding tax in breach of the EU ParentSubsidiary Directive, as a Belgian subsidiary could be subject to the fairness tax
when distributing its profits to its parent company, whereas these profits would
not be subject to the fairness tax if they would be retained within the Belgian
subsidiary?

Does the EU Parent-Subsidiary Directive prevent that dividends received by a
Belgian company qualifying for the dividends received deduction would result in
a higher fairness tax basis when being redistributed in a later year, whereas they
would result in a lower fairness tax basis when being redistributed in the same
year?
-- Patrice Delacroix and Olivier Hermand, PwC Belgium; [email protected]
Belgium – CJEU referral regarding interest withholding tax
On 19 December 2014, the European Commission referred Belgium to the CJEU (Case
C-589/14) claiming Belgium has failed to fulfil its obligations under the freedom to
provide services and the free movement of capital by adopting and maintaining a system
in which:
PwC EU Tax News
3

interest payable on unsecured debts to an investment company established in an
EEA state is subject to withholding tax, whereas an investment company
established in Belgium is exempt; and

interest payable on debts backed by Belgian securities is subject to withholding
tax when the securities are deposited or registered in an account in a financial
institution established in an EEA state, whereas interest is exempt when the
securities are deposited or registered in an account in a financial institution in
Belgium.
-- Patrice Delacroix and Olivier Hermand, PwC Belgium; [email protected]
Germany – CJEU judgement on German rules disallowing non-residents to
deduct annuities linked to an anticipated succession inter vivos: Grünewald
On 24 February 2015, the CJEU rendered its judgment in the Grünewald case (C559/13) on the deductibility of annuities linked to an anticipated succession inter vivos
by non-residents.
Mr. Grünewald was a non-resident individual who received 50% of an interest in a
German partnership previously held by his father by means of anticipated succession
inter vivos. The other half of the interest was granted to his brother. Subsequently, the
non-resident became taxable in Germany on his income earned through the partnership.
The non-resident had agreed to pay a monthly annuity to his father after the anticipated
succession was completed. The payments were not tax-deductible due to the fact that the
payor was a non-resident.
In its 2011 judgment in the Schröder case (C-450/09), the CJEU had already condemned
the German rule at stake to be incompatible with the free movement of capital. It had
decided that non-residents and residents were comparable in respect of the deductibility
of the annuity because the payment was directly linked to an activity that generated
taxable income in Germany. However, the German Federal Fiscal Court refused to
simply apply the Schröder ruling to the Grünewald case and referred the second case to
Luxembourg. According to the Federal Fiscal Court, the national laws had not been
properly explained to the CJEU by the Fiscal Court of Lower Saxony in the Schröder
referral.
Nonetheless, the CJEU followed its own judgment in Schröder and held that the German
legislation is in principle incompatible with EU law. It is for the referring court to assess
whether Mr. Grünewald’s situation is objectively comparable to a resident and the
deduction has to be granted. This would be the case if (i) Mr. Grünewald gained the
greater part of his overall income from German sources and had no significant income in
his state of residence (see case C-279/93, Schumacker) or (ii) the annuities were to be
regarded as an expense directly linked to the income from the activity of the business
established in Germany.
-- Ronald Gebhardt and Jürgen Lüdicke, PwC Germany; [email protected]
PwC EU Tax News
4
Germany – AG opinion on exit taxation in case of cross-border transfer of
assets from a partnership to a PE: Verder LabTec
On 26 February 2015, AG Jääskinen rendered his opinion in Verder LabTec (C-657/13).
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.
In its judgment in DMC (C-164/12) of 23 January 2014, the CJEU had already held that
the payment of an exit tax in five instalments is in line with EU law. Therefore, the AG
opines that the same should apply in the case of ten equal instalments.
-- Ronald Gebhardt and Jürgen Lüdicke, PwC Germany; [email protected]
Netherlands – CJEU judgment on the 150 kilometre distance requirement in
the Dutch 30% ruling for foreign employees with specific expertise: Sopora
On 24 February 2015, the CJEU handed down its decision in the Sopora case (C-512/13)
on the 150 kilometre (km) requirement in the Dutch 30% ruling for foreign workers with
specific expertise.
The Dutch Wage Tax Act contains provisions that allow employers to reimburse, exempt
from tax, certain ‘extraterritorial costs’ to their foreign workers, which are the costs
workers incur as a result of staying outside their countries of origin to work and live in
the Netherlands.
One important feature of the reimbursement of ‘extraterritorial costs’ is the so-called
30% ruling which essentially deems the extra-territorial costs of a taxpayer to be 30% of
his wage tax base, and allows him to be reimbursed for these costs without having to
specify the real amounts. Administrative ease was stated to be the reason for setting the
reimbursable extraterritorial costs at 30%, without requiring specification.
Per 1 January 2012, qualification for the 30% ruling not only requires a worker to have
specific expertise that is rare on the Dutch labour market, but also to reside more than
150 km from the Dutch border for two/thirds of the two-year period before commencing
employment in the Netherlands. One of the reasons for the government to introduce this
requirement is to prevent distortions in the border areas.
A foreign worker that does not satisfy the 150 km requirement is not entitled to the
deemed tax-exempt reimbursement of 30% of extraterritorial costs (without
specification), but he may still be reimbursed for the actual extraterritorial costs he
incurs and specifies.
In this case, Mr. Sopora found Dutch employment but did not qualify for the 30% ruling
because he did not meet the 150 km requirement. After several levels of appeal, the
PwC EU Tax News
5
Supreme Court referred preliminary questions to the CJEU on the validity of the 150 km
requirement under free movement of workers.
The CJEU held that, in principle, there is a restriction on the free movement of workers
if EU workers are treated less advantageously than Dutch workers or workers residing
less than 150 km from the Dutch border. The CJEU considered that, in general, any
foreign worker, regardless of the distance to the Dutch border of his residence, is able to
be reimbursed for extraterritorial costs upon specification and that the 30% ruling is in
essence a measure of administrative ease (i.e. no specification of actual costs required).
The CJEU found no restriction on the free movement of workers, but, importantly, this
would be different if the referring court would find the 30% rule to systematically overcompensate workers qualifying for it (by allowing more deemed costs to be reimbursed
than actually incurred). Should the referring court indeed find this -which is conceivable,
then it remains to be seen how it will decide the case and whether it will extend the 30%
ruling to employees like Mr. Sopora.
The CJEU held that considerations of an administrative nature cannot justify a derogation from EU law rules. According to CJEU case law, Member States cannot be denied
the possibility to attain legitimate objectives by introducing rules which are easily
managed and supervised by the competent authorities.
Sopora articulates that the 150 km requirement cannot, in itself, amount to indirect
discrimination or an impediment to the free movement of workers. A simplification
requirement is allowed (for the refer-ring court to ascertain), unless those limits are set
in such a way that that exemption systematically gave rise to a net overcompensation of
the extra-territorial expenses actually incurred.
-Robin
Hiemstra
and
[email protected]
Frederik
Boulogne,
PwC
Netherlands;
Sweden – AG opinion on deduction of FOREX losses in cross-border
situations
In Case C-686/13, a Swedish taxpayer (X AB) held a UK shareholding, of which the
capital was issued in USD. X AB planned the cessation of the activities of its UK
shareholding, which was regarded as an alienation under Swedish law. As a result, X AB
would incur a foreign exchange (FOREX) loss (SEK v USD). AG Kokott concluded on 22
January 2015 that EU law does not preclude the Member State of residence of the parent
company from disallowing 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 applies a system (here: the Swedish participation
exemption) which does not take capital gains and capital losses from such shares into
account for the calculation of the tax base.
11 days prior to the AG’s opinion, there was a decision by the Hague Court of Appeal (see
item under National Developments below).
PwC EU Tax News
6
NB: A Dutch court and an AG at the CJEU conclude differently as regards the
deductibility of a FOREX loss on the alienation of a foreign shareholding within a period
of only 11 days. It will be interesting to see how the CJEU will decide Case C-686/13.
-- Fredrik Ohlsson, Sjoerd Douma and Fredrik Boulogne, PwC Sweden and Netherlands;
[email protected]
UK – CJEU judgment regarding cross-border loss relief: Commission v UK
The CJEU published its judgment in Commission vs United Kingdom (C-172/13) on 3
February 2015 regarding infringement proceedings issued by the European Commission
against the UK's cross-border group relief provisions which were introduced with effect
from 2 April 2006 following the CJEU's judgment in the Marks & Spencer case
(December 2005). The Commission argued that these provisions are in breach of both
the TFEU and the EEA agreement on the basis that the conditions that must be met in
order to be able to claim relief make it virtually impossible to obtain relief.
The CJEU dismissed the Commission's action in its entirety. Firstly, it rejected the
Commission's assertion that the requirement in the UK legislation for the taxpayer to
demonstrate the losses are final (i.e. that immediately after the end of the accounting
period in which the loss is incurred, there's no possibility of it being utilised overseas in
past, current, or future periods), is disproportionate. The CJEU also determined that it is
acceptable for cross-border loss relief claims to be denied where the loss-making
company's territory makes no provision for losses to be carried forward (e.g. Estonia).
Finally, the CJEU rejected the Commission's argument that the legislation does not
provide relief for losses incurred prior to 1 April 2006, determining that the fact that the
UK has been allowing cross border loss relief claims is sufficient.
This decision will significantly limit claims for cross-border loss relief for losses from 1
April 2006 to those:

where the foreign subsidiary has been put into liquidation in the relevant loss
accounting period; or

where there is evidence of an intention to wind up a loss-making subsidiary and
initiation of the liquidation process soon after the end of the loss accounting
period, or

where the trade has ceased and all income producing assets have been sold
immediately after the end of the loss accounting period.
However, notwithstanding assertions by HMRC to the contrary, this decision should not
as regards timing impact claims for losses sustained prior to 1 April 2006, which
according to the Supreme Court decision in the Marks & Spencer case can be made by
demonstrating that the loss is “final” at the time of the relevant group relief claim.
-- Peter Cussons and Chloe Paterson, PwC United Kingdom; [email protected]
PwC EU Tax News
7
National Developments
Belgium – Antwerp Court of Appeal decision regarding Fokus Bank claims
In a -recently published- judgment of 3 June 2014, the Court of Appeal of Antwerp ruled
against the Belgian State and ordered it to refund the Belgian withholding tax suffered
by a Dutch real estate fund on a dividend distributed by its Belgian subsidiary. This
judgment – which established discrimination against the Dutch fund compared to a
similar local fund – is interesting in several respects.
In particular, the case concerned four dividends distributed on 31 May 2001, 31 May
2002, 30 May 2003 and 28 May 2004, respectively, by a Belgian closed-ended real
estate investment company (SICAFI/vastgoed-BEVAK) to its parent company, a Dutch
investment company (subject to tax – at 0% – in the Netherlands). A Belgian
withholding tax of 5% was levied on these dividends.
The Dutch fund – which considered that it had been discriminated against compared to
similar local funds – filed several claims to obtain a refund of this withholding tax. The
claims were rejected by the Belgian tax authorities. The Dutch fund then brought the
case to the Court of First Instance of Antwerp, which ordered the Belgian State to refund
the withholding tax. This judgment was appealed by the Belgian State.
In its judgment, the Court of Appeal of Antwerp considered that:

the Dutch fund was comparable to a local fund, and the relevant Belgian tax
provisions were in breach of the freedom of capital movement and the freedom of
establishment;

the discrimination only existed as from 12 June 2003, being the date on which the
local fund’s favourable regime with respect to Belgian withholding tax formally
entered into force (which is, in our view, subject to criticism);

with reference to the CJEU’s Amurta case (C-379-05), the tax credit the Dutch fund
received in the Netherlands in relation to the Belgian withholding tax suffered is not
deductible from the amount to be refunded;

default interest accrues on the amount to be refunded.
Hence, the Court of Appeal ordered the Belgian State to refund the Belgian withholding
tax – increased with default interest – levied on the dividend distributed to the Dutch
fund on 28 May 2004.
Although we think that there are sound arguments to consider that the discrimination
existed before 12 June 2003 (as local funds already benefitted from the favourable tax
regime in practice), the outcome of this judgment should encourage foreign (corporate)
funds to reclaim the Belgian withholding tax unduly levied on Belgian-sourced
dividends.
-- Patrice Delacroix and Olivier Hermand, PwC Belgium; [email protected]
PwC EU Tax News
8
Belgium – Constitutional Court annulment of tax on conversion of bearer
securities
On 5 February 2015, the Belgian Constitutional Court rendered a judgement that annuls
tax on the conversion of bearer securities, due to its incompatibility with EU law, in
particular with Directive 2008/7/EC of 12 February 2008 concerning indirect taxes on
the raising of capital.
This judgment follows a decision rendered in case C-299/13 in which the CJEU ruled
that Article 5(2) of Directive 2008/7 precludes the taxation of the conversion of bearer
securities into registered securities or dematerialised securities, such as those at issue in
the main proceedings, and that such a tax cannot be justified under other provisions of
the Directive (e.g. Article 6).
-- Patrice Delacroix and Olivier Hermand, PwC Belgium; [email protected]
Belgium – Constitutional Court annulment of retroactive increase of net
asset tax rate
On 22 January 2015, the Belgian Constitutional Court rendered a judgement annulling
the retroactive increase of the Net Asset Tax (“NAT”) rate introduced by the Act of 17
June 2013 with respect to assessment year 2013.
This Act had increased the NAT rate from 0.0800% to 0.0965% as from 1 January 2013,
as a result of which the increased NAT rate of 0.0965% applied to NAT returns already
filed. In this respect, taxpayers who filed a NAT return for assessment year 2013 were
forced to pay an additional NAT of 0.0165%.
The Act of 17 June 2013 has also increased the NAT rate to 0.0925% as from 1 January
2014. This second increase of the NAT rate for assessment year 2014 and onwards has
not been examined by the Constitutional Court. Following this judgement, Belgian and
foreign collective investment undertakings as well as insurance companies who paid the
additional NAT of 0.0165% for assessment year 2013 can ask the Belgian tax authorities
for a refund.
For credit institutions, the impact of this judgement is unclear, as the NAT rate for these
taxpayers had been increased a second time for assessment year 2013 (cf. articles 70, 71,
73 and 74 of the Act of 30 July 2013).
Note that a similar case is still pending before the Belgian Constitutional Court, which
specifically targets the NAT rate for credit institutions.
-- Patrice Delacroix and Olivier Hermand, PwC Belgium; [email protected]
PwC EU Tax News
9
Finland – Supreme Administrative Court decisions on withholding taxation
of Finnish sourced dividends from publicly quoted companies received by
two different types of US RICs
On 13 January 2015, the Finnish Supreme Administrative Court (“SAC”) rendered two
decisions concerning the withholding taxation of Finnish sourced dividends from
publicly quoted companies received by two different types of US Regulated Investment
Companies (“RIC”). In principle, dividends distributed to a US RIC are subject to a
withholding tax of 15% based on the US-Finland treaty whereas domestic dividends are
in many cases tax exempt. In both decisions, the SAC concluded that no withholding
taxes should have been levied in Finland on the basis of EU law (free movement of
capital safeguarded in Article 63 TFEU).
Decision 1: an open-end US RIC
The US RIC (“Fund 1”) was a sub-fund within a Massachusetts Business Trust. Fund 1
was an open-end investment fund. Fund 1 qualified as a RIC and thus it was (while liable
to tax as such) in practice tax exempt. The SAC considered whether Fund 1 could be
considered comparable to a Finnish investment fund which is tax exempt. If objective
comparability was achieved, there seemed to be a restriction on Article 63 TFEU.
The SAC analysed several criteria and concluded that when the legal and functional
characteristics of Fund 1 and a Finnish investment fund were taken into account as a
whole, the SAC held that Fund 1 was to be considered comparable to a Finnish
investment fund in the manner referred to in CJEU case law. According to the SAC, the
restriction could not be justified by the need to guarantee the effectiveness of fiscal
supervision when considering the information provided by Fund 1, the general
possibilities to obtain information on the nature of a US fund and the provisions on
exchange of information included in the treaty between Finland and the US.
Decision 2: a closed-end US RIC
The US RIC (“Fund 2”) was established in the form of a Delaware Statutory Trust. Fund
2 was a closed-end investment fund. The ordinary shares in Fund 2 were NYSE listed.
Fund 2 qualified as a RIC and thus, it was in practice tax exempt in the US. The SAC
considered whether Fund 2 could be considered comparable to (i) a Finnish investment
fund, (ii) a Finnish corporation or (iii) "another pool of assets" within the meaning of
Finnish tax legislation. If objective comparability was achieved and the intra-Finnish
situation would be tax exempt, there seemed to be a restriction on Article 63 TFEU.
The SAC analysed several criteria and concluded that Fund 2 was considered to be
mostly comparable to a Finnish corporation engaged in investment activities. In intraFinnish context, dividends distributed by a publicly listed corporation to another
publicly listed corporation are tax exempt. As the ordinary shares in the fund were listed
on the NYSE, the SAC held that the situations are objectively comparable. Similar to the
decision concerning Fund 1, the SAC held that different tax treatment of the cross-border
situation could not be justified.
We strongly recommend US RICs to file claims to safeguard their rights. It is possible to
claim refund for the withholding tax levied in year 2010 until 31 December 2015.
PwC EU Tax News
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For claims that are currently pending, we expect that the Finnish tax authorities will
start processing the claims soon.
-- Jarno Laaksonen, PwC Finland; [email protected]
Netherlands – The Hague Court of Appeal decision on deduction of FOREX
losses in cross-border situations
The case concerns a Dutch taxpayer (X NV) that had entered into a series of transactions
with group entities which resulted in a currency loss. X NV claimed this currency loss in
its corporate income tax return. The Dutch tax inspector took the view that currency
results on participations are exempt under the Dutch participation exemption and are
therefore not deductible for Dutch corporate income tax purposes. X NV invoked the
Deutsche Shell case (C-263/08), in which the CJEU ruled that prohibiting the deduction
of final currency losses that arose with the alienation of foreign PE assets constituted a
breach of EU law. The Court ruled that the Deutsche Shell doctrine should also be
applicable to currency results on participations in subsidiary companies. The Court did
not follow the point of view of the Dutch tax inspector that the currency losses of X NV
cannot be considered final as the currency losses are a result of intra-group restructuring
and the shareholdings in the subsidiaries continue to exist in the group. The Court
considered decisive that the currency loss should be permanent from the view of the
taxpayer, implying that it can neither be taken into account at the level of the Dutch
fiscal unity nor in a foreign Member State.
Furthermore, the Court decides that the fact the activities of X NV are not liquidated,
does not prevent the deductibility of the currency loss.
NB: 11 days later the AG Kokott’s opinion followed on the same topic (see item under
CJEU cases above).
NB2: A Dutch Court and an AG at the CJEU conclude differently within a period of only
11 days as regards the deductibility of a FOREX loss on the alienation of a foreign
shareholding. It is interesting to await how the CJEU will decide in Case C-686/13.
-Robin
Hiemstra
and
[email protected]
Frederik
Boulogne,
PwC
Netherlands;
UK – Prudential (CFC & Dividend GLO) further High Court decision
The High Court decision in the case of The Prudential Assurance Company Limited
("Prudential") v HMRC (HC-2014-000553) was published on 26 January 2015.
Prudential is a test claimant in the CFC & Dividend group litigation, which concerns the
compatibility with EU law of the UK taxation of portfolio dividends (i.e. dividends on
shareholdings of less than 10%) received from both EU and non-EU companies. The
High Court issued its main judgment in October 2013 (discussed in EU Tax News Issue
2013 - nr.006), in which it held that such dividends should have been taxable with credit
for underlying tax at the nominal foreign statutory rate of the immediate foreign
PwC EU Tax News
11
dividend paying company (if this was higher than the actual effective tax rate of
underlying tax), plus withholding taxes.
This further decision concerned how the main judgment should be applied in calculating
claims. This is subject to appeal and will be heard by the Court of Appeal in May 2015. A
number of issues were agreed with HMRC prior to the hearing but HMRC also conceded
key points (including the availability of compound interest on all claims) during the
hearing, and the claimants were successful on all remaining issues.
-- Peter Cussons and Chloe Paterson, PwC United Kingdom; [email protected]
UK – Court of Appeal decision on overcharging VAT on investment
management fees: HMRC v Investment Trust Companies
In February 2015 the Court of Appeal concluded in HMRC v Investment Trust
Companies (in liquidation) ([2015] EWCA Civ 82) that the claimants were entitled to
claim directly from HMRC the amount of VAT that had been unduly invoiced and which
HMRC had unjustly retained. This landmark ruling was achieved with the support of
PwC and PwC Legal who advised a group of more than 50 companies which had been
overcharged VAT.
The Investment Trust Companies (ITCs) had suffered VAT on investment management
fees in breach of EU law. Where they were within the statutory time limits to do so, the
suppliers had made claims to HMRC for the full amount of VAT overcharged (the 100s),
but HMRC had reduced those claims to take into account alleged exempt input tax (the
25s). HMRC paid the reduced amount (the 75s) to suppliers who then passed on this
amount to the ITCs (the customers). The ITCs made common law mistake claims to
recover directly from HMRC:

the 25s for the periods for which their suppliers had been able to make claims to
HMRC within statutory time limits; and

the 100s for periods which were not covered by repayments from suppliers
because the suppliers were prevented from making claims due to statutory time
limits (the "dead" periods).
The High Court had previously held that the ITCs were entitled to the 25s, but dismissed
the claims in respect of the dead periods.
The Court of Appeal has now held that:

the 25s were only recoverable by the ITCs from the suppliers; but

the ITCs are entitled to claim directly from HMRC the amounts of unduly
invoiced VAT that HMRC unjustly retained in periods where claims by their
suppliers were not possible due to time limits. The quantum unjustly retained by
HMRC is the amount of unduly invoiced VAT less any amounts of input tax
credit that HMRC had originally given to the claimants' suppliers.
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The result therefore is that the ITCs are entitled to recover the 75s paid in respect of the
dead periods directly from HMRC, but the 25s are irrecoverable in all periods.
This decision is regarded as revolutionary in terms of the way in which VAT charged
unlawfully can be recovered under English law and has given the claimants greater
reimbursement than has previously been available. It is the first case to have established
that where A has paid money to B, who in turn was obliged to pay the money onto C, that
A is able to claim directly against C and is not restricted to claiming against the
immediate counter-party.
-- Peter Cussons and Chloe Paterson, PwC United Kingdom; [email protected]
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EU Developments
EU – European Parliament ups the ante on tax transparency and rulings
With the fight against aggressive tax planning, tax fraud, tax avoidance and tax evasion
having become a top policy priority for the EU, the European Parliament is upping the
ante in the heated debate on tax rulings and calls for more tax transparency.
On 12 February 2015, the European Parliament decided to set up a special committee on
tax rulings and other measures similar in nature or effect (“TAXE”) “to examine practice
in the application of EU State aid and taxation law in relation to tax rulings and other
measures similar in nature or effect issued by Member States, if such practice appears to
be the act of a Member State or the Commission.” The special committee’s mandate is
therefore to analyse and examine how EU State aid rules have been applied by the
Commission to tax rulings in Member States since 1 January 1991 (this seems inspired
by the Commission’s ongoing State aid investigation into Apple otherwise this date
seems arbitrary), and Member States’ compliance with the EU’s Directives on Mutual
Assistance (1977) and on Administrative Co-operation in Tax Matters (2011), in
particular with regard to the spontaneous exchange of information on tax rulings. It
should be noted, however, that Member States are only effectively obliged to
spontaneously exchange information on cross-border tax rulings under certain
circumstances under the EU Directive on Administrative Co-operation in Tax Matters
since 2013. According to the Commission’s statistics, Member States haven’t actually
really done this in practice, however.
The big political groups in the European Parliament could only agree to set up a special
enquiry committee, rather than a full inquiry committee, as was initially proposed by
Green Members of the European Parliament (MEPs). The 45-strong special committee
also looks into aggressive tax planning and exchange of information with non-EU
countries and is in place for 6 months. The European Parliament is giving itself six
months “to take a picture” of the situation in all Member States (and produce a report on
this) and formulate legislative recommendations for the Commission and Council. A
PwC EU Tax News
13
number of committee meetings and hearings have been held already and are planned for
the remainder of the committee’s mandate.
In part to try to ‘appease’ the European Parliament on the tax rulings and transparency
issue, the Commission proposed to Member States on 18 March 2015 to amend the 2011
Directive and move towards mandatory automatic exchange of information on advance
cross-border tax rulings and advance pricing arrangements per 1 January 2016 as a key
part of its Tax Transparency Package. On 25 March, EU Tax Commissioner Moscovici
debated the Tax Transparency Package and the tax rulings proposal at the EU
Parliament. MEPs welcomed this initiative but warned Member States must be more
transparent about their national tax rulings, because unfair tax competition distorts
competition among companies and could lead to a “race to the bottom”.
The TAXE mandate runs parallel to the Commission’s formal State aid investigations
into Amazon, Apple, FIAT and Starbucks, but it cannot interfere with them as the
Commission’s work is conducted under EU competition law rules.
On 25 March, MEPs adopted a new Resolution on its Annual Tax Report which “lays a
basis for further Parliamentary work on tax”, e.g. fact finding by the special committee
and legislative work of the European Parliament’s ECON committee. The Resolution was
passed by 444 votes to 110, with 41 abstentions. The resolution’s promotor, the Greek
MEP Kaili stated: "The fight against aggressive tax planning, tax evasion and tax
avoidance is in the spotlight of public concern. This European Parliament resolution
sends a strong political message, by advocating immediate action for tax transparency,
taxation with social justice, and taxation policies that boost growth in a business-friendly
environment".
-- Bob van der Made, PwC Netherlands; [email protected]
EU – ECOFIN Council Conclusions meeting of 27 January 2015
Main outcomes regarding direct tax:
The Commission will step up efforts to combat tax evasion and tax fraud and promote
tax fairness and tax transparency. It will set out an action plan, and rapidly present a
proposal on the automatic exchange of information on cross-border tax rulings.
The ECOFIN Council formally adopted the amended EU Parent-Subsidiary Directive,
adding a binding anti-abuse clause to prevent tax avoidance and aggressive tax planning
by corporate groups.
The EU Member States still in the enhanced cooperation procedure regarding the EU
FTT met in the margins of the ECOFIN Council. In a joint statement after the meeting,
the Finance Ministers from Austria, Belgium, Estonia, France, Germany, Italy, Portugal,
Slovakia, Slovenia and Spain (Greece abstained 2 days after national election) said they
had renewed their commitment to the EU FTT project. Four days prior to the ECOFIN
Council, a joint letter of the Austrian and French Finance Ministers urged their other
PwC EU Tax News
14
nine counterparts in the process to "breathe new life into talks on the EU FTT" and
underscored “their desire to see the tax introduced in 2016".
-- Bob van der Made, PwC Netherlands; [email protected]
EU – Code of Conduct Group meeting of 4 February 2015
Agenda:

Appointment of Chair

Appointment of Vice-Chairs

Work Programme during the Latvian Presidency

Notification of Rollback and Standstill returns including administrative
practices for year ending 31 January 2014

Rollback: Gibraltar
-- Bob van der Made, PwC Netherlands; [email protected]
EU – Council High Level Working Party (Taxation) meeting of 5 February
2015
Agenda included:
1. BEPS in the EU: a roadmap for future work
- Presentation by the Presidency on the outcome of Working Party on Tax
Questions discussions (held on 21 January 2015)
- Discussion on the way forward
2. Common approach to OECD work on BEPS
- Exchange of views on ongoing work in the OECD
3. Savings negotiations with European third countries
- Update by the Commission on ongoing negotiations
- Discussion on the way forward
4. European Semester: tax priorities in the 2015 Annual Growth Survey
- Exchange of views
6. Exchange of best practices regarding the fight against tax avoidance and recent
reforms
Presentations by Spain and Estonia
The HLWP on Tax Questions deals with selected tax issues, including dossiers
negotiated in other taxation working parties (such as the Working Party on Tax
Questions (direct tax)). The aim of the HLWP is to have a discussion on a higher level
than the level of delegates attending other taxation working parties. The HLWP has last
year been made the focal point for discussions among EU-28 Member States and for
reporting to the ECOFIN Council, on the hot topic of BEPS and EU legislation.
PwC EU Tax News
15
-- Bob van der Made, PwC Netherlands; [email protected]
Spain – European Commission investigation into regulations imposing the
obligation to declare certain assets located out of Spain
On 19 February, 2015, the European Commission issued a letter in response to the
complaints brought by different Spanish associations and individuals regarding Spanish
regulations which established the obligation to declare certain assets located out of Spain
through Tax Form 720.
According to the letter, the Commission will further investigate the potential
incompatibility between EU Law and internal regulations and proposes the initiation of
an infringement procedure against the Kingdom of Spain regarding two specific aspects
of this compliance obligation:

Penalties: the Commission observes that there are differences between penalty
regimes in case of infringement of the obligation to declare assets located out of
Spain and the penalties in case of infringement of other internal tax duties. In
this regard, the Commission will investigate whether the penalties to be imposed
for the aforementioned infringement are reasonably similar to those penalties to
be imposed regarding infringements of the regulations to file the income tax
returns for internal situations. Otherwise, these penalties would be in breach of
EU Law.

Statute of limitation: regarding the statute of limitations on the taxation of nondeclared assets located out of Spain as unjustified capital gains, the Commission
considers that there could be a different tax treatment by comparison with a
domestic situation. In most circumstances, the Spanish regulations do not
foresee any statute of limitation with regard to undisclosed assets held outside of
Spain. The Commission states that, considering the legal framework for the
exchange of information, the aforementioned regulations can be in breach of EU
Law if the assets are located in other EU or EEA territory.
-- Antonio Puentes and Alfonso Santander, PwC Spain; [email protected]
Sweden – Swedish Government disagrees with the European Commission
on interest deduction limitations
As previously reported (EU Tax News 2015 – Issue nr. 001), the European Commission
sent a formal notice to the Swedish Government (C(2014) 8699 final) 27 November 2014
(case number 2013/4206) in connection with the Swedish interest deduction limitation
rules and their infringement of EU law.
The Commission's view was that the Swedish rules are in conflict with the freedom of
establishment within the EU and EEA. The Commission therefore urged the Swedish
government to comment on the notice.
PwC EU Tax News
16
The Swedish government responded with a 20 page letter dated 20 February 2015
(Fi2014/4205) in which it completely disagrees with the analysis made by the
Commission. The Swedish Government’s position is that the rules do not constitute a
restriction at all. In any case, even if the rules would be deemed to constitute a
restriction, the rules would still be justifiable and proportionate under CJEU case law,
argues the Swedish government.
It still remains to be seen whether the Commission will issue a reasoned opinion to the
Swedish Government on this matter. Our view is that the likelihood is low that the
Commission would accept the arguments put forward by the Swedish government. If so,
the logical next step should be a reasoned opinion in which Sweden is asked to amend
the rules.
-Fredrik
Ohlsson
and
[email protected]
Gunnar
Andersson,
PwC
Sweden;
Back to top
Fiscal State aid
Belgium – European Commission announces investigation into the Belgian
excess profit ruling system
On 3 February 2015 the European Commission released a press release announcing an
in-depth investigation into a Belgian tax provision which allows group companies to
exempt part of their corporate tax basis which results from the advantage of being part of
a multinational group. The press release explains the concerns of the Commission with
this provision and announces a further investigation to conclude if its doubts are
justified.
This investigation relates to the Belgian tax provision laid down in article 185, §2 of the
Income Tax Code. This article has been introduced in Belgian tax law in 2004 and has
formally introduced the “arm’s length” principle in the Belgian income tax code. This
provision considers (cross border) intra group relations in order to assess corporate
income tax on an arm’s length basis. Based on this article:

The taxable basis of a Belgian company can be increased to the extent it is lower
than an at arm’s length profit.

The taxable basis can be exempt to the extent the taxable basis exceeds an arm’s
length profit (e.g. as a result of being part of a multinational group).
The Commission has indicated that it has a number of concerns which require further
investigation:
PwC EU Tax News
17

There is a concern that this provision is only for the benefit of a limited number
of multinational companies (not available 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

The provision applies subject to the requirement that an upfront ruling is
obtained 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.
Based on the foregoing, the Commission has decided to further investigate this Belgian
tax provision in view of assessing whether its concerns are justified.
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 EC has issued
an information inquiry to all Member States. The opening of this investigation gives
interested parties an opportunity to submit comments.
-- Pieter Deré, PwC Belgium; [email protected]
Luxemburg – European Commission publishes non-confidential version of
opening decision in Amazon State aid case
On 16 January 2015 the European Commission published its opening decision in the
formal investigation into a transfer pricing agreement between Amazon EU Sarl and
Luxembourg. The Commission had already communicated this investigation through a
press release issued on 7 October 2014. The letter explains the reasons for the initiation
of the formal investigation procedure and specifies the additional information which the
Commission has requested from Luxembourg in this respect. The letter represents the
preliminary conclusion of the Commission: it is based on the outcome of this formal
investigation that the Commission will take a final position on whether Amazon has – in
its view – benefited from unlawful State aid granted by Luxembourg.
This formal investigation pertains to the use of tax rulings on the application of transfer
pricing rules. In the case at hand, the Commission holds the view that the agreement
made between Amazon EU Sarl and Luxembourg in 2003 may reflect a price which does
not correspond with the 'at arm's length' standard. The Commission refers to the
standards set by the OECD's Transfer Pricing Guidelines.
This formal investigation follows the opening of similar formal Commission State aid
investigations into three other companies – Apple, (allegedly) Fiat and Starbucks.
The Commission specifies a number of aspects of the agreement which it considers to be
of key relevance in the present context:

Luxembourg did not submit the economic analysis of the functions and risks.
The Commission in particular requests Luxembourg to share this economic
analysis.
PwC EU Tax News
18

The Commission questions whether the Transfer Pricing method applied and the
royalty calculation method in the agreement is in line with the OECD Transfer
Pricing standards.

The Commission expressed its desire to review the Transfer Pricing method
applied in view of the detailed functions and risk profile of Amazon EU Sarl.
All of this leads the Commission to conclude that the agreement may not be in line with
the arm’s length standard and that additional research is needed.
The Commission asserts that “if the method of taxation for intra-group transfers does
not comply with the arm’s length principle, and leads to a taxable base inferior to the one
which would result from the correct implementation of that principle, it provides a
selective advantage to the company concerned.”
Whilst this is not the first time that the Commission targets transfer pricing
arrangements, the Commission’s current view is likely to prove controversial. If this
position is confirmed in the final decision in these cases, further litigation before the EU
Courts is likely.
-- Alina Macovei, PwC Luxembourg; [email protected]
Hungary – European Commission announces in-depth investigation into
Advertisement Tax and suspension injunction
On 12 March 2015, the European Commission announced an in-depth State aid
investigation into the Advertisement Tax in Hungary (case ref. SA.39235), as well as a
suspension injunction (with immediate effect) by which the Commission prohibits
Hungary from applying the progressive tax rates of the Advertisement Tax.
The Advertisement Tax was introduced in Hungary in August 2014. It applies to certain
advertising services, including advertising made available in the media. It makes a
difference between primary and secondary taxpayers. The company providing the
advertising service (e.g. the entity displaying the ad in the media) is the primary
taxpayer. Persons or companies that order and pay for the advertisement are considered
to be secondary taxpayers.
The progressive tax rate applies to the primary taxpayers and in this case the tax base is
their net turnover from advertisement services. The first band’s tax base threshold is
HUF 500m (approx. EUR 1.6m) and the tax rate is 0%. In the second band the threshold
is HUF 5 billion (approx. EUR 17m) and the rate is 1%. The strong progression starts in
the third band with a tax rate of 10% and ranges up to 50% in the highest band.
With respect to only the 2014 tax year, taxpayers that had a zero or negative profit before
tax in 2013 were eligible to decrease their advertisement tax base with 50% of the
available tax loss carried forwards (accumulated under the corporate income tax rules).
The Commission has opened an in-depth State aid investigation due to having concerns
about two major attributes of the Hungarian Advertisement Tax.
PwC EU Tax News
19

The first concern is whether the steeply progressive rates could potentially
favour certain media companies as the progressive tax based on turnover could
place larger players at a disadvantage.

Secondly, the utilisation of corporate tax losses is also in question: the
availability to decrease the tax base only for those taxpayers that were lossmaking in 2013 may – in the view of the Commission – grant a selective
advantage to these companies.
The exact wording of the suspension injunction is not yet available, but it may have
effect on tax advance payments due. Nonetheless, as it is expected that the Hungarian
State will need to take some kind of formal, possibly even legislative action in relation to
the suspension, taxpayers may wish to wait before taking any steps.
As for the timing and the details of the Hungarian State’s formal action, nothing is
certain at this stage, but recent press communication suggests that the Advertisement
Tax Act will be amended by the Hungarian Parliament.
-- Gergely Júhasz, PwC Hungary; [email protected]
Spain – European Commission appeals General Court decisions on Spanish
financial goodwill amortisation before the CJEU
In 2009 the Commission found that the Spanish rules allowing companies to amortise
for tax purposes the financial goodwill arising from acquisitions of non-Spanish EU
shareholdings was incompatible with the State aid rules (“the First Decision”). In a
second decision dated January 2011, the Commission also concluded that the scheme
was also incompatible as regards acquisitions of non-EU shareholdings (“the Second
Decision”).
The Commission ordered the recovery of the illegal aid, but taking into account the
existence of legitimate expectations, the recovery only affected aid granted in connection
with acquisitions made post 21 December 2007 (or even 21 May 2011, in the case of some
non-EU acquisitions).
However, in its twin judgments issued on 7 November 2014 (T-219/10 Autogrill v
Commission, and T-399/11 Banco Santander and Santusa v Commission) the General
Court of the European Union (ex Court of First Instance) annulled the two Commission
decisions that had considered the Spanish financial goodwill amortization regime to
constitute State aid incompatible with the internal market.
On 9 March 2015, in the O.J., the EU announced that the Commission brought two
appeals against the General Court’s judgments dated 7 November 2014 before the Grand
Chamber of the CJEU (the highest EU court). The appeal case reference numbers are C20/15 P & C-21/15 P.
The pleas in law and main arguments brought by the Commission stress that the General
Court erred in law by incorrectly interpreting Article 107 (1) TFEU and, in particular, the
PwC EU Tax News
20
concept of selectivity of State aid contained in that article. The single ground of appeal
consists of two parts:

The General Court erred by requiring, in order to demonstrate that a measure is
selective, the identification of a category of undertakings with specific and
inherent characteristics (identifiable ex ante); and

The General Court incorrectly interpreted the concept of selectivity by making
an artificial distinction between aid to the export of goods and aid to the export
of capital.
In light of the above, the Commission asks the CJEU to:

Set aside the judgments under appeal;

Refer the cases back to the GCEU; and

Reserve the costs.
The main effect of the filing of both appeals by the Commission is that the CJEU will
have the final word with regard to the legality of the Spanish financial goodwill tax
amortisation regime. In the meantime, taxpayers affected by the aforementioned
Decisions should assess, in case-by-case basis, what individual actions should be taken
in order to safeguard their rights.
-- Antonio Puentes and Carlos Concha, PwC Spain; [email protected]
Spain – European Commission requests Spain to amend or abolish regional
taxes on large retail establishments
The European Commission has received a complaint regarding the tax on large retail
establishments in force in six Spanish regions (Autonomous Communities). The six tax
regulations have several features in common: these taxes are levied on those retail
establishments with surface over 2,000 or 2,500 square metres amounting between 2.4€
and 17.49€ per square metre.
Through a letter submitted to the Spain on 26 February 2015, the Commission states
that, at this stage and based on the information available, the exemptions granted to
small stores and to certain specialized stores may constitute state aid.
In addition, the Commission considers that the rationale put forward for the tax - to
make up for environmental and urban planning externalities - does not appear to be
supported by any study or data showing that smaller outlets and specialised outlets have
a smaller or no impact in the environment or urban planning.
Based on the considerations exposed above, the Commission has requested the Kingdom
of Spain to amend or abolish those provisions which may constitute State Aid before
next 31 March 2015. In case that no action is taken by Spain within that deadline, a
formal investigation would be opened by the Commission.
-Carlos
Concha
and
Alfonso
[email protected]
PwC EU Tax News
Santander
Ruiz,
PwC
Spain;
21
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 monitor and closely follow EU and OECD developments.
● Daily EU tax news from the EU/EEA serviced 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 check out our website 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.
PwC EU Tax News
22
EUDTG KEY CONTACTS:
Chair:
Stef van Weeghel
[email protected]
Co-Chair
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:
Peter Cussons
[email protected]
Chair of FS-EUDTG WG:
Patrice Delacroix
[email protected]
Chair of Real Estate-EUDTG WG:
Jeroen Elink Schuurman
[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 Koplimets
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
Peter Cussons
PwC EU Tax News
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[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
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[email protected]
[email protected]
[email protected]
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[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
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[email protected]
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