Belgium – Sparkasse Allgäu (C-522/14)
On April 14, 2016 the CJEU rendered its ruling in the Sparkasse Allgäu case (C-522/14). The case concerned disclosure requirements for a German bank in respect of the assets of a deceased German client that were held by an Austrian branch of the same bank. Under German law the bank was required to provide information on the assets of the client, whereas under Austrian law disclosure would represent a criminal offense under bank secrecy laws. The question referred to the CJEU was whether this represented an infringement of the freedom of establishment. The CJEU concluded that the German disclosure requirements did not represent an infringement, and noted that in the absence of any harmonizing measures on the exchange of information, Member States were free to impose an obligation on national credit institutions in respect of their foreign branches in order to ensure the effectiveness of fiscal supervision, provided transactions in those branches were not subject to discriminatory treatment. An exchange of information agreement relating to tax matters had been concluded between Germany and Austria, but was not in effect at the time of the facts in the case.
Denmark - Masco Denmark and Damixa (C-593/14)
On May 12, 2016 AG Kokott rendered her opinion in the Masco Denmark and Damixa case (C-593/14). The case concerns Danish rules, which allow for a tax exemption on interest income if the corresponding interest deduction is denied due to thin capitalization rules, but in effect only if the debtor company is resident in Denmark. The AG concluded that this difference in treatment did not constitute a restriction on the freedom of establishment. Furthermore, even if the difference in treatment was found to constitute a restriction, the AG held that the restriction could be justified based on the balanced allocation of taxing rights as well as the coherence of the tax system
Belgium – Riskin (C-176/15)
On April 12, 2016 AG Kokott rendered her opinion in the Riskin case (C-176/15). The case concerns Belgian legislation that treats dividends received from another Member State less favorably than those received from a third country, as a result of an obligation arising from a tax treaty concluded with a third state. Belgium generally allows taxpayers to credit the withholding tax levied at source by a third state from the Belgian tax payable on foreign dividends, whereas it makes that credit subject to additional conditions in the case of dividends paid by companies established in another Member State. The AG concluded that there is a restriction of the free movement of capital, but considered that this restriction is justified, because the provision in question cannot be regarded as a benefit separate from the tax treaty; it is an integral part thereof and contributes to its overall balance.
Germany – Feilen (C-123/15)
On March 17, 2016 AG Wathelet rendered his opinion in the Feilen case (C-123/15), concerning German legislation which grants an inheritance tax reduction for persons within a particular tax class, if the estate contains an asset which in the preceding 10 years had already been subject to inheritance tax in Germany. No reduction is granted however if that previous inheritance was taxed in another Member State. According to the AG, this difference in tax treatment does not constitute a restriction on the free movement of capital since the situations are not comparable. Indeed, the decisive criterion for determining whether national situations and cross-border situations are comparable is whether or not the Member State in question has a right to tax in both situations. As Germany did not have any right to tax the previous acquisition, which in this particular case took place in Austria, the situations are not comparable.
Portugal – Brisal (C-18/15)
On March 17, 2016 AG Kokott rendered her opinion in the Brisal case (C-18/15). The case concerns whether the Portuguese withholding tax on interest paid to non-resident financial institutions is contrary to EU law because it is imposed on the gross amount of the interest paid, whereas resident financial institutions are taxed on their net income. The AG concluded that the Portuguese legislation constitutes a restriction on the freedom to provide services and that it cannot be justified by other tax advantages (such as a lower tax rate for non-residents). In addition, she considered that financing costs such as ”overhead expenses” could, in principle, be deducted even where these could not be traced to specific loans.
For more information, see Euro Tax Flash 276
Infringement procedures – Closed
The European Commission announced on February 25, 2016 that the infringement procedure concerning Belgian tax benefits linked to the personal or family situation of the taxpayer solely for income received in Belgium was closed. The procedure was closed as Belgium had amended its legislation.
The European Commission announced on February 25, 2016 that the infringement procedure regarding discriminatory German inheritance tax legislation with regard to legacies to charities in other EU or EEA Member States was closed. The procedure was closed as Germany had amended its legislation.
For more information see the European Commission’s press release
On April 28, 2016 the European Commission requested in a reasoned opinion that France comply with the CJEU decision in the Accor case (C-310/09), concerning a preliminary ruling regarding the refund of tax paid by companies in France with subsidiaries in other countries. The Commission is of the opinion that the subsequent French Supreme Administrative Court decision in December 2012 is not in line with EU law, insofar as the tax paid by sub-subsidiaries in other EU countries was not taken into account, tax credits were systematically limited to one third of the dividend redistributed in France by non-resident subsidiaries, and formal and disproportionate evidence-based requirements were imposed.
For more information, see the European Commission’s press release.
On March 26, 2016 the European Commission decided to refer Greece to the CJEU regarding the inheritance tax it imposes on bequests to non-profit organizations. The Greek legislation provides for a lower tax rate for bequests of which the beneficiaries are non-profit-making legal persons. However this lower rate is not available for bequests to equivalent foreign legal persons, unless the relevant States themselves grant more favorable treatment with respect to bequests to Greek non-profit making legal persons. The question is whether this condition of reciprocity is compatible with EU and EEA law.
For more information, see the European Commission’s press release.
On February 10, 2016 a UK administrative court lodged a request for a preliminary ruling in the Prospector Offshore Drilling SA (et al.) case (C-72/16). The court asked whether the legislation applicable to companies providing drilling services is precluded by Articles 49, 56 or 63 TFEU when the legislation imposes a pre-determined cap on the deductibility of lease payments to associated companies, states that disallowed deductions may be relieved against other types of profits of the company or other group companies (but not profits from the affected trade in question) and ring-fences the profits from the affected trade by preventing UK incurred costs or both UK and non-UK losses from elsewhere in the oil contractor's group from being set off against the profits of the affected trade. A number of additional questions concerning the specifics of the legislation and potential breach were also asked.
On January 25, 2016 a Belgian court referred two questions to the CJEU in the Argenta Spaarbank case (C-39/16). The court asked (1) whether previously applicable regulations in the Belgian tax code infringed Article 4(2) of the Parent-Subsidiary Directive and (2) whether such regulations constituted a provision for the prevention of fraud or abuse within the meaning of Article 1(2) of the Parent-Subsidiary Directive and, if so, whether they went further than is necessary in order to combat such fraud or abuse. The regulations determined that, subject to conditions, interest was not to be regarded as a business expense up to an amount corresponding to the amount of the dividends qualifying for exemption.
On December 18, 2015 the Luxembourg administrative court lodged a request for a preliminary ruling in the Berlioz Investment Fund case (C-682/15). This case concerns a request from the French tax authorities to provide information under Directive 2011/16/EU on administrative cooperation in the field of taxation regarding the names and addresses of recipients of a dividend paid by a French subsidiary to a Luxembourg parent. The Luxembourg company refused to provide information to the Luxembourg tax office and was consequently fined. In this respect, the Luxembourg court has referred six questions to the CJEU on whether this procedure is compatible with the Charter of Fundamental Rights of the European Union.
EFTA Surveillance Authority approves tax refund scheme for employing seafarers
On April 27, 2016 the EFTA Surveillance Authority (ESA) approved a Norwegian scheme which provides for refunds of taxes and social security contributions paid by seafarers of certain qualifying ships. The full decision (PDF 275 KB) is available here.
Belgium appeals European Commission's decision on excess profit scheme
In its decision of January 11, 2016 the European Commission concluded that Belgium’s so-called “excess profit” tax rulings system represents State Aid (see ETF 271). On April 4, 2016 the press office of the EU General Court announced that Belgium has appealed this decision.
For more information, see the European Commission’s decision (PDF 387 KB).
Austria – AG Opinion in the Dilly’s Wellnesshotel Gmbh case (C-493/14)
On March 17, 2016 AG Wahl rendered his opinion in the Dilly’s Wellnesshotel Gmbh case (C-493/14) which concerns different issues regarding the procedure for the notification exemption for environmental aid under Article 25 of the General Block Exemption Regulation (GBER). In particular, he concluded that Austria infringed EU law since requirements laid down in the GBER in order to be exempt from the obligation to notify were not satisfied, in particular the express reference to this regulation in the aid scheme.
European Commission invites comments on State aid investigation regarding German public company HIS
On March 4, 2016 the Commission invited interested parties to submit comments on a German scheme for the state financing of software solutions for universities, including state funding and tax benefits. Comments should be submitted within one month of publication of the invitation.
For more information, see the invitation letter.
The European Commission publishes updated guide to GBER
In March 2016, the Commission published an updated guide to the General Block Exemption Regulation (GBER). The guide has been expanded to cover Articles 36 to 58 and now covers all the articles of the GBER. The guide is available here.
Norway postpones airline passenger tax due to State aid concerns
Norway has adopted an airline passenger tax as part of its 2016 fiscal budget. While the tax was intended to take effect on April 1, 2016 the effective date has been postponed until June 1, 2016 due to State aid concerns. The EFTA Surveillance Authority (ESA) has decided to review the measure, which it will do as quickly as possible.
European Commission invites comments on State aid investigation regarding tax exemptions granted to postal operator in Spain
On February 11, 2016 the Commission notified Spain of its decision to initiate the procedure laid down in Article 108(2) TFUE concerning aid granted to postal operator Sociedad Estatal Correos y Telégrafos (Correos), partially through exemptions from both Tax on Economic Activities (IAE) and Real Estate Tax (IBI). The Commission invited interested parties to submit comments.
For more information, see the Commission’s Invitation Letter
Appeal filed by EDF against the Commission's decision (Case T-747/15)
On December 22, 2015 EDF filed an action for annulment of the Commission’s decision concerning the EDF state aid case (Case T-747/15). In 1997, France did not levy all the corporation tax payable by EDF when certain accounting provisions were reclassified as capital. In its decision, the Commission, applying the “private investor test”, considered this legislation to be incompatible state aid and ordered France to recover EUR 1.37 billion from EDF. As a reminder, in 2003, the Commission had already considered this measure illegal, but the General Court, confirmed by the CJEU (Case C-124/10 P), reversed this decision, arguing that the Commission had failed to examine whether the French State acted like a “private investor” when it granted this measures to EDF.
Public consultation on improving double taxation dispute resolution mechanisms
On February 16, 2016, the EU Commission launched a public consultation on improving double taxation dispute resolution mechanisms, which closed on May 10, 2016. The aim of the consultation was to gather the views of all interested parties on how the current double taxation dispute resolution mechanisms operate and can be modified to be more efficient. KPMG EMA member firms took the opportunity to reply to the questionnaire and submit a further explanatory memo summarizing its position on this issue.
For more information, see the questionnaire reply (PDF 1.23 MB) and the explanatory memo of KPMG.
European Parliament adopts recommendations on the European Commission’s proposal on non-public Country-by-Country reporting
On May 12, 2016, the European Parliament adopted in plenary a report setting out their recommendations on the European Commission's proposal for the automatic exchange of corporate tax information among national tax authorities. According to the Members of the Parliament, the Commission should have full access to the information exchanged in order to assess whether Member States’ tax practices comply with state aid rules. Moreover, they want Member States to introduce sanctions to be imposed on multinational companies that fail to file their country-by-country report. The European Parliament has a consultative role on the Commission’s proposal and their recommendations are not binding.
For more information, see the European Parliament’s press release.
European Commission withdraws proposal on Financial Transaction Tax (FTT)
On April 30, 2016 the European Commission’s decision to withdraw its Proposal for a Council Directive on a common system of financial transaction tax and amending Directive 2008/7/EC (COM(2011) 594), as well the Proposal for a Council Regulation on the methods and procedure for making available the own resource based on the financial transaction tax (COM(2011) 738), was published in the Official Journal C 155. The European Commission’s 2013 proposal has not been withdrawn, however.
European Parliament adopts rules on trade secrets and the protection of whistle-blowers
On April 14, 2016, the European Parliament adopted new rules to give companies legal protection against theft or misuse of their trade secrets, while including safeguards for journalists and whistle-blowers. The directive, informally agreed with ministers before the vote, introduces an EU-wide definition of “trade secret” and will oblige EU Member States to ensure that victims of misuse of trade secrets are able to defend their rights in court and to seek compensation. Throughout the negotiations with ministers, MEPs stressed the need to ensure that the legislation does not curb media freedom and pluralism or restrict the work of journalists, in particular with regard to their investigations and the protection of their sources.
For more information, see the European Parliament’s press release.
European Parliament sets up inquiry committee into Panama Papers
On April 14, 2016 the European Parliament Conference of Presidents, consisting of the EP president as well as the leaders of the political groups, unanimously agreed to set up a special inquiry committee to investigate the so-called Panama Papers. The precise mandate of the committee, which must relate to breaches of EU law, was discussed on May 4 by the Conference of Presidents, and adopted in plenary in May.
For more information, see the EP Press Release.
European Commission issues proposal on Public Country-by-Country reporting
On April 12, 2016 the Commission officially announced and published its proposal on public Country-by-Country Reporting. The proposal would require multinational groups with a consolidated net turnover of EUR 750 million to report either if they are EU parented or otherwise have EU subsidiaries or branches. The report would require information on all members of the group (i.e. including non-EU members) within seven key areas: description of activities, number of employees, net turnover, profit or loss before tax, tax accrued and paid, and finally the amount of accumulated earnings. The information must be broken down for each EU Member State where the group is active. Information concerning jurisdictions outside of the EU may as a starting point be reported on an aggregated level. For activities in certain listed jurisdictions, the information must nevertheless be provided separately. These jurisdictions will be included on a “Common Union list” and will consist of jurisdictions which do not comply with principles for transparency and exchange of information, fair tax competition, standards set by the G20 and/or the OECD or other relevant standards.
For more information, see Euro Tax Flash 278 and the EC’s press release.
European Parliament discusses implications of the Panama Papers
The European Parliament, in the presence of the European Commission and Council representatives, discussed the Panama papers revelations during a plenary debate on April 12, 2016. The key question was whether or not the proposed measures against tax evasion and money laundering are effective, especially in light on the recent leaks. Several representatives called for urgency in drawing up a black-list of non-cooperative jurisdictions, as well as the implementation of effective sanctions for entities involved, prohibition of offshore companies whose only goal is to promote tax evasion, broadening of scope for country-by-country reporting, harmonization of the EU companies’ tax base (C(C)CTB), as well as launching of infringement procedures not complying with existing legislation (notably the anti-money laundering directive).
For more information on the debate, see the European Parliament’s press release.
TAXE 2 Committee exchanged views with various stakeholders
The Special Committee on Tax Rulings and other Measures Similar in Nature or Effect (TAXE 2 Committee) has met with various stakeholders. On March 14 and 15 the Committee exchanged views with representatives from Jersey, Guernsey, Andorra, Monaco, and Liechtenstein on the specific features and evolution of their corporate tax system, notably in view of recent developments both at the EU and OECD level in relation to tax avoidance, exchange of information and BEPS. Also on March 15 the Committee met with Apple, Google, Ikea, and McDonalds to hear their views on recent developments involving corporate taxation in the EU and beyond. The Committee had also met with major European banks on March 23 and April 5 (Crédit Agricole, ING Group, Nordea, Santander, UBS, Unicredit, Deutsche Bank and Royal Bank of Scotland) in order to investigate the banks’ alleged role in facilitating aggressive tax planning for corporate clients. The latter meeting was also attended by Commissioner Vestager, who provided an update and summary of the Commission’s current investigations into potential State Aid among the Member States.
For more information, see the different TAXE 2 press releases.
ECOFIN reaches political agreement on non-public country-by-country reporting
On March 8, 2016 the Council of the EU (ECOFIN) reached political agreement on the European Commission’s proposal to implement Country-by-Country Reporting to local tax administrations, as well as the exchange of the reports between them. The ECOFIN subsequently issued an updated text on May 11, 2016, which now includes the proposal suggested by Germany to allow Member States to defer secondary reporting until 2017. The political agreement is a first step towards the formal adoption of the proposal, which was included in its Anti-Tax Avoidance Package published on January 28, 2016 (see ETF 273). The ECOFIN also adopted conclusions on the strengthening of the Code of Conduct, aimed at mitigating measures that can create unfair tax competition.
For more information, see ETF 275 and the agreed text.
Expert group publishes reports on cross-border tax obstacles for individuals
The European Commission expert group on removing tax problems facing individuals who are active across borders within the EU have recently published two reports, one on Ways to tackle cross-border tax obstacles facing individuals within the EU and the other on Ways to tackle cross-border tax obstacles facing individuals within the EU. The task of the group was to assist the Commission in identifying and finding practical ways to remove any tax problems faced by individuals who move from one EU country to another to live, study, work or retire, or who invest in other EU countries, or inherit property across borders within the EU.
The EU JTPF publishes documents on joint audits and comparables in the EU
Following a meeting of the EU Joint Transfer Pricing Forum (JTPF) on February 18, two documents have recently been published. The first document is a presentation by the Netherlands and Germany on a pilot project for joint (cross-border) tax audits. The other document is a discussion on comparables in the EU with the aim of developing best practices and practical solutions.
The documents are available here.
Forum on Tax Administration to meet in May
The 10th Forum on Tax Administration (FTA) was held in plenary on May 11-13. For more information, see the OECD press release.
101 jurisdictions committed to Common Reporting Standard
On May 10, 2016 the OECD and the Global Forum on Transparency and Exchange of Information for Tax Purposes announced that Bahrain, Lebanon, Nauru, Panama and Vanuatu had committed to share financial account information automatically with other countries. In total, 101 jurisdictions have committed to implement information sharing in accordance with the Common Reporting Standard developed by the OECD and G20 countries.
International organizations to increase global cooperation in tax matters
On April 19, 2016 the OECD, International Monetary Fund (IMF), United Nations (UN) and the World Bank Group (WBG) announced details on their plans to increase their cooperation on tax issues - the so-called Platform for Collaboration on Tax - with an overarching aim to better support governments in addressing the tax challenges they face.
For more information, see the OECD press release and the joint Concept Note (PDF 2.3 MB) on the collaboration platform.
OECD updates G20 Finance Ministers on tax transparency
On April 14, 2016 the OECD delivered a report on international tax transparency to Finance Ministers in the G20. The report notes that major progress has been made with robust standards, but that work still needs to be done to ensure effective and global implementation of the standards. The main priority going forward should be the full implementation on the established standard on Exchange of Information Requests (EOIR) in time for the G20 Leader’s Summit in 2017. Eight jurisdictions are still blocked in phase 1 of the peer review process, whereas six jurisdictions have only recently been examined in Phase 2.
For more information, see the press release and full report (PDF 278 KB).
JITSIC met on the Panama Papers
On April 13, 2016 an extraordinary project meeting of the Joint International Tax Shelter Information and Collaboration (JITSIC) Network took place in Paris. The meeting was convened upon request from a number of Government representatives in light of the Panama Papers scandal. On the agenda was exploring possibilities of cooperation and information-sharing, identification of tax compliance risks and agreement on collaborative action in light of the Panama revelations.
For more information, see the OECD press release.
Public consultation on non-CIV funds
On March 24, 2016 the OECD released a consultation document on the treaty entitlement of non-collective investment vehicles, which follows up on BEPS Action 6, Preventing the Granting of Treaty Benefits in Inappropriate Circumstances. Feedback and input was requested on four main topics: LOB provision, PPT rule, anti-conduit rules and special tax regimes. Comments received have been published by the OECD on April 22 and are available for download here.
Standardized electronic format for exchange of Country-by-Country Reports published
On March 22, the OECD released its standardized electronic format for exchange of Country-by-Country Reports, the CbC XML Schema, as well as a user guide. The format and guide is available for download from the OECD website.
OECD gathers increasing support for BEPS
On March 1-3, 2016, the OECD hosted the Task Force on Tax and Development and the Global Forum for Transfer Pricing. The agenda included the new inclusive framework for BEPS implementation, which was welcomed by participants. On March 5-6, 2016 the OECD hosted a regional network meeting for Eastern Europe and Central Asia, the aim of which was to deepen the engagement from developing countries in the anti-BEPS project.
For more information, see the OECD press releases first and second.
Treaty residency of pension funds
On February 29, 2016 the OECD invited interested parties to comment on a discussion draft concerning the tax residency of pension funds, aimed at ensuring that a pension fund is treated as a resident of the State in which it is constituted for the purposes of tax treaties (see the OECD press release). The comments have been published by the OECD on April 6, and are available for download here.
Reporting obligations for payments to tax havens
In March 2016 a decree was published on countries which do not levy tax or have a low tax rate. Payments of EUR 100,000 or more to countries or territories on the “Belgian” list or on the “OECD” list have to be reported in the corporate income tax return.
Permanent amnesty procedure
On March 11, 2016 the government approved a bill on a permanent amnesty procedure for tax and social security purposes. The intention is that the amnesty procedure will be available and applicable from April 1.
List of countries not qualifying for participation exemption
On March 10, 2016 a list of countries and territories not qualifying for the Belgian participation exemption was published in the Official Gazette. The list is identical to the draft published in November 2015, except for Switzerland.
For the full list and additional information, see TaxNewsFlash-Europe.
New mandatory reporting required for certain entities
New legislation in Bulgaria implements the requirements of EU Directive 2013/34 and, among other measures, introduces new mandatory reporting obligations for certain entities. According to the new requirements, certain large enterprises will have to complete reports listing payments they have made to governments, prepare a corporate governance declaration, and file a declaration of non-financial information.
Read an April 2016 report prepared by the KPMG member firm in Bulgaria
Tightening criminal code on tax evasion
On April 27, 2016 the senate approved legislation which penalizes the act of preparing for tax evasion as a criminal offense. As a response to criticism, the Minister of Justice noted that the legislation was not intended to criminalize any and all forms of legitimate tax planning or optimization. The legislation must be signed into law by the president before becoming effective.
Amendment of participation exemption approved by senate
On April 6, 2016 the senate approved changes in the participation exemption which clarifies that dividends received by Czech parent companies are not exempt if deductible by the subsidiary. The legislation implements the anti-hybrid rule added to the Parent-Subsidiary Directive. A general anti-abuse rule is not implemented as an abuse principle is already established in case law. In order for the legislation to be adopted, the bill must be signed into law by the president.
Law on international co-operation in tax administration
On April 4, 2016 the Ministry of Finance announced that the Law on international cooperation in tax administration would be amended and published in the Official Gazette on April 6, 2016.
Reports on achievements and future plans
The Ministry of Finance has published a report which outlines the Ministry’s achievements in effective and fair collection of taxes during the period 2014-2015, as well as the administration’s plans for the period 2016-2017. The plans include improvements in the administration of taxes as well as measures to counter various forms of tax evasion.
Draft tax legislative proposals
In March 2016, the Ministry of Finance released draft tax legislation for public comments. The draft legislative proposals contain around 200 amended provisions and include measures that would limit the applicability of rules allowing for no taxation of revenue associated with non-deductible expenses.
For more information, see the March 2016 report prepared by the KPMG member firm in the Czech Republic
New Transfer Pricing documentation guidelines issued
On April 28, 2016, the Danish tax authorities published two Orders (BEK nos. 401 and 402) regarding transfer pricing documentation. The guidelines, which will apply as of January 1, 2017 include more specific documentation requirements than under the previous documentation guidelines.
Proposal for amendment of tax law due to breach of EU law
On March 31, 2016 the Danish Ministry of Taxation proposed to amend several tax laws. The aim of the proposal is to bring the Danish tax rules, which are currently considered in breach of the free movement of capital, in line with EU law. Three issues in particular are identified and addressed in the proposal:
• Amendment to the recapture rule for losses of foreign permanent establishments, due to the CJEU decision in the Nordea Bank case
• A broadening of the definition of subsidiary shares, and consequently the scope of the participation exemption regime, in order to bring the legislation in line with the CJEU decision in the Kronos case (C-47/12).
• Reduction of the general withholding rate on dividends to non-Danish entities from 27% to 22%, as the rate of tax imposed on EU resident entities would otherwise be higher than the one imposed on Danish resident entities.
The proposal also includes an anti-avoidance rule to prevent investors from avoiding Danish withholding taxes. The amendments are planned to enter into
force on July 1, 2016.
Amendments to Income Tax Act, double non-taxation
On February 23, 2016, a draft amendment to the current Income Tax Act was presented to Parliament. The aim of the draft is to implement the changes made to the Parent-Subsidiary Directive. If adopted, the amendments will be effective from January 1, 2017.
Modification in the Finnish withholding tax reclaim period
The Finnish government recently proposed to shorten the statute of limitations for WHT reclaims to three years. The change would enter into force in tax year 2017, so that Finnish WHT levied in 2016 could be reclaimed until the end of 2021 (five years), but Finnish WHT levied in 2017 could only be reclaimed until the end of 2020 (three years). The legislative amendments remain to be enacted by the Finnish parliament. However, it is very likely that the new legislation will be passed by parliament without significant changes
Automatic exchange of information and CRS
Directive 2014/107/EU on automatic exchange of information entered into force on January 1, 2016 and the Common Reporting Standard (CRS) was enacted by law 226/2016 of April 8, 2016 and entered into force on April 15, 2016. The Finnish tax authorities have published an information leaflet on the rules.
Administrative guidelines: Change of ownership and tax losses
On March 29, 2016 the Finnish tax authorities published guidance on the tax treatment applicable to loss carry-forwards in transactions involving a change of ownership (Guidance No. A74/200/2015 of March 21, 2016). The publication affects a number of previously issued guidelines. In particular, the guidance covers the authorization procedure under which losses may, subject to conditions, be carried forward after a change in ownership. In the P Oy case (C-6/12), the CJEU held that the Finnish system may in certain circumstances be found to constitute State aid.
Administrative guidelines: Taxation of foreign pension funds
On March 22, 2016 the Finnish tax authorities published guidance on the taxation of dividends received by foreign entity pension funds (Guidance No. A218/200/2015 of March 15, 2016). The guidance follows amendments to the Finnish tax legislation subsequent to the CJEU decision in the Commission vs. Finland case (C-342/10) and elaborates on requirements that must be satisfied in order for foreign funds to benefit from a similar tax treatment as Finnish pension funds that are allowed to deduct contributions to legal reserves for tax purposes. In effect, this takes the form of refunds of withholding tax.
The guidance is available in an unofficial English version on the website of the Finnish tax authorities.
Public consultation launched on 1% add-back on dividends within tax-consolidated groups
Following the CJEU decision in the Groupe Steria (C-386/14) case and the resulting legislative changes, guidelines on the taxation of dividends distributed within tax-consolidated groups were published by the French tax authorities on May 4, 2016. As of January 1, 2016, dividends eligible for the participation exemption and received by a company of a tax-consolidated group (1) from a French qualifying subsidiary will no longer be fully exempt, but will be subject to a 1% add-back, and (2) from an EU/EEA qualifying subsidiary will be subject to a similar 1% (previously 5%) add-back. Interested parties may submit comments on the guidelines until June 4, 2016.
Panama placed back on French black-list
On April 5, 2016, following the Panama Papers leak, France announced that Panama would be reclassified as a non-cooperative jurisdiction and consequently be reintroduced on the so-called black-list of non-cooperative jurisdictions and territories (NCJTs). Panama was originally removed from the list back in 2012 after a tax treaty was entered into between France and Panama.
Increasing bank transparency
On April 29, 2016 the Ministry of Finance announced a proposal to increase bank transparency. Under the proposal, parts of the German tax code will be amended to remove existing provisions which offer protection for bank clients and prevent tax investigators from using information obtained from audits in tax avoidance cases. The proposal would also increase statute of limitations periods, as well as strengthen penalties for banks and taxpayers involved in tax avoidance schemes and broaden reporting requirements for both banks and taxpayers.
Draft bill on exchange of Country-by-Country Reports
On April 12, 2016 the Ministry of Finance published a draft bill on the implementation of the multilateral competent authority agreement on the exchange of country-by-country reports.
Action plan to tackle tax havens published by Ministry of Finance
On April 11, 2016 the Ministry of Finance published a 10-point action plan to combat tax havens, aggressive tax planning and money laundering. The action plan covers the following points:
• Panama to join in information exchange and adopt legislation to identify companies lacking in substance;
• Harmonization of national and international black lists;
• Global implementation of new standard for AEOI (automatic exchange of information);
• Monitoring mechanisms for the AEOI;
• Global registers of beneficial owners;
• Linking various national beneficial owner registers internationally,
• Deterrents on banks for promoting aggressive tax planning;
• Increased administrative sanctions on misconduct;
• Ensure evaders are not escaping sanctions due to statutes of limitations;
• Strengthening national money-laundering legislation.
Draft guidance on application of arm’s length principle published
On March 18, 2016 the Ministry of Finance published draft guidance on the application of the arm’s length principle to permanent establishments pursuant to section 1(5) of the Foreign Tax Act.
The guidance, in German, is available for download from the Bundesfinanzministerium here.
Automatic exchange of information and hybrid mismatch rules
A draft bill was submitted on March 16, 2016 which seeks to implement Directive 2014/107/EU on automatic exchange of financial information as well as well as the recent amendments to the Parent Subsidiary Directive on hybrid mismatches.
Tax bill submitted to Parliament
On May 3, 2016 a tax bill was submitted to parliament which, introduces inter alia, the following changes:
• Amendments to the current Hungarian regime on Intellectual property (IP) income in order to bring the rules in line with the modified nexus approach as outlined in the OECD BEPS Action 5;
• Amendments to the rules on tax avoidance, so that if the “main purpose” (instead of the “only purpose”) of a transaction is to attain tax advantages, then related expenses or tax benefits would not be allowed;
• Introduction of a new type of tax audit related to binding rulings, in order to determine whether the transaction underlying the ruling actually took place, and, on this basis, whether the ruling is binding on the tax authorities;
• A further reduction of the surtax on financial institutions (bank tax).
For more information see the May 2016 report (PDF 247 KB) prepared by the KPMG member firm in Hungary.
Circulars on tax ruling procedures and leveraged buyouts
On April 1, 2016 the Italian tax authorities issued two circulars, No. 9/E providing a description and analysis on the various tax rulings available under Italian law, and No. 6/E analyzing the tax treatment of leveraged buyout transactions.
Extension of patent box documentation deadline
On March 23, 2016 the Italian tax authorities amended protocols of the tax ruling procedure for taxpayers that wish to apply the patent box regime. The taxpayers applying before March 31, 2016 may file required documentation within 150 days as opposed to the previous 120 days.
International tax ruling procedures
On March 21, 2016 the Italian tax authorities enacted implementing rules for international tax ruling procedures. Qualifying entities may apply for advance rulings with respect to (i) transfer pricing and assessment of asset values in inbound or outbound changes of residency; (ii) domestic and treaty rules concerning attribution of profits to domestic or foreign permanent establishments; (iii) existence of PEs ; and (iv) domestic and treaty rules applied to cross-border income.
Extension of black list communication deadline
Italian taxpayers with transactions with blacklisted jurisdictions exceeding certain thresholds must file an annual ‘black list communication’. For the income year 2015, the deadline for filing has been extended to September 20, 2016.
Draft decree on “branch exemption” regime for foreign PEs
In late February 2016 the Italian tax authorities issued a draft decree for implementing Italy’s new “branch exemption” regime. Under the regime, resident enterprises may elect different treatment of the profits and losses of their foreign permanent establishments (PEs) as an alternative to the standard tax treatment with tax credits.
For more information see the March 2016 report prepared by the KPMG member firm in Italy
Developments in beneficial ownership
During the period March 10 to April 7, 2016 Jersey carried out a consultation process on proposed changes to the Companies Registry concerning, inter alia, an automatic update of the registry upon certain change of ownership transactions as well as the introduction of a central registry of directors. The process is now closed but the consultation document can be viewed here and comments will be released in due course. On April 11, 2016 the Chief Minister further announced that Jersey had entered into an agreement with the United Kingdom for the enhanced sharing of beneficial ownership information. The agreement is intended to speed up response times from the Registry.
Government mandates consultation on BEPS
On May 3, 2016, the government approved a consultation report, prepared by the tax authorities on the implementation of BEPS related action points, including provisions to avoid double non-taxation, introduction of country-by-country reporting for multinationals, transfer pricing documentation requirements as well as transitional rules for the existing IP box regime. The consultation process is open until June 17, 2016.
Income tax law amended, Parent-Subsidiary Directive
On March 22, 2016 parliament adopted changes to the corporate income tax code in order to implement anti-abuse rules as required under the Parent-Subsidiary Directive.
For more information see the April 2016 report prepared by the KPMG member firm in Lithuania.
Government expresses commitment to BEPS
On April 21, 2016, as part of a greater tax reform for 2017, the Luxembourg government announced a commitment to the BEPS initiatives, while at the same time ensuring that Luxembourg remains a competitive jurisdiction. Finance Minister Gramegna stated that the objective is to adapt the Luxembourg tax framework to these changes in order to ensure that it remains attractive while also respecting the new international and European standards, in the spirit of a level playing field.
For more information, see the April 2016 report prepared by the KPMG member firm in Luxembourg.
Deadline for CRS announced
On April 21, 2016 the Luxembourg tax authorities announced that financial institutions must submit required information by June 30 of the year following the relevant tax year. The first submission must be made for 2016, and is due on June 30, 2017.
Automatic exchange of information with respect to advance tax rulings
On March 11, 2016, the Luxembourg Council of Ministers adopted a draft Bill implementing the EU Directive on the automatic exchange of tax rulings and adopted a Bill on the abolition of the Savings Directive.
IMF announces preliminary tax recommendations for Luxembourg
On March 1, 2016 the International Monetary Fund (IMF) issued its preliminary tax recommendation for Luxembourg, following their article IV consultation. IMF recommends, inter alia, both a broadening of the corporate tax base as well as abolition of certain special regimes, while at the same time reducing the statutory tax rates.
For more information, see the IMF press release.
Proposed measures of 2017 tax reform
On February 29, 2016, the Luxembourg government released an outline of the proposals for tax reform in 2017. For corporate taxpayers, the most significant measure is an expected decrease of the rate of corporate income tax, which would be phased down from the current rate of 21% to 19% in 2017, and then to 18% in 2018. Other tax reform proposals concerning corporations include measures that would introduce certain limits on the ability to carry forward tax losses and enhance efforts to address tax fraud
For more information see the March 2016 report prepared by the KPMG member firm in Luxembourg
Updated classification of foreign entities published
On May 4, 2016, the Dutch tax authorities published an updated list of foreign entities. The transparency of these entities is determined by means of the criteria set out in Decree CPP2009/519 of December 11, 2009. The new classification (PDF 345 KB) is available here.
Administrative guidance on the implementation of the Miljoen, X and Société Générale cases
By policy statement dated April 25, 2016 (DGB 2016/1731M, published on April 29, 2016) the Dutch Deputy Minister of Finance followed-up on the final judgment of the Dutch Supreme Court in the Miljoen, X and Société Générale cases. Based on this policy statement, it is now clear how the Dutch tax authorities will deal with requests by non-resident shareholders for the refund of Dutch dividend withholding tax. In addition, non-resident individuals who own real estate in the Netherlands will also benefit, as they will now be entitled to the tax-free amount.
For more information, see Euro Tax Flash 280
Dutch position concerning nexus approach for innovation box
In a letter to the lower house of parliament dated April 15, 2016 the State Secretary for Finance explained that application of the innovation box would require activities in the Netherlands to have sufficient substance and that the benefitting company must perform all the R&D activities. In order to bring the Dutch innovation box in line with the OECD nexus approach, rules would be amended to ensure that the income qualifying for the incentive is directly related to the development costs.
Dutch position concerning switch-over clause in EU anti-BEPS package clarified
The Dutch State Secretary for Finance indicated, in a letter issued to the lower house of Parliament on April 15, 2016, that the Netherlands is now in favor of a split of the EU Anti-Avoidance Directive. If the switch-over clause is maintained in the proposal, the Netherlands will request an impact assessment.
MoU entered into with Norway concerning exchange of information in tax matters
On April 6, 2016 the Netherlands and Norway signed a Memorandum of Understanding on the automatic exchange of information, which will be applicable for the first time to information regarding the calendar year 2014.
For more information, see the Memorandum
Dividends from Irish fund qualify for participation exemption
In an advance ruling published on March 17, 2016 the Norwegian tax authorities concluded that dividends received from an Irish fund qualified for the Norwegian participation exemption. The main argument in the decision was that the establishment of the fund in Ireland was not deemed to be motivated by tax reasons as no tax benefit was achieved. The decision did not assess whether the fund – an Irish umbrella fund with limited liability (UCITS) – was deemed comparable to a Norwegian share fund, as this was assumed to be the case.
Ruling regarding dividends from Dutch holding company qualifying for participation exemption
On February 23, 2016 the Norwegian tax authorities issued an advance ruling stating that dividends received by a Norwegian company from a partially owned Dutch holding company qualify for the Norwegian participation exemption.
The tax authorities argued that as the scheme was not tax motivated, there was no reason to examine whether the Dutch holding company performed real economic activities in the Netherlands.
The Government of Panama reaffirms its commitment to strengthen transparency
On April 3, 2016 the Panamanian government published a statement on its website, reaffirming its commitment to implement reforms strengthening transparency. The government also highlighted the existence of the legislation approved in 2015 based on the Financial Action Task Force (FATF) action plan.
For more information, see the government press release.
Parliament discusses GAAR
On April 14, 2016 the Polish parliament discussed a draft amendment introducing a general anti-avoidance rule (GAAR). The proposed amendment will apply to transactions or business activities undertaken which are of a fictitious character and do not reflect economic reality and whose main purpose was to avoid taxation. The draft envisage that the GAAR will only apply if the transaction exceeds PLN 100,000 in a tax year, and taxpayers will be able to request opinions from the Ministry of Finance in order to ascertain whether a transaction or arrangement is within the scope of the GAAR.
State budget 2016
On April 1, 2016 the Budget for 2016 was gazetted following the adoption by the Parliament on March 17, 2016. The budget includes authorization to amend the partial exemption regime for income from patents to ensure compliance with the OECD’s modified nexus approach as well as implementation of country-by-country reporting.
Changes to Parent-Subsidiary Directive (GAAR) transposed
On February 29, 2016 the law transposing the implementation of a general anti-abuse rule (GAAR) in the Parent-Subsidiary Directive was published in the official gazette.
Working group for Panama papers launched
On April 5, 2016 the Romanian National Agency for Fiscal Administration (NAFA) stated in a press release that a working group had been established to assess and review the implications of the so-called Panama papers.
"First taxpayer" status awarded
On April 23, 2016 the Ministry of Finance announced that it had granted for the first time a “first taxpayer” status, which allows companies to request from the tax authorities a swift and cooperative approach when dealing with complex tax issues. Nevertheless, this status does not affect the tax authorities’ powers.
Public consultation on tax reform
The Slovenian government has launched a public consultation procedure for recent proposals for tax reform. The proposal includes an increase of the statutory tax rate from 17% to 20% and changes to rules regarding the tax deductibility of goodwill.
Measures to combat tax fraud
On April 11, 2016 the Official Bulletin of the parliament published a number of proposed measures to combat tax fraud, including:
• Recovery of financial benefits from illegal amnesties, corruption and money laundering;
• Introduction of reporting standards for financial institutions operating in tax havens;
• Strict control on investment institutions;
• Removal of foreign security regime;
• Stricter rules on credit card payments;
• Reform of tax crime provisions;
• Introduction of new tax agency law;
• Implementation of EU and international measures to combat tax evasion and aggressive tax planning.
The proposals are non-binding suggestions but may be taken into consideration when drafting legislation.
Resolution on tax control plan 2016 published – further details
On February 23, 2016, a Resolution approving the 2016 tax control plan was published. Further details about this plan have become available. It is focused on:
• the verification and investigation of tax and customs fraud (black economy, exchange of information, international tax planning, digital economy, etc.)
• the monitoring of fraud in the tax collection stage;
• the collaboration between the State Tax Agency and the tax administrations of the autonomous regions.
Combating tax avoidance, recent proposal
On 28 April, 2016 the Minister of Finance announced new plans to tackle tax avoidance. Referring to the OECD recommendations on BEPS, the Minister proposed ten measures:
• Increase the number of participating countries to the global standards on information exchange;
• Implement automatic exchange of information on beneficial owners;
• Create a committee to assess whether tax advisors could be obliged to inform tax authorities on abusive arrangements;
• Promote a global blacklist of non-cooperative jurisdictions and introduce counter-measures;
• Intensify efforts to combat VAT fraud;
• Strengthen tax penalties;
• Increase the resources of the tax administration;
• Promote the development of tax good governance policies at corporate level;
• Assist developing countries in combating tax avoidance; and
• Introduce additional measures to fight against domestic tax evasion and black economy.
Automatic exchange of information with respect to tax rulings
On April 7, 2016 the Swedish government presented draft legislation to the Swedish parliament implementing the Directive on the automatic exchange of tax rulings (Directive 2015/2376/EU). If adopted, the law should become effective from January 1, 2017.
Consultation on exchange of country-by-country reports
On April 13, 2016, the Federal Council initiated a consultation on the multilateral agreement on the exchange of country-by-country reports and the Federal Act required for its implementation. This consultation will run until July 13, 2016. This proposal aims at improving tax transparency by means of an automatic transmission of country-by-country reports between the tax authorities, on an annual basis.
Update on Corporate Tax reform
On March 16 and 17, 2016 the Swiss National Council addressed draft legislation for corporate tax reform (“Corporate Tax Reform III”). The National Council responded to certain international developments, in particular the OECD recommendations on BEPS, and supported the decisions of the Council of the States regarding the repeal of certain “privileged” tax regimes, such as the holding company and domiciliary and mixed company regimes at the cantonal/municipal levels and the principal company regime at the federal level. The National Council also approved the introduction of a patent box regime, a research and development (R&D) “super deduction,” and the introduction of a notional interest deduction.
For more information, see the March 2016 blog article by the KPMG member firm in Switzerland.
Consultation on legislation for corporate offence of failure to prevent criminal facilitation of tax evasion
On April 17, 2016, HMRC published a consultation document titled Tackling tax evasion: a new corporate offence of failure to prevent the criminal facilitation of tax evasion. This follows an earlier consultation in July 2015 and the response document of December 2015 which contained a first draft of the legislation. In this latest consultation HMRC is seeking feedback on the wording of the new corporate criminal offence and how this policy is best expressed in statute and guidance. The new consultation document (PDF 445 KB) contains updated draft legislation and draft guidance.
Initiatives on exchange of beneficial ownership information
Following the initiative announced on April 14, 2016 to pilot automatic exchange of beneficial ownership information in relation to companies and trusts between the ‘Big 5’ European partners (UK, Germany, France, Italy and Spain), this has now been extended to more than 20 jurisdictions. In April 2016 the United Kingdom also signed exchange of notes and technical protocols with a number of jurisdictions on sharing of beneficial ownership information of corporate and legal entities, namely Bermuda (PDF 1.36 MB) , British Virgin Islands, Anguilla (PDF 327 KB) , Cayman Islands, Gibraltar (PDF 1.45 MB) , Turks and Caicos Islands, Isle of Man (PDF 367 KB) and Guernsey.
Companies to be liable for employees who facilitate tax cheating
On April 11, 2016, the Prime Minister's Office announced that the United Kingdom will bring forward plans to introduce a criminal offence for corporations that fail to stop their staff from facilitating tax evasion.
For more information, see the announcement.
United Kingdom launches taskforce on "Panama Papers"
On April 10, 2016, the Prime Minister announced the creation of a cross-government taskforce to deal with the Panama Papers revelations.
For more information, see the announcement.
Closure of offshore disclosure facilities
In April 2016, the HMRC announced closure of offshore disclosure facilities regarding Liechtenstein, Jersey, Isle of Man, Guernsey.
Finance (No. 2) Bill 2015-16 published
On March 24, 2016 the UK government published Finance (No. 2) Bill 2016, implementing the tax changes announced previously by the government in the 2016-2017 Budget. The main changes include:
• A reduction of the corporation tax to 17% in 2020;
• A reform of the loss relief rules including relaxations in the group relief regime and additional general restrictions on brought forward losses being set off against current year profits from April 2017;
• Limited tax deductibility of corporate interest to 30% of UK earnings or a worldwide interest/earnings ratio where net UK interest is more than GBP 2 million
• Counter-measures against tax avoidance by multinational enterprises including new rules to address hybrid mismatch arrangements and to provide that payments for the use of intellectual property based overseas are subject to tax
• Changes to combat the current and historic use of disguised remuneration tax avoidance schemes, including “gold bullion” schemes
• Updated definition of "transfer pricing guidelines" from April 1, 2016 in order to incorporate the new October 2015 OECD Transfer Pricing Guidelines
For more information, see the Finance Bill 2016 and explanatory notes on the UK government website.
Summary of responses on cash, tax evasion and the hidden economy
On March 24, 2016 HMRC published the summary of the key findings from stakeholders to the government's call for evidence on cash, tax evasion and the hidden economy. Some respondents provided evidence that cash is used in the hidden economy and to facilitate tax non-compliance. However, this does not necessarily mean that an increase in the use of cash alternatives will improve compliance in these areas. They suggested that those intent on evading payment of tax or committing financial crimes will find a way to do so, regardless of any trend.
For more information, see the document published by the HMRC.
Country-by-Country Reporting adopted by the UK
On February 26, 2016 Country-by-Country Reporting as set out in the OECD BEPS initiative was adopted in the UK. On the same date. HMRC also published a policy paper on the subject, available here.
US Treasury announces key measures to combat money laundering, corruption and tax evasion
On May 5, 2016 the US Treasury Department announced that actions to combat tax evasion and strengthen transparency had been taken, including new customer due diligence rules, proposed Beneficial Ownership legislation, and proposed regulations related to foreign-owned, single-member limited liability companies (LLCs). Together, these efforts target key points of access to the international financial system – when companies open accounts at financial institutions, when companies are formed or when company ownership is transferred, and when foreign-owned U.S. companies seek to evade their taxes.
For more information, see the press release released by the US Treasury.
US District Court dismisses challenges to FATCA
On April 26, 2016 a US District Court dismissed a legal action challenging the Foreign Account Tax Compliance Act (FATCA), the corresponding intergovernmental agreements (IGAs) and the Report of Foreign Bank and Financial Accounts (FBAR).
For more information, see the US District Court’s decision (PDF 2.33 MB).
Joint Committee on Taxation issues report on cross-border taxation
The Joint Committee on Taxation of the US Congress has released a report entitled “Present Law and Recent Global Developments Related to Cross-Border Taxation” dated February 23, 2016. It discusses, inter alia, the BEPS Project undertaken by the OECD at the request of the G20 and the recent European Commission’s State aid investigations of certain tax rulings.
For more information, see the report.
Interpretative ruling regarding tax evasion criminal law
On March 12, 2016 the Bulgarian Supreme Court issued an interpretative ruling considering that, in cases of misreporting and non-payment of tax liabilities, any persons exercising functions within the company resulting in misreporting and tax evasion could potentially be subject to criminal proceedings. In addition, if the tax evasion and misreporting is conducted at the company level, the state can seek liability in tort against the individual perpetrators.
Ruling on place of management of a Belgian company under Belgium-France treaty
On March 7, 2016 the French Administrative Supreme Court ruled that a place of management deemed to be a permanent establishment under the Belgium-France tax treaty is a place where the most senior members of a company take the strategic decisions which determine the conduct of the company's business as a whole. The place where the board of directors is situated may be taken into consideration but is not sufficient in itself. Thus, in the case at hand, a French branch carrying on management functions can be considered as a place of management deemed to be a French permanent establishment of a Belgian company.
Supreme Administrative Court: is German group exemption provision for real estate transfer tax purposes State aid?
On November 25, 2015, the Supreme Administrative Court rendered four decisions under which it asked the German Ministry of Finance to join the proceedings. According to the Court it is to be examined from an EU law perspective whether or not the group tax exemption for real estate transfer tax purposes constitutes a newly introduced State aid. It is still unclear whether Germany had submitted the regulation to the EU Commission for authorization for State aid purposes prior its entry into force.
For more information see the April 2016 report prepared by the KPMG member firm in Germany
Lower Tax Court of Münster: Requirements of the Motive Test in the context of the German CFC rules
On November 20, 2015 the Lower Tax Court of Münster ruled that royalty income earned at the level of a Cyprus subsidiary was to be qualified as passive income as the licenses generating the income had been purchased externally and not developed internally. The Court further considered that the requirements of the “motive test” based on the Cadbury-Schweppes CJEU case law were not met, since the Cyprus company did not carry on genuine economic activities.
For more information see the April 2016 report prepared by the KPMG member firm in Germany
Italian Supreme court rules that the CFC regime is fully compliant with the fundamental freedoms
On December 16, 2015, the Supreme Court concluded that the Italian CFC regime was compliant with EU standards and did not contradict the Italy-Cyprus income tax treaty provisions on permanent establishments. The case involved an Italian company with a subsidiary located in Cyprus (a “black list” country at that time), which was denied the benefit of the safe harbor conditions (i.e. business test and subject-to-tax test). Following the Supreme Court’s decision, a group of Italian experts filed a complaint with the EU Commission, asserting that the Italian CFC regime, in particular provisions applicable to CFCs that are not located in “black list” countries, is contrary to EU law.
For more information see the April 2016 report prepared by the KPMG member firm in Italy
Netherlands Supreme Court confirms CJEU decision in the Sopora case (C-512/13)
On March 4, 2016, the Dutch Supreme Court issued its decision in the case Sopora v. Dutch tax administration, and followed the decision of the CJEU. The Supreme Court held that the 30% ruling does not result in systematic over-compensation and, therefore, is compatible with the free movement of workers.
For more information, see the TaxNewsflash-Europe and the report prepared by the KPMG member firm in the Netherlands.
Netherlands Supreme Court confirms CJEU decision in Miljoen (C-10/14), X (C-14/14), and Société Générale (C-17/14) cases
On March 4, 2016, the Dutch Supreme Court gave its decision in the Miljoen, X, Société Générale v. State Secretary for Finance case. Confirming the CJEU decision, the Dutch court reached a favorable conclusion for dividends distributed to foreign individuals, finding that the imposition of the withholding tax on these dividend distributions was a restriction on the free movement of capital. However, the court found no similar violation with respect to the withholding tax imposed on dividends distributed to a foreign company
For more information, see the TaxNewsflash-Europe and the report prepared by the KPMG member firm in the Netherlands.
Constitutional Court finds list of taxpayers having failed to fulfill their tax obligations in conflict with Constitution
In Slovenia, the Financial Administration each month publishes on its website a list of taxpayers who have not filed their tax returns or have unsettled tax debts. On March 10, 2016, the Constitutional Court held that this practice, for the part concerning individuals, is in conflict with the Constitution. This practice had not been questioned with respect to companies
Denied deduction of loss on related-party receivables in breach of free movement of capital
On February 16, 2016 the Swedish Supreme Administrative Court ruled that denied deduction of foreign exchange losses on related-party receivables was in breach of the free movement of capital. Indeed, it led to an increase in risk for companies with non-SEK denominated receivables, which affect mainly or only cross-border transactions. This case is different from X AB case (C-686/13) since the restriction could not be justified by the need to maintain the coherence of the national tax system, as foreign exchange gains were taxable.
Federal Administrative Court rejects Dutch request for administrative assistance
On March 21, 2016 the Swiss Federal Administrative Court ruled that no administrative assistance may be provided in response to a group request in respect of UBS banking details submitted by the Dutch tax authorities on July 23, 2015. In the request, the Dutch tax authorities did not disclose any client names, but merely indicated the criteria for identifying the clients covered by the request. The Court stressed that the protocol to the Netherlands-Switzerland Income Tax Treaty (2010), which is an integral part of the treaty and therefore binding under international law, clearly states that the treaty prohibits group requests that do not disclose any names.
CFC and Dividend Group Litigation – Court of Appeal upholds High Court decision on issues of liability and quantification, except on restitution for ACT paid
On January 26, 2015, the High Court delivered its judgment in The Prudential Assurance Company Limited v. The Commissioners for HM Revenue and Customs (HMRC). It concerns issues of liability and quantification arising from the alleged or established invalidity under EU law of various aspects of the UK legislation which governed the taxation of “portfolio dividends” (i.e. dividends derived from holdings of less than 10% of the shares in the companies concerned) paid by companies resident either in the EU or third countries to corporate shareholders resident in the UK.
On April 19, 2016, the England and Wales Court of Appeal upheld this decision but allowed HMRC's appeal in a limited respect concerning three sub-issues related to the quantum of restitution on advance corporation tax paid.