CJEU judges in Case C-607/17 Memira Holding (Freedom of establishment – Deduction of losses of a non-resident subsidiary – Concept of ‘final losses’ – Merger-absorption of the subsidiary by the parent company)
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On June 19, 2019 the Court of Justice of the European Union (CJEU) judged in Case C‑607/17, Skatteverket versus Memira Holding AB (ECLI:EU:C:2019:510).
This request for a preliminary ruling concerns the interpretation of Article 49 TFEU, read in conjunction with Article 54 TFEU.
This request has been made in proceedings between the Skatteverket (Swedish Tax Board) and Memira Holding AB (‘Memira’) concerning the possibility for Memira of deducting from its corporation tax the losses of a subsidiary established in another Member State where that subsidiary has been absorbed by merger.
CJEU judges in Case C-608/17, Holmen (Freedom of establishment – Deduction of losses of a non-resident subsidiary – Concept of ‘final losses’ – Application to a sub-subsidiary)
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On June 19, 2019 the Court of Justice of the European Union (CJEU) judged in Case C‑608/17, Skatteverket versus Holmen AB (ECLI:EU:C:2019:511).
This request for a preliminary ruling concerns the interpretation of Article 49 TFEU, read in conjunction with Article 54 TFEU.
The request has been made in proceedings between the Skatteverket (Swedish Tax Board) and Holmen AB concerning the possibility of the latter deducting from its corporation tax the losses of a sub-subsidiary established in another Member State.
The OECD releases the transfer pricing country profiles of Chile, Finland and Italy and updates the profiles of Colombia and Israel
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On June 18, 2019 the OECD released the transfer pricing country profiles of Chile, Finland and Italy. Therewith the total number of transfer pricing country profiles available on the OECD website comes to 55.
These country profiles focus on countries' domestic legislation regarding key transfer pricing principles, including the arm's length principle, transfer pricing methods, comparability analysis, intangible property, intra-group services, cost contribution agreements, transfer pricing documentation, administrative approaches to avoiding and resolving disputes, safe harbours and other implementation measures.
Russian Federation deposits its instrument of ratification for the MLI
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On June 18, 2019 the OECD announced that on the same date the Russian Federation deposited its instrument of ratification for the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).
Read more: Russian Federation deposits its instrument of ratification for the MLI
The Netherlands and Switzerland concluded a Protocol to amend their existing DTA
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On June 12, 2019 the Kingdom of the Netherlands and the Swiss Confederation concluded a Protocol amending the Convention of 26 February 2010 between the Swiss Confederation and the Kingdom of the Netherlands for the avoidance of double taxation with respect to taxes on income (Hereafter: the Protocol).
Although the Protocol has been signed, it has not entered into force yet. For the Protocol to enter into force, the respective ratification procedures have to have been finalized in both countries.
Below we will discuss a selection of provisions included in the Protocol of which we think they might interest our readers.
Read more: The Netherlands and Switzerland concluded a Protocol to amend their existing DTA
Dominica removed from the EU-list of non-cooperative jurisdictions in taxation matters
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During its meeting of June 14, 2019 the Economic and Financial Affairs (ECOFIN) Council has once again adjusted the EU's list of non-cooperative jurisdictions in taxation matters. This time Dominica was removed from the list.
Read more: Dominica removed from the EU-list of non-cooperative jurisdictions in taxation matters
The opinion of the AG in Case C-75/18, Vodafone Magyarország (Competition — State aid — Freedom of establishment)
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On June 13, 2019 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Kokott in the Case C-75/18, Vodafone Magyarország Mobil Távközlési Zrt. versus Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (ECLI:EU:C:2019:492), was published.
In these proceedings the Court is concerned with questions relating to tax law and the rules on State aid which at the same time have particular importance for the turnover-based digital services tax currently being proposed by the European Commission. The question thus also arises in this case whether the taxation of a company’s revenue according to its turnover constitutes a turnover tax or whether such a tax is a direct income tax.
In addition, the Court must once again consider the question of indirect discrimination arising from a tax regime, where in this case the discrimination can be inferred solely from its progressive rate. Lastly, the Court must address the question whether progressive taxation of economically stronger undertakings also constitutes unjustified aid in favour of other undertakings.
The redistributive effect which is generally pursued with a progressive tax rate means per se that economically stronger persons are subject to higher taxation and thus disadvantaged in comparison with economically weaker persons. As economically stronger persons tend to engage in cross-border business, this could be seen as indirect discrimination against them, in particular where the progressive scale is specifically employed to catch economically stronger foreign undertakings.
The Court must therefore rule on the compatibility with EU law of a progressive tax rate and a basic allowance, which has developed historically in many Member States, is considered necessary from the point of view of the welfare state and is, therefore, also applied to taxation of income in the Member States. Furthermore, a progressive tax rate and a basic allowance also form the basis for the digital services taxes which are planned EU-wide and have already been introduced in various Member States.
The OECD publishes the OECD Secretary-General’s Report to the G20 Finance Ministers and Central Bank Governors
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On June 8, 2019 the OECD published the OECD Secretary-General’s Report to the G20 Finance Ministers and Central Bank Governors. The report contains two parts. Part I reports on the activities and achievements in the OECD’s international tax agenda. Part II reports on the activities and achievements of the Global Forum on Transparency and Exchange of Information for Tax Purposes.
The opinion of the AG in Case C-189/18, Glencore Agriculture Hungary (VAT — Articles 167 and 168 of Directive 2006/112/EC — Right of deduction — Tax evasion or fraud — Burden of proof)
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On June 5, 2019 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Bobek in the Case C-189/18, Glencore Agriculture Hungary Kft. versus Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (ECLI:EU:C:2019:462), was published.
Glencore Agriculture Hungary Kft. (Glencore) challenges two decisions of the Nemzeti Adó- és Vámhivatal(National Tax and Customs Administration, Hungary) (‘the NTCA’) which refused deduction of value added tax (VAT) paid on certain supplies on the ground that Glencore was aware or should have been aware of tax evasion or fraud committed by its suppliers. In the main proceedings, Glencore questions the lawfulness of the tax procedures before the NTCA. It complains, in particular, of a lack of fairness and of a breach of its rights of defence.
The national court seised of that challenge, the Fővárosi Közigazgatási és Munkaügyi Bíróság (Budapest Administrative and Labour Court, Hungary), entertains doubts as to the compatibility with EU law of certain national provisions and practices. In particular, the referring court asks for clarifications on the principles governing the burden of proof placed upon tax authorities to prove the involvement of a taxable person in tax evasion perpetrated by its suppliers; the right of the taxable person to be granted access to the documents which are relevant to its defence; and the scope of the review to be carried out by the national court of the findings of the tax authorities and the manner in which those authorities collected evidence.
The OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters entered into force on June 1, 2019 with respect to El Salvador
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Based on the overview of Jurisdictions Participating in the Convention on Mutual Administrative Assistance in Tax Matters as available on the website of the OECD, the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters entered into force on June 1, 2019 with respect to El Salvador.
The MLI entered into force with respect to Finland and Guernsey
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On June 1, 2019 the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI) entered into force with respect to the Republic of Finland and with respect to Guernsey.
Read more: The MLI entered into force with respect to Finland and Guernsey
Digitalisation of the economy – Inclusive Framework on BEPS adopts a programme of work to develop a consensus solution to the tax challenges arising from the digitalisation of the economy
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During their plenary meeting of May 28-29, 2019 the members of the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) adopted a programme of work to develop a consensus solution to the tax challenges arising from the digitalisation of the economy. The document contains a road map for resolving the tax challenges arising from the digitalisation of the economy, and committed to continue working toward a consensus-based long-term solution by the end of 2020.
Albania signs the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI)
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On May 28, 2019 the OECD issued a press release announcing that on the same day Albania signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). Therewith Albania became the 88th jurisdiction to join the MLI.
The opinion of the AG in Case C-270/18, UPM France (Taxation of energy products and electricity — Directive 2003/96/EC — Exemption of small producers of electricity, subject to taxation of the electricity produced)
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On May 23, 2019 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Sharpston in the Case C-270/18, UPM France versus Premier ministre, Ministre de l’Action et des Comptes publics (ECLI:EU:C:2019:442), was published.
Council Directive 2003/96/EC of 27 October 2003 restructuring the [EU] framework for the taxation of energy products and electricity (Directive 2003/96, or ‘the Directive’) afforded France a special transitional period to make the necessary adjustments to existing arrangements. This reference for a preliminary ruling enquires as to the respective rights and obligations of taxable entities and of the Member State during that period.
Specifically, UPM France claims, on the basis of Article 14(1)(a) of Directive 2003/96, that it is entitled to reimbursement of tax paid on its consumption of natural gas in an installation for the combined generation of heat and electricity, where the electricity thereby produced was consumed for its own use in a further manufacturing process. UPM France has been unsuccessful thus far before the national courts. The Conseil d’État (Council of State, France; ‘the referring court’), as the final court of appeal, has now requested the Court’s assistance in interpreting Articles 14(1)(a) and 21(5), third subparagraph, of Directive 2003/96.
The opinion of the AG in Case C-329/18, Altic (VAT – Interpretation of Article 168(a) of Directive 2006/112/EC – Supply by co-contractors involved in tax fraud – Duty of care of the taxable person)
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On May 22, 2019 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Bobek in the Case C-329/18, Valsts ieņēmumu dienests versus SIA Altic (ECLI:EU:C:2019:442), was published.
SIA Altic bought rapeseed from two other companies and deducted the input value added tax (VAT) paid on those transactions. A subsequent inspection carried out by the Latvian tax authorities revealed that those companies were fictitious. The tax authorities therefore considered that the transactions had not taken place and ordered SIA Altic to pay the corresponding VAT. SIA Altic sought the annulment of that decision. Both the first- and the second‑instance national courts ruled in its favour.
The Augstākā tiesa (Supreme Court, Latvia), seised on appeal on a point of law, harbours doubts as to the correct interpretation of Directive 2006/112/EC on the common system of value added tax read in conjunction with the requirements of sectorial legislation in the field of food law. Those doubts concern the argument by the Latvian tax authorities that SIA Altic should have known about the involvement of its co-contractors in VAT fraud, because it was active in the food sector and it was therefore obliged to verify its business partners to the higher standard applicable in that sector, in accordance with the obligations imposed by Regulations (EC) No 178/2002, (EC) No 852/2004, and by (EC) No 882/2004.
The present case gives the Court the opportunity to refine its case-law on the criteria to determine whether an operator ‘knew or should have known’ that he was participating in an operation connected with VAT fraud for the purposes of refusing the right to deduct. In particular, the Court is asked to what extent, if at all, specific sectorial obligations applicable to operators active in certain fields, such as those pertaining to food law, are of relevance for the general tax assessment of whether or not an operator was or should have been aware that he was involved in a transaction connected with VAT fraud.
Aruba, Barbados and Bermuda removed from the EU-list of non-cooperative jurisdictions in taxation matters
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During its meeting of May 17, 2019 the Economic and Financial Affairs (ECOFIN) Council has once again adjusted the EU's list of non-cooperative jurisdictions in taxation matters. This time Aruba, Barbados and Bermuda were removed from the list.
CJEU judges in Case C-235/18, Vega International Car Transport and Logistic (VAT – Article 135(1)(b) of Directive 2006/112/EC – Exemptions for other activities — Granting and negotiation of credit — Fuel cards)
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On May 15, 2019 the Court of Justice of the European Union (CJEU) judged in Case C‑235/18, Vega International Car Transport and Logistic — Trading GmbH versus Dyrektor Izby Skarbowej w Warszawie (ECLI:EU:C:2019:412).
This request for a preliminary ruling concerns the interpretation of Article 135(1)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).
The request has been made in proceedings between Vega International Car Transport and Logistic — Trading GmbH, whose registered office is in Austria (‘Vega International’), and the Dyrektor Izby Skarbowej w Warszawie (Director of the Tax Chamber in Warsaw, Poland) concerning the latter’s refusal to reimburse Vega International the value added tax (VAT) relating to fuel purchase transactions carried out by means of fuel cards.
CJEU judges in Case C-712/17, EN.SA. (VAT – Transactions found to be non-existent)
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On May 8, 2019 the Court of Justice of the European Union (CJEU) judged in Case C‑712/17, EN.SA. Srl versus Agenzia delle Entrate — Direzione Regionale Lombardia Ufficio Contenzioso (ECLI:EU:C:2019:374).
This request for a preliminary ruling concerns the interpretation of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘the VAT Directive’).
The request has been made in the course of proceedings between EN.SA. Srl and the Agenzia delle Entrate — Direzione Regionale della Lombardia (the Italian Tax Authority — Lombardy Regional Department Disputes office) (‘the Tax Authority’) concerning a revised assessment to tax to which that company was made subject, establishing a tax liability for additional value added tax (VAT), together with interest and penalties.
Read more: CJEU judges in Case C-712/17, EN.SA. (VAT – Transactions found to be non-existent)
