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The next hearing of the European Parliament’s Committee of Inquiry into Money Laundering Tax Avoidance and Tax Evasion (PANA Committee) is going to take place in the morning of September 26, 2017. The hearing will be divided into two parts. During the first part (9.05 – 10.40 CET) the PANA Committee will look into the world of professional soccer. The second part of the hearing (10.40 – 12.05 CET) will be devoted to corporate tax planning.

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On September 18, 2017 the OECD published Taxation Working Papers No. 32 titled: “Legal tax liability, legal remittance responsibility and tax incidence -Three dimensions of business taxation”, which was drafted by Anna Milanez.

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On September 6, 2017 the Dutch State Secretary for Finance issued a decree amending the existing policy decrees regarding business mergers, legal divisions & legal mergers in order to bring the existing policy decrees in line with the amendments made to the innovation box by the Belastingplan 2017, which was published in the Dutch Staatscourant of September 15, 2017.

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On September 15, 2017 the Irish Revenue released Revenue eBrief No. 80/17. Via the eBrief the Irish Revenue informs the public that it has published a new Tax and Duty Manual (Tax and Duty Manual Part 37-00-41, “Review of Opinions or Confirmations”). The purpose of the manual is to set out Revenue policy on the maximum period of validity of Revenue opinions or confirmations. It also provides an update in respect of a review of opinions or confirmations issued by Revenue before 1 January 2012.

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On September 14, 2017 the Treasurer of the Commonwealth of Australia issued a press release announcing that on that same date the Australian Government introduced legislation to remove the double taxation of digital currency.

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On September 14, 2017 the Government of Japan and the Government of Federative Republic of Brazil signed an Agreement regarding Mutual Administrative Assistance and Cooperation in Customs Matters (Hereafter: The Agreement).

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On September 14, 2017 the Court of Justice of the European Union (CJEU) judged in Case C-132/16, Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ — Sofia versus ‘Iberdrola Inmobiliaria Real Estate Investments’ EOOD (ECLI:EU:C:2017:683).

This request for a preliminary ruling concerns the interpretation of Article 26(1) and Articles 168 and 176 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 the Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ — Sofia (the Director of the ‘Appeals and Tax and Social Insurance Practice’ Directorate of Sofia, Bulgaria) and ‘Iberdrola Inmobiliaria Real Estate Investments’ EOOD (‘Iberdrola’) concerning two adjusted tax notices addressed to the latter and relating to the entitlement to deduct input value added tax (VAT).

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On September 14, 2017 the Court of Justice of the European Union (CJEU) judged in Case C-646/15, Trustees of the P Panayi Accumulation & Maintenance Settlements versus Commissioners for Her Majesty’s Revenue and Customs (ECLI:EU:C:2017:682).

This request for a preliminary ruling concerns the interpretation of Articles 49, 54, 56 and 63 TFEU.

The request has been made in proceedings between the Trustees of the P Panayi Accumulation & Maintenance Settlements (‘the Panayi trustees’) and the Commissioners for Her Majesty’s Revenue and Customs (‘the tax authority’) on the taxation of unrealised gains in value of the assets comprised in a trust on the transfer of its trustees’ place of residence to a Member State other than the Member State of origin.

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On September 14, 2017 the Court of Justice of the European Union (CJEU) judged in Case C-628/15, The Trustees of the BT Pension Scheme versus Commissioners for Her Majesty’s Revenue and Customs (ECLI:EU:C:2017:687).

This request for a preliminary ruling concerns the interpretation of Articles 49 and 63 TFEU.

The request has been made in proceedings between the Trustees of the BT Pension Scheme (‘the Trustees’) and the Commissioners for Her Majesty’s Revenue and Customs (‘the Commissioners’) concerning the refusal to recognise a right to a tax credit to a pension fund not subject to tax on its investment income in respect of its receipt of dividends representing foreign-sourced income of a company resident for tax-purposes in the United Kingdom.

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On September 12, 2017 the OECD published a press release announcing that on that same date Brunei Darussalam signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. By doing so, Brunei Darussalam became the 113th signatory to the convention.

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On September 12, 2017 the Court of Justice of the European Union (CJEU) judged in Case C-648/15, Republic of Austria, represented by C. Pesendorfer, F. Koppensteiner and H. Jirousek, acting as Agents, applicant, versus Federal Republic of Germany, represented by T. Henze and J. Möller, acting as Agents (ECLI:EU:C:2017:664).

By its application, the Republic of Austria asks the Court to rule on the dispute which has arisen between it and the Federal Republic of Germany concerning the interpretation of Article 11(2) of the Abkommen zwischen der Republik Österreich und der Bundesrepublik Deutschland zur Vermeidung der Doppelbesteuerung auf dem Gebiet der Steuern vom Einkommen und vom Vermögen (Convention between the Republic of Austria and the Federal Republic of Germany for the avoidance of double taxation with respect to taxes on income and capital) of 24 August 2000 (BGBl. III, 182/2002, ‘the Austro-German Convention’) concerning the taxation of the interest from financial instruments (Genussscheine) issued by a company with its seat in the Federal Republic of Germany and held by a company with its seat in the Republic of Austria.

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On July 7, 2017 the Korkein hallinto-oikeus (Finland) lodged a request for a preliminary ruling with the Court of Justice of the European Union (CJEU) in the Case A versus Veronsaajien oikeudenvalvontayksikkö (Case C-410/17). The questions referred for a preliminary ruling have been published in the Official Journal of the European Union of September 11, 2017.

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On September 7, 2017 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Bobek in the Case C-251/16, Edward Cussens, John Jennings and Vincent Kingston  versus T.G. Brosnan (ECLI:EU:C:2017:648) was published.

 

From the introduction by the Advocate General

Tax authorities do not fall in love easily. There is (arguably at least) one notable exception to this rule: the 2006 judgment in Halifax, in which this Court confirmed the existence of the principle of prohibition of abusive practices in the area of value added tax (VAT) law. That judgment appears to have been embraced with a passion by tax authorities across the Member States.

 

However, as is often the case, the true nature of the object of one’s suddenly formed emotional attachments is likely to remain somewhat hazy and unexplored for some time. The same is true of the prohibition of abusive practices, also referred to as the prohibition of abuse of law, in the area of VAT. Although it was explicitly confirmed more than a decade ago, and has been since then the object of extensive scholarly discussion and analysis, the detailed operation of that principle, including the precise test to be applied for ascertaining abuse, may be said to be still somewhat underdeveloped.

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On September 7, 2017 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Bobek in the Case C-305/16, Avon Cosmetics Ltd versus The Commissioners for Her Majesty’s Revenue and Customs (ECLI:EU:C:2017:651) was published.

Avon Cosmetics Limited (‘Avon’) sells its beauty products in the United Kingdom to representatives, known colloquially as ‘Avon Ladies’, who in turn make retail sales to their customers (‘direct selling model’). Many of the Avon Ladies are not registered for VAT. As a result, their profit margins would not normally be subject to VAT.

 

That problem of ‘lost VAT’ or ‘VAT avoidance’ at the last stage of the supply chain is typical of direct selling models. In order to deal with that problem, the United Kingdom sought and obtained a derogation from the standard rule that VAT is charged on the actual sales price. In Avon’s case, that derogation essentially allowed the United Kingdom’s tax authority, Her Majesty’s Revenue and Customs (‘HMRC’), to charge Avon VAT, not on thewholesale price paid by the unregistered Avon Ladies, but instead on the retail price at which the Avon Ladies would go on to sell the products to the final consumer.

 

However, the way the derogation is applied does not take into account the costs incurred by the unregistered representatives in their retail selling activities, and the input tax that they would normally have been able to deduct had they been VAT registered (‘notional input tax’). In particular, where Avon Ladies buy products for demonstration purposes (not to resell but to use as a selling aid) they cannot deduct VAT on those purchases as input tax.

 

The result is that the disregarded notional input tax in relation to such costs ‘sticks’ in the supply chain and increases the overall VAT charged on the direct selling model over that charged on sales through ordinary retail outlets.

 

In the context of a challenge by Avon of its VAT assessment, the referring court asks a number of questions concerning the interpretation and validity of the Derogation. In particular, the referring court asks: (i) whether there is an obligation to take into account the notional input tax of direct resellers such as the Avon Ladies, (ii) whether there was an obligation for the United Kingdom to bring the issue of notional input tax to the European Commission’s attention when it requested the Derogation, and (iii) what would be/what are the consequences of failing to comply with either of those obligations.

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On September 7, 2017 the Japanese Ministry of Finance issued a press release announcing that on that same date the Government of Japan and the Government of the Russian Federation signed a Convention for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (Hereafter: the new DTA).

Although the DTA has been signed, it has not entered into force yet. For the new DTA to enter into force, the respective ratification procedures have to have been finalized in both countries. The Convention between the Government of Japan and the Government of the Union of Soviet Socialist Republics for the Avoidance of Double Taxation with respect to Taxes on Income, with Protocol, signed at Tokyo on 18 January, 1986 shall between Japan and Russia cease to be applicable from the date upon which the new DTA applies in respect of the taxes to which the new DTA applies in accordance with the provisions of Article 29, Paragraph 2 of the new DTA (“ENTRY INTO FORCE”).

 

Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.

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On September 7, 2017 the Court of Justice of the European Union (CJEU) judged in Case C-6/16, Eqiom SAS, formerly Holcim France SAS, Enka SA versus Ministre des Finances et des Comptes publics (ECLI:EU:C:2017:641).

This reference for a preliminary ruling concerns the interpretation of Articles 49 and 63 TFEU, and of Article 1(2) of Council Directive 90/435/EEC of 23 July 1990 on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States (OJ 1990 L 225, p. 6), as amended by Council Directive 2003/123/EC of 22 December 2003 (OJ 2004 L 7, p. 41) (‘the Parent-Subsidiary Directive’).

The request has been made in proceedings between Eqiom SAS, formerly Holcim France SAS, successor in law to Euro Stockage, and Enka SA, on the one hand, and the French tax authorities, on the other hand, concerning the refusal of the latter to exempt from withholding tax dividends distributed by Euro Stockage to Enka, the parent company of Euro Stockage.

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On September 6, 2017, the Swiss Federal Council opened a consultation on tax proposal 17. The Swiss Federal Council started the project “Tax proposal 17” after the failure of the third series of corporate tax reforms. The purpose of the proposal is to make a significant contribution to Switzerland remaining an appealing location and thus to added value, jobs and tax receipts.

The consultation will run for three months and ends on December 6, 2017. In a press release it is stated that the Federal Department of Finance (FDF) is planning to submit the dispatch for Parliament to the Federal Council in the spring of 2018. Consequently, the earliest that tax proposal 17 can enter into force is 2020.

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On September 6, 2017 the OECD released an update of its Guidance on the Implementation of Country-by-Country Reporting.

The additional guidance addresses a.o. the following issues:

·   the definition of revenues;

·   the treatment of MNE groups with a short accounting period; and

·   the treatment of the amount of income tax accrued and income tax paid.

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