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On April 28, 2017 the Japanese Ministry of Finance issued a press release announcing that the governments of Japan and the Russian Federation have agreed in principle on a new Convention replacing the Tax Convention that is currently in place between both jurisdictions.
Read more: Japan and the Russian Federation agree in principle on a new DTA
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On April 27, 2017 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Kokott in the Case C-39/15, Argenta Spaarbank NV versus Belgium (ECLI:EU:C:2017:323) was published.
The purpose of these preliminary ruling proceedings is to clarify whether Directive 90/435/EEC (‘the Parent-Subsidiary Directive’) conflicts with a Belgian rule according to which interest payments by a company are not regarded as decreasing profits to the extent that in the same tax year it receives exempted dividends from holdings which have been owned by the company for less than a year. This does not depend on any relationship between the interest paid and the holdings.
The question arises against the backdrop of the fiscal treatment of interest expenses claimed by the Belgian-based credit institution Argenta Spaarbank in the years 2000 and 2001. As it also received dividends in the corresponding period from company shares that had been held for less than a year, the tax administration treated interest expenses, to the amount of this dividend income, as non-deductible.
The court is asked to examine the disputed measure, first, in the light of Article 4(2) of the Parent-Subsidiary Directive, according to which the Member States may provide for a prohibition on the deduction of costs relating to the holding. Second, the referring court asks whether the rule may be covered by Article 1(2) of the Parent-Subsidiary Directive, according to which national provisions on the prevention of tax evasion remain unaffected. However, it is first necessary to determine whether a Member State is actually bound by the Parent-Subsidiary Directive in the circumstances described.
Read more: The opinion of the AG in Case C-39/16, Argenta Spaarbank (Parent-Subsidiary Directive)
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On April 27, 2017 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Mengozzi in the Case C-648/15, Republic of Austria versus Federal Republic of Germany (ECLI:EU:C:2017:311) was published.
The underlying case is the first in which a Member State, here the Republic of Austria, has brought before the Court, pursuant to Article 273 TFEU, a dispute, between it and another Member State, namely the Federal Republic of Germany, ‘which relates to the subject matter of the Treaties’ and ‘is submitted to it under a special agreement between the parties’.
That dispute relates to the interpretation and application of Article 11 of the Convention of 24 August 2000 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 (‘the German-Austrian Convention’), for the purposes of the taxation of interest from registered certificates known as ‘Genussscheine’ acquired by UniCredit Bank Austria AG (‘Bank Austria’), a company established in Austria, from a German bank, the Westdeutsche Landesbank Girozentrale Düsseldorf und Münster, now Landesbank NRW (‘WestLB’).
In essence, while the Republic of Austria considers that, as the Member State of residence of the beneficial owner of the interest paid, it alone is entitled to tax that income, pursuant to Article 11(1) of the German-Austrian Convention, the Federal Republic of Germany also claims the right to tax that income, as the Member State in which that interest originates, because the interest must be classified as ‘income from rights or debt-claims with participation in profits’ within the meaning of Article 11(2) of the German-Austrian Convention. That conflict of interpretation led to double taxation of the interest received by Bank Austria, which gave rise to the dispute before the Court.
In addition to the opportunity to resolve this technical dispute, the present case more broadly offers the Court the opportunity to define the limits of its jurisdiction under Article 273 TFEU and, in view of the nature of the dispute before it, the procedural and interpretative rules and substantive law applicable in this context.
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On April 21, 2017 the Australian Federal Court judged in the case between Chevron Australia Holdings PTY Ltd (CAHPL) and the Commissioner of Taxation of the Commonwealth of Australia. The dispute regards the question whether or not CAPHL is allowed to take a deduction into account for Australian Income Tax purposes for interest due over a Credit Facility Agreement that was made available by Chevron Texaco Funding Corporation (CFC, a 100% US-resident subsidiary of CAPHL). Transfer pricing principles play a central role in the judgment of the Court.
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On April 26, 2017 the Court of Justice of the European Union (CJEU) judged in Case C-564/15, Tibor Farkas versus Nemzeti Adó- és Vámhivatal Dél-alföldi Regionális Adó Főigazgatósága (ECLI:EU:C:2017:302).
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, as amended by Council Directive 2010/45/EU of 13 July 2010 (‘Directive 2006/112’), and the principles of fiscal neutrality and proportionality.
The request has been made in proceedings between Mr Tibor Farkas and the Nemzeti Adó- és Vámhivatal Dél-alföldi Regionális Adó Főigazgatósága (Dél-alföld Regional Tax Directorate, part of the National Treasury and Customs Authority, Hungary, ‘the Hungarian tax authority’) concerning the latter’s decision that Mr Farkas has an outstanding tax liability and imposing a tax penalty on him as a result of the non-application of national provisions on the reverse charge system.
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