Sep 12

 

CJEU expected to judge in Case C-648/15, Austria v Germany (the interpretation and application of Article 11 of the DTA between Germany and Austria)

 

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 his conclusion the Advocate General to the CJEU propose that the Court should: hold that the phrase ‘income from rights or debt-claims with participation in profits’, contained in Article 11(2) 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 must be interpreted as meaning that it covers income which provides a creditor with a part or a share of the debtor’s profits, to the exclusion of income which varies only in the event of losses incurred by that debtor.

 

More information with respect to the Opinion of the Advocate General in this case can be found here.

 

 

 

 

Sep 14

 

CJEU expected to judge in Case C-628/15, The Trustees of the BT Pension Scheme (Freedom of establishment)

 

Questions referred for a preliminary ruling:

 

1.     Given that the Court, in its answer to Question 4 in the judgment of 12 December 2006, [Test Claimants in the FII Group Litigation, (C‑446/04, EU:C:2006:774)], determined that Articles 43 and 56 of the EC Treaty — now Articles 49 TFEU and 63 TFEU — precluded legislation of a Member State which allows resident companies distributing dividends to their shareholders which have their origin in foreign-sourced dividends received by them to elect to be taxed under a regime which permits them to recover advance corporation tax paid, but, first, obliges those companies to pay that advance corporation tax and subsequently to claim repayment and, secondly, does not provide a tax credit for their shareholders, whereas those shareholders would have received such a tax credit in the case of a distribution made by a resident company which had its origin in nationally sourced dividends, are any rights under EU law conferred on those shareholders themselves, whether under Article 63 TFEU or otherwise, in cases where they are the recipients of the dividends elected to be paid under that regime, in particular where a shareholder is resident in the same Member State as the company distributing the dividends?

 

2.     If the shareholder referred to in Question 1 does not itself have rights under Article 63 TFEU, is it entitled to rely on any infringement of rights under Article 49 TFEU or Article 63 TFEU of the company distributing the dividend?

 

3.     If the answer to Question 1 or Question 2 is that the shareholder has rights under or can rely on EU law, does EU law impose any requirements as to the remedy to be provided to the shareholder under domestic law?

 

4.     Does it make any difference to the Court’s answer to the above questions that:

(a)   the shareholder is not liable to income tax in the Member State on any dividends received, with the consequence that, in the case of a distribution made by a resident company outside the above regime, the tax credit to which the shareholder is entitled under domestic legislation may result in a payment of the tax credit to the shareholder by the Member State;

(b)   the national court has decided that the infringement of EU law by the domestic legislation in question was not sufficiently serious so as to give rise to a liability of the Member State in damages in favour of the company distributing the dividends, under the principles established [in the judgment of 5 March 1996, Brasserie du pêcheur and Factortame (C‑46/93 and C‑48/93, EU:C:1996:79)], or that

(c)    in some cases, but not all, the company distributing the dividends under the above regime may have increased the amount of its distributions paid to all shareholders to provide a cash sum equivalent to that which would be achieved by an exempt shareholder from a payment of dividends outside the regime?

 

In his conclusion the Advocate General proposed that the Court answer the questions referred for a preliminary ruling by the Court of Appeal (England and Wales) (Civil Division) (United Kingdom) as follows:

 

1.     Article 63 TFEU confers rights on shareholders which have received foreign-sourced dividends treated as FIDs on which they may rely in legal proceedings.

 

2.     The principle of the primacy of EU law obliges the Member States to adopt such measures as are necessary to enable any person that has suffered discrimination prohibited by, inter alia, Article 63 TFEU to obtain the payment of any sums to which it would have been entitled in the absence of such discrimination. If the effectiveness of Article 63 TFEU is to be preserved and shareholders which have received foreign-sourced dividends treated as FIDs are to be guaranteed effective judicial protection, it is necessary that they should be placed, in so far as is possible and in a manner consistent with the principles of equivalence and effectiveness, in the position they would have been in had they not suffered discrimination as a result of the national provisions in question.

 

3.     The Court regards as irrelevant:

-   the fact that, in the Member State in which it is resident, the shareholder is not liable to tax on any dividends received, with the consequence that, in the case of a distribution made by a resident company outside the FID regime, the tax credit to which the shareholder is entitled under domestic legislation could result in a payment of that tax credit to the shareholder by the Member State;

-   the fact that the national court has decided that the infringement of EU law by the domestic legislation in question is not sufficiently serious to give rise to liability in damages on the part of the Member State in favour of the company distributing the dividends, in accordance with the principles established in the judgment of 5 March 1996, Brasserie du pêcheur and Factortame (C‑46/93 and C‑48/93, EU:C:1996:79), as the rights which Article 63 TFEU confers on the shareholders in question are independent of the rights conferred on the companies distributing the dividends;

-   the fact that the company distributing the dividends under the abovementioned regime may have increased the amount of its distributions to all shareholders so as to pay a cash sum equivalent to that which would have been obtained by an exempt shareholder from a payment of dividends outside the FID regime.

 

More information with respect to the Opinion of the Advocate General in this case can be found here.

 

 

 

 

Sep 14

 

CJEU expected to judge in Case C-646/15, Trustees of the P Panayi Accumulation & Maintenance Settlements (Freedom of establishment)

 

Questions referred for a preliminary ruling:

 

(1)   Is it compatible with the freedom of establishment, the free movement of capital, or the freedom to provide services for a Member State to enact and maintain legislation such as section 80 of the Taxation of Chargeable Gains Act 1992 under which a charge to tax arises on the unrealised gains in value of the assets comprised in a trust fund if the trustees of a trust become at any time neither resident nor ordinarily resident in the Member State?

 

(2)   On the assumption that such a charge to tax restricts the exercise of the relevant freedom, is such a charge justifiable in accordance with the balanced allocation of powers of taxation, and is such a charge proportionate where the legislation neither grants the trustees the option to defer the charge to tax or to pay in instalments, nor does it take into account any subsequent fall in the value of the trust assets?

 

Specifically, the following questions are referred:

 

(3)   Are any of the fundamental freedoms engaged where a Member State imposes a charge to tax on unrealised capital gains on the increase in value of assets held by trusts at the time when the majority of the trustees cease to be resident or ordinarily resident in that Member State?

 

(4)   Is a restriction on the freedom created by that exit charge justified in order to ensure balanced allocation of powers of taxation, in circumstances where it was possible that capital gains tax might still be imposed on the realised gains, but only if specific circumstances arose in the future?

 

(5)   Is proportionality to be determined on the facts of the individual case? In particular, is the restriction created by such a charge to tax proportionate in circumstances where:

(a)   the legislation makes no provision for an option to defer the payment of tax or for payment in instalments, or for account to be taken of any subsequent fall in the value of the trust assets after the exit,

(b)   but in the particular circumstances of the assessment to tax under appeal, the assets were sold before the tax was payable and the relevant assets did not decrease in value between the relocation of the trust and the date of sale?

 

In his conclusion the Advocate General proposed that the Court reply to the request for a preliminary ruling from the First-tier Tribunal (Tax Chamber) of the United Kingdom as follows:

(1)   The answer to Questions 1 and 3 must be that a trust may rely on the fundamental freedoms provided for in Article 54 TFEU even though it has no legal personality under national law. The foregoing is subject to the condition that the trust is able to engage in economic transactions in its own right and to that extent benefits from and is subject to its own rights and obligations under national law. Taxing the unrealised capital gains accruing to a trust (as such or in the person of the trustees) on the ground that national law deems the place of effective management to have been transferred to another Member State constitutes a restriction of the freedom of establishment.

 

(2)   The answer to Questions 2 and 4 must be that that restriction on the freedom of establishment can in principle be justified on the ground of preserving the allocation of the powers of taxation between the Member States. That is the case even where, although the exit State to some extent retains an option to tax, that option no longer lies within the autonomous discretion of that Member State but is essentially dependent on the decisions of the taxable person.

 

(3)   The answer to questions 2 and 5 must be that the proportionality of the taxation of unrealised capital gains must be assessed by reference to the particular situation obtaining at the time of the assessment to tax. It is disproportionate where, as here, there is no option to defer payment and where the tax debt would fall due at a later date if it were not for the exit. This is the case irrespective of whether the assets concerned were disposed of before the due date for payment and without any fall in value. The principle of proportionality does not require the exit State to take account of any subsequent fall in the value of operating assets.

 

More information with respect to the Opinion of the Advocate General in this case can be found here.

 

 

 

 

Sep 14

 

CJEU expected to judge in Case C-132/16, Iberdrola Inmobiliaria Real Estate Investments (VAT legislation – Deduction of input tax – Services supplied free of charge for the benefit of the municipal infrastructure)

 

Questions referred for a preliminary ruling:

 

1. Do Article 26(1)(b), Article 168(a), and Article 176 of Directive 2006/112 preclude a provision of national law such as Article 70(1)(2) of the ZDDS, which restricts the right to deduct input VAT in respect of the supply of services relating to construction or improvement of a property owned by a third party, which are used both by the recipient of the supply and by the third party, for the sole reason that the third party enjoys the result of those services free of charge, without taking into account the fact that the services are to be used in the context of the economic activity of the taxable recipient?

 

2. Do Article 26(1)(b), Article 168(a), and Article 176 of Directive 2006/112 preclude a tax practice consisting of refusing to recognise the right to deduct the input VAT in respect of the supply of services, where the expenditure corresponding to those services is counted among the taxable person’s general costs, on the ground that it was incurred in order to construct or improve a property owned by another person, without taking into account the fact that that property is also to be used by the recipient of the supply of building services in the context of its economic activity?

 

In his conclusion the Advocate General proposed that the two questions referred by the Varhoven administrativen sad (Supreme Administrative Court of the Republic of Bulgaria) be answered together as follows:

Article 26(1)(b), Article 168(a) and Article 176 of the VAT Directive are to be interpreted to the effect that they do not permit the deduction of input tax for services which are supplied free of charge directly to a third party for its own purposes, even if they are motivated by business reasons. This holds irrespective of the manner of entry in the accounts under national law chosen by the taxable person. Consequently, the abovementioned provisions do not preclude a national rule such as Article 70(1)(2) of the ZDDS or national administrative practice to that effect.

 

More information with respect to the Opinion of the Advocate General in this case can be found here.

 

 

 

 

 

Sep 16

 

Informal ECOFIN meeting

 

Corporate Taxation Challenges of the Digital Economy - Ministers will discuss how to modernize the corporate income tax rules in a way that would take into account the new business models using digital technology.

 

 

 

 

 

 

 

 

 

 

 

The schedule above merely contains a selection of events/important dates taking place during the week and should in no way be considered to be complete. It is very well possible that other important events take place during the week that were not included in the schedule above. It is your own responsibility to research other sources to review whether other important events take place that are not included in the schedule above.

 

Furthermore the schedule above is solely based on the information provided as by the respective authorities when the schedule above was drafted. It is your own responsibility to check whether the information included in the schedule above is complete, accurate and correct. International Tax Plaza and/or its owners do not accept any liability if the information provided in the schedule above is incomplete, not accurate and/or incorrect.

 

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