Tag: Article 49 TFEU

Article 49 of the Treaty on the Functioning of the European Union (TFEU)

“Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State.

Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 54, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.”

TFEU Articles 49 and 54 are the basis for State Aid cases.

Germany vs X GmbH & Co. KG, October 2022, European Court of Justice, Case No C-431/21

Germany vs X GmbH & Co. KG, October 2022, European Court of Justice, Case No C-431/21

A Regional Tax Court in Germany had requested a preliminary ruling from the European Court of Justice on two questions related to German transfer pricing documentation requirements. whether the freedom of establishment (Article 49 TFEU) or the freedom to provide services (Article 56 TFEU) is to be interpreted in such a way that it precludes the obligation to provide transfer pricing documentation for transactions with a foreign related parties (Section 90 (3) AO) and whether the sanctions regulated in section 162(4) AO could be contrary to EU law The Regional Tax Court considered that these provisions establish special documentation requirements for taxpayers with transactions with foreign related parties. In the event of non-compliance with these documentation requirements, section 162(4) AO leads to a sanction in the form of a fine/surcharge. Neither was provided for taxpayers with transactions with domestic related parties. However, such discrimination can be justified by compelling reasons in the public interest. In this context, the Regional Tax ... Read more
Finland vs D Oy, December 2021, Supreme Administrative Court, Case No. KHO:2021:179

Finland vs D Oy, December 2021, Supreme Administrative Court, Case No. KHO:2021:179

At issue was whether interest expenses incurred as a result of intra-group liabilities related to the acquisition of shares were tax deductible. In August 2010, the Swedish companies H AB and B AB had agreed, among other things, to sell E Oy’s shares to B AB and to allow B AB to transfer its rights and obligations to purchase the said shares directly or indirectly to its own subsidiary. B AB’s subsidiary had established D Oy in August 2010. In September 2010, before the completion of the acquisition, B AB had transferred its rights and obligations to purchase E Oy’s shares to D Oy. Ownership of E Oy’s shares had been transferred to D Oy at the end of September 2010. D Oy had financed the acquisition of E Oy’s shares mainly with a debt it had taken from B AB, from which D Oy had deducted the interest expenses incurred in its annual taxation. The tax audit report considered ... Read more
Finland vs G Oy, December 2021, Supreme Administrative Court, Case No. KHO:2021:178

Finland vs G Oy, December 2021, Supreme Administrative Court, Case No. KHO:2021:178

At issue was whether interest expenses incurred as a result of intra-group liabilities related to the acquisition of shares were tax deductible. In 2005, CA / S, indirectly owned by private equity investors A and B, had purchased a listed share in DA / S. DA / S’s subsidiary EA / S had established H AB in July 2008. On 25 August 2008, EA / S had transferred approximately 83.8 per cent of F Oy’s shares in kind to H AB and sold the remaining approximately 16.2 per cent at the remaining purchase price. On August 26, 2008, EA / S had subscribed for new shares in G Oy and paid the share subscription price in kind, transferring 56 percent of H AB’s shares. On August 27, 2008, G Oy had purchased the remaining 44 percent of H AB’s shares. EA / S had granted G Oy a loan corresponding to the purchase price, the interest expenses of which the ... Read more
Romania vs Impresa Pizzarotti & C SPA Italia, October 2020, ECJ Case C-558/19

Romania vs Impresa Pizzarotti & C SPA Italia, October 2020, ECJ Case C-558/19

A Regional Court of Romania requested a preliminary ruling from the European Court of Justice in the Case of Impresa Pizzarotti. Impresa Pizzarotti is the Romanian branch of SC Impresa Pizzarotti & C SPA Italia (‘Pizzarotti Italia’), established in Italy. In 2017, the Romanian tax authorities conducted an audit of an branch of Impresa Pizzarotti. The audit revealed that the branch had concluded, as lender, two loan agreements with its parent company, Pizzarotti Italia: one dated 6 February 2012 for EUR 11 400 000 and another dated 9 March 2012 for EUR 2 300 000. Those sums had been borrowed for an initial period of one year, which could be extended by way of addendum, that the loan agreements did not contain any clause concerning the charging of interest by Impresa Pizzarotti, and that although the outstanding amount as of 1 January 2013 was EUR 11 250 000, both loans had been repaid in full by 9 April 2014. Transactions between Romanian persons and non-resident ... Read more
Denmark vs Bevola, June 2018, European Court of Justice, Case No C-650/16

Denmark vs Bevola, June 2018, European Court of Justice, Case No C-650/16

The Danish company Bevola had a PE in Finland. The PE incurred a loss when it was closed in 2009 that could not be utilized in Finland. Instead, Bevola claimed a tax deduction in its Danish tax return for 2009 for the loss suffered in Finland. A deduction of the loss was disallowed by the tax authorities because section 8(2) of the Danish Corporate Tax Act stipulates that the taxable income does not include profits and losses of foreign PEs (territoriality principle). Bevola would only be entitled to claim a tax deduction for the Finnish loss in the Danish tax return by making an election of international joint taxation under section 31 A. However, such an election means that all foreign entities must be included in the Danish tax return and the election is binding for a period of 10 years. The decision of the tax authorities was confirmed by the National Tax Tribunal on 20 January 2014. The taxpayer ... Read more
Spain vs. Schwepps (Citresa), February 2017, Spanish Supreme Court, case nr. 293/2017

Spain vs. Schwepps (Citresa), February 2017, Spanish Supreme Court, case nr. 293/2017

The Spanish Tax administration made an income adjustment of Citresa (a Spanish subsidiary of the Schweeps Group) Corporate Income Tax for FY 2003, 2004, 2005 and 2006, resulting in a tax liability of €38.6 millon. Citresa entered into a franchise agreement and a contract manufacturing agreement with Schweppes International Limited (a related party resident in the Netherlands). The transactions between the related parties were not found to be in accordance with the arm’s length principle. In the parent company, CITRESA, the taxable income declared for the years 2003 to 2005 was increased as a result of an adjustment of market prices relating to the supply of certain fruit and other components by Citresa to Schweppes International Limited. In the subsidiary, SCHWEPPES, S.A. (SSA), the taxable income declared for the years 2003 to 2006 was increased as a result of adjustment of market prices relating to the supply of concentrates and extracts by the entity Schweppes International Limited, resident in Holland, to SSA. The taxpayer ... Read more