Tag: Freedom of establishment

Netherlands vs [X] B.V., legal successor to [Y] U.A., March 2020, Pending before the Supreme Court, Case No ECLI:NL:PHR:2020:102

Netherlands vs [X] B.V., legal successor to [Y] U.A., March 2020, Pending before the Supreme Court, Case No ECLI:NL:PHR:2020:102

To acquire companies and resell them with capital gains a French Investment Fund distributed the capital of its investors (€ 5.4 billion in equity) between a French Fund Commun de Placement à Risques (FCPRs) and British Ltds managed by the French Investment Fund. For the purpose of acquiring the [X] group (the target), the French Investment Fund set up three legal entities in the Netherlands, [Y] UA, [B] BV, and [C] BV (the acquisition holding company). These three joint taxed entities are shown as Fiscal unit [A] below. The capital to be used for the acquisition of [X] group was divided into four FCPRs that held 30%, 30%, 30% and 10% in [Y] respectively. To get the full amount needed for the acquisition, [Y] members provided from their equity to [Y]: (i) member capital (€ 74.69 million by the FCPRs, € 1.96 million by the Fund Management, € 1.38 million by [D]) and (ii) investment in convertible instruments (hybrid loan ... Continue to full case
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 ... Continue to full case
Germany vs Hornbach-Baumarkt, May 2018, European Court of Justice, C-382/16

Germany vs Hornbach-Baumarkt, May 2018, European Court of Justice, C-382/16

In the Hornbach-Baumarkt case, a German parent company guaranteed loans of two related companies for no remuneration. The German tax authorities made an assessment of the amount of income allocated to the parent company as a result of the guarantee, based on the fact that unrelated third parties, under the same or similar circumstances, would have agreed on a remuneration for the guarantees. Hornbach-Baumarkt argued that German legislation was in conflict with the EU freedom of establishment and lead to an unequal treatment of domestic and foreign transactions since, in a case involving german domestic transactions, no corrections to the income would have been made for guarantees granted to subsidiaries. The company further argued that the legislation is disproportionate to achieving the objectives as it provides no opportunity for the company to present commercial justification for the non-arm’s-length transaction. The German Court requested a preliminary ruling from the European Court of Justice on these arguments. In May 2018 The European ... Continue to full case
Spain vs. CÍTRICOS Y REFRESCANTES, S.A., Oct. 2016

Spain vs. CÍTRICOS Y REFRESCANTES, S.A., Oct. 2016

The CÍTRICOS case is about the use of TNM-method in Spain prior to 2006. Article 16 of the pre-reform 2006 TRLIS, picked up the implementation of this method as a preferred respect to other methods. Following the amendment of the article, this preference has disappeared, invoking a new and more in line with the principles of the OECD. – Method net margin operations (TNMM) applied by the Administration. This method was not expressly admitted by the Spanish legislation prior to the 2006 reform. The tax administration justify their application of the method in the following notes: – Article 9 of the Hispano-Dutch Convention (Being market valuation of related-party transactions between an entity resident with a Dutch resident entity). In either case, when the two enterprises in their relations, joined by accepted conditions imposed, which differ from those which would be made between independent enterprises, the benefits of the companies would have obtained in the absence of these conditions and that ... Continue to full case
UK vs Cadbury- Schweppes, September 2006, European Court of Justice, Case C-196/04

UK vs Cadbury- Schweppes, September 2006, European Court of Justice, Case C-196/04

The legislation on ‘controlled foreign companies’ in force in the United Kingdom provided for the inclusion, under certain conditions, of the profits of subsidiaries established outside the United Kingdom in which a resident company has a controlling holding. The UK tax authorities thus claimed from the parent company of the Cadbury Schweppes group, established in the United Kingdom, tax on the profits made by one of the subsidiaries of the group established in Ireland, where the tax rate was lower. The Court was asked to consider whether this legislation was compatible with the provisions of the Treaty on freedom of establishment (Articles 43 and 48 EC). The Court recalled that companies or persons could not improperly or fraudulently take advantage of provisions of Community law. However, the fact that a company has been established in a Member State for the purpose of benefiting from more favourable tax legislation does not in itself suffice to constitute abuse of the freedom of ... Continue to full case
Belgium vs Lammers & Van Cleeff, January 2008, European Court of Justice, Case No. C-105/07

Belgium vs Lammers & Van Cleeff, January 2008, European Court of Justice, Case No. C-105/07

The question in this case, was whether EU community law precluded Belgien statutory rules under which interest payments were reclassified as dividends, and thus taxable, if made to a foreign shareholder company. A Belgian subsidiary was established and the two shareholders of the Belgian subsidiary and the parent company, established in the Netherlands, were appointed as directors. The subsidiary paid interest to the parent which was considered by the Belgian tax authorities in part to be dividends and was assessed as such. The European Court of Justice was asked to rule on the compatibility of these Belgien statutory rules with EU Community law The Court ruled that art. 43 and 48 EC precluded national legislation under which interest payments made by a company resident in a member state to a director which was a company established in another member state were reclassified as taxable dividends, where, at the beginning of the taxable period, the total of the interest-bearing loans was higher ... Continue to full case