Tax Arbitration and the EU Treaties

in Haslehner, Werner; Kofler, Georg; Lyons, Timothy (Eds.) et al Alternative Dispute Resolution and Tax Disputes (2023)

Opinion Statement ECJ-TF 4/2022 on the ECJ Decision of 22 September 2022 in W AG (Case C-538/20) on the Deductibility of Foreign Final Losses

in European Taxation (2023), 63(2/3), 105-110

In this CFE Opinion Statement, submitted to the EU Institutions in November 2022, the CFE ECJ Task Force comments on the ECJ decision of 22 September 2022 in W AG (Case C-538/20), on the deductibility of ... [more ▼]

In this CFE Opinion Statement, submitted to the EU Institutions in November 2022, the CFE ECJ Task Force comments on the ECJ decision of 22 September 2022 in W AG (Case C-538/20), on the deductibility of foreign final losses. The W AG decision makes it clear that comparability should be examined differently depending on whether the exemption is granted by domestic or tax treaty law. The CFE ECJ Task Force has reservations regarding this distinction. For the taxpayer, an exemption has the same economic effects regardless of whether it is adopted through domestic law or tax treaty law. Moreover, W AG departs from the Court’s reasoning and thinking in Lidl Belgium, which also concerned Germany and the same rules. Ideally, the Court should have made this explicit. Finally, it remains to be seen whether Marks and Spencer (Case C-446/03) is still “good law” or if W AG was one of the final nails in the coffin of the “final loss” doctrine. [less ▲]

Auswirkungen der Investmentsteuerreform betreffend Vereinbarkeit mit EU-Recht, Verhinderung von Steuersparmodellen und Steuervereinfachung

Report (2023)

The InvStG 2018 addressed the various concerns raised from an EU law perspective prior to the reform. The reform of investment tax law can therefore be considered a success in this respect. Explicit ... [more ▼]

The InvStG 2018 addressed the various concerns raised from an EU law perspective prior to the reform. The reform of investment tax law can therefore be considered a success in this respect. Explicit disadvantages for cross-border situations existing prior to the reform have been almost completely eliminated with the InvStG 2018. Nevertheless, following the mission to critically examine the law from both a primary law and secondary law perspective, this report highlights points with regard to which a certain need for adjustment can be stated. These are all questions of detail, which are expected to concern only a small number of cases. There are no concerns for the large majority of regulations and cases. The tax saving models addressed by the investment tax reform, in particular the models of "Kopplungsgeschäfte", "Zins- & Dividendensurrogate", "Ertragsausgleich Enhancements" and with the Luxembourg SPF, are in principle effectively eliminated by the conceptual countermeasures in the InvStG 2018. Within the scope of the study, only selective tax avoidance options remained in the context of these models. At the same time, the new conception of investment taxation opened up new scope for tax structuring, particularly in the different partial exemption rates and the option-opening documentary requirements for the partial exemption rates, limited tax liability, real estate income and for tax-privileged investors. New tax structuring opportunities could also arise with cryptocurrencies and tokens. In order to avoid individual tax arrangements, the legislator could take up the regulatory proposals outlined in this report. For investment funds, which are particularly important in the mass case law of investment fund taxation, the InvStG 2018 has achieved its goal of legal and administrative simplification and thus a reduction of the compliance burden. These simplification effects have been relativised by the different partial exemption rates and the retroactive exemptions for tax- privileged investors. [less ▲]

Chancen und Grenzen von Schiedsverfahren im internationalen Steuerrecht

in Schön, Wolfgang; Stark, Johanna (Eds.) Zukunftsfragen des deutschen Steuerrechts IV (2022)

This contribution considers the opportunities created for thee improvement of international tax dispute resolution by various types of arbitration mechanisms, as well as their legal and political limits ... [more ▼]

This contribution considers the opportunities created for thee improvement of international tax dispute resolution by various types of arbitration mechanisms, as well as their legal and political limits in light of superior norms, in particular constitutional law requirements, EU fundamental rights, and internal market rules. [less ▲]

Is There a Need for a Directive on Pillar Two? A Few Normative Comments.

in Intertax, International Tax Review (2022), 50(6/7), 527-530

Poland’s request to link the entry into force of the Pillar 2 Directive to an international agreement on Pillar 1 raises fundamental questions about the European constitutional structure. Beyond the mere ... [more ▼]

Poland’s request to link the entry into force of the Pillar 2 Directive to an international agreement on Pillar 1 raises fundamental questions about the European constitutional structure. Beyond the mere legality of such a link, this contribution seeks to respond to some normative concerns related to the creation of such secondary legislation. [less ▲]

Assessment of recent anti-tax avoidance and evasion measures (ATAD & DAC6)

Report (2022)

Opinion Statement ECJ-TF 2/2021 on the ECJ Decision of 25 February 2021 in Société Générale (Case C-403/19) on the Calculation of the Maximum Amount of a Foreign Direct Tax Credit

in European Taxation (2022)

The Court’s decision in Société Générale reinforces established case law that EU law neither prohibits juridical double taxation nor does it impose an obligation on the residence Member State to prevent ... [more ▼]

The Court’s decision in Société Générale reinforces established case law that EU law neither prohibits juridical double taxation nor does it impose an obligation on the residence Member State to prevent the disadvantages that could arise from the exercise of competence thus attributed by the two Member States. The parallel existence of taxing jurisdiction, however, must be distinguished from the exercise of such jurisdiction by each Member State. While Member States are free to determine the connecting factors for the allocation of taxing jurisdiction in tax treaties, in exercising the “power of taxation, so allocated by bilateral conventions for the avoidance of double taxation, the Member States must comply with EU rules and, more particularly, observe the principle of equal treatment”. It is generally accepted in the Court’s case law that both the ordinary credit and exemption (including exemption with progression) methods are permissible to avoid double taxation. In Société Générale, this position was confirmed, specifically as regards the “maximum deduction” under the ordinary credit method in tax treaties, even though this treatment can result in a disadvantage for cross-border income as compared with domestic income. As the disadvantage in Société Générale was due to the difference between gross-basis taxation of dividends in the source Member States (Italy, the Netherlands and the United Kingdom) and net-basis taxation of those foreign-sourced dividends in the residence state (France), it remains to be seen whether or not future cases will bring clarity in light of the Seabrokers decision of the EFTA Court, which examined how expenses can be lawfully allocated to foreign income from the perspective of the residence Member State. [less ▲]

Interest and Non-Discrimination under the OECD Model Convention

in Maisto, Guglielmo (Ed.) Taxation of Interest under Domestic Law, EU Law and Tax Treaties (2022)

The taxation of interest in cross-border situations can often give rise to instances of discrimination, many of which can be remedied through a careful consideration of the non-discrimination rules ... [more ▼]

The taxation of interest in cross-border situations can often give rise to instances of discrimination, many of which can be remedied through a careful consideration of the non-discrimination rules contained in Article 24 OECD MC. This provision operates in tandem with the distributive rules of the tax treaty, but is not, in general, limited by them. A core difficulty of the application of the non-discrimination provision lies in establishing comparability of situations necessary to identify acceptable distinctions drawn in national law from those that are prohibited. This is especially challenging in the context of interest deduction limitation rules, which often do not simply attached consequences to the recipient's residence but to other criteria, which are however closely linked. This chapter proposes a test that builds on the traditional idea of simply adding the protected condition to characteristics of the disadvantaged taxpayer but refining this approach by searching for scenarios in which the "closely linked" criteria can the detached from each other to single out the basis of the discrimination. This test aims to improve on the rather rough traditional approach without the need for reference to a state's alleged discrimination aims and their "legitimacy" within the international tax system. The contribution goes on to show that both Article 24(4) and Article 24(3) OECD MC have an important role to play for cross-border interest payments to ensure equal treatment with respect to deductibility, the level of taxation and the granting of withholding tax credits. [less ▲]

Arbitration after BEPS

in Kofler, Georg; Mason, Ruth; Rust, Alexander (Eds.) Thinker, Teacher, Traveler – Reimagining International Tax (Essays in Honor of H. David Rosenbloom) (2021)

Following the introduction of increasingly complex international tax rules through the OECD's Base Erosion and Profit Shifting (BEPS) Project, a stronger focus has recently been placed on mandatory ... [more ▼]

Following the introduction of increasingly complex international tax rules through the OECD's Base Erosion and Profit Shifting (BEPS) Project, a stronger focus has recently been placed on mandatory binding dispute resolution mechanisms. Despite its great appeal from the perspectives of effectiveness and economy of procedure, mandatory tax arbitration faces a number of political, practical and also legal difficulties. This chapter, which is dedicated to H. David Rosenbloom, a long-standing champion of tax arbitration, considers those challenges. [less ▲]

Value Creation and Income Taxation: A Coherent Framework for Reform?

in Haslehner, Werner; Lamensch, Marie (Eds.) Taxation and Value Creation (2021)

Digitalization of the global economy has forced a rethink of the allocation of taxing rights along the lines of “value creation”. The current international tax system relies on a vast network of double ... [more ▼]

Digitalization of the global economy has forced a rethink of the allocation of taxing rights along the lines of “value creation”. The current international tax system relies on a vast network of double taxation conventions (DTCs) intended to allocate taxing rights between states and avoid double taxation. However, the system’s logic is rooted in the early 20th century and not fit- ting the modern global economy – particularly in so far as it presupposes a threshold physical presence in form of a “permanent establishment” (PE) to permit taxation in the state of source. Today, the traditional thresholds for giving taxing rights to “states of source” hardly reflect the reality of business activity that strongly relies on intangible assets and the provision of remote services, which are not easy to pin down at any particular place. Calls for fundamental changes crystalized in the OECD and G20 initiated BEPS Project launched in 2013 to reform the international tax system with one overall objective: To “ensure that profits are taxed where economic activities take place and value is created.” Yet despite virtual unanimity on that objective, and great number of measures already taken purportedly contributing to it, there is no clarity on its actual meaning. This contribution seeks to shed light on a potential meaning of "value creation" as it relates to (international) income taxation, employing a cross-disciplinary perspective. [less ▲]