Tax & Legal

The Supreme Tax Court has held that the 5% expense disallowance on tax-free dividends was, up to 2002, a restriction on the freedom of establishment rather than of capital movement and could thus be upheld in respect of a 33% share in a US company.

The Supreme Tax Court has held that there is ultimately no trade tax disallowance of expenses directly connected with tax-free dividend income earned through an Organschaft subsidiary.

The ECJ has held that provisions allowing full expense deduction within tax groups must be applied to otherwise eligible foreign subsidiaries.

In this issue: PwC Reports, Official Pronouncments, Supreme Tax Court Cases, From Europe and From PwC

An ECJ advocate general has suggested the court hold that the 5% effectively connected expense add-back for foreign dividends infringes a company’s freedom of establishment if an otherwise comparable domestic company could avoid the add-back by joining a tax group.