Tax & Legal

An ECJ advocate general has suggested the court recognise a restriction on the free movement of capital from the differing treatment of the corporation tax underlying domestic and foreign dividends, but hold it to be justified in the interests of maintaining the internationally agreed balance of taxing rights.

The Supreme Tax Court has held that a US distribution of shares in a former subsidiary is a tax-free capital repayment to a German resident shareholder if so classified under US law.

The Supreme Tax Court has followed an ECJ case in holding that a foreign corporate shareholder may claim from the local tax office a refund of the tax deducted at source from its dividend.

The Supreme Tax Court has followed an ECJ case in holding that a foreign corporate shareholder may claim from the local tax office a refund of the tax deducted at source from its dividend.

The ECJ has held that no restriction on the freedom of capital movement arises from relieving domestic double taxation on dividend income under an exact imputation system, whilst foreign double taxation is relieved by exempting the foreign income.

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.

The Supreme Tax Court has held that the provision in the Trade Tax Act requiring that foreign dividends on shareholdings of up to 10% be charged to tax if received in 2001 is contrary to European law and must be disapplied for that year.

Despite apparently favourable ECJ judgments, the Supreme Tax Court has once again refused a taxpayer credit for the foreign corporation tax due on a dividend received during the currency of the old, imputation tax System.

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

The ECJ has held that the foreign tax imputation credit on a dividend received from abroad is the lower of the corporation tax shown to have been paid abroad and the income tax due on the dividend by recipient.

An ECJ advocate general has suggested the court give rather general guidance on the calculation and verification of the creditable corporation tax underlying a dividend from another EU country.