PwC

Tax & Legal

Tax & Legal

ECJ – German Anti-Treaty-Shopping Rule infringes EU law


On 20 December 2017 the European Court of Justice (ECJ) issued its decision on two cases referred to it by the Cologne Tax Court on the compatibility of the anti-abuse rule in Section 50d Income Tax Act (ITA) with EU law. According to Section 50d (3) ITA certain intermediary foreign companies are not entitled to a (full or partial) refund of German withholding tax; without a preceding oral hearing the ECJ took the view that the section was incompatible with both the Parent-Subsidiary Directive and the freedom of establishment. Continue reading

VAT: Divergent treatment of discounts on medicinal products violates EU law


On 20 December 2017 the European Court of Justice (ECJ) held that the divergent VAT treatment of discounts granted by pharmaceutical companies (i.e. trader/entrepreneur for VAT purposes) to statutory (public) health insurance funds and private health insurance funds constitutes an infringement of EU law. The ECJ followed the Advocate General’s opinion and confirmed the doubts of the German Supreme Tax Court which had referred the question to the ECJ under reference V R 42/15. Continue reading

Foreign Tax Act: Income adjustment in accordance with community law?


The Lower Tax Court of Rhineland Palatinate has asked the ECJ to rule on the income adjustment provision of the Foreign Tax Act as amended in 2003 as it might not be in accordance with EU-law. The focus of the judicial review is on the tax consequences of a business relationship with a related party and where the terms do not meet the third party comparison test. The ECJ advocate general has suggested the court decide that the German rules for profit adjustment under Sec. 1 Foreign Tax Act are not in violation of the freedom of establishment. Continue reading

Immediate taxation on transfer of a foreign branch is not proportional


In a decision published on 23 November 2017 the European Court of Justice (“ECJ”) again considered the question on the taxation of the transfer of assets of a foreign branch in exchange for new shares. The question was referred to it by the Administrative Court of Helsinki in Finland. The ECJ held that the taxpayer must be given the choice between an immediate charge to tax and a deferred payment of tax. Continue reading

European Court of Justice: compulsory content of invoices for purpose of deduction of input VAT


On 15 November 2017 the European Court of Justice (ECJ) published its decision in the joined cases of Geissel and Butin ruling that Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (“the VAT Directive”) – Articles 168(a) and 178 (a) together with Article 226(5) – must be interpreted as precluding national legislation, which makes the exercise of the right to deduct input VAT subject to the condition that the address where the issuer of an invoice carries out its economic activity must be indicated on the invoice. Continue reading

Referral to European Court of Justice: Does expatriate exit taxation (Section 6 Foreign Transactions Act) contravene the terms of the Agreement for the Free Movement of Persons?


On 2 November 2017 the Tax Court of Baden-Württemburg released a press bulletin stating that by a notice dated 14 June 2017 (2K 2413/15), it had referred a question to the European Court of Justice (“ECJ”) with regard to Section 6 Foreign Transactions Act (“FTA”) – expatriate exit taxation. The question referred was whether the expatriate exit tax rule under Section 6 FTA contravened the principle of non-discrimination contained in the Agreement for the Free Movement of Persons between the EU and Switzerland. Continue reading

VAT – Supply of goods – Finance lease with option to purchase


On 4 October 2017 the European Court of Justice decided that a finance lease with an option to purchase should be qualified as a “supply of goods” where the exercise the option appears to be the only economically rational choice that the lessee could make at the appropriate time. As a result the whole of the VAT becomes due when the object to be leased is handed over. Continue reading

VAT: Referrals to European Court of Justice on imputed taxation (“Sollbesteuerung”) and margin-scheme taxation.


Supreme Tax Court judges have expressed doubt both upon the previously uncontested obligation of entrepreneurs subject to the so-called imputed taxation (“Sollbesteuerung) to pre-finance VAT and upon the exclusion of the reduced VAT rate on the provision of holiday apartment rentals according to the so-called margin-scheme taxation. The Supreme Tax Court has therefore referred two cases to the European Court of Justice (ECJ) (i) referral of 21 June 2017: V R 51/16; and (ii) referral of 3 August 2017: V R 60/16. Continue reading