PwC

Tax & Legal

Tax & Legal

Compatibility of Dutch group taxation regime with EU fundamental freedom of establishment


The European Court of Justice issued a joint judgment in two cases regarding the Dutch group taxation regime under which a parent company is not allowed to deduct interest in respect of a loan taken from a Swedish related company in order to finance its capital contribution to an Italian subsidiary. This is held to be in conflict with the EU freedom of establishment. On the other hand, the refusal to deduct currency losses resulting from fluctuations in the exchange rate is viewed by the court as being not in violation of EU-law. Continue reading

European Court of Justice: customs values and the recognition of transfer pricing adjustments


In its decision in Hamamatsu Photonics Deutschland (C-529/16) the European Court of Justice (ECJ) held that Articles 28 to 31 of the Customs Code (old version) must be interpreted as meaning that they do not permit an agreed transaction value, composed of an amount initially invoiced and declared and a flat-rate adjustment made after the end of the accounting period, to form the basis for the customs value, without it being possible to know at the end of the accounting period whether that adjustment would be made up or down. Continue reading

German taxation of dividends paid to Canadian pension fund in conflict with EU law?


The Lower Tax Court of Munich referred preliminary questions to the European Court of Justice regarding the compatibility of the German regime of dividend withholding tax imposed on a Canadian pension fund with the free movement of capital as provided in Article 63 of the Treaty on the Functioning of the European Union. Continue reading

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