15_Kerschner_Xiamen Summer School

Justifications
Fiscal cohesion Balanced allocation of taxing rights Prevention of tax avoidance Effectiveness of fiscal supervision and tax collection
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Fundamental Freedoms
General non-discrimination clause (Art 18 TFEU)
No discrimination on grounds of nationality
General free movement (Art 21 TFEU) 5 fundamental freedoms
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Case law on the application of the fundamental freedoms
Institute for Austrian and International Tax Law

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Order of Priority I
Freedom of establishment (Art 49 TFEU)

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3
Principles of EU law I
Supremacy
Relation between EU law and national law „the law stemming from the EC Treaty (now TFEU) could not be overridden by domestic legal provisions“
More than one freedom may be applicable – no explicit rules of priority Third-country situations: only free movement of capital is applicable
ECJ’s rule of priority: if one of the freedoms is primarily affected, the other one is only affected as an „unavoidable consequence“
Where the national legislation in question does not apply exclusively to situations in which the parent company exercises decisive influence over the dividend paying company, can a resident company rely upon Article 63 TFEU … in respect of dividends received from a subsidiary over which it exercises decisive influence and which is resident in a third country?
Order of priority Third countries: standstill clause re the free movement of capital
Comparability analysis
Vertical and horizontal comparison Comparability in third-country situations
Institute for Austrian and International Tax Law

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14
ECJ Argenta Spaarbank, C350/11 July 4, 2013
Deduction for risk capital also for foreign PE? Freedom of establishment aimed at ensuring equal treatment by the host Member State, but also at home Member State Different treatment of domestic PE and foreign PE (the income of which is not taxed) Comparable situations
ECJ March 7, 1985, C 32/83, Van Gend & Loos Clearly and precisely worded Unconditional and independent from any national implementation measure
EU directive’s provisions:
Free movement of goods (Arts. 28 et seq.) Free movement of workers (Arts. 45 et seq.) Freedom of establishment (Arts. 49 et seq.) Freedom to provide services (Arts. 56 et seq.) Free movement of capital (Arts. 63 et seq.)
(ECJ July 15, 1964, 6/64 Costa v E.N.E.L)
EU law prevails over national law (even constitutional law)
Institute for Austrian and International Tax Law
Proportionality
Institute for Austrian and International Tax Law

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2
Introductory remarks
Institute for Austrian and International Tax Law
ECJ February 10, 2011, C-436/08, C-437/08, Haribo and Salinen
Institute for Austrian and International Tax Law

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Order of Priority II
Individuals and companies Primary and secondary right of establishment Directed at host state and home state
Free movement of capital (Art 63 TFEU)
Precise and unconditional Time limit elapsed or MS failed to implement it correctly
Institute for Austrian and International Tax Law

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ECJ‘s answer
In general: Facts of the case But in 3rd-country situations: Provision at issue!
Thus, here: Free movement of capital!
பைடு நூலகம்
Institute for Austrian and International Tax Law

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4
Principles of EU law II
Direct effect
confers legally enforceable rights part of national law – no need for implementation TFEU treaty provisions:
„A national measure … primarily affects freedom of establishment … provisions cannot be relied on in a situation involving a company in a non-member country”
Also applicable in third-country cases Relevant for direct taxation
directly applicable
Institute for Austrian and International Tax Law

www.wu.ac.at/taxlaw
Institute for Austrian and International Tax Law

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10
ECJ FII Group Litigation, C35/11 November 13, 2012
Explicit question referred by UK Tax Court:
The Impact of European Law on Tax Treaty Law
Ina Kerschner June 25, 2014
Institute for Austrian and International Tax Law

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1
Agenda
Principles of EU law Fundamental Freedoms

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Case law on the comparability analysis
Institute for Austrian and International Tax Law

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Discrimination Test Discrimination: "Application of different rules to comparable situations or the application of the same rules to different situations“ Selection of situations to be compared Evaluation of comparability
Protection of capital movements as such Also applicable to third countries Art 64 TFEU: standstill clause
Overlap: Direct investments in the form of an establishment Most relevant overlap in ECJ case law
Institute for Austrian and International Tax Law

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13
Vertical pair of comparison
Internal situation and cross-border situation Factual cross-border and hypothetical internal situation Inbound and outbound
Institute for Austrian and International Tax Law

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9
ECJ Lasertec, C-492/04 May 10, 2007
loan 75 % interest/dividends
German thin-cap rules