© 2011 Grant Thornton UK LLP. All rights reserved.

IFA Presentation

EU law update

Roopa AitkenGrant Thornton UK LLPMay 2011

© 2011 Grant Thornton UK LLP. All rights reserved.

Agenda

• Philips Electronics: referral to Court of Justice (Jan 2011)

• Application of EU law to BVIs• Capital gains / exit taxes

© 2011 Grant Thornton UK LLP. All rights reserved.

Philips Electronics: Referral to Court of Justice: January 2011

Philips Netherlands

Philips UKJV Co.

Netherlands

3rd Party

UK

50%

50%100%

Profits LossesLosses ?

© 2011 Grant Thornton UK LLP. All rights reserved.

Philips Case: 4 Questions referred

1. Restriction?

2. Justified?

3. Proportionate?

4. Philips UK entitled to make claim?

© 2011 Grant Thornton UK LLP. All rights reserved.

Combinations of justifications

M&S (C-446/03)December 2005

• balanced allocation; • double use of losses; and• preventing tax avoidance

Oy AA (C-231/05)July 2007

• balanced allocation; and• preventing tax avoidance

Lidi Belgium (C-414/06)May 2008

• balanced allocation; and• preventing double use of losses

X Holding BV (C-337/08)February 2010

• balanced allocation

© 2011 Grant Thornton UK LLP. All rights reserved.

Is Philips UK entitled to benefit?

Philips Netherlands

Philips UKJV Co.

Netherlands

3rd Party

UK

50%

50%100%

Profits LossesLosses ?

© 2011 Grant Thornton UK LLP. All rights reserved.

Application of EU law to BVIs

• Prunus case (C-384/09): BVIs

5 May 2011

• Question: treat BVIs as a Member State or as a third country?

• Decision also applies to other OCTs listed in Annex II to the Treaty e.g. Falkland Islands, Netherlands Antilles, Cayman Islands etc

© 2011 Grant Thornton UK LLP. All rights reserved.

Exit taxes and capital gains

• Nov 2010 Commission referral to C of J: Denmark, Netherlands, Spain

• 2 cases pending at ECJ on company exit taxes– National Grid Indus BV (C-371/10); and– Commission v Portugal (C-38/10)

• Jan 2011: Irish exit taxes: Commission request

• Commission action against UK: Feb 2011 s 13 TCGA 1992

• UK - impact on intra-group transfers (s171 TCGA 1992)?

© 2011 Grant Thornton UK LLP. All rights reserved.

UK Intra-group transfers

EU EU EU

UK UK UK EU UK 3rd Country

Assets Assets Assets

Tax neutraltransfer?