November 2015 - edition 147EU Tax Alert
The EU Tax Alert is an e-mail newsletter to inform you of recent developments in the EU that are of interest for tax professionals. It includes recent case law of the European Court of Justice, (proposed) direct tax and VAT legislation, customs, state aid, developments in the Netherlands, Belgium and Luxembourg and more.
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Highlights in this edition
Commission announces final decisions in Starbucks and Fiat State Aid investigationsOn 21 October 2015, the Commission announced its final decisions that the advance pricing agreements concluded with Starbucks (the Netherlands) and Fiat (Luxembourg) constitute unlawful State aid. In both cases, the Commission states that the tax burden was unduly reduced by EUR 20 to 30 million over the period under investigation. The Commission requires the Netherlands and Luxembourg to recover such State aid from Starbucks and Fiat respectively.
ECOFIN Council reaches agreement on the automatic exchange of information on tax rulings and APAsOn 6 October 2015, the Council of the European Union reached agreement on a proposal for a Council Directive (‘the New Directive’) amending Directive 2011/16/EU (Directive on administrative cooperation between Member States) and requiring automatic exchange of information on ‘advance tax rulings’ (‘Tax Rulings’) and ‘advance pricing arrangements’ (‘APAs’) between EU Member States (‘MSs’) and, subject to limitations, to the EU Commission.
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Contents
Highlights in this edition• Commission announces final decisions in Starbucks
and Fiat State Aid investigations
• ECOFIN Council reaches agreement on the automatic
exchange of information on tax rulings and APAs
Direct Taxation• CJ rules that Austrian group taxation rules that deny
the amortization of goodwill in case of holdings
acquired in non-resident companies contravene the
freedom of establishment (Finanzamt Linz)
• CJ rules that national legislation that allows a public
administrative body of a Member State to transfer
personal data to another public administrative body
and their subsequent processing, without the data
subjects having been informed of that transfer or
processing, contravenes Directive 95/46/EC (Bara
and Others)
• Commission asks POLAND to stop discriminatory tax
treatment of pensions contributions paid to Individual
Pension Insurance Accounts (IKZE)
• Commission launches a public consultation to help
identify the key measures for inclusion in the re-
launch of the proposal for a Common Consolidated
Corporate Tax Base (CCCTB)
• The Netherlands releases Tax Bill to extend fiscal
unity regime in accordance with EU law
VAT• CJ rules that national rule on limitation periods for
criminal offences must be disapplied if it has an
adverse effect on the fulfilment of the Member States’
obligations under EU law (Taricco)
• AG Wathelet opines on whether the arbitrage
with different VAT tariffs between Member States
constitutes an abusive practice on the obligations
of national tax authorities to prevent double taxation
and on the use of evidence obtained in criminal
proceedings (WebMindLicenses Kft.)
Customs Duties, Excises and other Indirect Taxes• CJ rules on CN classification of Amino acid mixes
(Kyowa Hakko Europe GmbH)
• AG opines that preferential import duty tariff can
be applied to a mixture of crude palm kernel oil
originating in several countries (ADM Hamburg AG)
• European Commission requests GREECE to amend
its legislation granting reduced rates of excise duty to
“Tsipouro” and “Tsikoudià”
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Commission is of the opinion that an inflated price - paid
for green coffee beans to a Swiss based group trading
company - unduly reduces Starbucks Manufacturing tax
base, leaving no margin to pay the royalty.
Fiat
The Commission finds that the APA concluded by Fiat
Finance and Trade Sarl (FFT) endorses a methodology
that is not appropriate for the calculation of taxable
profits reflecting market conditions. In particular, the
Commission finds it artificially lowers taxes paid by FFT
in Luxembourg, by applying a number of economically
unjustifiable assumptions, down-ward adjustments and
a capital base for tax purposes that is much lower than
the company’s actual capital. In addition, the estimated
remuneration applied to this already lower capital for tax
purposes is also lower compared to market rates.
Initial comments by Loyens & Loeff
The Commission’s key message is that artificial and
complex methods used to shift profits where there is
no economic justification will not be accepted. Whether
this particular application of the State aid provisions to
corporate tax planning structures involving APAs will hold
before the European courts, is still uncertain.
Both the Netherlands and Luxembourg governments
issued statements claiming that the APAs granted
do not amount to State aid. Also the two companies
involved disagree with the EU Commission’s analysis.
Nevertheless, the combination of the use of the State
aid provisions and the other European initiatives to
fight ’base erosion and profit shifting’, are likely to
have a serious impact on tax regimes and tax planning
structures that are perceived by the EU to be privileged
and harmful. The transparency initiatives in the corporate
tax field (e.g., Country-by-Country Reporting and the
automatic exchange of rulings in the EU) will also put
more emphasis and pressure on tax planning structures
involving APAs and rulings.
Moreover, the constant political, media and public
attention are making MNEs and governments aware that
it is extremely difficult to fight the widespread perception
that they have struck inappropriate tax deals. Needless
to say, all of these developments will also affect Swiss
based MNEs, with potentially ’sensitive rulings’ in the EU.
Highlights in this edition
Commission announces final decisions in Starbucks and Fiat State Aid investigationsOn 21 October 2015, the Commission announced in
its final decisions that the advance pricing agreements
(APAs) concluded with Starbucks (the Netherlands)
and Fiat (Luxembourg) constitute unlawful State aid. In
both cases, the Commission states that the tax burden
was unduly reduced by EUR 20 to 30 million over the
period under investigation. The Commission requires the
Netherlands and Luxembourg to recover such State aid
from Starbucks and Fiat respectively.
State aid rules require that incompatible State aid is
recovered in order to reduce the distortion of competition
in the EU Single Market. The Commission considers that
APAs should not have the effect of granting taxpayers
lower taxation than other taxpayers in a similar legal and
factual situation.
The two final decisions, concerning Starbucks and Fiat,
confirm that the Commission is determined to challenge
potential State aid elements embedded in APAs,
examining in a very detailed manner the transfer pricing
methods agreed by tax authorities.
Although the full text of the final decisions will not be
published until confidentiality issues have been resolved,
the announcement of the Commission already gives
sufficient guidance to warrant looking anew at existing
APAs in the EU.
Starbucks
The Commission finds that a royalty paid by Starbucks
Manufacturing EMEA BV (Starbucks Manufacturing)
for the use of know-how cannot be justified as it does
not adequately reflect market value. According to the
Commission, only Starbucks Manufacturing is required
to pay for using this know-how whereas no other
Starbucks group company nor independent roasters
to which roasting is outsourced are required to pay a
royalty in essentially the same situation. The Commission
finds that in the case of Starbucks Manufacturing, the
existence and level of the royalty means that a large part
of its taxable profits is unduly shifted. Furthermore, the
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exchange, irrespective of whether they are still valid
on 1 January 2017. MSs can choose not to exchange
information on Tax Rulings and APAs issued, amended
or renewed before 1 April 2016 if the Tax Ruling or APA
relates to a group that had an annual turnover of less
than EUR 40 million in the year preceding the issuance,
amendment or renewal of the Tax Ruling or APA (that is,
small and medium-sized enterprises). This exemption
will not apply to companies engaged in financial or
investment activities.
The terms Tax Ruling and APA are very broadly defined as
any agreement, communication, or any other instrument
or action with similar effects, including agreements
reached in audits, which can be relied upon by taxpayers.
Tax Rulings deal with the interpretation or application of
a legal or administrative tax provision to a cross-border
transaction or with the question whether or not activities
give rise to a permanent establishment in another Member
State and are made in advance of the transaction or the
filing of the tax return covering the period in which the
transaction takes place. APAs establish an appropriate
set of criteria for the determination of the transfer
pricing of cross-border transactions between associated
enterprises or the attribution of profits to a permanent
establishment.
The scope of the above definitions means that not only
rulings and APAs in the traditional meaning of these
terms will be covered by the New Directive, but also
a vast array of other agreements between taxpayers
and tax administrators for dealing with the tax affairs of
multinational enterprises.
Besides certain basic information, such as the identity
of the taxpayers involved, the date of issuance, the start
date and the period of validity of the Tax Ruling or APA,
the information to be exchanged also comprises more
substantive information. Examples of such substantive
information include a description of the transactions
covered, the transaction amount, the method and the
set of criteria used for the determination of the transfer
pricing or the transfer price itself and the identification of
other MSs likely to be concerned and the identification of
taxpayers in those states likely to be affected by the Tax
Ruling or APA. The description of the transactions covered
in the Tax Ruling or APA may be drafted in abstract
terms that do not lead to the disclosure of commercial,
Similar decisions can be expected in the other formal
State aid investigations involving Apple, Amazon and
the Belgian ’excess profit ruling’ system. More formal
State aid investigations in relation to tax rulings can be
expected to follow as the Commission had requested a
substantial number of individual tax rulings from various
Member States earlier this year.
ECOFIN Council reaches agreement on the automatic exchange of information on tax rulings and APAs On 6 October 2015, the Council of the European
Union reached agreement on a proposal for a Council
Directive (‘the New Directive’) amending Directive
2011/16/EU (Directive on administrative cooperation
between Member States) and requiring automatic
exchange of information on ‘advance tax rulings’ (‘Tax
Rulings’) and ‘advance pricing arrangements’ (‘APAs’)
between EU Member States (‘MSs’) and, subject to
limitations, to the Commission.
The New Directive is one of the results of the EU’s efforts
to combat tax avoidance and aggressive tax planning.
On 18 March 2015, the EU Commission launched the
Transparency Package, which contained a number of
initiatives to help MSs protect their tax base and which
also included a proposal for automatic exchange of
information on Tax Rulings and APAs. The New Directive
is the political outcome of the discussion on the EU
Commission’s proposal. The New Directive is also
largely in line with the recommendations on automatic
exchange of information of tax rulings that were made
as part of Action 5 (Countering Harmful Tax Practices) of
the OECD/G20 BEPS project and that were released on
5 October 2015.
The New Directive requires MSs to automatically
exchange information on Tax Rulings and APAs that are
issued on or after 1 January 2017. In addition, information
on Tax Rulings and APAs issued, amended or renewed
between 1 January 2012 and 31 December 2013 will be
subject to information exchange, provided that they are
still valid on 1 January 2014 (i.e., a five year look-back
period instead of the ten year look-back foreseen in the
proposal of the EU Commission). Information on Tax
Rulings and APAs that were issued, amended or renewed
after 1 January 2014 will be subject to information
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Direct TaxationCJ rules that Austrian group taxation rules that deny the amortization of goodwill in case of holdings acquired in non-resident companies contravene the freedom of establishment (Finanzamt Linz)On 6 October 2015 the CJ delivered its judgment in case
Finanzamt Linz v Bundesfinanzgericht, Außenstelle Linz
(C-66/14).This case concerns the Austrian legislation
regarding group taxation which provides for an
amortisation of goodwill, at the level of the parent, only
for resident subsidiaries.
An Austrian group had majority holdings in both resident
and non-resident Austrian subsidiaries. Among those
participations, the group acquired 100% of the shares in
a Slovakian company for which it claimed a depreciation
of goodwill. The local tax authorities rejected such claim
considering that the depreciation of goodwill was only
allowed to companies subject to unlimited tax liability in
Austria. Following a decision favourable to the taxpayer
in a lower instance, the tax office appealed against that
decision based on the lines of arguments: (i) whether
the depreciation of goodwill provided for under Austrian
Law, is compatible with Articles 107 TFEU and 108(3)
TFEU. Such depreciation creates an advantage for the
beneficiary but questions whether that advantage must
be regarded as favouring certain undertakings or the
production of certain goods, (ii) whether the limitation
of goodwill depreciation may nevertheless be justified
either on the ground that it relates to situations that are
not objectively comparable or by an overriding reason in
the general interest.
The CJ dismissed the first question by considering it
that it bore no relation to the subject-matter of the main
proceedings.
As regards the second question, the CJ started by
stating that legislation such as that at issue in the
main proceedings created a tax advantage for a parent
company acquiring a holding in a resident company,
in cases of positive goodwill. By not granting, in those
industrial or professional secrets, or be contrary to public
policy. The Commission is responsible for developing
standard formats to report information on Tax Rulings
and APAs as well as a central database accessible for
MSs. Information must generally be submitted within
three months after the end of each half calendar year.
Information on pre-1 January 2017 Tax Rulings and
APAs must be submitted before 1 January 2018. MSs
may request additional information, including the full text
of the Tax Ruling or APA, under the normal procedures
for information exchange upon request provided for in
Directive 2011/16/EU.
Information on bilateral or multilateral APAs with non-MSs
will not be subject to automatic exchange of information
if this is prohibited under the international tax agreement
pursuant to which the APA was negotiated. In that case,
however, the basic information referred to above does
need to be exchanged, to the extent that it was included
in the request that led to the bilateral or multilateral APA.
The Commission itself will not have access to information
on the identity of the taxpayers involved, the summary
of the content of the Tax Rulings and APAs, including a
description of the transactions covered, the description of
the set of criteria used for the determination of the transfer
pricing or the transfer price itself and the identification of
the taxpayers in other MSs likely to be affected by the
Tax Ruling or APA. It will, however, have access to all
other information. The EU Commission may only use
the information to which it has access to assess MSs’
compliance with the New Directive. It is not permitted
to use such information for other purposes, such as for
State aid investigations.
Before the New Directive can be formally adopted by
the EU Council, the European Parliament must give its
opinion. Following the adoption of the New Directive by
the EU Council, MSs must implement the New Directive
in their national laws before 1 January 2017.
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of the tax system by considering that there was no
direct link between the tax advantage consisting in the
depreciation of the goodwill, on the one hand, and the
tax attribution to the parent company of the results of the
resident company, on the other hand.
CJ rules that national legislation that allows a public administrative body of a Member State to transfer personal data to another public administrative body and their subsequent processing, without the data subjects having been informed of that transfer or processing, contravenes Directive 95/46/EC (Bara and Others)On 1 October 2015, the CJ delivered its judgment in
case Smaranda Bara and Others v Președintele Casei
Naționale de Asigurări de Sănătate, Casa Naţională de
Asigurări de Sănătate, Agenţia Naţională de Administrare
Fiscală (ANAF) (C-201/14). The case concerns the
interpretation of Articles 124 TFEU and Articles 10, 11
and 13 of Directive 95/46/EC of the European Parliament
and of the Council of 24 October 1995 on the protection
of individuals with regard to the processing of personal
data and on the free movement of such data in a case
involving the transfer of personal date between public
administrative bodies without the data subjects having
been informed of that transfer or processing.
The applicants in the main proceedings earn income
from self-employment. The ANAF (National Tax
Administration Agency) transferred data relating to
their declared income to the CNAS (National Health
Insurance Fund). On the basis of that data, the CNAS
required the payment of arrears of contributions to the
health insurance regime. The applicants in the main
proceedings brought an appeal before the national court,
in which they challenged the lawfulness of the transfer of
tax data relating to their income in the light of Directive
95/46. They submitted that the personal data were, on
the basis of a single internal protocol, transferred and
used for purposes other than those for which they had
initially been communicated to the ANAF, without their
prior explicit consent and without their having previously
been informed. The case was referred to the CJ.
circumstances, that tax advantage to a parent company
which acquires a holding in a non-resident company,
that legislation introduces a difference in tax treatment
between parent companies to the detriment of those
which acquire a holding in a non-resident company. That
difference in treatment is such as to hinder the exercise
by the parent company which acquires a holding in a non-
resident company of its freedom of establishment for the
purposes of Article 49 TFEU by deterring it from acquiring
or setting up subsidiaries in other Member States.
Therefore, the CJ concluded that such a difference in
treatment could only be allowed if related to situations
which are not objectively comparable or if justified by an
overriding reason of public interest.
As regards the question whether the situations were
objectively comparable, the CJ recalled that the
comparability of cross-border situations with internal
situations must be assessed having regard to the
aim pursued by the national provisions at stake. In
this particular case, the CJ considered that they were
comparable taking into account that the Austrian
legislation intended to create a tax incentive for the
creation of groups of companies by ensuring equal
treatment between the purchase of the establishment
(‘asset deal’) and the purchase of the holding in the
company that owns the establishment (‘share deal’).
In regard to possible justifications Austria claimed that
the difference at stake could be justified based on the
need to preserve a balanced allocation of the powers to
tax between Member States and the coherence of the tax
system. The CJ started by refusing the first justification.
It stated that legislation such as that at issue in the main
proceedings allowed the parent company to depreciate
the goodwill, irrespective of whether the company in
which a holding is acquired makes a profit or incurs a
loss. Regarding the granting of that tax advantage, that
legislation concerned neither the exercise of the power
to impose taxes in respect of the profits and losses
of the company in which a holding is acquired, nor,
consequently, the allocation of the power to impose taxes
between the Member States. The CJ also refused the
justification based on the need to maintain the coherence
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Commission asks POLAND to stop discriminatory tax treatment of pensions contributions paid to Individual Pension Insurance Accounts (IKZE) On 22 October 2015, the Commission has asked Poland
to change its national tax rules, which treat contributions
to certain private pension accounts opened in Polish
financial institutions more favourably than those opened
in other Member States.
According to the Polish domestic rules, private pension
contributions are only tax deductible when they are
paid into Individual Pension Insurance Accounts (IKZE)
opened by Polish investment funds, exchange maker
houses, insurance establishments, banks and pension
funds. In the Commission’s view, such domestic
payments are, therefore, treated more favourably than
contributions paid into similar financial products and
institutions established in other EU Member States and
EEA States. Such a difference in tax treatment may
constitute an infringement of the freedom to provide
services and the free movement of capital as set out in
EU Treaties. The Commission’s request takes the form
of a reasoned opinion. In the absence of a satisfactory
response within two months, the Commission may refer
Poland to the CJ.
Commission launches a public consultation to help identify the key measures for inclusion in the re-launch of the proposal for a Common Consolidated Corporate Tax Base (CCCTB)On 8 October 2015, the Commission launched a public
consultation to help identify the key measures for
inclusion in the re-launch of the proposal for a CCCTB.
The call for feedback comes as part of the implementation
of the Commission’s Action Plan for Fair and Efficient
Corporate Taxation which was presented in June this
year. A wide range of views is sought from businesses,
civil society and other stakeholders. The Commission
intends to come forward with revised legislation next
year.
The question referred was, in essence, whether
Articles 10, 11 and 13 of Directive 95/46 must be
interpreted as precluding national measures, such as
those at issue in the main proceedings, which allow a
public administrative body in a Member State to transfer
personal data to another public administrative body and
their subsequent processing, without the data subjects
being informed of that transfer and processing.
The CJ started by observing that the tax data transferred
to the CNAS by the ANAF are personal data within the
meaning of Article 2(a) of the directive, since they are
‘information relating to an identified or identifiable natural
person’. In that regard, it stated that in accordance with
the provisions of Chapter II of Directive 95/46, entitled
‘General rules on the lawfulness of the processing of
personal data’, subject to the exceptions permitted under
Article 13 of that directive, all processing of personal data
must comply, first, with the principles relating to data
quality set out in Article 6 of the directive and, secondly,
with one of the criteria for making data processing
legitimate listed in Article 7 of the directive, Furthermore,
the data controller or his representative is obliged to
provide information in accordance with the requirements
laid down in Articles 10 and 11 of Directive 95/46, which
vary depending on what data are, or are not, collected
from the data subject, and subject to the exceptions
permitted under Article 13 of the directive.
According to the Court, in this case it is clear from the
information provided by the referring court that the
applicants in the main proceedings were not informed by
the ANAF of the transfer to the CNAS of personal data
relating to them. Therefore, the transfer of the information
at stake was not carried out in compliance with the
directive.
The CJ further added that the case in the proceedings did
not meet the conditions for the exceptions under Article
13. Therefore, the legislation at stake was considered as
being in breach of Directive 95/46/EC.
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Intermediate Fiscal Unity
The EU/EEA intermediate subsidiary needs to satisfy
certain requirements that correspond with the existing
requirements for fiscal unity subsidiaries, including legal
form (e.g., comparable to Netherlands limited liability
companies), tax residency (outside the Netherlands,
within the EU/EEA), liability to a tax on profits in the EU/
EEA country of residence and absence of a permanent
establishment (PE) in the Netherlands.
The EU/EEA intermediate subsidiary cannot be included
in the Intermediate Fiscal Unity; only the Netherlands
parent company and the Netherlands second-tier
subsidiary held by such intermediate subsidiary. As a
general rule, the EU/EEA intermediate subsidiary is
treated as a regular participation of the Intermediate
Fiscal Unity.
Sister Fiscal Unity
The EU/EEA parent company needs to satisfy certain
requirements that correspond with the existing
requirements for fiscal unity parent companies, including
requirements to the legal form (e.g., comparable to
Netherlands limited liability companies, cooperative
associations or mutual insurance companies), tax
residency (outside the Netherlands, within the EU/EEA),
liability to a tax on profits in the EU/EEA country of
residence and absence of a PE in the Netherlands.
The EU/EEA parent company cannot be included in the
Sister Fiscal Unity; only the Netherlands subsidiaries
held by such parent company (directly or indirectly via
EU/EEA intermediate subsidiaries). In principle, one of
the Netherlands subsidiaries needs to be designated by
the taxpayer as parent company of a Sister Fiscal Unity.
Various aspects need to be considered in determining
which subsidiary to designate as parent company.
The designated parent company needs to meet the
requirements for fiscal unity subsidiaries (e.g., strict
requirement on legal form). The tax book year of the
designated parent company ends at the time the Sister
Fiscal Unity is formed.
This consultation wants to gather views, in particular,
on the extent to which a CCCTB could function as an
effective tool against aggressive tax planning without
compromising its initial objective of making the Single
Market a more business-friendly environment. Feedback
is also expected on the proposed ‘two-step approach’
of the initiative and on the criteria that could determine
which companies should be subject to a mandatory
CCCTB. The consultation will also look at ideas on how
to address the ‘debt bias’ and the type of rules that would
best foster Research & Development activity.
The public consultation will remain open until 8 January
2016.
The Netherlands releases Tax Bill to extend fiscal unity regime in accordance with EU law On 16 October 2015, Netherlands Government released
a Tax Bill to extend the fiscal unity regime in accordance
with EU law, following judgments handed down by the
CJ on 12 June 2014 in the Joined cases SCA Group
Holding BV and others (joined cases C-39/13, C-40-13
and C-41/13). The fiscal unity regime is a consolidation
regime for corporate income tax purposes that provides
for offset of losses and profits between members as well
as non-recognition of gains and losses on transactions
between members.
The Tax Bill extends the fiscal unity regime to allow for
(i) the formation of a fiscal unity between a Netherlands
parent company and a Netherlands second-tier subsidiary
held via one or more EU/EEA intermediate subsidiaries
(Intermediate Fiscal Unity), and (ii) the formation of
a fiscal unity between Netherlands subsidiaries held,
directly or indirectly via EU/EEA intermediate subsidiaries,
by an EU/EEA parent company (Sister Fiscal Unity).
The Tax Bill codifies, to a large extent, a Decree of the
Netherlands State Secretary of Finance of 16 December
2014 (Stcrt. 2014, 38029), that was issued to extend the
fiscal unity regime in anticipation of the Tax Bill. The Tax
Bill also introduces rules to counter unintended effects
of the fiscal unity regime extension. Finally, the Tax Bill
tightens the ownership condition for the formation of a
fiscal unity, such that full legal and beneficial ownership,
including legal title, of at least 95% of the shares in the
subsidiary must be held.
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Entry into force
The Tax Bill may be amended during the course of the
legislative process, and will take effect after publication in
the official Netherlands Government Gazette (Staatsblad).
The Tax Bill includes a two-year grandfathering rule for
existing fiscal unities, with respect to the amendment to
the ownership condition.
How to proceed?
The Tax Bill provides an incentive for international groups
with operations in the Netherlands to investigate whether
a(n) (extended) fiscal unity is available and beneficial.
The Tax Bill is restricted to EU/EEA situations. Cases,
however, are pending before Netherlands tax courts,
in which a fiscal unity is requested in group structures
where parent companies and intermediate subsidiaries
are established outside the EU/EEA. In these cases,
the position that a fiscal unity can be formed is based
on a non-discrimination clause in a bilateral tax treaty. In
addition, the Tax Bill does not include amendments based
on the judgment of the CJ in the case Groupe Steria
(C-386/14). This case may, under circumstances, extend
specific benefits of a domestic fiscal unity to a cross-
border situation and may result in further amendments
to the fiscal unity regime. In either situation, it should be
considered to request a fiscal unity or file an objection, in
order to preserve the taxpayer’s rights.
VAT CJ rules that national rule on limitation periods for criminal offences must be disapplied if it has an adverse effect on the fulfilment of the Member States’ obligations under EU law (Taricco)On 8 September 2015, the CJ delivered its judgment
in the case Ivo Taricco (C-105/14). Mr Taricco and a
number of other persons were charged with having
established a criminal organization or having participated
as a member in it in the period from 2005 to 2009. The
purpose of the criminal organization is said to have been
the commission of the criminal offences of producing
false invoices and submitting fraudulent VAT returns.
The false invoices related to commercial transactions
involving champagne. On the basis of agreements,
Fiscal unity including EU/EEA company with a PE in the
Netherlands
Under current law, a non-Netherlands resident company
with a PE in the Netherlands can be included in a
fiscal unity as parent company, regarding its PE, if its
shareholding in a qualifying Netherlands subsidiary
is attributable to such PE (PE Fiscal Unity). For non-
Netherlands resident companies that reside in the EU/
EEA, the Tax Bill abolishes the attribution requirement.
These companies can, furthermore, form a PE Fiscal
Unity, regarding their PE in the Netherlands, with a
Netherlands subsidiary held via an EU/EEA intermediate
subsidiary.
If an EU/EEA parent company owns multiple PEs in
the Netherlands via (separate) EU/EEA intermediate
subsidiaries, such PEs can be included in a Sister Fiscal
Unity. Moreover, Netherlands subsidiaries owned by that
EU/EEA parent company can also be included in such
Sister Fiscal Unity.
Rules to counter unintended effects of the fiscal unity
regime extension
The Tax Bill introduces rules to counter unintended
effects of the fiscal unity regime extension, including
amendments to the liquidation loss rules and the
interest deduction limitation rules for loans taken up for
investment in participations qualifying for the participation
exemption. The majority of these rules aim to avoid
double deductions for losses incurred on receivables
from, and shareholdings in, EU/EEA parent companies
and EU/EEA intermediate subsidiaries.
Tightening of ownership condition
Under current law, the ownership condition for the
formation of a fiscal unity, that at least 95% of the legal
and beneficial ownership of the shares of the subsidiary
must be held, can under circumstances be satisfied if the
legal title to the shares are held by an entity outside the
fiscal unity (e.g., if the fiscal unity parent company owns
depository receipts over shares of a subsidiary and (de
facto) exercises the voting rights attached to such shares
at its sole discretion). The Tax Bill tightens the ownership
condition such that full legal and beneficial ownership,
including legal title, of at least 95% of the shares in the
subsidiary must be held.
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AG Wathelet opines on whether the arbitrage with different VAT tariffs between Member States constitutes an abusive practice on the obligations of national tax authorities to prevent double taxation and on the use of evidence obtained in criminal proceedings (WebMindLicenses Kft.)On 16 September 2015, Advocate General Wathelet
delivered his Opinion in the WebMindLicenses Kft. case
(C-419/14). A Hungarian software developer transferred
know-how to a Liechtenstein trust, which granted
a licence to exploit the know-how to a Portuguese
entity, Lalib. The trust then transferred the know-how
to a Portuguese entity of the developer, which in turn,
transferred the know-how to a Hungarian entity of the
developer, WebMindLicenses (hereafter WML). WML
entered into an agreement with Lalib to continue the
licensing of the know-how to Lalib. Lalib exploited the
know-how on several websites with adult content which
offer chat and webcam performance services. According
to the Hungarian tax authorities, WML never transferred
the exploitation of the know-how to Lalib and in fact,
exploited the know-how itself. The authorities claim
that the entering into the licensing agreement between
WML and Lalib constituted an abusive practice. In the
subsequent legal proceedings, the national court referred
no less than 17 preliminary questions to the CJ. The AG
reformulated these into four questions, on which he gives
the following conclusions.
First, the AG noted that procuring services from a taxable
person located in a Member State with a lower VAT
rate does not on its own constitute an abusive practice.
Furthermore, a difference in the applicable VAT rate of
4% seems to be insufficient to justify the claim that the
essential purpose of the transaction is a tax benefit.
However, the AG left it up to the referring national court
to investigate whether the essential purpose of the
transaction is a tax benefit.
domestic sales of champagne were falsely recorded as
intra-Community supplies. One of the companies took
receipt of false invoices, deducted the VAT on it and filed
a fraudulent annual VAT return. The parties issuing the
invoices did not submit any annual VAT returns, while
others did submit returns but did not pay the VAT due.
The referring court in this case pointed out that it is ‘quite
likely’ that the prosecution of all defendants will become
time-barred (on 8 February 2018 at the latest) before a
final judgment is given. According to the referring court,
that result was nonetheless foreseeable, because of
a rule laid down in the Italian Penal Code which, by
allowing the limitation period to be extended, following
an interruption, by only a quarter of its initial duration,
is tantamount to not interrupting the limitation period
in most criminal proceedings. In this light, the referring
court expressed the concern that the limitation regime in
Italy is becoming a ‘guarantee of impunity’ for economic
criminals. Given the aforementioned, the CJ was asked
for a preliminary ruling.
First of all, the CJ ruled that it is for the referring court
to determine whether the applicable national provisions
allow the effective and dissuasive penalisation of cases
of serious fraud affecting the EU’s financial interests. If
the national court concludes that the application of the
national provisions has the effect that, in a considerable
number of cases, the commission of serious fraud will
escape criminal punishment, it would be necessary to find
that national measures could not be regarded as being
effective and dissuasive. If needed, the national court
must, according to the CJ, give full effect to Article 325(1)
and (2) TFEU, by disapplying the provisions of national
law, the effect of which would be to prevent the Member
State concerned from fulfilling its obligations.
12 13
proteins. By replacing the cow’s milk protein allergens,
the goods at issue provide the substances necessary for
the development of the immune system and growth of
those children.
By a request dated 12 August 2008 made to the
Bundesfinanzdirektion B (Federal Revenue Office
B), Kyowa Hakko requested the issue of BTIs on the
classification of the goods at issue in the CN. In that
request, it proposed that the goods be classified under
subheading 3003 90 of the CN. On 23 October 2008,
that authority issued BTIs classifying those goods
under a subheading of heading 2106 of the CN, namely
subheading 2106 90 92.
On 24 November 2008, Kyowa Hakko brought a complaint
before the Hauptzollamt, disputing the classification
of the goods at issue in the CN laid down by the
Bundesfinanzdirektion B. In that complaint, it argued that
the goods at issue ought to be classified under heading
3003 of the CN on the ground that they were processed
into goods used principally for therapeutic purposes in
cases of allergy to cow’s milk protein, allergies to other
foodstuffs and diseases of the digestive system and for
prophylactic purposes. By decision of 5 January 2011 the
Hauptzollamt rejected that complaint as unfounded.
On 1 February 2011, Kyowa Hakko brought an action
before the Finanzgericht Hamburg (Finance Court,
Hamburg) against that decision. By a decision of
19 September 2012, that court dismissed the action,
holding that the goods at issue should not be classified
under heading 3003 of the CN.
On 2 November 2012, Kyowa Hakko lodged an appeal
on points of law before the referring court against the
decision of the Finanzgericht Hamburg. In that appeal,
Kyowa Hakko maintained its argument that the goods at
issue should be classified under heading 3003 of the CN.
In the request for a preliminary ruling, the referring
court noted, in essence, that the CN does not provide
any definition of the notion of ‘medicinal product’.
Nonetheless, it is of the view that the goods at issue
cannot be classified as ‘medicinal products’, for the
purposes of heading 3003 of the CN. In that regard,
Second, the AG concluded that the possibility of double
taxation does not preclude the tax authorities of a
Member State to determine the place of service as being
that Member State, since the tax authorities in a Member
State are not bound by decisions from tax authorities in
other Member States.
Third, EU Regulation 904/2010 on administrative
cooperation in the field of VAT does not entail an
obligation for the tax authorities in a Member State to file
a request with the tax authorities of the Member State in
which the taxable person has already paid VAT.
Lastly, the AG concluded that the use of evidence in
tax procedures, which evidence is obtained by way of
monitoring phone calls and seizing and copying e-mails
in a criminal procedure, can only be in accordance with
articles 7 and 8 of the Charter of Fundamental Rights
of the EU if those methods of obtaining evidence are
provided by law, pursue a legitimate purpose and are
proportional. It is up to the referring national courts to
investigate if these requirements are met.
Customs Duties, Excises and other Indirect TaxesCJ rules on CN classification of Amino acid mixes (Kyowa Hakko Europe GmbH)On 17 September 2015, the CJ delivered its judgment
in the case Kyowa Hakko Europe GmbH (C-344/14).
The case concerns the classification in the Combined
Nomenclature (CN) of Amino acid mixes used for the
preparation of foodstuffs for infants and young children
allergic to cow’s milk proteins.
Kyowa Hakko produces amino acid mixes, called
RM0630 and RM0789, which are composed of various
individual amino acids of a very high degree of purity (‘the
goods at issue’). The goods at issue are manufactured
in such a way that they do not contain cow’s milk
proteins. Kyowa Hakko supplies those goods, in bulk,
to another undertaking which uses them, adding to
them carbohydrates and fats, to prepare foodstuffs for
infants and young children who are allergic to cow’s milk
13
preparation of foodstuffs for infants and young children
who are allergic to cow’s milk proteins, must be classified
under heading 2106 of the Combined Nomenclature
as ‘food preparations’ since, because of their objective
characteristics and properties, those goods do not have
clearly defined therapeutic or prophylactic characteristics,
with an effect concentrated on precise functions of the
human organism and, accordingly, are not capable of
being applied in the prevention or treatment of diseases
or ailments and also are not naturally intended for medical
use, which it is for the national court to ascertain.
AG opines that preferential import duty tariff can be applied to a mixture of crude palm kernel oil originating in several countries (ADM Hamburg AG) On 10 September 2015, AG Wahl delivered its Opinion
in the case ADM Hamburg AG (C-294/14). The case
deals with the requirement that products, declared for
release for free circulation in the European Union, for
the application of a preferential treatment, be the same
products as exported from the beneficiary country in
which they are considered to originate.
On 11 August 2011, ADM Hamburg imported a number
of consignments of crude palm kernel oil from Ecuador,
Colombia, Costa Rica and Panama to Germany for
release into free circulation in the European Union. All
those countries are GSP (General System of Preferences)
exporting countries. The oil was transported in different
tanks of a cargo vessel. To benefit from preference, ADM
Hamburg submitted preferential treatment certificates
issued by the abovementioned countries.
The case before the referring court concerns only one
of those consignments (‘the consignment at issue’). The
consignment at issue contained a mixture of crude palm
kernel oil originating in different beneficiary countries.
On 8 December 2011, the Hauptzollamt Hamburg-Stadt
issued an import duty notice. As regards the consignment
at issue, it calculated the import duties on the basis of
the duty rate for third countries, that is, without granting
the consignment the requested preferential treatment.
The reason for denying preferential treatment was, in
essence, that, crude palm kernel oil from different import
that court is of the opinion that those goods, used as a
substitute for milk product allergens for as long as the
immune system of a child allergic to cow’s milk proteins is
not fully developed, do not appear to have a therapeutic
or prophylactic purpose. The goods at issue replace only
a pathogenic component of the normal diet of an infant,
without acting on the allergy to cow’s milk proteins and
without treating or reducing it.
However, although it considered that the goods at issue
must be classified under heading 2106 of the CN and
that the decisions adopted to that effect by both the
Hauptzollamt and the Finanzgericht Hamburg were well
founded, the referring court considered that, having regard
to the different position set out in the decision of the Upper
Tribunal (Tax and Chancery Chamber) of 27 September
2013, it is necessary to obtain a preliminary ruling from
the Court in order to state the correct classification of
those goods in the CN and, accordingly, to ensure a
uniform interpretation of the law in the EU.
In those circumstances, the Bundesfinanzhof (Federal
Finance Court) decided to stay the proceedings and
refer the following questions to the Court of Justice for a
preliminary ruling:
‘(1) Do amino acid mixes such as those at issue in the
present case (RM0630 and RM0789), from which (in
combination with carbohydrates and fats) a foodstuff
is manufactured by which a substance that is vital for
health and present in normal diet but which can in
individual cases trigger an allergic reaction is replaced
and, as a result, allergy-induced health impairments
can be avoided and existing complaints alleviated,
if not cured, constitute medicaments consisting of
two or more constituents which have been mixed
together for therapeutic or prophylactic uses within
the meaning of heading 3003 of the CN?
(2) If the answer to Question 1 is in the negative, do the
amino acid mixes constitute food preparations under
heading 2106 of the CN which, pursuant to note 1(a)
to Chapter 30 of the [CN], are excluded from Chapter
30 because they have no prophylactic or therapeutic
effect beyond the supply of nutrition?’
The CJ ruled that the amino acid mixes such as those
at issue in the main proceedings, which are used in the
14
European Commission requests GREECE to amend its legislation granting reduced rates of excise duty to “Tsipouro” and “Tsikoudià” The European Commission has formally requested
Greece to amend its excise duty schemes for two specific
alcoholic beverages – “Tsipouro” and “Tsikoudià”.
“Tsipouro” and “Tsikoudia” are traditional alcoholic drinks
which are produced in the north of Greece and in Crete.
Both drinks have protected geographical indications.
Currently, Greece applies 50 percent of the ordinary
excise duty rate applied on ethyl alcohol and a super-
reduced rate to “Tsipouro” and “Tsikoudià” (around 6%
of the ordinary excise duty rate) when these drinks are
produced in bulk by so-called “two-day” distillers (vine
growers or producers of other agricultural products).
EU rules provide that the same excise duty rate should
apply to all products made with ethyl alcohol. Exemptions
or derogations are provided explicitly by EU law and
must be strictly interpreted. Greece does not have any
derogation for “Tsipouro” or “Tsikoudià”. The Commission
is of the view that both schemes infringe the relevant EU
excise duty legislation and also favour a domestically-
produced spirit drink over spirit drinks produced in other
Member States. This is an infringement of EU rules on
the free movement of goods.
The Commission’s request takes the form of a reasoned
opinion. In the absence of a satisfactory response within
two months, the Commission may refer Greece to the
Court of Justice of the EU.
consignments from different countries of origin had been
mixed together in a single tank.
After an unsuccessful administrative appeal, ADM
Hamburg brought an action before the Finanzgericht
Hamburg. Since it had doubts as to the correct
construction of the relevant provision of EU law, the
Finanzgericht Hamburg decided to stay the proceedings
and to request a preliminary ruling on the following
question:
‘Is the factual condition laid down in the first sentence
of Article 74(1) of [Regulation No 2454/93] whereby the
products declared for release for free circulation in the
European Union must be the same products as exported
from the beneficiary country in which they are considered
to originate, fulfilled in a case such as the present case,
where several part-consignments of crude palm kernel
oil are exported from different GSP exporting countries,
in which they are considered to originate, and imported
into the European Union not as physically separate
consignments, but are all exported after being poured
into the same tank of the cargo vessel and imported
as a mixture in that tank into the European Union, such
that it can be ruled out that other products (not enjoying
preferential treatment) have been put into the tank of the
cargo vessel during the time the products were being
transported until they were released for free circulation?’
The AG opined that in circumstances such as those
underlying the present case where (i) the products which
have been mixed together are materially, in terms of being
crude palm kernel oil, the same and interchangeable,
(ii) they originate in countries benefiting from the same
preferential treatment, and (iii) there is no doubt as to their
originating status, the requirement of identity between
the products exported and those declared for release for
free circulation in the European Union, as laid down in
Article 74(1) of Regulation No 2454/93, is fulfilled.
15
Correspondents● Gerard Blokland (Loyens & Loeff Amsterdam)
● Kees Bouwmeester (Loyens & Loeff Amsterdam)
● Almut Breuer (Loyens & Loeff Amsterdam)
● Robert van Esch (Loyens & Loeff Rotterdam)
● Raymond Luja (Loyens & Loeff Amsterdam;
Maastricht University)
● Arjan Oosterheert (Loyens & Loeff Amsterdam)
● Lodewijk Reijs (Loyens & Loeff Rotterdam)
● Bruno da Silva (Loyens & Loeff Amsterdam;
University of Amsterdam)
● Patrick Vettenburg (Loyens & Loeff Rotterdam)
● Ruben van der Wilt (Loyens & Loeff Amsterdam)
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Editorial boardFor contact, mail: [email protected]:
● René van der Paardt (Loyens & Loeff Rotterdam)
● Thies Sanders (Loyens & Loeff Amsterdam)
● Dennis Weber (Loyens & Loeff Amsterdam;
University of Amsterdam)
Editors● Patricia van Zwet
● Bruno da Silva
Although great care has been taken when compiling this newsletter, Loyens & Loeff N.V. does not accept any responsibility whatsoever for any
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