Exit Taxation as an Obstacle to Corporate Emigration from the Spectre of EU Tax Law (original) (raw)
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Corporate Mobility in the European Union and Exit Taxes
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The author, in this article, examines corporate mobility from a private international law perspective and an EC law perspective. In this respect, the author pays special attention to the relevant case law of the European Court of Justice and considers its implications for exit tax regimes in Europe.
European Company and Financial Law Review, 2013
and the subsequent infringement cases against Portugal, the Netherlands, Spain and Denmark afforded the CJEU the opportunity to determine its policy regarding exit taxes levied when a company relocates its primary establishment or mere assets from one Member State to another. The Court acknowledged that each of the Member States' tax sovereignty in this area is restricted by the freedom of establishment; this is remarkable because the Court had previously held, in both Daily Mail and Cartesio, that the sovereignty of Member States to determine the connecting factor (i.e., a registered office or central administration) that a company must maintain in order to remain a company governed by the laws of that Member State cannot be challenged by companies based on their EU establishment rights. This article analyses the differences between corporate and tax restrictions on corporate relocations, doing so against the background of (international) tax law, while also considering the relationship between both regimes. It then proceeds to critically examine the Court's demarcation of justified exit taxes, and also highlights the questions that remain. * Affiliated researcher at the Institute of Tax Law, Faculty of Law, KU Leuven and member of the Brussels Bar. Mr Peeters previously published a case note in this area (S. Peeters, 'Exitbelastingen op emigrerende vennootschappen: een moeilijk evenwicht na National Grid Indus', 1 TRV (2012), pp. 5-20), on which this article is substantially based. He wishes to thank Prof. Alvin C. Warren (Harvard Law School) who supervised his LL.M. paper on exit taxation in April 2011.
Intertax, 2012
This article emphasizes the problems caused by the lack of harmonization of the connecting factors in order to determine the fiscal residence of companies. In practice, the current discussion on application of the freedom of establishment for companies has focused on the transfer of their seat within the EU. But no unifying or harmonizing measures has yet been adopted at the European level. This absence of regulation enables EU Member States to establish their own criteria, which obviously may vary depending on each national legal system. In our view, notwithstanding the existing case law, the intervention of the European legislator is required in order to solve either the tax evasion, or the international double taxation that could arise from a corporate mobility situation. Undoubtedly, tax harmonization of the connecting factors would improve the economic integration in the EU, without significant interference in the fiscal sovereignty of the Member States.
Cross Border Movement of Companies: The New Eu Rules on Cross Border Coversion
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Cross-border companies' mobility is issue which has been gaining public attention in Europe since the end of the 1980's. Although it is clear, from the wording of the articles 49 and 54 of the TFEU, that companies should benefit from a freedom of establishment, in practice, the scope of this freedom is quite unclear. Companies wishing to move abroad are usually facing insurmountable obstacles which are still, more than 30 years after the famous Daily Mail case, very present. The recent EU legislative activity may finally bring this problem to an end. In April 2018 the European Commission proposed new rules on cross-border mobility. By enacting the Proposal of the Directive on cross-border conversions, mergers and divisions European Commission introduced important novelties to the cross-border mobility with an aim to simplify procedures, bring legal certainty and create such a legal environment which will enable companies to operate easily on the Single Market. In this paper authors will analyse only the rules of the Proposal that apply to cross-border conversions of companies. The new Proposal on cross-border conversions seem to be an adequate tool for companies that wish to convert abroad. However, the process of conversion is far from being simple. It is a very specific, multi-layered process which involves different stakeholders and authorities and requires their coordinated action. Authors will provide for a critical overview of the proposed legal solutions with special respect to the recent ECJ decision in Polbud case, in which the ECJ reaffirm the right of companies to cross-border conversion.
2024
Cross-referencing in law was always problematic. This is more the case when the cross-reference is made between two different legal systems, with the decision-making at each level being exercised by different entities. The case at hand is even more complicated since it involves, at the same time, three different legal systems: the EU system, the domestic law system and the public international law system - each one with its specificities in what concerns normative creation. Due observance of the EU principles of subsidiarity and proportionality may make it hard to remove many instances of cross-referencing between the EU and domestic or public international law levels. In any case, the EU legislator should be careful in the cross-referencing, not remitting to a certain label or categorisation but to the underlying legal treatment associated with that label. Even if that increases complexity in the legislation, it may be the only way of ensuring that posterior changes in the referred provisions do not undermine the EU law instrument, preventing or deviating it from its underlying rationale. Corporate tax directives were designed on the assumption of an underlying tax obstacle, being it juridical or economic double taxation. That assumption is explicitly referred to in the Preamble of the Directives. However, the way they were designed does not ensure a strict link between such obstacles and the entitlement to the directive benefits. The EU legislator was clearly concerned with limiting access to the Directives’ benefits to cases in which all parties to the transaction / restructuring operation were residents for tax treaty purposes in the Union. However, as demonstrated, the real requirement is that the tax obstacle occurs within the EU, and that beneficiaries of the EU directives are subject to worldwide taxation in the EU. Here, reference should not be made to the epiphenomena (the residence) but to real phenomena (the worldwide taxation of that item of income in all of the involved companies). Better-designed provisions, with a more robust and stricter alignment between the wording and the rationale, reduce administrative and compliance costs while decreasing cases where the EU-nationals may exploit frictions between the wording of the provision and its object and purpose, decreasing the instances where national administrations and/or Courts are forced to resort to anti-avoidance provisions or (unwritten) principles. Only by proceeding in this way can the EU legislator ensure that the EU legal order is truly at the service of the Member States and its nationals and that the internal market is strengthened, as required by the founding treaties.
Corporate Mobility under Private International Law and European Community Law: Debunking Some Myths
his paper examines corporate mobility from a private international law perspective and a European Community law perspective. It considers the two important conflicts of laws theories: the incorporation theory and the real seat theory. It looks at the rationale behind these theories and the long-standing dichotomy between incorporation States and real seat States. The paper examines how the application of the incorporation theory and the real seat theory affect corporate mobility in a number of scenarios. The emphasis of the paper is on corporate mobility in the European Community context. The provisions of the EC Treaty furthering cross-border corporate movement and relevant secondary legislation are examined. The limitations of the current legislative framework are appraised and attempts to enact legislation dealing specifically with corporate mobility are evaluated. Important case law of the European Court of Justice is also assessed. Six cases are analysed: Daily Mail, Centros, Überseering, Inspire Art, SEVIC and Cartesio. The effect of these cases on cross-border transfers of seat is considered. Also, general trends arising from the judgments are depicted and contrasted with entrenched assumptions under private international law. The paper concludes with an overall assessment of the extent to which obstacles to cross-border mobility have been eliminated as a result of Community law.
a. Parent-Subsidiary Directive ___________________________________________________ 6 b. Interest and royalties directive ________________________________________________ 7 c. Directive on Administrative Cooperation (DAC) ___________________________________ 9 d. Public Country-by-Country Reporting (CBCR) ____________________________________ 10 3. Some of the problems observed in EU Member States _________________________11 4. Proposals _____________________________________________________________13 a. Some positive results of the PANA Committee___________________________________ 14 b. Policy recommendations moving forward ______________________________________ 15 1 Tax justice advisor for GUE/NGL in the European Parliament.
Transfer of Corporate Seat in EU: Recent Developments
ATHENS JOURNAL OF LAW
Transfer of corporate seat has been important legal topic in EU law ever since 1980's. While it was clear from the wording of the very first EEC treaties, that companies should benefit from a freedom to establish themselves in another Member State, the extent of this freedom was, more or less, unclear. Some useful guidance with regard to the issue when and under what circumstances a company can transfer its corporate seat and its activities to another Member State, have been given by the ECJ. Every new Court's decision regarding transfer of corporate seat (such as ECJ decisions in case Centros, Inspire Art, Überseering, Daily Mail, Cartesio) had huge echo among corporate lawyers and business and were analysed in the smallest details. The most recent ECJ decision in Polbud case again showed that transfer of corporate seat is topic that still raises number of legal questions. In that sense, paper will analyse relevant EU legislation applicable to corporate mobility. It will particularly focus on new proposal of the Directive 2017/1132 on cross-border conversion, mergers and divisions and possible impacts of that Directive to corporate mobility. Special attention will be given to the ECJ ruling in Polbud case in which ECJ had to decide on delicate question as to whether or not companies should be allowed to "change nationality".
Company’s Cross-border Transfer of Seat in the EU after Cartesio
Jean Monnet Working Papers, 2009
This paper analyses the present state of affairs of companies' cross-border mobility in the EU after the ECJ's judgment in Cartesio. This judgment is subject to an in-depth critical examination in light of the preceding case-law of the Court on companies' freedom of establishment. Departing from Cartesio the paper enters into the debate about the adoption of new harmonization measures designed to remove the existing barriers on companies' cross border mobility in the internal market that result from the divergent and deep rooted Member States' companies' private international law rules. The paper critically assesses the non-EU legislatives initiatives regarding the adoption of the long awaited 14 th company law directive on the crossborder transfer of registered office. It argues that such a harmonization measure should now be finally adopted allowing companies to transfer their registered office alone from one Member State to another. That legal instrument must, in any event, respect the boundaries of the 'abuse of law' put forward by the Court in Cadbury Schweppes in the context of the exercise of the community right of establishment by companies in the EU.