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ECJ Direct Tax Cases - An Update

ECJ Direct Tax Cases - An Update. Mr Chris Curmi, International Tax Partner. Session Outline . Introduction Direct effect of Fundamental Freedoms Update on cases since Montreal June 2005 Tax Conference: Recent cases involving natural persons Recent cases involving corporations.

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ECJ Direct Tax Cases - An Update

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  1. ECJ Direct Tax Cases- An Update Mr Chris Curmi, International Tax Partner

  2. Session Outline • Introduction • Direct effect of Fundamental Freedoms • Update on cases since Montreal June 2005 Tax Conference: • Recent cases involving natural persons • Recent cases involving corporations Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  3. Introduction - 1 • Little harmonisation has been achieved so far in the field of direct taxation • Classical system of taxation / full imputation tax system • Unique systems of taxation (Eg. Estonia) • Due to the direct impact on the economy and social policy direct taxation has been remanded to the sovereignty of individual Member States (MSs) • Although MSs have sovereign legislative powers in the field of direct taxation, the European Court of Justice (ECJ) has repeatedly held that they must do so without breaching Community Law. Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  4. “Although, as Community law stands at present, direct taxation does not fall within the purview of the Community, the powers retained by the Member States must nonetheless be exercised consistently with Community law” ECJ Schumaker Case C-279/93

  5. “The Commission’s policy objectives in the tax field: … the Commission believes that many aspects of the taxation rules of Member States must be modified if they are to contribute to the proper functioning of the Internal market and to the competitiveness of the EU … the Commission has no ambitions to propose the harmonisation of corporate tax rates … increased co-operation between tax administrations is in the interests of the Member States business and the general public” Laszlo Kovacs European Commissioner for Taxation Ireland, 24 February 2006

  6. Introduction - 2- Impact of Fundamental Freedoms BRITAIN IN DRIVE TO CURB POWER OF ECJ “Britain is to spearhead a drive to curb the power of the ECJ over fiscal policy in a move that could cost some multinationals the chance to regain billions of euros in back taxes. When Britain takes over the presidency of the EU … UK officials said they would arrange a meeting of finance ministers to discuss redefining the rules of the internal market in ways that would give national exchequers more protection against its <ECJ’s> rulings. ….. A principal focus would be ensuring that ECJ rulings did not give rise to back dated claims for compensation by companies. Moves to clip the wings of the ECJ in the field of taxation would find favour at high levels in the UK Treasury. Britain’s corporate tax system is under attack at the ECJ with cases brought by multinationals including Marks & Spencer and Cadbury Schweppes” FT – June 20 2005 (Front Page Headline) Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  7. Introduction - 3 • In particular, the MSs must respect the 4 Freedoms enshrined in the EC Treaty: • << Free movement of goods (Arts. 23 – 38 EC Treaty) >> • Free movement of persons (Arts. 39 – 48) • Free movement of services (Arts. 49 – 55) • Free movement of capital (Arts. 56 – 60) • 4 Freedoms encompass 2 principles: • Right of cross border circulation throughout the EU • Prohibition of discrimination on the grounds of nationality and origin Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  8. A selection of Recent ECJ direct Tax CasesCases involving natural persons

  9. “N” case (Case C-470/04) - 1- AG Opinion(case pending before ECJ) • AG Opinion – 30 March 2006 • Challenge to Dutch “exit” tax provisions • Facts: • Mr “N”- Dutch resident and was sole shareholder in 3 Dutch co’s which were mind and managed out of Curacao • Emigrated from Netherlands in 1997 and took up residence in the UK • Deferred tax assessment <for 10 years> with security (latter dropped following ECJ decision in Lasteyrie case decision re French “exit” tax provisions) • Claim: • Challenged the Dutch tax assessment – in breach of Freedom of Establishment (Art. 43) + assessment of interest Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  10. “N” case (Case C-470/04) - 2- AG Opinion(case pending before ECJ) • Concluded that Dutch “exit” tax provision was not in breach of Art 43 where: • The assessed tax is deferred until shares are actually disposed of; and, • Ensured that the tax levied on the disposal is not higher than the tax that would have been levied on disposal within the Netherlands • …. However – breach of Art. 43: • Where deferral of tax liability is against provision of security: • Release of security • Compensation I.f.o. taxpayer for financial loss suffered in consequence of providing security Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  11. Meilicke (Case C-292/04) - 1-AG Opinion(case pending before ECJ) • AG Opinion – 10 November 2005 • Challenge to (old) German imputation tax system on dividend tax credits • Facts: • Mr Meilicke was a German resident and received foreign source dividends in Germany (from Danish & Dutch companies) • German tax law granted a tax credit to the shareholder in receipt of a dividend from a German company • No equivalent tax credit for dividends received from companies outside Germany • Claim: • German imputation tax system was in breach of Arts 56 & 58 – Free movement of Capital Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  12. Meilicke (Case C-292/04) - 2- AG Opinion(case pending before ECJ) • Concluded that restricting the imputation tax credit to dividends paid by resident companies violates the free movement of capital • Found support in his argument in the Manninen (2004) decision and in the Verkooijen (2000) decision • …. With a difference: • German request for a limitation on the retroactiveeffect of the decision (estimated to cost € 5 billion) • Acceded to by AG – retroactiveeffect only from 6 June 2000 (Verkooijen decision). • Limited impact since German imputation system was abolished w.e.f. 1.1.2001. Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  13. D v. Rijksbelastingdienst (Case C-376/03) –1- ECJ Decision • ECJ decision – 5 July 2005 • Challenge to Dutch wealth tax • Facts: • “D” (German national) resident in Germany and owned property in the Netherlands (which equated to 10% of his wealth) • D was not entitled to a Dutch wealth tax allowance which is available to Dutch residents and all EU nationals (provided > 90% of their assets are located in the Netherlands) • Belgium / Netherlands tax treaty granted the Dutch wealth tax allowance regardless of the % of wealth located in the Netherlands • Claim: • Dutch tax law on granting of wealth tax was in breach of Art. 56 - Free Movement of Capital Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  14. D v. Rijksbelastingdienst (Case C-376/03) –2- ECJ Decision • Decision: • Overruled AG Opinion • <Any wealth tax which gives resident taxpayers a right to a rebate and which it denies to non-residents is in in breach of the free movement of capital> • <Most favoured nation (MFN) argument: • The national of 1 MS (in this case Germany) can claim the benefit of the best host state tax treaty (in this case, the Dutch treaty with Belgium) and that this MFN argument prevailed irrespective of whether the tax treaty concerned was intra-EU or with a non-EU third country>. • Ruling: • No discrimination – taxpayers are not in a comparable position • No discrimination – in different treatment of nationals of Contracting States resulting from the allocation of taxation powers • Reciprocal rights & obligations of a tax treaty only apply to individuals of those Contracting States Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  15. Ritter (Case C-152/03) – 1- ECJ Decision • ECJ Decision– 21 February 2006 • Challenge to German individual loss relief provisions • Facts: • Ritters derived their employment income in Germany but resided in France • Ritters were civil servants and were subject to unlimited German tax liability • House in France gave rise to imputed negative income • No reduction in German tax base for negative imputed income (since tax treaty between Germany / France gave each state exclusive taxing rights over income from immovable property situated therein). • Claim: • German tax law on granting of individual loss relief was in breach of Art. 43 & 56 - Freedom of Establishment & Free Movement of Capital Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  16. Ritter (Case C-152/03) – 2- ECJ Decision • Decision: • Case falls within the scope of Free movement of Workers (Art. 39) • Situation comparable with that of a German-resident living in his own house situated in Germany (Ritter – unlimited German taxation and bulk of employment income derived from Germany) • Rejected Germany’s argument on the fiscal coherence on their tax system. • Different tax treatment of non-resident taxpayers, who essentially derive their entire taxable income in Germany, and of taxpayers both working and living in Germany, is an indirect discrimination forbidden under Art 39 of EC Treaty. Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  17. Other Cases • Bouanich (C-265/04) - ECJ Decision (19 January 2006) • Challenge to Swedish tax rules on Share Repurchases • Freedom of Capital (Art. 56) • Resident shareholder – acquisition cost deductible from chargeable gain • Non-Resident shareholder – treated as a dividend <no deduction for acquisition cost> • Centro di Musicologia Walter Staufer (C-386/04) • AG Opinion (15 December 2005) • Challenge to German tax rules on non-profit organisations • Remove discrimination on exemption from taxation Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  18. A selection of Recent ECJ direct Tax CasesCases involving corporations

  19. Bosal Holding BV(Case C-168/01)– 1- A reminder from last year’s conference • Landmark decision – 18 September 2003 • Challenge to Dutch tax legislation on the deductibility of costs in connection with the holding of a subsidiary • Facts: • Bosal was an active holding company and held various underlying subsidiary companies in 9 other Member States • Dutch tax legislation allows a deduction for costs in connection with a holding of a subsidiary company if those costs are indirectly instrumental in realising profits taxable in the Netherlands [Costs in financing holdings in Dutch companies were, in general, deductible] • Bosal was denied a deduction for the costs incurred (€ 1.8m circa) in relation to the financing of the holdings in companies established in the 9 other MSs Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  20. Bosal Holding BV(Case C-168/01)– 2- A reminder from last year’s conference Non-Resident Subsidiary MS 2 Costs in financing Sub A not deductible Netherlands Dutch Parent Resident Subsidiary Costs in financing Sub B are deductible Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  21. Impact of Bosal Case –Dutch High Court Ruling on third-country impact - 1 • Dutch High Court Ruling – 10 March 2005 • Facts: • X BV held shares in 25 subsidiaries, of which 12 were situated outside the EEA • X BV argued that, on the strength of the Bosal Holding decision, it should be allowed a deduction for all its subsidiaries, including the 12 resident outside the EEA (included Swiss company and Cypriot & Polish company which were not EU members at the time - 1997) • Claim was also based, inter alia, on Art 56 EC Treaty (Free movement of Capital) which also applied to movement of capital to or from third countries • Ruling: • Claim was rejected on the basis of the standstill provision in Art. 57 EC (re Free movement of Capital) which allows restrictions on the free movement of capital to third countries existing before 31.12.1993 to be kept in place as long as such restrictions are not changed substantially or renewed. • No substantial changes were made between 1993 and 2000 & 2001 (years applicable to case) • See next slide for result of Appeal Court Decision in 2006 Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  22. Impact of Bosal Case – Recent Dutch Appeal Court Ruling on third-country impact - 2 • Dutch Appeal Court Ruling – 1 February 2006 • Ruling: • Distinguished between DIRECT holdings in EU/EEA & third countries • For Swiss direct subsidiary: • Appeal was rejected on the basis of the standstill provision in Art. 57 EC (re Free movement of Capital) which allows restrictions on the free movement of capital to third countries existing before 31.12.1993 to be kept in place as long as such restrictions are not changed substantially or renewed. • No substantial changes were made between 1993 and 2000 & 2001 (years applicable to case) • Delay on part of Dutch in amending the cost deductibility provisions in conformity with EC Treaty has denied X BV a cost deduction ! • For EU/EEA direct subsidiaries <but which, in turn held holdings in non-EU/EEA subsidiaries>: • Appeal accepted taxpayer claim for application of Bosal decision • Fact that the EU/EEA direct subsidiaries themselves held subsidiaries outside the EU/EEA was irrelevant • The profits of the (sub-)subsidiaries residing outside the EU/EEA were indirectly (through participation) for the benefit of the subsidiary in the EU Member State. Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  23. Impact of Bosal Case – Recent Dutch Appeal Court Ruling on third-country impact - 3 MS 1 Applying Standstill Provision To Art. 57 of EU Treaty Direct shareholder of non-EU subsidiary is not resident in MS = APPLY Standstill provision = No Deduction @ MS1 for costs in maintaining participation in non-EU subsidiaries Direct shareholder of non-EU subsidiary is resident in a MS Benefit from the profits of the non-EU subsidiary at the level of the EU Co’s = APPLY Bosal Decision = Deduction @ MS1 for costs in maintaining participation in non-EU subsidiary MS 2 Non EU Non EU Non EU Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  24. Marks & Spencer Plc (Case C-446/03) – 1- ECJ Decision • Landmark decision – 13 December 2005 • Challenge to UK group loss relief provisions • Facts: • M&S had loss making subsidiaries in Belgium, France & Germany • M&S wanted to offset the foreign losses of the subsidiaries (GBP 30m) against its UK profits • Group loss relief in the UK was refused as UK group loss relief provisions are restricted to losses of UK resident subsidiaries (incl. Foreign PEs). • Claim: • UK tax law on granting of group loss relief was in breach of Art. 43 & 48 - Freedom of Establishment Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  25. Marks & Spencer Plc (Case C-446/03) – 2- ECJ Decision UK Parent United Kingdom Other MSs Subsidiary Subsidiary Branch Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  26. Marks & Spencer Plc (Case C-446/03) – 3- ECJ Decision UK Parent UK Parent United Kingdom Other MSs Subsidiary Subsidiary Branch Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  27. Marks & Spencer Plc (Case C-446/03) – 4- ECJ Decision • Decision: • UK group relief provisions are not, in themselves, contrary to Arts. 43 & 48 – main considerations: • Option to have losses taken into account in either the State in which established or another State would significantly jeopardise a balanced allocation of the powers to impose taxes between MSs • If foreign losses were used in the UK, they might be used twice if they were also used in the other MS (“double – dip”). • Risk of tax avoidance (transfer loss to high tax jurisdictions). • HOWEVER, UK group loss provisions do not observe the principle of proportionality & go beyond what is necessary to attain the objectives pursued if: • Non-resident subsidiary has exhaustedthe possibilities available in its state of residence of using the losses for prior / current / future accounting periods • (including 3rd party use where the subsidiary has been sold to a 3rd party). Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  28. Marks & Spencer Plc (Case C-446/03) – 5- ECJ Decision • Consequences: • UK Finance Bill, 2006 announced legislative changes <effective 1 April 2006> to extend the rules for the relief of losses within a group. • Apply to foreign subsidiaries resident in the EEA or foreign subsidiary that has incurred the loss in a PE in the EEA • Compliance obligation will fall on the UK based claimant company • Anti-avoidance provisions (effective 20.2.06) to deny loss relief where there are arrangements which: • Either result in losses becoming unrelieved outside the UK that were otherwise relievable; or, • Give rise to unrelieved losses which would not have arisen but for the extension of the group loss relief provisions. Estimated to cost the UK Exchequer approx. £ 50m per annum. • Likely to be substantial practical difficulties in applying the principles that the ECJ has set out in actual cross-border relief situations • At what stage is it known that there is no possibility of utilising the losses in the subsidiary’s state of residence?<UK High Court – 10 April 2006 – submitted to Special Commissioners re German / Belgian subsidiary losses – M&S denied group loss relief for French subsidiary since losses used by purchaser of subsidiary> Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  29. Cadbury Schweppes (C-196/04) – 1 - AG Opinion(case pending before ECJ) • AG Opinion – 2 May 2006 • Challenge to UK CFC legislation • Facts: • CS operated 2 group finance companies located in the Irish IFSC, Dublin • Profits taxable @ 10% • UK IR applied CFC legislation – the profits of the Irish subsidiaries were attributed to the UK parent and subject to UK tax • Claim: • UK CFC legislation was in breach of Freedom of establishment (Art.43) / Services (Art. 49) / Capital (Art. 56) • EU wide relevance in view of CFC legislation applied by notable EU MSs • Denmark; Finland; France; Germany; Italy; Portugal; Spain & Sweden supported the UK case> Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  30. Cadbury Schweppes (C-196/04) – 2 - AG Opinion(case pending before ECJ) • Concluded • UK CFC legislation should only be able to be applied in accordance with EC law where the foreign company had entered into wholly artificial arrangements to circumvent national tax laws. • Relevant provisions of EC law where: • Freedom of Establishment (Art. 43) • Freedom to provide Services (Art. 48) • Decision to establish subsidiaries in Ireland to enjoy very favourable rates of tax is not an abuse of the Freedom of Establishment • Irrelevant that Dublin IFSC tax regime was a harmful tax regime under EU Code of Conduct • UK CFC legislation did restrict the Freedom of Establishment • Each MS was entitled to set its own tax rate • If subsidiary provides genuine and actual services to the parent company, it could not be regarded as tax evasion of avoidance • 3substance tests • Premises + staff + equipment / competence & decision execution / economic substance Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  31. SEVIC Systems AG (Case C-411/03) – 1- ECJ Decision • Decision – 13 December 2005 • Challenge to German Company Re-organisation Code but which has German direct tax implications • Facts: • Sevic AG entered into a merger agreement with a Luxembourg company • German local trade registrar refused the application to register the merger on the grounds that German Re-organisation code only permitted mergers between legal entities established in Germany. • Claim: • German Company Re-organisation code on mergers was in breach of Art. 43 & 48 - Freedom of Establishment Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  32. SEVIC Systems AG (Case C-411/03) – 2- ECJ Decision • Decision: • Provisions of the German Re-organisation Code which restrict registration of mergers to mergers of companies that are registered in Germany is in breach of freedom of establishment • Consequences: • All EU lawmakers will need to ensure that company & tax legislation comply with with Arts. 43 & 48 • Tax implications – German practice of treating the transaction as a (deemed) liquidation followed by a re-incorporation & consequent (deemed) realisation of gain on all assets is under review. Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  33. Other Cases decided - 1 • CLT - UFA (C-253/03) – ECJ Decision: 23 February 2006 • Challenge to German taxation on distributions of a PE at a rate higher than that applicable in the case of a German subsidiary. • Luxco with German PE (42% vs 30% + wht (33.5%) • Freedom of establishment- Art.43- • Choice of appropriate vehicle <PE or sub> must not be limited by discriminatory tax provisions • Detrimental tax treatment of a PE cannot be justified because there is no funadmenetal difference between a PE and a subsidiary. • No temporal effect limitation imposed <but till German tax reform in 2000> • Keller Holding GmbH (C-471/04) – ECJ Decision: 23 February 2006 • Challenge to German non-deductibility of costs related to exempt dividends from EU second tier subsidiary under the old imputation tax system • Freedom of establishment – Art. 43 • German tax rules <at the time of the proceedings> were incompatible with Art. 43 Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  34. Keller Holding GmbH - illustrated GmbH 1 Keller H Dividend taxable but no tax <Imputation credit> Dividend taxable but no tax <Imputation credit> No Deduction @ Keller H for costs in maintaining participation in Keller G since have immediate economic connection with exempt income (A) Deduction @ GmbH 1 for costs in maintaining participation in GmbH 2 since have immediate economic connection with taxable income (B) GmbH 2 Keller G Dividend tax exempt <DTA Germany / Austria> Germany Austria Austria Sub (A) and (B) not compatible with Art. 43 Freedom of Establishment Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  35. Other Cases decided - 2 • Denkavit (C-170/05) – AG Opinion: 27 April 2006 • Challenge to French withholding tax on dividends to non-residents <1987 – 89> prior to EC Parent Subsidiary Directive. • Denkavit International BV <Dutch resident> - 5% French Dividend wht • Credit not applied – Dutch participation exemption on dividend received • Freedom of establishment- Art.43-claimed a refund of French 5% wht • Tax legislation imposing a withholding tax on dividends paid to foreign parent companies while not taxing dividends in the hands of domestic parent companies contravenes FoE principle • It is incumbent on the source country to verify that double taxation is effectively avoided in the home country of the dividend recipient either on the basis of the tax treaty or under domestic legislation to the same extent as in internal situations in the source State. • <Did not address the temporal effect of the decision> • Potential impact • Possible claims for breach of FoE principle where the dividend is not covered by the EC P/S Directive • Eg: Situation where minimum holding period / minimum participation not satisfied under P/S Directive and economic double taxation on dividend income Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  36. Other Cases pending - 1- AG Opinionawaited(case pending before ECJ) • Columbus Container (C-298/05) • Challenge to German CFC legislation • Vodafone 2 (C-203/05) • Further challenge to UK CFC legislation i.r.o. taxation in the UK of profits of a Luxembourg subsidiary company • Similarly to Cadbury Schweppes – Arts 43 / 49 / 56 Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  37. Other Cases pending - 2- AG Opinionawaited(case pending before ECJ) • FII Group Litigation (C-446/04) • Wide range of issues, including inter alia: • Taxation of domestic and foreign dividend income of a UK company: • UK dividends – exempt from tax • Foreign dividends – subject to tax with credit for foreign wht + underlying profit tax <provided hold > 10% in foreign entity> • AG Opinion – 6 April 2006 – “foreign source” dividends being treated less favorably than “domestic source” dividends • Challenge to <former>UK system of franked investment income for ACT purposes • UK dividends – eligible as FII & offset against ACT payable on dividend distribution by recipient company • Foreign dividends – not eligible as FII & hence no offset against ACT payable on dividend distribution by recipient company • AG Opinion – 6 April 2006 – no full economic double taxation relief on dividends from companies resident in other EU MSs is in breach of Art. 43 (Freedom of Establishment) and Art 56 (Free movement of capital) Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  38. Other Cases pending - 3- AG Opinionawaited(case pending before ECJ) • ACT Group Litigation Class 4 (C-374/04) • Claims by companies which have received dividends from a UK company and i.r.o. no tax credits were provided for in the relevant tax treaties with the UK • Other EEA companies received a partial tax credit or a full tax credit • AG Opinion – 23 February 2006: - the differences in tax treatment flow purely from MSs division of tax jurisdiction in terms of the relevant tax treaty and which do not fall within the scope of Art. 43 (Freedom of Establishment) and Art. 56 (Free movement of Capital) • Rejects the notion that the EU Treaty obliges MSs to extend “Most Favoured Nation” treatment granted to resident of one MS under a tax treaty to residents of another MS • Confirms that LOB clauses in tax treaties are compatible with the EU Treaty Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  39. Other Cases referred to ECJ • French 3% Patrimonial tax • Luxco <not treaty protected> • Discrimination in treatment of foreign companies subjected to the 3% patrimonial tax on French immovable property vis-à-vis entities which are exempted from the tax: • companies the French immovable assets of which represent < 50% of their French assets • companies that have their effective management in France; • Foreign companies covered by a mutual assistance or non-discrimination clause in a tax treaty with France Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  40. Conclusion Tax harmonisation through the back door! “The European Court of Justice is increasingly taking over the role of lawmaker on crucial tax issues in Europe, not least in the area of company taxation” “It is clear that the court [ECJ] is becoming increasingly active in striking down member states’ tax rules that it considers contravene either the European treaty or other European legislation. Many of these rules were designed to protect member states’ national tax bases where cross-border activities were involved, but are incompatible with the EU rules on non-discrimination and free movement within the internal market” Fritz Bolkestein - (then) EU Commissioner of the Internal Market; Customs & Taxation (Financial Times 21 October 2003) Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

  41. Presentation Information Prepared by Chris R Curmi International Tax Partner CPS International Limited 1, Col. Savona Street, Sliema SLM07 MALTA Tel: + 356 2134 4391 Fax: + 356 2134 4229 E-mail: curmichris@cps.com.mt Nexia Tax Conference, Geneva 2 June 2006 (c) 2006 CPS International Limited

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