Terra/Wattel European Tax Law - Volume 1: General Topics and Direct Taxation

Preface / V

Overview / VII

List of abbreviations / XXIII

PART 1
General EU law and Taxation / 1

CHAPTER 1
Introduction / 3
Peter Wattel

CHAPTER 2
Constitutional Foundations: EU Tax Competences; Legal Basis for Tax Integration; Sources and Enactment of EU Tax Law / 9
Rita Szudoczky and Dennis Weber
2.1 Division of (Tax) Competences Between the Union and the Member States / 9
2.2 Sources of EU Tax Law / 11
2.2.1 Primary and Secondary EU Law / 11
2.2.2 Primary law / 12
2.2.2.1 Treaty Provisions Relevant for Taxation / 12
2.2.2.2 General Principles of EU law / 13
2.2.3 Secondary Law: Characteristics of Regulations, Directives and Decisions / 14
2.2.4 International Agreements Concluded by the Union / 15
2.2.5 Soft Law / 16
2.2.5.1 Recommendations, Opinions and Communications / 16
2.2.5.2 Codes of Conduct / 17
2.3 Enactment of EU Measures as Regards Taxation / 18
2.3.1 Different Legislative Procedures / 18
2.3.2 Treaty Bases for Tax Integration / 20
2.3.3 Escapes From the Unanimity Requirement: Enhanced Cooperation, Market Distortion Provisions / 21

CHAPTER 3
General EU Law Concepts and Tax Law / 23
Peter Wattel
3.1 Introduction / 23
3.1.1 An Internal Market / 23
3.1.2 Interaction of Positive and Negative Integration; Direct and Indirect Taxation; Limits to Negative Integration in Tax Matters / 24
3.1.3 Access to the Four Freedoms / 26
3.1.3.1 Treaty Standing; Cross-Border Element; Internal Situations; EU Citizenship / 26
3.1.3.2 Treaty Access in Direct Tax Cases / 27
3.1.3.3 Abuse of Right Does Not Bar Treaty Access (but May Justify a Restriction) / 30
3.1.4 The Rule of Law; Human Rights; General Principles of EU Law; Effective Legal Remedy / 31
3.2 The Four Freedoms / 35
3.2.1 ‘Discriminations’ and ‘Obstacles’; Market access and Market Equality; the Rule of Reason / 35
3.2.1.1 Discrimination and Restriction Concepts / 35
3.2.1.2 Permissible Restrictions on Free Movement; the Rule of Reason / 37
3.2.2 Rule of Reason Justifications for (Fiscal) Market Restrictions / 39
3.2.3 (Rare) Examples of Direct Tax Measures Affecting Free Trade in Goods; French Newspapers and Krantz / 43
3.2.4 Direct Taxation and the Freedom to Provide (and Purchase) Services / 43
3.2.5 The Free Movement of Persons and the Right of Residence / 44
3.2.6 Freedom of Capital and Payments; Extending to Third States / 48
3.2.7 Discriminations, Restrictions, Disparities and Dislocations / 50
3.2.7.1 Measures With and Without Distinction; From an Obstacle-Approach to a Discrimination- Approach; Exercise in Parallel of Taxing Power / 50
3.2.7.2 Disparities / 55
3.2.7.3 Dislocations (Tax Base Compartmentalization); Source Taxation and EU-Wide Taxation; National Tax Treatment of Nonresidents? / 56
3.3 Normal Conditions of Competition (a ‘Level Playing Field’) / 65
3.4 Sincere Cooperation and Effectiveness of EU Law / 66
3.5 Implications of the Principle of Effectiveness of EU Law in the National Legal Order / 69
3.5.1 Direct Effect and Primacy of EU Law; Consistent Interpretation; Effects of Directives / 69
3.5.2 Enforcement of EU Law: Procedural Equivalence and Effectiveness / 72
3.5.2.1 National Procedural Autonomy on Two Conditions; Procedural Rule of Reason / 72
3.5.2.2 Illustration: Restrictions on Restitution of Overpaid Tax / 74
3.5.2.3 Application of EU Law ex officio; Public Policy Provisions / 76
3.5.3 National Time-Limits, Final Decisions and Res Iudicata / 78
3.5.3.1 The Length of National Time-Limits; Again Equivalence and Effectiveness / 78
3.5.3.2 (No) Revision of Final Administrative Decisions and Final Judgments / 80
3.5.4 State Liability for ‘Serious’ Breaches of EU Law / 85
3.5.4.1 Introduction; Conditions for Liability / 85
3.5.4.2 A ‘Sufficiently Serious’ Breach of EU Law / 86
3.5.4.3 Interaction with Direct Effect; Incidental Damages / 88
3.5.4.4 State Liability for Wrongful Supreme Court Judgments / 88
3.5.4.5 Penalty Payments for Breaches of EU Law / 90

CHAPTER 4
The EU Charter of Fundamental Rights, General Principles of EU Law and Taxation / 91
Pasquale Pistone
4.1 Legal status, classification and relation with EU law principles / 91
4.2 General provisions / 92
4.2.1 Scope and requirements for protection: in which cases does the Charter apply? / 92
4.2.1.1 “only when they are implementing Union law” / 92
4.2.1.2 The level of fundamental rights protection; interaction of the Charter, the European Convention and national constitutional law / 93
4.2.2 Limitations of Rights and the link with the Community and Union Treaties / 93
4.2.3 Interaction between the Charter and the European Convention / 94
4.3 Tax Aspects of EU fundamental rights / 95
4.3.1 Right to privacy and data protection / 95
4.3.2 Right to property / 96
4.3.3 Equality before the law and non-discrimination / 97
4.3.4 Freedom of movement and residence / 97
4.3.5 Right to an effective remedy and fair trial / 97
4.3.6 Presumption of innocence and right of defence / 99
4.3.7 Provisions geared solely at the EU institutions / 100
4.3.8 Principles of legality and proportionality of criminal offences and penalties / 101
4.3.9 Prohibition of double jeopardy / 101

CHAPTER 5
Third States and External Tax Relations / 103
Update and Elaboration by Ana Paula Dourado and Peter Wattel
5.1 Overview / 103
5.2 Third State Capital Movement / 103
5.2.1 Introduction; Differences Between Intra-EU and Third State Capital Movement / 103
5.2.2 In Principle the Same Substance as Intra-EU, but: ‘a Different Legal Context’ / 104
5.2.3 The Grandfather Clause (Article 64(1) TFEU) / 106
5.2.4 Mutual Exclusion or Overlap? How to Distinguish Capital Movement From Establishment and Service Provision? / 109
5.2.5 No Intra-EU Cherry-Picking From Tax Treaties With Third States, nor Vice Versa / 114
5.3 Member States’ Overseas, Associated and Dependent Territories: Member State, Third State, ‘Second’ State? / 115
5.4 The European Economic Area Agreement (EEAA) / 119
5.5 The EU Blacklist of Non-cooperative Third States / 119

PART 2
Integration of Direct Taxation / 121

Part 2A Harmonization of Corporate Income Taxation / 121

CHAPTER 6
The Parent-Subsidiary Directive / 123
Update by Otto Marres
6.1 Introduction / 123
6.2 Main Features / 124
6.3 Qualifying Companies (Arts. 2 and 3) / 124
6.3.1 ‘Company of a Member State’ and ‘Permanent Establishment’ (Art. 2) / 124
6.3.2 Parent and Subsidiary Status (Art. 3) / 129
6.3.3 No Other Requirements / 131
6.4 Inbound Dividends: Exemption or Indirect Credit (Art. 4) / 131
6.4.1 The General Rule: Choice of Exemption or Indirect Credit; Even Asymmetrical / 131
6.4.2 Linking Rule: No Exemption for Deductible Payments / 133
6.4.3 Respecting Both CIN and CEN / 134
6.4.4 Ordinary Credit; Excess Foreign Corporation Tax / 134
6.4.5 Multi-Tier Credit / 135
6.4.6 (Non-)Deductibility of Charges ‘Related’ to the Holding (Art. 4(3)); Bosal Holding and Argenta Spaarbank II / 136
6.5 ‘Distributions of Profits’; Constructive Dividends; Hybrid (Transparent) Entities; Liquidation Proceeds / 137
6.5.1 Distributions of Profits (Art. 1) / 137
6.5.2 Hybrid Entities (Art. 4(2)); Fiscal Transparency / 138
6.6 Outbound Dividends: Abolition of Withholding Tax (Art. 5) / 138
6.6.1 The General Rule / 138
6.6.2 Transitional and Deleted Derogations / 139
6.6.3 ‘Withholding Tax’ / 139
6.6.4 Article 6; (No) Précompte Mobilier / 139
6.6.5 Imputation Systems; Imputation Taxes; Outbound Payment of Imputation Credits (Art. 7) / 140
6.7 Anti-Abuse Reservation (Art. 1(2)-1(4)) / 141
6.7.1 In a Nutshell / 141
6.7.2 Main purpose or one of the main purposes of obtaining a tax advantage / 142
6.7.3 Defeating object or purpose / 142
6.7.4 Artificiality / 143
6.7.5 Refusing ‘the benefits of the Directive’ / 143
6.7.6 Article 1(4): Reservation of Competence (any Autonomy Left?) / 145

CHAPTER 7
The Tax Merger Directive / 151
Update by Frederik Boulogne
7.1 Introduction; Objective; History / 151
7.2 Ad Hoc Tax Problems of Mergers and Divisions / 153
7.3 Longer-Term Tax Problems of Restructuring Operations / 153
7.4 Operations Covered and Definitions (Art. 2) / 154
7.4.1 Operations Covered (Art. 2(a-e) and (k)) / 154
7.4.2 ‘Branch of Activity’ (Art. 2(j)); Independent Functioning / 155
7.4.3 Coverage after the SEVIC, Cartesio and VALE Cases, the Implementation of the Amendment, and the Company Law Directive on Cross-Border Mergers of Limited Liability Companies / 157
7.5 10% Additional Cash Pay-Out (Art. 2(a)-(c) and (e)) / 159
7.6 Gist and System of the Directive / 159
7.7 Qualifying Companies (Art. 3) / 161
7.8 Taxation of the Companies Involved / 162
7.8.1 Deferral of Capital Gains Tax and Carry-Over of Tax Values (Arts. 4, 9 and 11) / 162
7.8.2 Carry-Over of Losses Connected to the Remaining Branch (Arts. 6 and 13(2)) / 163
7.8.3 Carry-Over of Tax-free Provisions and Reserves (Arts. 5 and 13(1)) / 163
7.8.4 Branch Requirement (Arts. 4(2)(b) and 12(1)(b)) / 164
7.8.5 Valuation of Shares Received / 164
7.8.6 Hybrid (Transparent) Entities / 165
7.9 Cancellation of Shares (Art. 7) / 166
7.10 Taxation of the Shareholders Involved (Arts. 8, 11 and l4) / 167
7.11 Transfer or Incorporation of a Foreign Branch (Art. 10) / 168
7.12 Operations and Migrations Not Covered / 169
7.13 The Anti-Abuse Reservation (Art. 15) / 170
7.13.1 Evasion and Avoidance; Objective and Subjective Elements; Scope and National Implementation of the Anti-Abuse Provision / 170
7.13.2 The Leur-Bloem Case; Facts / 171
7.13.3 Admissibility: Domestic Situation, but National Law Refers to EU Law / 172
7.13.4 (not included in this student edition)
7.13.5 (not included in this student edition)
7.13.6 Purely Fiscal Advantages Are Not ‘Valid Commercial Reasons’ / 172
7.14 (not included in this student edition) / 173
7.15 Consequences / 173

CHAPTER 8
The Settlement of Cross-Border Tax Disputes in the European Union / 175
Pasquale Pistone
8.1 Cross-border tax disputes: from none to up to four types of legal instruments for their settlement / 175
8.2 Brief historical overview / 176
8.3 Legal basis / 177
8.4 The relations between the legal instruments / 178
8.5 Scope / 178
8.5.1 General issues / 178
8.5.2 Personal scope / 179
8.5.3 Substantive scope / 179
8.5.4 Objective scope / 180
8.5.5 Territorial scope / 180
8.6 The procedures / 180
8.6.1 The mutual agreement procedure / 180
8.6.1.1 General issues / 180
8.6.1.2 Access to the mutual agreement procedure / 181
8.6.1.3 The unilateral phase / 181
8.6.1.4 The consultation phase / 182
8.6.1.5 The final phase / 183
8.6.2 Arbitration / 184
8.6.2.1 Introductory remarks / 184
8.6.2.2 The appointment and composition of the panel / 185
8.6.2.3 The rules of functioning / 186
8.6.2.4 The modes of arbitration / 187
8.6.2.5 The involvement of the affected person(s) during the procedure / 188
8.6.2.6 Confidentiality of the proceedings / 189
8.6.2.7 The decision / 190
8.6.2.8 The derogations / 191
8.6.2.9 Cost of the proceedings / 192
8.7 The relations with domestic judicial procedures / 193

CHAPTER 9
Tax Aspects of the European Economic Interest Grouping (EEIG) and the European Company (SE) / 195
not included in this student edition

CHAPTER 10
The Interest and Royalty Directive / 197
Update by Axel Cordewener
10.1 Introduction: Background, History and Aim / 197
10.2 Scope of Application / 198
10.2.1 Objective (Substantive) Scope of Application / 198
10.2.1.1 Interest and Royalty Payments (Article 2) / 198
10.2.1.2 Potential Limitations through Exclusion of Certain Payments (Article 4) / 199
10.2.2 Subjective (Personal) Scope of Application / 200
10.2.2.1 ‘Company of a Member State’ (Article 3(a)) / 200
10.2.2.2 Association Requirement (Article 1(7) juncto Article 3(b)) / 201
10.2.2.3 ‘Permanent Establishment’ (Article 3(c)) / 202
10.2.2.4 Recipient as ‘Beneficial Owner’ (Article 1(4), (5)) / 203
10.2.3 Territorial Scope of Application / 203
10.2.4 Temporal Scope of Application / 204
10.3 Relief Rule: Tax Exemption in the Source State / 204
10.3.1 Exemption from ‘Any Taxes’ (Art. 1(1)) / 205
10.3.2 Relief Procedure / 206
10.3.2.1 Immediate Exemption from Withholding Tax (Article 1(11) – (14)) / 206
10.3.2.2 Right to Refund if Immediate Exemption Failed (Article 1(15) – (16)) / 206
10.4 Special Issues / 207
10.4.1 Anti-Tax Avoidance Provisions / 207
10.4.1.1 Minimum Association Period (Article 1(10)) / 207
10.4.1.2 Prevention of Fraud and Abuse (Article 5) / 208
10.4.2 Direct Effect of Beneficial Rules / 209
10.4.3 Relation to Relief Provisions under Domestic Law or Double Tax Treaties (Article 9) / 209
10.5 Some Comments on the Current Status of the Directive and Proposals for Further Amendments / 209

CHAPTER 11
A Common Consolidated Corporate Tax Base (C(C)CTB) / 213
Jan van de Streek
11.1 Introduction / 213
11.2 General Policy Objectives / 215
11.2.1 Stimulating Growth and Investment / 215
11.2.2 Enhancing the Fairness of Corporate Income Tax / 217
11.2.3 Legal Basis and Subsidiarity / 218
11.3 Personal and Material Scope of the CCTB/CCCTB proposals / 220
11.3.1 Mandatory Regime for Large Companies / 220
11.3.2 Optional Regime for SMEs / 222
11.3.3 Issues Subject to National Corporate Income Tax / 223
11.4 Main Features of the Common Tax Base / 225
11.4.1 A Few General Principles and No Link to IAS/IFRS / 225
11.4.2 Calculation of the Tax Base / 227
11.4.3 Foreign Income and Participation Exemption / 229
11.4.4 Loss Relief / 232
11.5 Consolidation and Formulary Apportionment / 234
11.5.1 Consolidation / 234
11.5.2 Sharing Formula / 237
11.5.3 Administrative Framework / 240
11.6 Outlook / 242

CHAPTER 12
The Anti-Tax-Avoidance Directive (ATAD) / 245
Daniël Smit
12.1 Introduction and Background: an Ambitious EU Agenda Beyond BEPS / 245
12.2 History, Objective, Scope and Main Features of the ATAD / 246
12.2.1 Adoption of the ATAD: Politically Controversial, but Eventually Feasible / 246
12.2.2 De Minimis-Standard and “Menu of Options”; Intra-EU Fragmentation Risk Not Solved / 247
12.2.4 Personal Scope; Corporate Tax Liability as The Gateway / 248
12.3 (not included in this student edition)
12.4 The Four Specific Anti-Tax Avoidance Rules (SAARs) / 249
12.4.1 The Earnings-Stripping Rule / 249
12.4.1.1 Introduction and Background / 249
12.4.1.2 Scope of the Rule: Exceeding Borrowing Costs minus 30% EBITDA = non-Deductible / 251
12.4.1.3 Exceptions to the Interest Limitation Rule / 253
12.4.2 The Exit Tax and Tax Base Step-Up Rule / 255
12.4.2.1 Introduction and Background / 255
12.4.2.2 Exit Tax and Tax Base Step-Up, but Mutual Recognition of Market Value Bridge too Far / 255
12.4.2.3 An Alarming Lack of Definitions and Over- and Under-Inclusiveness / 256
12.4.2.4 The Intra-EU/EEA Option for Stagged Recovery: a Curse in Disguise? / 257
12.4.2.5 Valuation Mismatches: the Real BEPS-Issue Left Unsolved / 258
12.4.3 The CFC-Rule(s) / 258
12.4.3.1 Introduction and Background / 258
12.4.3.2 Three Cumulative Proxies: CFC, Effectively Low-Taxed, Bad Income / 259
12.4.3.3 The Full-Fledged CFC-Rule and the Light (Quasi) CFC-Rule / 261
12.4.3.4 The “Substance”-Escape under the Full-Fledged CFC-Rule / 262
12.4.3.5 Income Attribution and Double Taxation Relief (Add-Back & Credit) / 263
12.4.4 The Hybrid Mismatch Rule / 264
12.4.4.1 Introduction and Background / 264
12.4.4.2 Deduction without Inclusion (D/NI) Mismatches / 264
12.4.4.3 Double Deduction (DD) Mismatches / 268
12.4.4.4 A Final Backstop against “Import of Mismatches” / 269
12.5 The Mandatory General Anti-Tax Avoidance Rule (GAAR) for Corporate Taxation / 270
12.5.1 Introduction and Background; a Single European Abuse of Law Concept / 270
12.5.2 (not included in this student edition)
12.5.3 The GAAR Tests / 270
12.5.3.1 Artificiality / 271
12.5.3.2 Motive / 272
12.5.3.3 Defeat of Object and Purpose of Corporate Tax Law / 273
12.5.3.4 Burden of Proof / 273
12.6 Entry into Force / 274
12.7 A Final Chord? / 275

Part 2B Exchange of Information and Recovery Assistance / 277

CHAPTER 13
Administrative Cooperation in the Assessment and Recovery of Direct Tax Claims / 279
Update by Sigrid Hemels
13.0 Background; History; Legal Basis / 279
13.0.1 The Need for Cross-Border Administrative Cooperation in Tax Matters / 279
13.0.2 OECD Initiatives before the Financial Crisis / 280
13.0.3 EU Mutual Assistance Initiatives before the Financial Crisis / 280
13.0.4 Poor Results, Failing the OECD Standard; Revised Directives on Recovery Assistance (2012) and Administrative Cooperation (2013) / 281
13.0.5 Influence of BEPS on the DAC / 282
13.0.6 Legal Basis: ‘Internal Market’ or ‘Fiscal’? / 282
13.1 The Directive on Administrative Cooperation 2011/16/EU (DAC) / 283
13.1.1 General Provisions; Minimum Standard; Language, Scope and Organisation / 283
13.1.1.1 Taxes Covered; Not Just Direct Taxes / 284
13.1.1.2 Personal Scope; Anyone or Anything Subject to Tax / 285
13.1.1.3 Objective Scope: ‘Foreseeably Relevant’ Information / 285
13.1.1.4 Channel of Exchange / 285
13.1.1.5 Temporal Scope / 286
13.1.2 Three Types of Exchange of Information / 286
13.1.2.1 Mandatory Exchange upon Request / 286
13.1.2.2 Mandatory Automatic Exchange / 287
13.1.2.3 Spontaneous Exchange / 295
13.1.3 Admission of Foreign Officials / 296
13.1.4 Simultaneous Controls / 297
13.1.5 Notification of Foreign Decisions and Instruments / 297
13.1.6 Access to Anti-Money-Laundering Information, Including Information on Ultimate Beneficial Owners / 297
13.1.7 Disclosure, Use and Forwarding of Information Obtained / 298
13.1.8 Grounds for Refusal of Cooperation / 299
13.1.8.1 Non-Exhaustion of Appropriate Domestic Means / 300
13.1.8.2 Lack of Domestic Legal Basis / 300
13.1.8.3 Lack of Reciprocity / 301
13.1.8.4 Protection of Commercial Secrets / 301
13.1.8.5 Protection of the Ordre Public / 301
13.1.9 Taxpayers’ Judicial Protection / 301
13.1.9.1 No Right to Be Involved / 302
13.1.9.2 Right to Legal Remedy in Case of Penalty / 303
13.1.9.3 Data Protection / 304
13.1.9.4 Confidentiality Obligation of the European Commission / 305
13.1.9.5 Direct Effect / 305
13.1.10 Information Overload? / 306
13.2 The Recovery Assistance Directive (RAD) / 306
13.3 Concurrence Rules / 307
13.3.1 DAC and RAD / 308
13.3.2 MCMAATM Convention and EU Rules / 308
13.3.3 Domestic Law, Bilateral or Multilateral (Tax) Treaties and EU Rules / 308

Part 2C Negative Integration of Direct Taxation / 311

CHAPTER 14
Conceptual Background of the CJEU Case Law in Direct Tax Matters / 313
Peter Wattel
14.1 The Basic Clash between (International) Tax Law and Internal Market Law / 313
14.1.1 Basics of International Tax Law; Residence and Source Taxation / 313
14.1.2 Opposing Points of Departure of International Tax Law and Internal Market Law / 315
14.2 The Court Accepts All Tax Connecting Factors and All Methods for Double Tax Relief / 316
14.3 Territoriality Taxation or EU-Wide Taxation / 317
14.4 Basic Notions in the Court’s Direct Tax Case Law / 320
14.4.1 ‘Discrimination’, not Mere ‘Restriction’: Nondiscriminatory ‘Obstacles’, ‘Parallel Exercise’ and Disparities are Outside Free Movement Scrutiny / 320
14.4.2 Comparability (Subject-to-Tax) and Justifiability (Tax Base Integrity); Assertion and Exercise of Taxing Power / 322
14.5 Departures from the Subject-to-Tax Approach or the One-Country Approach / 328
14.5.1 The ‘Always-Somewhere’ or ‘One-Market’ Approach / 328
14.5.2 The Mutual Recognition Approach / 331
14.5.3 The Overall Approach: ‘Neutralization’ in the Other Jurisdiction; De Groot, Denkavit France, Amurta, Miljoen / 334

CHAPTER 15
Free Movement and Tax Base Integrity / 339
Update by Cécile Brokelind and Peter Wattel
15.1 Overview of the Development of the CJEU's View on Tax Avoidance / 339
15.2 Correspondence Between (i) the Abuse of Rights Prohibition, (ii) the Anti-Abuse Reservations in Secondary EU Tax Law, and (iii) the ATAD and CCCTB Requirements Correspondence between Abuse of Rights, Anti-Abuse Reservations, and ATAD / 341
15.3 (not included in this student edition)
15.4 Abuse of Rights as a General Principle of EU Law; Objective and Subjective Element / 343
15.5 Exclusion of Categories of Cross-Border Cases; Fiscal Coherence; Balanced Allocation; Fiscal Supervision; Territoriality; Overlap of Justifications for Free Movement Restrictions
15.6 Procedural Issues; Division of the Onus of Proof / 351
15.7 Consequences of a Finding of Abuse: ‘Redefine so as to Re-Establish’ / 354
15.8 Allowing General Tax Base Protection / 354
15.8.1 Rise, Fall and Revival of Fiscal Cohesion / 354
15.8.2 The Fiscal Principle of Territoriality / 356
15.8.3 A Balanced Allocation of Taxing Power between Member States / 358
15.9 Conclusion – A Single Concept – Tax Base Integrity as the Fiscal Manifestation of the Court’s General Abuse of Rights Doctrine / 359

CHAPTER 16
Division of Tax Jurisdiction; Double Tax Relief Mechanisms; Tax Treaty Issues / 361
Update by Otto Marres
16.1 International Double Taxation (and why its Elimination is a Union Goal but not an Obligation for the Member States) / 361
16.1.1 Why is there International Double Taxation in the first Place? / 361
16.1.2 National Autonomy; no Obligation to Eliminate Double Taxation / 362
16.2 Capital Import Neutrality (CIN; Exemption) and Capital Export Neutrality (CEN; Credit) / 362
16.2.1 Source Taxation and Residence Taxation; Assumption and Exercise of Taxing Jurisdiction / 362
16.2.2 Capital Export Neutrality (CEN); the Credit Method / 363
16.2.3 Capital Import Neutrality (CIN); the Exemption Method / 363
16.2.4 Differences and Similarities; Deferral; CFC Legislation / 364
16.2.5 Acceptance of Both Credit and Exemption in Secondary EU Law; the Court Accepts All Methods for Double Tax Relief; Remaining Inconsistencies / 365
16.3 Tax Treaty Issues / 367
16.3.1 National Autonomy; Conclusion of Bilateral Tax treaties / 367
16.3.2 Treaties to be Regarded as National Law; the Overall Approach / 368
16.3.3 Tax Treaties and their Substantive Rules / 369
16.3.4 Treaty Overrides / 371

CHAPTER 17
Corporate Income Taxation / 373
Update by Hein Vermeulen
17.1 Introduction / 373
17.2 Host State: Equal Treatment of Branches and Subsidiaries / 373
17.3 Origin State: Are Parents of Foreign and Domestic Branches and Subsidiaries Comparable? / 375
17.4 Group Taxation Schemes / 377
17.4.1 Group Taxation Schemes of Domestic Entities / 378
17.4.2 Group Taxation Schemes of Domestic Entities and Non-Domestic Entities: current losses / 379
17.4.3 Group Taxation Schemes of Domestic Entities and Non-Domestic Entities: other advantages than current losses / 381
17.5 CFC Legislation / 382
17.6 Thin Capitalization, Profits Adjustments, and the Treaty Freedoms / 385

CHAPTER 18
Cross-border Loss Relief / 393
Update by Ana Paula Dourado
18.1 Introduction; the Issues; Overview; Distinction between Individuals and Companies / 393
18.2 Technical Background / 395
18.3 Negative Integration; Pre-Marks & Spencer II Case Law / 396
18.4 Nonresident Group Companies; Marks & Spencer II and Oy AA: Relief (only) for Definitive Losses; No Profit Carry-Over / 398
18.5 Foreign Branches; Lidl Belgium and Krankenheim Ruhesitz / 401
18.6 Risk of currency loss / 403
18.7 Double Branch Dip (Philips Electronics) and Cross-Border Loss Importation by Merger (A Oy) / 404
18.8 Individuals / 406
18.9 Proportionality and M&S III / 408
18.10 Reincorporation of PE Losses: Nordea Bank, Timac Agro and A/S Bevola / 409

CHAPTER 19
Cross-Border Dividend Taxation / 413
Update by Hein Vermeulen
19.1 Possible Unequal Treatment of Cross-Border Dividends / 413
19.2 The CJEU’s basic Notions; Juridical and Economic Double Taxation, and Exertion of Taxing Power / 414
19.3 Inbound Dividends (Residence Taxation): National Treatment, Exit Imputation Systems / 417
19.3.1 Economic Double Taxation of Inbound Dividends / 417
19.3.2 Juridical Double Taxation of Inbound Dividends / 420
19.3.3 Asymmetric Undoing of Economic Double Taxation of Inbound Dividends / 424
19.4 Outbound Dividends (Source Taxation): National Treatment of Non-Resident Shareholders and the gross/net Dilemma / 425
19.4.1 Economic Double Taxation / 425
19.4.2 Juridical Double Taxation or Denial of Exemption / 426

CHAPTER 20
Exit Taxes / 431
Servaas van Thiel
20.1 Exit Taxation on Accrued Income / 431
20.2 Exit taxes on accrued gains in the case of emigrating natural persons / 433
20.3 Exit taxes on accrued gains in the case of emigrating companies / 436
20.4 Towards a single approach for emigrating natural and legal persons? / 442

CHAPTER 21
Individual Income Taxation / 445
Update by Hein Vermeulen
21.1 Introduction / 445
21.2 Tax Scales; Correction of Overpaid Withholding Tax by Assessment / 446
21.3 Income-Related Deductions / 447
21.4 Personal Ability to Pay; the Schumacker Case Law / 449
21.4.1 Home state Responsibility; No National Treatment in the Source state / 449
21.4.2 But: Residents and Nonresidents Are Not in a Different Position / 452
21.4.3 Exacerbating Disparities; the Mechanics of Double Tax Relief; Rate Progression; Two Inconsistencies of International Tax Law / 455
21.4.4 Trying to Get It Right / 455
21.4.5 The De Groot Case: A Chance Missed / 457
21.4.6 Renneberg: Schumacker Applies Also to Home state Losses / 459
21.4.7 Imfeld: two situations in which the residence state is not obliged to take account of personal and family circumstances / 460
21.4.8 The Schumacker test applies to a full tax year / 460
21.4.9 Case C-283/15, X: proportional extension of personal deductions by multiple source states in the absence of home state income / 461
21.5 Option to Be Taxed as a Resident / 462

CHAPTER 22
State Aid and Direct Taxation / 467
Sjoerd Douma
22.1 Introduction / 467
22.2 The notion of State aid / 468
22.2.1 Introduction / 468
22.2.2 Undertaking / 468
22.2.3 State resources and imputability / 469
22.2.4 Advantage / 470
22.2.5 Selectivity / 473
22.2.6 Effect on trade and competition / 478
22.2.7 Selected topics / 479
22.3 Compatibility of State aid with the internal market / 484
22.3.1 The Commission’s State aid policy / 484
22.3.2 Limitations on the Commission’s discretion / 485
22.4 State aid procedure and enforcement / 485
22.4.1 Introduction / 485
22.4.2 Monitoring of existing aid / 485
22.4.3 Notification of new aid / 486
22.4.4 Recovery of unlawful aid / 486
22.4.5 Judicial appeal / 487
22.5 Concluding remarks / 488

CHAPTER 23
Tax Competition and the Code of Conduct for Business Taxation / 489
Martijn Nouwen and Peter Wattel
23.1 Introduction; the Soft Law Approach / 489
23.2 The (Half-Hearted) Fight Against Harmful Tax Competition / 491
23.2.1 Introduction / 491
23.2.2 The Code of Conduct Group for Business Taxation and its Working Method / 491
23.2.3 The Code Criteria for Assessing Harmfulness of Competitive National Tax Measures / 492
23.2.4 The Results of the Group’s Work (1): Quasi-Case Law; Interaction with State Aid Law / 494
23.2.5 The Results of the Group’s Work (2): Quasi-Legislation / 496
23.2.6 Third Country Issues; ‘Dialogue’ between the EU and Non-EU-Member States / 499
23.3 Conclusion / 500

Index / 503
Table of cases / 527