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© Paolo Arginelli The Multiple Interrelation between Tax Treaty Law and European law Paolo Arginelli, LL M Università Cattolica del Sacro Cuore (Piacenza)
© Paolo Arginelli Agenda Effects on the scope and the consequences of the application of the rules Interpretation of the rules Infringement of the rules Case study
© Paolo Arginelli Scope and consequences of the application of the rules EU law modifying the scope of application of tax treaty-based rules –National treatment required ECJ, case C-307/97, Compagnie de Saint-Gobain, paras. 58 and 59 –No (treaty) MFN treatment required ECJ, case C-376/03, D., paras. 54, 57, 61 and 62 ECJ, case C-374/04, ACT Group Litigation, paras. 83, 84 and 87 to 90
© Paolo Arginelli Scope and consequences of the application of the rules Tax treaties modifying the effects of EU fundamental freedoms on domestic law or the scope of application of secondary EU law –Tax treaty credit potentially washing away the host State breach of EU law ECJ, case C-379/05, Amurta, paras. 78, 79 and 83 ECJ, case C-540/07, Commission v. Italy, paras. 37 and 37 –Scope of application of Directive 2011/96/EU (Parent-Subsidiary) Parent company established under the law of a third country and resident of a Member State entitled therein to the benefits of the P-S Directive under article 24(1) of the tax treaty between those two States
© Paolo Arginelli Interpretation of the rules EU law as a means for interpreting tax treaties –Article 33(3)(c) VCLT: relevant rules of international law applicable in the relations between the parties Both primary and secondary law are relevant with regard to tax treaties concluded between EU Member States –The concept of abuse developed by the ECJ with reference to tax cases concerning the potential breach of the EU fundamental freedoms »Standard applicable in order to establish the limits of domestic law anti-avoidance rules and principles under tax treaties (CFC, deemed residence, etc)
© Paolo Arginelli Interpretation of the rules EU law as a means for interpreting tax treaties (continue) –Article (3(2) of OECD Model-based tax treaties Relevant also with regard to tax treaties concluded with third countries –EU law as part of (or implemented under) domestic law »The meaning of the term beneficial owner under art. 1(4) of Directive 2003/49/EC (Interest-Royalty) –Indirect effect: EU law influences the legal construction of domestic law terms »The Italian Supreme Court has more than once relied on the case-law of the ECJ on the interpretation of the term normal resident, as used in Directive 83/182 /EEC (Tax exemptions within the Community for certain means of transport temporarily imported), in order to construe the term domicilio used in the definition of tax residence under Italian income tax law
© Paolo Arginelli Interpretation of the rules Tax treaties as a means for interpreting EU law –OECD-Model based tax treaties as general practice for the allocation of taxing rights on cross-border transactions ECJ, case C-279/93, Schumacker, para. 32; ECJ, case C-336/96, Gilly, para. 31 EU State Aids discipline: technical measures aimed at avoiding international double taxation generally not regarded as State Aid measures (cf. para. 13 of Communication 98/C 384/03) –Need to establish what is foreign source income –Relevance of the OECD Model »WTO Appellate Body, 14 January 2002, case WT/DS108/AB/RW, paras. 141 and 142, concerning the interpretation of the Agreement on Subsidies and Countervailing Measures
© Paolo Arginelli Infringement of the rules EU law infringing tax treaties –Potential infringement of article 24 of OECD Model-based tax treaties concluded with third countries caused by the scope of application of the CCCTB Commission s proposal COM(2011) 121/4: extension of the CCCTB to companies established under the laws of a third country, provided they are resident of, or have a PE in, a Member State
© Paolo Arginelli Infringement of the rules Tax treaties infringing EU law –Conclusion of tax treaties in areas of exclusive competence of the EU Article 3(2) TFUE ECJ, Opinion 1/03, New Lugano Convention; ECJ, Case 22/70, ERTA; ECJ, Opinion 1/76, Inland waterway vessels Agreement –Conclusion of tax treaties in areas of shared competence, but in violation of EU law –Consequences of the infringement Infringement procedure ex art. 258 TFUE Action for reparation for damage before the national court (cf. ECJ, case C- 446/04, FII Group Litigation, para. 209 ff. ) –The EU rule infringed confers rights on individuals –The breach of the EU rule is sufficiently serious –There is a direct causal link between the breach and the damage
© Paolo Arginelli Infringement of the rules Tax treaties infringing EU law –Examples The 2011 Rubik Agreements between (i) Switzerland and Germany and (ii) Switzerland and the United Kingdom Lob clauses in tax treaties concluded by Member States (as resident States) –Recent case: art. 2 of the Protocol to the 1999 Italy-United States tax treaty (entered into force on 16 December 2009) –Different from ACT Group Litigation (source State) –Relevance of the Open Skies judgments (e.g. ECJ, case C-471/98, Commission v. Belgium)
© Paolo Arginelli Case study MS A p.e. MS B MS C --- Third Country 5% 15% p.ex. No p.ex. dividends
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