1. Scuola Europea di Alti Studi Tributari Bologna 2017 Doctoral Seminar Tax treaties and EU law
Jacques Malherbe
Professor emeritus, Catholic University of Louvain
Direction : Prof. Adriano di Pietro

2. European directives and tax treaties
European directives have so far reduced taxation of companies
Anti-BEPS directive oblige MS to increase it: they must modify domestic law
Parent-subsidiary directive: distributed profits must be taxed to the parent if they are deductible to the subsidiary (directive 2014/86/UE, 8 July )

3. Tax treaties
Divide tax base between Contracting States
Are above domestic law

4. ATAD 1 and ATAD 2 directives
Determine taxable base of companies
Profits of PE in Source State may be exempt in Residence State only if tax in Source State ≥ ½ of tax in Residence State
Otherwise tax credit, no exemption (switch over)
Tax treaty providing for exemption of foreign PE?
CFC rules?
Reservation in signature of MLI
What about ATAD?

5. CCTB and CCCTB proposed directives
Determine tax base
Divide tax between MS
Definition of PE: only in EU
No definition of PE of
companies resident of third countries in EU
companies resident of EU in third countries
What about treaty definitions?
Even treaties between MS?

6. Limitation on Benefits (LOB) US - India - Japan
Open skies, C-466/98
No benefits to airline of UK controlled by nationals non-contracting States
Violation of freedom of establishment

7. Limitation on Benefits (LOB) US - India - Japan
Gottardo, C-55/00
Only Italian nationals may include years worked in Switzerland for Italian pensions
Discrimination

8. Limitation on Benefits (LOB) US - India - Japan
D, C-376/03
Resident of Germany denied allowance for Dutch wealth tax because did not hold 90% of his wealth in the Netherlands
Belgium-Netherlands treaty waives this condition
Discrimination? No
Not in comparable situations
Consequence of convention
Traditional: comp. Schumacker

9. Limitation on Benefits (LOB) US - India - Japan
Class IV ACT, C-374/04
UK company dividend to Dutch company: imputation credit
If Dutch company owned by non-residents, denied if State of resident does not have similar treaty with UK
Not comparable: treaty and non-treaty situations
But: if ACT credit, there is UK withholding

10. Limitation on Benefits (LOB) US - India - Japan
Treaty Japan-Netherlands: LOB clause
Restriction?
Yes
Otherwise all treaties could discriminate
Comp. Gibraltar State Aid
Justification?
Prevents treaty shopping
Balance of powers between Contracting States
Proportional?
Limited to artificial arrangements?
Cadbury Schweppes: yes
Colombus Container: no
Competent Authority?

11. Corporate law Centros, C-212/97 Überseeing, C-208/00
Treaty shopping allowed
Primary establishment without substance
Secondary establishment admitted

12. Tax on foreign UCITS NN (L) International, C-48/15
Belgian tax on Luxembourg UCITS placing units in Belgium
On the amount placed in Belgium
No violation of freedom of establishment
But violation of double tax treaty?
Tax on assets only in State of residence (Brussels Court of first instance – appealed)

13. Exemption of dividends
Saint-Gobain
Treaty Germany-US must apply to PE in Germany of French company

14. Art. 293 EC
MS will engage in negotiations to eliminate double taxation
Disappeared in Treaty of Lisbon
A multilateral convention is not subject to scruting of ECJ
cfr. Arbitration convention on transfer pricing to be replaced by directive (90/436/CEE)

15. Art. 293 EC
Competence of the EU to enter into tax treaties with third countries Common Commercial policy?
Tax clauses are accessory
cfr. FSC case of WTO
Implicit competence?
Art TFEU
No tax competence
But what if CCTB adopted?
ex. Agreement with Switzerland extending parent-subsidiary directive

16. Tax Advantage not conform with object and finality of treaty
MLI
PPT test
Tax Advantage not conform with object and finality of treaty
Vague: legal norm must be clear and its effects predictable
SIAT
Itelcar
Tax administration has no burden of proof
COM(2016)271: treaty applicable only if real economic activity