Feb 28

CJEU expected to deliver judgment in Case C-387/16, Nidera (VAT – Refund of overpaid tax – Interpretation of Article 183 of Council Directive 2006/112/EC)

Question referred for a preliminary ruling:

Must Article 183 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with the principle of fiscal neutrality, be interpreted as precluding a reduction in the interest that is normally payable under national law on a VAT overpayment (excess) which was not refunded (set off) in due time, which reduction takes into account circumstances other than those resulting from the actions of the taxable person himself, such as the relationship between the interest and the amount of the overpayment not refunded in due time, the period of time during which the overpayment was not refunded and the underlying reasons for this, as well as the losses actually incurred by the taxable person?

The opinion in this case as delivered by Advocate General Szpunar on October 5, 2017 can be found here

Feb 28

CJEU expected to deliver judgment in Case C-307/16, Pieńkowski (VAT – Export exemptions)

Question referred for a preliminary ruling:

Must Articles 146(1)(b), 147, 131 and 273 of Council of 28 November 2006 on the common system of value added tax 1 be interpreted as precluding national legislation which excludes application of the exemption to a taxable person who does not satisfy the condition relating to attainment of the relevant turnover ceiling for the previous tax year and who also has not concluded an agreement with a person authorised to refund tax to travellers?

The opinion in this case as delivered by Advocate General Bot on September 7, 2017 can be found here

Feb 28

CJEU expected to deliver judgment in Case C-672/16, Imofloresmira - Investimentos Imobiliários (VAT – real estate)

Questions referred for a preliminary ruling:

(1)   When a property, despite being unoccupied for the period of two or more years, is being marketed, that is it is available on the market to be let or for the provision of ‘office centre’ services, and it is established that the owner intends to let the property subject to VAT and has made the necessary efforts to give effect to that intention, is the characterisation as a ‘failure actually to use the property for the purposes of the business’ and/or ‘failure actually to use the property in taxed transactions’ — for the purposes of Article 26(1) of the VAT Code and Article 10(1)(b) of the Regime for the Waiver of the VAT exemption in Transactions relating to Immovable Property, introduced by Decree-Law No 21 of 29 January 2007, in their earlier versions — and therefore adopting the view that the deduction initially made must be adjusted, since it is above the amount to which the taxable person was entitled, compatible with Articles 167, 168, 184, 185 and 187 of Council Directive 2006/112/EC of 28 November 2006?

(2)   If the answer is in the affirmative, may that adjustment, having regard to the correct interpretation of Articles 137, 167, 168, 184, 185 and 187 of … Directive 2006/112/EC …, be imposed only once for the entirety of the period yet to expire — as laid down in the Portuguese legislation, in Article 10(1)(b) and (c) of the Regime for the Waiver of the VAT exemption in Transactions relating to Immovable Property, introduced by Decree-Law No 21 of 29 January 2007, in its earlier version — where the property has been unoccupied for more than two years, but still marketed to be let (with the possibility of waiver) and/or for the provision of services (taxable), with the aim of assigning the property in subsequent years to taxed activities which confer the right to deduct?

(3)   Is Article 2(2)(c) of the Regime for the Waiver of the VAT exemption in Transactions relating to Immovable Property introduced by Decree-Law No 21 of 29 January 2007, in conjunction with Article 10(1)(b) of that regime, compatible with Articles 137, 167, 168 and 184 of … Directive 2006/112/EC …, in making it impossible for a taxable person for VAT to waive the VAT exemption when entering into new leases after a single adjustment to VAT has been made and in undermining the subsequent deduction regime during the adjustment period?

Mar 1

Opinion of the Advocate General expected to be delivered in joined Cases C-115/16 (N Luxembourg 1), C-118/16 (X Denmark) and C-119/16 (C Danmark I) (The Interest and Royalty Directive – beneficial ownership)

Questions referred for a preliminary ruling:

1. Is Article 1(1) of Directive 2003/49/EC, read in conjunction with Article 1(4) thereof, to be interpreted as meaning that a company resident in a Member State that is covered by Article 3 of the Directive and, in circumstances such as those of the present case, receives interest from a subsidiary in another Member State, is the ‘beneficial owner’ of that interest for the purposes of the Directive?

1.1.  Is the concept ‘beneficial owner’ in Article 1(1) of Directive 2003/49/EC, read in conjunction with Article 1(4) thereof, to be interpreted in accordance with the corresponding concept in Article 11 of the OECD 1977 Model Tax Convention?

1.2.  If question 1.1. is answered in the affirmative, should the concept then be interpreted solely in the light of the commentary on Article 11 of the 1977 Model Tax Convention (paragraph 8), or can subsequent commentaries be incorporated into the interpretation, including the additions made in 2003 regarding ‘conduit companies’ (paragraph 8.1, now paragraph 10.1), and the additions made in 2014 regarding ‘contractual or legal obligations’ (paragraph 10.2)?

1.3.  If the 2003 Commentaries can be incorporated into the interpretation, is it then a condition for deeming a company not to be a ‘beneficial owner’ for the purposes of Directive 2003/49/EC that there actually has been a channelling of funds to those persons who are deemed by the State in which the interest payer is resident to be ‘the beneficial owners’ of the interest in question, and — if so — is it then a further condition that the actual passing take place at a point close in time to the payment of the interest and/or take place as a payment of interest?

1.3.1.   Of what significance is it in that connection if equity capital is used for the loan, if the interest in question is entered on the principal (‘rolled up’), if the interest recipient has subsequently made an intra-group transfer to its parent company resident in the same State with a view to adjusting earnings for tax purposes under the prevailing rules in the State in question, if the interest in question is subsequently converted into equity in the borrowing company, if the interest recipient has had a contractual or legal obligation to pass the interest to another person, and if most of the persons deemed by the State where the person paying the interest is resident to be the ‘beneficial owners’ of the interest are resident in other Member States or other States with which Denmark has entered into a double taxation convention, so that under the Danish taxation legislation there would not have been a basis for retaining tax at source had those persons been lenders and thereby received the interest directly?

1.4.  What significance does it have for the assessment of the issue whether the interest recipient must be deemed to be a ‘beneficial owner’ for the purposes of the Directive if the referring court, following an assessment of the facts of the case, concludes that the recipient — without having been contractually or legally bound to pass the interest received to another person — did not have the ‘full’ right to ‘use and enjoy’ the interest as referred to in the 2014 Commentaries on the 1977 Model Tax Convention?

2. Does a Member State’s reliance on Article 5(1) of the Directive on the application of national provisions for the prevention of fraud or abuse, or of Article 5(2) of the Directive, presuppose that the Member State in question has adopted a specific domestic provision implementing Article 5 of the Directive, or that national law contains general provisions or principles on fraud, abuse and tax evasion that can be interpreted in accordance with Article 5?

2.1.  If question 2 is answered in the affirmative, can Paragraph 2(2)(d) of the Law on corporation tax, which provides that the limited tax liability on interest income does not include ‘interest which is tax-exempt … under Directive 2003/49/EC on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States’, then be deemed to be a specific domestic provision as referred to in Article 5 of the Directive?

3. Is a provision in a double taxation convention entered into between two Member States and drafted in accordance with OECD’s Model Tax Convention, under which taxation of interest is contingent on whether the interest recipient is deemed to be the beneficial owner of the interest, a conventional anti-abuse provision covered by Article 5 of the Directive?

4. Is it abuse, etc. under Directive 2003/49/EC if, in the Member State where the interest payer is resident, tax deductions are allowed for interest, whilst interest in the Member State where the interest recipient is resident is not taxed?

5. Is a Member State that does not wish to recognise that a company in another Member State is the beneficial owner of interest and claims that the company in the other Member State is a so-called artificial conduit company, bound under Directive 2003/49/EC or Article 10 EC to state whom the Member State in that case deems to be the beneficial owner?

6. If a company resident in a Member State (parent company) is in fact deemed not to be exempt from tax at source under Directive 2003/49/EC concerning interest received from a company resident in another Member State (subsidiary), and the parent company of the latter Member State is deemed to have limited tax liability on that interest in that Member State, does Article 43 EC, read in conjunction with Article 48 EC, preclude legislation under which the latter Member State requires the company liable for retaining the tax at source (subsidiary) to pay overdue interest in the event of overdue payment of the tax at source claim at a higher rate of interest than the overdue interest rate that the Member State charges on corporation tax claims (including interest income) lodged against a company resident in the same Member State?

7.    If a company resident in a Member State (parent company) is in fact deemed not to be exempt from tax at source under Directive 2003/49/EC concerning interest received from a company resident in another Member State (subsidiary), and the parent company of the latter Member State is deemed to be a taxable person with limited tax liability on that interest in that Member State, does Article 43 EC, read in conjunction with Article 48 (in the alternative Article 56 EC), viewed separately or as a whole, preclude legislation under which:

(a)   the latter Member State requires the person paying the interest to retain tax at source on the interest and makes that person liable to the authorities for the non-retained tax at source, where there is no such duty to retain tax at source when the interest recipient is resident in the latter Member State?

(b)   a parent company in the latter Member State would not have been required to make advance payments of corporation tax in the first two fiscal years, but would only have begun to pay corporation tax at a much later time than the due date for tax at source?

    The EU Court of Justice is requested to include the answer to question 6 in its answer to question 7.

Mar 1

Opinion of the Advocate General expected to be delivered in joined Cases C-116/16 (T Danmark) and C-117/16 (Y Denmark) (The Parent-Subsidiary Directive – national provisions for the prevention of fraud or abuse)

Questions referred for a preliminary ruling:

1. Does a Member State’s s reliance on Article 1(2) of the Directive on the application of national provisions for the prevention of fraud or abuse,, presuppose that the Member State in question has adopted a specific domestic provision implementing Article 1(2) of the Directive, or that national law contains general provisions or principles on fraud, abuse and tax evasion that can be interpreted in accordance with Article1(2) ?

1.1   If question 1 is answered in the affirmative, can Paragraph 2(1)(c) of the Law on corporation tax, which provides that ‘it is a precondition that taxation of the dividends be waived … under the provisions of Council Directive 90/435/EEC on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States’, then be deemed to be a specific domestic provision as referred to in Article 1(2) of the Directive?

2. Is a provision in a double taxation convention entered into between two Member States and drafted in accordance with OECD’s Model Tax Convention, under which taxation of distributed dividends is contingent on whether the dividends recipient is deemed to be the beneficial owner of the dividends, a conventional anti-abuse provision covered by Article 1(2) of the Directive?

3. Should the Court answer question 2 in the affirmative, is it then for the national courts to define what is included in the concept ‘beneficial owner’, or should the concept, in the application of Directive 90/435/EEC, be interpreted as meaning that a specifically EU law significance should be attached to the concept referred to the EU Court of Justice for a ruling?

4. Should the Court answer question 2 in the affirmative and the answer to question 3 is that it is not for the national courts to define what is included in the concept ‘beneficial owner’, is the concept then to be interpreted as meaning that in a company resident in a Member State which, in circumstances such as those of the present case, receives dividends from a subsidiary in another Member State, is the ‘beneficial owner’ of those dividends as that concept is to be interpreted under EU law?

(a)   Is the concept ‘beneficial owner’ to be interpreted in accordance with the corresponding concept in Article 1(1) of Directive 2003/49/EC (‘the Interest & Royalties Directive’), read in conjunction with Article 1(4) thereof?

(b)   Should the concept be interpreted solely in the light of the commentary on Article 10 of the OECD 1977 Model Tax Convention (paragraph 12), or can subsequent commentaries be incorporated into the interpretation, including the additions made in 2003 regarding ‘conduit companies’, and the additions made in 2014 regarding ‘contractual or legal obligations’?

(c)    What significance does it have for the assessment of the issue whether the dividends recipient must be deemed to be a ‘beneficial owner’ if the dividends recipient has had a contractual or legal obligation to pass the interest to another person?

(d)   What significance does it have for the assessment of the issue whether the dividends recipient must be deemed to be a ‘beneficial owner’ that the referring court, following an assessment of the facts of the case, concludes that the recipient — without having been contractually or legally bound to pass the interest received to another person — did not have the ‘full’ right to ‘use and enjoy’ the interest as referred to in the 2014 Commentaries on the 1977 Model Tax Convention?

5. If it is assumed in the case that there are ‘domestic provisions required for the prevention of fraud or abuse’, see Article 1(2) of Directive 90/435/EEC, that dividends have been distributed from a company (A) resident in a Member State to a parent company (B) in another Member State and from there passed to that company’s parent company (C), resident outside the EU/EEA, which in turn has distributed the funds to its parent company (D), also resident outside the EU/EEA, that no double taxation convention has been entered into between the first-mentioned State and the State where C is resident, that a double taxation convention has been entered into between the first-mentioned State and the State where D is resident, and that the first-mentioned State, under its legislation, would therefore not have had a claim to tax at source on dividends distributed from A to D, had D been the direct owner of A, is there abuse under the Directive so that B is not protected thereunder?

6. If a company resident in a Member State (parent company) is in fact deemed not to be exempt from tax at source pursuant to Article 1(2) of Directive 90/435/EEC concerning dividends received from a company resident in another Member State (subsidiary), does Article 49 TFEU, read in conjunction with Article 54 TFEU, preclude legislation under which the latter Member State taxes the parent company resident in the other Member State on the dividends, then the Member State in question deems resident parent companies in otherwise similar circumstances to the exempt from tax on such dividends?

7. If a company resident in a Member State (parent company) is in fact deemed not to be exempt from tax at source pursuant to Article 1(2) of Directive 90/435/EEC concerning dividends received from a company resident in another Member State (subsidiary), and the parent company in the latter Member State is deemed to have limited tax liability in that Member State on the dividends in question, does Article 49 TFEU, read in conjunction with Article 54 TFEU, preclude legislation under which the latter Member requires the company liable for retaining the tax at source (subsidiary) to pay overdue interest in the event of overdue payment of the tax at source claim at a higher rate of interest than the overdue interest rate that the Member State charges on corporation tax claims lodged against a company resident in the same Member State?

8. Should the Court answer question 2 in the affirmative and the answer to question 3 is that it is not for the national courts to define what is included in the concept ‘beneficial owner’, and if a company (parent company) resident in a Member State cannot, on that basis, be deemed exempt from tax at source pursuant to Directive 90/435/EEC concerning dividends received from a company resident in another Member State (subsidiary), is the latter Member State then bound pursuant to Directive 90/435/EEC or Article 4(3) TEU to state whom the Member State in that case deems to be the beneficial owner?

9. If a company resident in a Member State (parent company) is in fact deemed not to be exempt from tax at source under Directive 90/435/EEC concerning dividends received from a company resident in another Member State (subsidiary), does Article 49 TFEU, read in conjunction with Article 54 TFEU (in the alternative Article 63 TFEU), viewed separately or as a whole, preclude legislation under which:

(a)   the latter Member State requires the subsidiary to retain tax at source on the dividends and makes that person liable to the authorities for the non-retained tax at source, where there is no such duty to retain tax at source when the parent company is resident in the Member State?

(b)   the latter Member State calculates overdue interest on the tax at source owing?

The EU Court of Justice is requested to include the answer to questions 6 and 7 in its answer to question 9.

10.In circumstances where:

(1)   a company (parent company) resident in a Member State fulfils the requirement in Directive 90/435/EEC of owning (in 2011) at least 10% of the share capital of a company (subsidiary) resident in another Member State;

(2)   the parent company is in fact deemed not to be exempt from tax at source pursuant to Article 1(2) in Directive 90/435/EEC concerning dividends distributed by the subsidiary;

(3)   the parent company’s (direct or indirect) shareholder(s), resident in a non-EU/EEA country, are deemed to be the beneficial owner(s) of the dividends in question;

(4)   the aforementioned (direct or indirect) shareholder(s) also do not fulfil the aforementioned capital requirement;

does Article 63 TFEU then preclude legislation under which the Member State where the subsidiary is situated taxes the dividends in question when the Member State in question deems resident companies fulfilling the capital requirement in Directive 90/435/EEC, that is to say, in fiscal year 2011 owns at least 10% of the share capital in the dividend-distributing company, to be tax-exempt on such dividends?

Mar 1

Opinion of the Advocate General expected to be delivered in Case C-299/16, Z Denmark (The Interest and Royalty Directive – Beneficial ownership)

Questions referred for a preliminary ruling:

1. Is Article 1(1) of Directive 2003/49/EC, read in conjunction with Article 1(4) thereof, to be interpreted as meaning that a company resident in a Member State that is covered by Article 3 of the Directive and, in circumstances such as those of the present case, receives interest from a subsidiary in another Member State, is the ‘beneficial owner’ of that interest for the purposes of the Directive?

1.1.  Is the concept ‘beneficial owner’ in Article 1(1) of Directive 2003/49/EC, read in conjunction with Article 1(4) thereof, to be interpreted in accordance with the corresponding concept in Article 11 of the OECD 1977 Model Tax Convention?

1.2.  If question 1.1. is answered in the affirmative, should the concept then be interpreted solely in the light of the commentary on Article 11 of the 1977 Model Tax Convention (paragraph 8), or can subsequent commentaries be incorporated into the interpretation, including the additions made in 2003 regarding ‘conduit companies’ (paragraph 8.1, now paragraph 10.1), and the additions made in 2014 regarding ‘contractual or legal obligations’ (paragraph 10.2)?

1.3.  If the 2003 Commentaries can be incorporated into the interpretation, in that case of what significance is it in the assessment of whether a company can be deemed not to be a ‘beneficial owner’ for the purposes of Directive 2003/49/EC, if the interest in question is entered on the principal (‘rolled up’), if the interest recipient has had a contractual or legal obligation to pass the interest to another person and if most of the persons deemed by the State where the person paying the interest is resident to be the ‘beneficial owners’ of the interest are resident in other Member States or other States with which Denmark has entered into a double taxation convention, so that under domestic law there would not have been a basis for retaining tax at source had those persons been lenders and thereby received the interest directly?

1.4.  What significance does it have for the assessment of the issue whether the interest recipient must be deemed to be a ‘beneficial owner’ for the purposes of the Directive if the referring court, following an assessment of the facts of the case, concludes that the recipient — without having been contractually or legally bound to pass the interest received to another person — did not have the ‘full’ right to ‘use and enjoy’ the interest as referred to in the 2014 Commentaries on the 1977 Model Tax Convention?

2. Does a Member State’s reliance on Article 5(1) of the Directive on the application of national provisions for the prevention of fraud or abuse, or of Article 5(2) of the Directive, presuppose that the Member State in question has adopted a specific domestic provision implementing Article 5 of the Directive, or that national law contains general provisions or principles on fraud, abuse and tax evasion that can be interpreted in accordance with Article 5?

2.1.  If question 2 is answered in the affirmative, can Paragraph 2(2)(d) of the Law on corporation tax, which provides that the limited tax liability on interest income does not include ‘interest which is tax-exempt … under Directive 2003/49/EC on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States’, then be deemed to be a specific domestic provision as referred to in Article 5 of the Directive?

3. Is a provision in a double taxation convention entered into between two Member States and drafted in accordance with OECD’s Model Tax Convention, under which taxation of interest is contingent on whether the interest recipient is deemed to be the beneficial owner of the interest, a conventional anti-abuse provision covered by Article 5 of the Directive?

4. Is a Member State that does not wish to recognise that a company in another Member State is the beneficial owner of interest and claims that the company in the other Member State is a so-called artificial conduit company, bound under Directive 2003/49/EC or Article 10 EC to state whom the Member State in that case deems to be the beneficial owner?

5. In a case where an interest payer is resident in one Member State and the interest recipient is resident in another Member State and where the interest recipient is deemed by the first Member State not to be the ‘beneficial owner’ of the interest in question under Directive 2003/49/EC and is therefore deemed to have limited tax liability on that interest in that Member State, does Article 43 EC, read in conjunction with Article 48 EC, preclude legislation under which the first Member State, in the taxation of the non-resident interest recipient, does not take account of expenses in the form of interest expenses that the interest recipient has had in circumstances such as those of the present case, whilst interest expenses are generally deductible under that Member State’s legislation and can therefore be deducted from taxable income by a resident interest recipient?

6. If a company resident in a Member State (parent company) is in fact deemed not to be exempt from tax at source under Directive 2003/49/EC concerning interest received from a company resident in another Member State (subsidiary), and the parent company of the latter Member State is deemed to have limited tax liability on that interest in that Member State, does Article 43 EC, read in conjunction with Article 48 EC, preclude legislation under which the latter Member State requires the company liable for retaining the tax at source (subsidiary) to pay overdue interest in the event of overdue payment of the tax at source claim at a higher rate of interest than the overdue interest rate that the Member State charges on corporation tax claims (including interest income) lodged against a company resident in the same Member State?

7. If a company resident in a Member State (parent company) is in fact deemed not to be exempt from tax at source under Directive 2003/49/EC concerning interest received from a company resident in another Member State (subsidiary), and the parent company of the latter Member State is deemed to be a taxable person with limited tax liability on that interest in that Member State, does Article 43 EC, read in conjunction with Article 48 (in the alternative Article 56 EC), viewed separately or as a whole, preclude legislation under which:

7.1.  the latter Member State requires the person paying the interest to retain tax at source on the interest and makes that person liable to the authorities for the non-retained tax at source, where there is no such duty to retain tax at source when the interest recipient is resident in the latter Member State?

7.2.  a parent company in the latter Member State would not have been required to make advance payments of corporation tax in the first two fiscal years, but would only have begun to pay corporation tax at a much later time than the due date for tax at source?

    The EU Court of Justice is requested to include the answer to question 6 in its answer to this question.