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Approved Changes (4)

European Union-Germany

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German Exit Tax on Transfer of Assets to EU PE Compatible with EU Law

The European Court of Justice on 21 May 2015 rendered its ruling in the case Verder LabTec GmbH & Co. KG v. Finanzamt Hilden (Case C‑657/13). The case involved a German limited partnership which transferred IP rights to its Dutch permanent establishment. The transfer triggered an exit tax in Germany on the unrealized gains inherent in the transferred IP rights, which is required to be paid over a 10-year period. The Court was asked to determine whether the German tax on unrealized gains on the transfer of assets to the Dutch PE is compatible with EU rules.  ECJ Advocate General Niilo Jääskinen rendered his opinion on the case on 26 February 2015, and concluded therein that the German rules are permissible under EU law.

The Court determined that the German rules indeed infringe on the freedom of establishment enshrined in EU law. Nevertheless, in line with the reasoning of the Advocate General, the Court found that the rules are permissible under EU law. The Court reached this conclusion on the grounds that the rules (a) are needed to preserve the allocation of taxing powers between the Member States concerned and are, thus, objectively justified by overriding reasons of public interest; and (b) are proportional in particular based on the fact that the tax due is payable over a 10-year period.


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Malta 2015 Budget Measures Implementation Act Passed

On 30 April 2015, the Maltese Parliament passed the Budget Measures Implementation Act XIII, thus approving the Budget presented by the Minister of Finance on 17 November 2014.

Aside from a reduction in personal income tax, salient features of the passed act include the following:

  • The definition of a company is amended to include partnerships en nom collectif and partnerships encommandite, which would have elected to be treated as a company.  From year of assessment 2016, such partnerships will therefore be treated similarly to a company and will, inter alia, be eligible to such corporate tax measures as the participation exemption, the refundable tax credit or the group trading loss surrender. On the other hand, the condition for a partnership to carry on a trade, business, profession or vocation in order to be treated as a transparent entity has been removed. A partnership which does not opt to be treated as a corporate tax entity where permitted, can be regarded as a transparent entity regardless of its activities;
  • In view of the election for eligible partnerships to be treated as corporate taxpayers, the definition of dividends is amended to include amounts distributed or credited to the partners of qualifying partnerships; and
  • The participation exemption regime is amended effective 1 January 2016. From that date, dividends received from a qualifying EU holding and benefitting from the withholding tax exemption in the source country under the EU Parent-Subsidiary Directive, are excluded from the participation exemption regime in Malta, if such dividends were deductible to the paying EU subsidiary.


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Switzerland Names Suspect Foreign Tax Evaders

The Swiss federal tax administration begun the publication of the identity of non-resident natural persons and legal entities suspected of tax evasion. A first batch of identified suspects was disclosed in several “notices” published in the May 2015 edition of the Swiss Official Gazette. The list carries the identities of nationals from, inter alia, France, Germany, India, the Netherlands, Norway, South Korea, the UK and the US, as well as of legal entities established in Panama, Singapore, the British Virgin Islands and elsewhere. It appears that in contrast to other nationals whose identity is fully disclosed, US persons are only identified by their initials. The notices are broadly divided in two types. The first type consists of final notices whereby the Swiss federal tax authorities announce their resolve to exchange information with the relevant requesting State in relation to the person named, and generally grants the latter 30 days to object to the determination.  The second type consists of communications requesting specified identified persons with unknown current addresses to contact the Swiss authorities within 7 days in pursuance of their right to be heard in the framework of ongoing exchange of information requests.

The Swiss federal tax authorities are reported to have resorted to this unusual procedure in view of the massive amount of information exchange requests received from various other countries, and the inability or unwillingness of Swiss banks to trace persons who in many cases no longer hold Swiss bank assets.

United Kingdom

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HRMC Guidance on Removal of Holding and Treasury Companies from Definition of UKFI

HMRC issued on 21 May a guidance note on the removal of “relevant holding company” and “treasury company” from the definition of a UK Financial Institution (UKFI) for the purposes of applying the UK agreements on the automatic exchange of information.  The instruments affected by the removal include the FATCA agreement with the United States, the UK/Crown Dependencies and Gibraltar agreement (CD and G), and the Multilateral Competent Authority agreement implementing the Common Reporting Standard (CRS), the latter taking effect for EU Member States under Council Directive 2011/16/EU.

Click the following link for the issued guidance note.

Proposed Changes (1)

European Union-France-Germany-United Kingdom

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EU to Discuss Minimum Corporate Tax Rate across the Union

In a move supported by France and Germany, the European Union is to discuss setting a minimum corporate tax rate across the Union. The minimum rate would operate substantially similarly to the 15% standard floor rate for VAT across the European Union. The plan will be discussed on Wednesday 27 May in a meeting of the Forum of Commissioners, a setting during which strategic orientations for the Union are floated.  It is expected to be opposed by a number of Member States, including the UK, which are not keen on surrendering more of their fiscal sovereignty to the Union. The proposal comes weeks after the Commission announced the revival of old plans to introduce a Common Consolidated Tax Base (CCTB) for companies across the European Union.


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