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RECENT DEVELOPMENTS FOR TAX SPECIALISTS EDITION 183 EU Tax Alert - CJ rules that impossibility to deduct tax losses incurred in another Member State prior to the transfer of corporate tax residence is not a breach of the fundamental freedoms (AURES Holdings) - CJ rules that Netherlands tax rules on dividends paid to non-resident UCITS partly violate EU law (Deka) - CJ rules that Hungarian progressive tax having greater impact on undertakings owned by non-residents is not in breach of EU Law (Vodafone; Tesco) - VAT: new payment data exchange requirements adopted Highlights in this edition - CJ rules that impossibility to deduct tax losses incurred in another Member State prior to the transfer of corporate tax residence is not a breach of the fundamental freedoms (AURES Holdings) - CJ rules that Netherlands tax rules on dividends paid to non-resident UCITS partly violate EU law (Deka) - CJ rules that Hungarian progressive tax having greater impact on undertakings owned by non-residents is not in breach of EU Law (Vodafone; Tesco) - VAT: new payment data exchange requirements adopted EU Tax Alert 3 Contents Highlights in this edition - CJ rules that Belgian tax on stock exchange transactions does not breach freedom to provide - CJ rules that impossibility to deduct tax losses services (Anton van Zantbeek) incurred in another Member State prior to the transfer - Upcoming Commission proposals for June 2020 of corporate tax residence is not a breach of the fundamental freedoms (AURES Holdings) VAT - CJ rules that Netherlands tax rules on dividends paid to non-resident UCITS partly violate EU law (Deka) - Small Business Exemption extended to cross-border - CJ rules that Hungarian progressive tax having greater activities impact on undertakings owned by non-residents is not - New payment data exchange requirements adopted in breach of EU Law (Vodafone; Tesco) - CJ rules that Hungarian progressive tax having greater - VAT: new payment data exchange requirements impact on undertakings owned by non-residents is not adopted in breach of EU Law (Vodafone) - CJ rules that Hungarian progressive tax having greater State Aid/WTO impact on undertakings owned by non-residents is not in breach of EU Law (Tesco) - CJ rejects preliminary reference made by Central Tax - CJ rules on Hungarian obligation to submit a tax Tribunal of Spain as it does not qualify as a ‘Court’ declaration on suppliers of advertising services (Banco Santander) established in another Member State (Google Ireland) - CJ rules on VAT deduced rate for letting of places on Direct Taxation camping or caravan sites (Segler) - CJ rules on the VAT treatment of land registry costs - Council has revised EU list of non-cooperative which concern a statutory obligation of the seller jurisdictions for tax purposes (blacklist) (Amărăşti Land Investment) - CJ rules that impossibility to deduct tax losses - AG opines on the right to VAT deduction incurred in another Member State prior to the transfer (AGROBET CZ) of corporate tax residence is not a breach to the fundamental freedoms (AURES Holdings) Customs Duties, Excises and - CJ rules on the Belgian legislation applying the PSD as other Indirect Taxes regards the order in which the deductible income must be deducted from taxable profits (Brussels Securities) - CJ rules that Italian tax on betting is not in breach of CJ rules that Netherlands tax rules on dividends paid to EU Law (Stanleyparma) non-resident UCITS partly violate EU law (Deka) 4 Highlights in this edition CJ rules that impossibility to deduct liable on the basis of the 2012 tax year. The Czech tax tax losses incurred in another Member authorities considered that that loss could not be invoked State prior to the transfer of corporate as a deductible element of the tax base on the basis of tax residence is not a breach to the Paragraph 38n of the Law on income tax. According to fundamental freedoms (AURES Holdings) those authorities, Aures is, as a Czech tax resident, taxable on its worldwide income under Czech tax law. However, it On 27 February 2020, the CJ delivered its judgment in can deduct from the tax base only a loss arising from an case AURES Holdings a.s. v Odvolací finanční ředitelství economic activity in the Czech Republic. Aures appealed (C-405/18). The case deals with the transfer of a against this decision. It claimed in the appeal before company’s place of effective management to a Member that by the cross-border transfer of its place of effective State other than its registered seat and the fact that the management it exercised the freedom of establishment national legislation at stake does not allow a tax loss and that the impossibility for it to deduct the 2007 tax loss incurred in the Member State of incorporation before the in the Czech Republic, which it can no longer claim in the transfer of its seat to be claimed. Netherlands, amounts to an unjustified restriction on that freedom. AURES Holdings, is a company incorporated under Netherlands law whose registered seat and place of The CJ started by observing that, to exclude a loss effective management were in the Netherlands, by virtue of incurred by a company resident in one Member State which it was a tax resident of the Netherlands. In the 2007, but incorporated in another Member State under the Aures incurred a loss in the Netherlands. On 1 January latter’s law during the tax year in which that company 2008, Aures set up a branch in the Czech Republic which, was resident in the Member State of incorporation from under Czech law, constitutes a permanent establishment the benefit of that advantage, whereas that advantage of that company without legal personality and whose is granted to a company resident in the Member State activity is taxable in that Member State. On 1 January of residence which incurred a loss in the same tax year, 2009, Aures transferred its place of effective management constitutes a difference in tax treatment. Therefore, and by from the Netherlands to the Czech Republic. Following that reason of that difference in treatment, a company transfer, Aures also transferred its tax residence from incorporated under the law of a Member State might the Netherlands to the Czech Republic. However, Aures be dissuaded from transferring its place of effective retained its registered seat and its entry in the commercial management to another Member State in order to pursue register in Amsterdam. Thus, it continued to be governed, its economic activities there. as regards its internal relations, by Netherlands law. In the light of that transfer of place of effective management and, Such a difference in treatment resulting from a Member consequently, of its tax residency, Aures applied to the State’s tax legislation to the detriment of companies Czech tax authorities for deduction of the loss which it exercising their freedom of movement can be permissible had incurred in the Netherlands on the basis of the 2007 only if it relates to cases which are not objectively tax year from the corporation tax base for which it was comparable or if it is justified by an overriding reason in EU Tax Alert 5 the public interest. According to the Court, by providing CJ rules that Netherlands tax rules on that a company may not claim, in the Member State in dividends paid to non-resident UCITS partly which it is now resident, a loss incurred in a tax year in violate EU law (Deka) which it was a tax resident of another Member State, the Czech legislation is conducive, in essence, to preservation On 30 January 2020, the Court of Justice of the European of the allocation of the power to impose taxes between Union (‘CJ’) issued its judgment in the case of Köln Highlights the Member States and to prevent the risk of double Aktienfonds Deka (‘KA Deka’). The CJ answered two deduction of losses. preliminary questions from the Netherlands Supreme Court on the compatibility with EU law of differences in the In this regard, the CJ noted that a company resident in a Netherlands dividend withholding tax regime, depending Member State which has incurred a loss in that Member on whether the recipient is a non-resident UCITS or a in this edition State and a company which has transferred its place of Netherlands resident UCITS qualifying as a so-called ‘fiscal effective management and, consequently, its tax residency investment fund’ (fiscale beleggingsinstelling, ‘FBI’). to that Member State having incurred a loss during a tax year during which it was a tax resident of another Member The judgment makes clear that the Netherlands FB regime State, without any activity in the former Member State are is at least partly not in line with the TFEU. The Netherlands not, in principle, in a comparable situation. The situation Supreme Court will now need to apply the CJ findings to of a company which effects such a transfer is subject the specific case. This judgment is relevant for funds and successively to the tax jurisdiction of two Member States, other interested parties in a similar position. Furthermore, it namely, first, the Member State of origin, in respect of the may impact several cases pending before the Netherlands tax year during which the loss is incurred, and, second, courts in which non-resident UCITS claim a refund of the host Member State, in respect of the tax year for which Netherlands dividend withholding tax based on the free that company applies for that loss to be deducted. movement of capital under the TFEU. Therefore and for the CJ, where the host Member State Netherlands FBI regime has no tax jurisdiction over the tax year during which the Under Netherlands tax law, UCITS qualifying as an FBI loss at issue arose, the situation of a company, which may claim a refund of Netherlands dividend withholding has transferred its tax residency to that Member State tax.

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