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EDITION 183 EU Tax Alert

- CJ rules that impossibility to deduct tax losses incurred in another Member State prior to the transfer of corporate 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 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 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) Duties, and -- CJ rules on the Belgian legislation applying the PSD as other Indirect 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 . According to fundamental freedoms (AURES Holdings) those authorities, Aures is, as a Czech tax resident, taxable on its worldwide income under Czech . 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 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. This requires meeting in particular the following two and subsequently claims a loss there previously incurred conditions: in another Member State, is not comparable to that of i. The shareholders or participants must meet certain a company the turnover of which was subject to the tax requirements, generally related to the percentage of powers of the previous Member State on the basis of the investment (the ‘shareholder requirements’). tax year during which that company incurred that loss. ii. The UCITS must distribute all proceeds eligible for In addition, the fact that a company which has transferred distribution within 8 months after the relevant financial its tax residency from one Member State to another falls year (the ‘redistribution requirement’). successively within the tax jurisdiction of two Member States is liable to give rise to a greater risk of that loss Judgment of the CJ being taken into account twice, since such a company The CJ first decided that the shareholder requirements might claim the same loss in respect of the authorities of comply with the free movement of capital, under two both Member States. conditions: i. the requirements should not ‘de facto’ constitute a less Overall, the CJ concluded that the Member State to which favourable treatment for non-resident UCITS, and a company transfers its place of effective management ii. the tax authorities should require proof from both cannot be required to take into account a loss incurred resident and non-resident UCITS that they comply with before that transfer which relates to tax years in respect of the shareholder requirements. which that company did not fall within the tax jurisdiction of It will be for the Netherlands national court to investigate that Member State. whether these conditions are met.

Further, the CJ ruled that the redistribution requirement is in conflict with the free movement of capital, if two conditions are met. First, in the home State of the UCITS, 6

the proceeds should be deemed distributed or are Vodafone appealed against this decision claiming that the included in the shareholders’ or participants’ tax base in legislation relating to that tax constitutes prohibited State that State, as if they were distributed. Second, in view of aid and is contrary to Article 401 of the VAT Directive. the objective pursued by the requirement, the non-resident It considered that the effect of that tax, which is based UCITS is in a situation comparable to that of an FBI, which on turnover and is calculated in accordance with a scale again will have to be investigated by the Netherlands that comprises progressive rates applicable to various tax national court. The CJ confirmed that, if the objective bands, may be indirectly discriminatory vis-à-vis taxable of the redistribution requirement is taxing the proceeds persons owned by foreign natural persons or legal persons at the level of the participant, a non-resident UCITS is and, therefore, be contrary to Articles 49, 54, 107 and 108 comparable to an FBI. TFEU particularly since, in practice, only the Hungarian subsidiaries of foreign parent companies pay the special Additional remarks tax at the rate laid down for the highest band of turnover. Following this CJ judgment, the domestic procedure will resume. Shortly, the Netherlands Supreme Court can The CJ started by recalling that the freedom of be expected to answer the preliminary questions of the establishment aims to guarantee the benefit of national Lower Court. It is then up to the Lower Court to determine treatment in the host Member State to nationals of other how to precisely apply the framework laid down by the Member States by prohibiting any discrimination based CJ (and the Supreme Court) in the case of KA Deka. on the place in which companies have their seat. In order The judgment only deals with years before the introduction to be effective, the scope of freedom of establishment of the ‘remittance reduction’ (afdrachtsvermindering) in must mean that a company may rely on a restriction on Netherlands tax law (years prior to 2008). It is currently the freedom of establishment of another company which not yet clear whether the outcome of the case would be is linked to it in so far as that restriction affects its own different under the new remittance reduction regime. taxation. In this case, Vodafone has its registered office in The CJ’s ruling is of relevance for other cases with a Hungary but is 100% owned by Vodafone Europe, which similar fact pattern. The KA Deka case, however, does not has its registered office in the Netherlands. cover situations where the shareholders or participants Furthermore, not only overt discrimination based on the are resident in a State that is neither the home State of location of the seat of companies, but also all covert forms the UCITS, nor the investment State. It is therefore still of discrimination which, by the application of other criteria open whether the ruling of the CJ on the redistribution of differentiation, lead in fact to the same result are, in that requirement in this case would also apply to such regard, prohibited. Therefore, a compulsory levy which ‘triangular situations’. provides for a criterion of differentiation that is apparently objective but that disadvantages in most cases, given CJ rules that Hungarian progressive tax its features, companies that have their seat in another having greater impact on undertakings Member State and which are in a situation comparable to owned by non-residents is not in breach of that of companies whose seat is situated in the Member EU Law (Vodafone) State of taxation, constitutes indirect discrimination based on the location of the seat of the companies, which is On 3 March 2020, the CJ delivered its judgment in case prohibited under Articles 49 and 54 TFEU. Vodafone Magyarország Mobil Távközlési Zrt. V Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága/ (C-75/18). In this case, the law on the special tax on certain sectors The case deals with the Hungarian tax on the turnover of makes no distinction between undertakings according to telecommunications operators that is a progressive tax where they have their registered office. All the undertakings that causes a greater impact on undertakings owned by operating in Hungary in the telecommunications sector are natural or legal persons of other Member States than on subject to that tax, and the tax rates that are, respectively, national undertakings. applicable to the various bands of turnover defined by that law apply to all those undertakings. That law Vodafone is a public limited company governed by does not, therefore, establish any direct discrimination. Hungarian law, active in the telecommunications However, Vodafone and the Commission maintain that market, whose sole shareholder is Vodafone Europe BV, the fact that the special tax is progressive is, in itself, to established in the Netherlands. Vodafone was the subject the advantage of taxable persons owned by Hungarian of a tax inspection that led to an additional assessment. natural persons or legal persons and to the disadvantage EU Tax Alert 7

of taxable persons owned by natural persons or legal Identically to the decision followed in the Vodafone case persons of other Member States, with the result that (C-75/18) dealt with in this edition, the CJ confirmed that the special tax constitutes, taking into consideration its the progressive rates of the special tax do not, inherently, characteristics, indirect discrimination. create any discrimination, based on where companies have their registered office, between taxable persons According to the CJ and contrary to what is maintained by owned by Hungarian natural persons or legal persons the Commission, progressive taxation may be based on and taxable persons owned by natural persons or legal turnover, since, on the one hand, the amount of turnover persons of other Member States. constitutes a criterion of differentiation that is neutral and, on the other, turnover constitutes a relevant indicator of New payment data exchange requirements a taxable person’s ability to pay. Following the preamble adopted of the relevant legislation, its aim is to impose a tax on taxable persons who have an ability to pay that exceeds On 18 February 2020, the Council of the EU agreed to the general obligation to pay tax. For the CJ, the fact that new measures to facilitate the detection of tax fraud in the greater part of such a special tax is borne by taxable cross-border e-commerce transactions. persons owned by natural persons or legal persons of other Member States cannot be such as to merit, by itself, The new measures supplement the EU’s ‘e-commerce categorisation as discrimination. That situation is due to package’ which enters into force on 1 January 2021. the fact that the Hungarian telecommunications market The supplementary rules require payment service providers is dominated by such taxable persons, who achieve the (most notably banks) to establish and maintain a register highest turnover in that market. Accordingly, that situation of cross-border payments. The information gathered has is an indicator that is fortuitous, if not a matter of chance, to be suitable for electronic submission to the Member and which may arise, even in a system of proportional States’ Tax Authorities. The information collected by the taxation, whenever the market concerned is dominated by Member States will be stored centrally in what has been undertakings of other Member States or of non-Member dubbed the ‘central electronic storage system of payment States or by national undertakings owned by natural information’ (‘CESOP’). From this system, all Member persons or legal persons of other Member States or of States will be able to extract the necessary information for non-Member States. processing by the national anti-fraud officials.

Therefore, the CJ concluded that the progressive rates of The additional rules for collection and storage of the special tax do not, inherently, create any discrimination, information naturally also require additional rules on the based on where companies have their registered office, protection of personal data. In this light, information may, between taxable persons owned by Hungarian natural for example, only be stored for a limited time and only persons or legal persons and taxable persons owned by the information necessary for combatting VAT fraud may natural persons or legal persons of other Member States. be collected. Moreover, stored information will only be accessible to designated VAT fraud investigation officials. CJ rules that Hungarian progressive tax The new measures are intended to enter into force as of having greater impact on undertakings 1 January 2024. owned by non-residents is not in breach of EU Law (Tesco) State Aid/WTO

On 3 March 2020, the CJ delivered its judgment in case CJ rejects preliminary reference made by Vodafone Magyarország Mobil Távközlési Zrt. V Nemzeti Central Tax Tribunal of Spain as it does not Adó- és Vámhivatal Fellebbviteli Igazgatósága/ (C-323/18). qualify as a ‘Court’ (Banco Santander) The case deals with the Hungarian tax on the turnover in the store retail sector that is a progressive tax that On 21 January 2020, the CJ delivered its judgment in case causes a greater impact on undertakings owned by natural Banco de Santander SA (C-274/14). The case deals with or legal persons of other Member States than on national the definition of court or tribunal of a Member State. undertakings. 8

In May 2002, Banco de Santander Central Hispano law. However, the question arises as to whether the TEAC (BSCH), the ultimate parent company of the tax fulfils the criterion of independence. consolidated group, acquired 100% of the shares in AKB Holding GmbH (‘AKB’), a company governed According to the CJ case law, the concept of by German law. That acquisition generated financial ‘independence’ has two aspects. The first aspect, which goodwill. In December 2002, BSCH transferred the is external, requires that the body concerned exercises shares in AKB whose acquisition price had generated the its functions wholly autonomously, without being subject relevant goodwill to Holneth BV, a company governed to any hierarchical constraint or subordinated to any by Netherlands law, and Santander Consumer Finance other body and without taking orders or instructions from SA (‘SCF’), a company governed by Spanish law; both any source whatsoever, being thus protected against companies also belonged to the tax consolidated group. external interventions or pressure liable to impair the In view of the relevant goodwill, the tax consolidated independent judgment of its members and to influence group made deductions. The tax authorities rejected the their decisions. The second — internal — aspect of goodwill deduction claimed by SCF. Banco de Santander the concept of ‘independence’ is linked to ‘impartiality’ submitted a complaint against that recovery notice to the and seeks to ensure a level playing field for the parties TEAC (Central Tax Tribunal), claiming that, notwithstanding to the proceedings and their respective interests with the indirect nature of the relevant goodwill as a result of regard to the subject matter of those proceedings. its having been generated by the acquisition of a holding That aspect requires objectivity and the absence of any company, that goodwill is deductible from corporation interest in the outcome of the proceedings apart from tax. It argued that, the question in this case is whether, the strict application of the rule of law. The concept pursuant to Decision 2011/5, the Commission’s first of ‘independence’, which is inherent in the task of decision on the tax scheme at issue, the adjudication, implies above all that the body in question corresponding to the amortization of the relevant goodwill acts as a third party in relation to the authority which before 21 December 2007, following the acquisition of a adopted the contested decision. Those guarantees of non-resident holding company, must be recovered as aid independence and impartiality require rules, particularly as that is illegal and incompatible with the internal market. regards the composition of the body and the appointment, For Banco Santander, given that the combined provisions length of service and the grounds for abstention, rejection of Article 1(2) and Article 4(1) of Decision 2011/5 are such and dismissal of its members, in order to dismiss any that acquisitions made before 21 December 2007 are reasonable doubt in the minds of individuals as to the excluded from the obligation of recovery, on account of imperviousness of that body to external factors and its a pre-existing legitimate expectation, and the fact that neutrality with respect to the interests before it. the acquisition at issue in the main proceedings took place before that date, it was argued that it is essential, The CJ noted that, in the present case and according for the purposes of determining the dispute in the main to the national legislation applicable, the President and proceedings, that an answer be given to the question members of the TEAC are appointed by Royal Decree as to whether those provisions of Decision 2011/5 must adopted by the Council of Ministers, on the proposal of be interpreted as applying also to indirect acquisitions, the Minister for the Economy and Finance, for an indefinite in particular to the acquisition of a non-resident period. According to that provision, both the President holding company, such as the one at issue in the main and the members of the TEAC may be removed from proceedings. The Central Tax Tribunal decided to refer the office according to the same procedure, that is to say, case to the CJ. by Royal Decree adopted by the Council of Ministers on the proposal of the Minister for the Economy and The CJ discussed whether the question was admissible Finance. Whilst, it is true, the applicable national legislation and in particular, whether the TEAC meets the criteria lays down rules governing, inter alia, abstention and for being considered as a court or tribunal. The CJ recusal of the President and other members of the started by observing that there is no doubt that the body TEAC or, in the case of the President of the TEAC, rules making the reference in the present case, on the basis on conflicts of interest, disqualification and duties of of the information in the file submitted to the Court, that transparency, it is common ground that the arrangements it satisfies the criteria that it be established by law, that for removal of the President and other members of the it be permanent, that its jurisdiction be compulsory, that TEAC are not determined by specific rules, by means of its procedure be inter partes and that it apply rules of express legislative provisions, such as those applicable EU Tax Alert 9

to members of the judiciary. The members of the TEAC appeal are thus conflated. Thus, those characteristics of are covered solely, in that respect, by the general rules the extraordinary appeal for the unification of precedent of administrative law and, in particular, by the basic which may be brought against decisions of the TEAC regulations relating to civil servants, as the Spanish demonstrate the organisational and functional links that Government confirmed during the hearing before the exist between that body and the Ministry of the Economy Court. That finding also applies in relation to the members and Finance, in particular, the Director-General of Taxation of the regional and local TEAs (tax tribunals). Consequently, of that ministry and the Director-General of the department the removal of the President and the other members of which adopts the decisions contested before the TEAC. the TEAC and of the members of the other TEAs is not The existence of such links makes it impossible to regard limited, to certain exceptional cases reflecting legitimate the TEAC as a third party in relation to that administration. and compelling grounds that warrant the adoption of such a measure, subject to the principle of proportionality and to Consequently, the CJ concluded that the TEAC does the appropriate procedures being followed, such as cases not satisfy the internal aspect of the requirement of of incapacity or of a serious breach of obligations rendering independence that is characteristic of a court or tribunal. the individuals concerned unfit for the purposes of carrying out their duties. It follows that the applicable national Direct Taxation legislation does not ensure that the President and the other members of the TEAC are protected against direct or Council has revised EU list of non- indirect external pressures that are liable to cast doubt on cooperative jurisdictions for tax purposes their independence. (blacklist) Furthermore, as regards the requirement of independence in its second, internal, aspect, it must be noted that there On 27 February 2020, the Council agreed on a revised is indeed a separation of functions within the Ministry of EU list of non-cooperative jurisdictions for tax purposes the Economy and Finance between, on the one hand, (blacklist). The list is now composed by the following the departments of the tax authority responsible for 12 jurisdictions: management, clearance and recovery of tax and, on the other, the TEAs which rule on complaints lodged against 1. American Samoa the decisions of those departments. Nevertheless, certain American Samoa does not apply any automatic exchange characteristics of the extraordinary appeal procedure of financial information, has not signed and ratified, before the Sala Especial para la Unificación de Doctrina including through the jurisdiction they are dependent on, (Special Chamber for the Unification of Precedent, the OECD Multilateral Convention on Mutual Administrative Spain), are such as to cast doubt on the fact that the Assistance as amended, did not commit to apply the TEAC acts as a ‘third party’ with respect to the interests BEPS minimum standards and did not commit to before it. Only the Director-General of Taxation of the addressing these issues. Ministry of the Economy and Finance may lodge such an extraordinary appeal against decisions of the TEAC with 2. Cayman Islands which he or she disagrees. However, that Director-General Cayman Islands does not have appropriate measures will automatically be part of the eight-person panel that is in place relating to economic substance in the area of to hear that appeal, along with the Director-General or the collective investment vehicles. Director of the department of the State Tax Administration Agency to which the body that issued the act referred to in 3. Fiji the decision that is the object of that extraordinary appeal Fiji is not a member of the Global Forum on transparency belongs. Thus, both the Director-General of Taxation of and exchange of information for tax purposes (‘Global the Ministry of the Economy and Finance, who lodged the Forum’), has not signed and ratified the OECD Multilateral extraordinary appeal against a decision of the TEAC, and Convention on Mutual Administrative Assistance as the Director-General or the Director of the department amended, has harmful preferential tax regimes, has not of the State Tax Administration Agency which adopted become a member of the Inclusive Framework on BEPS the act referred to in that decision, will sit as part of or implemented OECD anti-BEPS minimum standard, and the Special Chamber of the TEAC hearing that appeal. has not yet resolved these issues yet. The roles of party to the extraordinary appeal procedure and that of members of the body that is to hear such an 10

4. Guam 11. US Virgin Islands Guam does not apply any automatic exchange of US Virgin Islands does not apply any automatic exchange financial information, has not signed and ratified, including of financial information, has not signed and ratified, through the jurisdiction they are dependent on, the including through the jurisdiction they are dependent on, OECD Multilateral Convention on Mutual Administrative the OECD Multilateral Convention on Mutual Administrative Assistance as amended, did not commit to apply the Assistance as amended, has harmful preferential tax BEPS minimum standards and did not commit to regimes, did not commit to apply the BEPS minimum addressing these issues. standards and did not commit to addressing these issues.

5. Oman 12. Vanuatu Oman does not apply any automatic exchange of Vanuatu does not have a rating of at least ‘Largely financial information, has not signed and ratified the Compliant’ by the Global Forum on Transparency and OECD Multilateral Convention on Mutual Administrative Exchange of Information for Tax Purposes for Exchange Assistance as amended, and has not resolved these of Information on Request, facilitates offshore structures issues yet. and arrangements aimed at attracting profits without real economic substance and has not resolved these issues 6. Palau yet. Palau does not apply any automatic exchange of financial information, has not signed and ratified the CJ rules on the Belgian legislation applying OECD Multilateral Convention on Mutual Administrative the PSD as regards the order in which the Assistance as amended, and has not resolved these deductible income must be deducted from issues yet. taxable profits (Brussels Securities)

7. Panama On 19 December 2019, the CJ delivered its judgment Panama does not have a rating of at least ‘Largely in case Brussels Securities SA v État Belge (C-289/19). Compliant’ by the Global Forum on Transparency and The case deals with the application of the Parent- Exchange of Information for Tax Purposes for Exchange Subsidiary Directive (PSD) and the order in which the of Information on Request and has not resolved this issue deductible income must be deducted from taxable profits. yet. According to Belgian legislation for determining the 8. Samoa definitive taxed income (DTI), 95% of the amount collected Samoa has a harmful preferential tax regime and has not or received from a subsidiary should be deducted pursuant committed to addressing this issue. to the PSD regime,. In so far as it has not been possible Furthermore, Samoa committed to comply with criterion to deduct that amount, it is to be carried forward to 3.1 by the end of 2018 but has not resolved this issue yet. subsequent tax years. In turn and in regard to deduction for risk capital (‘DRC’) in respect of a tax period, the risk 9. Seychelles capital to be taken into account corresponds, to the Seychelles has harmful preferential tax regimes and has amount of the company’s equity capital at the end of not resolved these issues yet. the previous tax period, determined in accordance with accounting legislation and the annual accounts as shown 10. Trinidad and Tobago on the balance sheet. Trinidad and Tobago does not apply any automatic exchange of financial information, has a ‘Non-Compliant’ Brussels Securities, a company established in Belgium, rating by the Global Forum on Transparency and is subject to corporation tax in that Member State. In its Exchange of Information for Tax Purposes for Exchange tax return for the 2011 financial year, Brussels Securities of Information on Request, has not signed and ratified the stated that it had determined its tax base by deducting OECD Multilateral Convention on Mutual Administrative first, the DRC and second, the DTI. It also claimed the Assistance as amended, has harmful preferential tax right to carry forward deductions to the 2012 tax year in regimes, and has not resolved these issues yet. respect of DTI, DRC and tax losses. In a correction notice dated 21 May 2013, the tax authorities stated that they intended to review the amount of DRC which could be EU Tax Alert 11

carried forward at the beginning and at end of the 2011 that continues to be possible after the DTI has first been tax year on the basis of the order in which tax deductions deducted. In particular, the parent company’s tax base is are to be applied. According to that order, first DTI must established by deducting from its profits, first DTI carried be deducted from the taxable profits, then the DRC, and forward, then, to the extent that there remain taxable finally the losses to be carried forward. Since Brussels profits, DRC carried forward, if the time limit for its use has Securities had not made the deductions in that order in not expired, and finally, losses carried forward. Therefore, respect of the tax years 2005 to 2011, the tax authorities the CJ observed that, the deduction as a priority of DTI considered that no amounts could be carried forward to may reduce or even extinguish, the tax base, which may the 2012 tax year in respect of DTI and that the amount have the effect of depriving the taxpayer, totally or partially, of the DRC should be increased. The losses to be carried of another . While, in accordance with the forward were maintained. national legislation applicable to the dispute in the main proceedings, losses may be carried forward indefinitely, Brussels Securities appealed this decision. It considered DRC may be carried forward only to the following seven that ‘According to Brussels Securities’, the order in tax years. In those circumstances, the order in which which tax deductions are to be applied, would mean that deductions must be applied, as described in paragraph 41 a company covered by the DTI system would lose the above, may result in the expiry of the right to use the benefit of the tax advantage represented by the DRC, up deferred DRC, up to the amount of DTI that has been to the amount of DTI that it may deduct. Therefore, and deducted as a priority from the parent company’s taxable in its view, the national legislation does not comply with profits. Therefore, the CJ considered that the combination Article 4 of the PSD. The case was referred to the CJ. of the DTI scheme applicable to dividends received, the order of deductions set out in national legislation, and the The CJ started by observing that the first indent of time limit on the ability to use DRC can have the effect Article 4(1) of the PSD prohibits Member States from that receiving dividends is likely to result in the parent taxing the parent company in respect of the profits company losing another tax advantage provided for by distributed by its subsidiary, without drawing a distinction national legislation, and, therefore, that company being based on whether the chargeable event of the taxation taxed more heavily than would have been the case if it had of the parent company is the receipt of those profits or not received dividends from its non-resident subsidiary or their redistribution (and that that prohibition also applies if, as the referring court states, the dividends had simply to national legislation which, although it does not tax the been excluded from the parent company’s tax base. dividends received by the parent company in themselves, The CJ noted that the Belgian legislation is contrary to the may have the effect that the parent company is subject objective pursued by the first indent of Article 4(1) of the indirectly to taxation on those dividends). Such legislation PSD, the receipt of such dividends is not fiscally neutral for is compatible neither with the terms, nor with objectives the parent company. and scheme of PSD, since it does not allow the objective of preventing economic , as set out in the Therefore, the CJ concluded that the PSD must be rule established at the first indent of Article 4(1) of that interpreted as precluding the Belgian legislation which directive, to be fully attained. provides that dividends received by a parent company from its subsidiary must first be included in the tax base In accordance with the Belgian legislation, the part of of the parent company, before 95% of the amount of the DTI that cannot be deducted in the relevant tax year the dividends is then deducted, and any surplus may be due to insufficient profits may now be carried forward carried forward to subsequent tax years indefinitely, that to subsequent tax years. In addition, the ability to carry deduction having priority over another tax deduction which forward is not limited in time. It is therefore apparent that may only be carried forward for a limited time. the reduction in losses which may be carried forward, due to the inclusion of dividends in the parent company’s tax base, is now offset by an unlimited ability to carry forward DTI in the same amount. However, DTI carried forward must be deducted as a priority from the positive results achieved by the parent company in subsequent years, other deductible items, in particular, the DRC and losses, being deductible only if, and to the extent that, 12

CJ rules that Belgian tax on stock exchange Belgian legislation establishes a difference in treatment transactions does not breach freedom to between recipients of financial intermediation services provide services (Anton van Zantbeek) resident in Belgium which is liable to dissuade them from using the services of non-resident service providers, while On 30 January 2020, the CJ delivered its judgment in making it more difficult for the latter to offer their services case Anton van Zantbeek VOF v Ministerrad (C-725/18). in that Member State. It concluded that national legislation The case deals with the Belgian rules that extend the therefore constitutes a restriction on the freedom to scope of a tax on stock exchange transactions. provide services. The Belgian Governed argued that such legislation, Anton van Zantbeek, a company established in Belgium, however, is intended to ensure the effective collection of brought an action before the Constitutional Court seeking tax and fiscal supervision and to combat . the annulment of the Belgian provisions. Those allegedly have widened the scope of the tax on stock exchange The CJ observed that according to the information transactions to which transactions entered into or contained in the reference for a preliminary ruling and executed in Belgium which relate to Belgian or foreign confirmed by the Belgian Government, the Belgian public funds are subject, in so far as the transaction is provisions are intended, inter alia, to prevent unfair executed through a professional intermediary. Under those competition between resident and non-resident provisions, those transactions are no longer the only professional intermediaries, in so far as the former are transactions subject to that tax, since the transactions obliged to levy the tax at source on behalf of their clients ‘deemed to be concluded or executed in Belgium’ are when executing stock exchange transactions, while the also covered, with the result that that tax is also due if latter are not obliged to do so on transactions executed for the purchase or sale order is issued to a non-resident Belgian issuers of an order, and to ensure the effectiveness professional intermediary by a resident issuer of an order, of tax collection and fiscal supervision. Therefore, the namely by ‘a natural person who has his habitual residence CJ considered that such reasons within the concept in Belgium’ or by a ‘legal person on behalf of a registered of ‘overriding reasons in the public interest’, within the office or an establishment of that legal person in Belgium’. meaning of the case law of the Court so that they are In this latter case, the issuer of an order becomes liable for capable of justifying a restriction on the freedom to provide the tax instead of the professional intermediary, since non- services. resident professional intermediaries cannot be required to comply with the Belgian tax provisions. That issuer of The CJ then assessed whether that legislation is able to an order is required to declare and pay that tax within achieve the objectives pursued. In this regard it noted that two months of the transaction in question unless he can that making the issuer of an order using the services of establish that it has already been paid, either through the a non-resident intermediary subject to the tax is likely to intermediary or his liable representative. ensure that the stock exchange transactions concerned will not escape taxation by making fiscal supervision more Mr Zantbeek argued that the legislation at effective and making it more difficult to circumvent that tax, stake establishes a difference in treatment between the burden of which is borne by the issuer of an order. Belgian issuers of an order, depending on whether they As regards the question whether the national legislation at use a professional intermediary established in Belgium issue in the main proceedings does not go beyond what or elsewhere, being therefore contrary, inter alia, to the is necessary to achieve those objectives, the CJ observed freedom to provide services. The case was referred to that the information necessary for the establishment and the CJ. supervision of such tax such which is levied on each stock exchange transaction, cannot be obtained by The Court started by assessing whether the free administrative cooperation alone and by the automatic and movement of services precludes legislation of a Member compulsory exchange of information in the field of taxation. State which establishes a tax on stock exchange Finally, the CJ also noted that the solution provided in transactions concluded or executed on the order of the legislation appears to be the least restrictive on the a resident of that Member State by a non-resident freedom to provide services rand therefore does not professional intermediary, with the result that an issuer appear to go beyond what is necessary to achieve these of an order is liable for that tax and for the declaration objectives. obligations connected with that tax. For the CJ, the EU Tax Alert 13

Therefore, the CJ concluded that the Belgian legislation The legislative proposals mentioned above are part of the does not contravene the freedom to provide services. EU Commission’s plans to fight tax evasion. The most important concrete steps to be taken in such regard Upcoming Commission proposals for include introducing new digital solutions to improve tax June 2020 authorities’ analysis capacities and to share information in real time; On June 2020, the Commission will present an action plan and two concrete legislative proposals to fight tax fraud When it comes to tackling cross-border tax barriers, the and evasion. most important concrete steps to be taken include: -- mechanisms to prevent and solve tax disputes; 1. Exchange of data from digital platform to tax -- procedures for withholding taxes on investment across authorities borders; The Commission will propose updating the EU Directive -- exploring digital solutions to levy taxes at source in real on Administrative Cooperation (Directive 2011/16/EU, time. also known as the DAC) to include the ability for tax administrations to collect and then exchange taxpayer data The Commission will also present defensive measures collected by digital platform providers during the course against blacklisted countries. of their operations, delivering a common EU reporting standard in this area. The expected proposal in line with VAT the trend of many governments around the globe which are delegating more and more tax obligations to private Small Business Exemption extended to platforms, which include not only reporting duties, but also cross-border activities the collection and levy of taxes. On 18 February 2020, the Council of the EU agreed Pursuant to the EU Inception Impact Assessment of to extend and simplify the VAT exemption for small 7 February 2020the aim of the proposal is to provide tax businesses (SMEs). administrations with information to identify taxpayers who Currently, Member States are allowed to exempt supplies generate revenue through the digital platform economy by SMEs with an annual turnover not exceeding a given and to enable tax administrations to obtain information (Member State specified) threshold. This relieves the SMEs to control that taxpayers pay their fair share as well as to from the administrative burden of VAT filing obligations provide for better cooperation across tax administrations and relatively high compliance costs. At the same time, and keep business compliance costs to a minimum by it provides the Member States’ tax authorities with the providing a common EU reporting standard. same relief (i.e. not having to administratively process In achieving such goal, the proposal expressly states that every small business whose actual VAT taxable turnover is the initiative must ensure the protection of taxpayers’ insignificant). fundamental rights and especially data protection rights (GDPR). Currently, cross-border supplies cannot benefit from the SME exemption, no matter how small the (VAT taxed) 2. VAT E-commerce fraud and third countries business. After the extension however, a Member State A Recommendation for a Council Decision will be may exempt an SME from its VAT filing obligations, despite proposed to authorize the Commission to open the SME not being established in the Member State negotiations for an agreement between the EU and a concerned (where the supply is taking place), provided that major economic player on administrative cooperation, the turnover in concern stays below the national threshold combating fraud (in particular in e-commerce) and recovery and as long as the SME’s annual turnover in the Union as a of claims in the field of VAT. The ‘major economic player’ whole stays below EUR 100,000. could be, for instance, China or the US. This proposal would complement the recent Directive that introduced the SMEs will be able to declare their transactions using exchange of payment data by payment service providers a ‘single registration window’ in their Member State of (PSP) in cross-border e-commerce transactions. establishment. This way, no additional VAT registration and reporting is required of the SME. All in all, this should contribute to a level playing field for businesses, regardless 14

of where they are established in the EU. The new and According to the Court, it follows, first, that the obligation improved VAT (filing) exemption for SMEs is intended to to submit a tax declaration, laid down in the law, does not enter into force on 1 January 2025. impinge on the exercise of the activity of advertising online in Hungary and, second, that a supplier of advertising CJ rules on Hungarian obligation to submit services who, before commencing its advertising activity a tax declaration on suppliers of advertising which is taxable, has not registered for tax purposes services established in another Member in Hungary is subject to that obligation, whereas that State (Google Ireland) obligation does not apply to a supplier of advertising services who is already registered for tax purposes in On 3 March 2020, the CJ delivered its judgment in case that Member State for the purposes of some form of Google Ireland Limited v Nemzeti Adó- és Vámhivatal tax, that being so irrespective of either supplier’s place Kiemelt Adó- és Vámigazgatósága (C-482/18). The case of establishment. Therefore, the Court was of the view deals with a series of fines on that company for having that the obligation to submit a tax declaration, which is infringed the obligation to submit a tax declaration of an administrative formality, does not per se constitute an persons exercising an activity subject to the tax on obstacle to the freedom to provide services. advertisements laid down in Hungarian legislation. Subsequently the CJ dealt with the Hungarian fines for By decision of 16 January 2017, the Hungarian tax failure to comply with similar obligations to submit a authority found, first, that Google Ireland was exercising an tax declaration and to register required of them under activity which fell within the scope of the law and, second, the general provisions of the national tax legislation. that it had not registered with the tax authority within According to the Court, the system of penalties, of the Law 15 days of commencing its activity. Consequently, the on the taxation of advertisements, enables significantly tax authority imposed a fine. By decisions adopted on higher fines to be issued than those resulting from the the following four days, the tax authority imposed four application of the Law on general tax procedures in the new fines on Google Ireland. Google Ireland brought an event of infringement, by a supplier of advertising services action for the annulment of those decisions before the established in Hungary. Furthermore, the amount of referring court. the fines imposed under that system is not increased for continued non-compliance with the corresponding In support of its action, Google Ireland submits, first of obligation to register to such an extent, nor necessarily all, that the imposition of fines on the ground of a failure within such a short period of time, as that applied under to comply with the obligation to register laid down in the the system of penalties laid down in the Law on the Law on the taxation of advertisements is contrary to the taxation of advertisements. Therefore, and having regard to freedom of provide services. Furthermore, it submits the difference in treatment introduced between suppliers of that companies established in Hungary may satisfy the advertising services according to whether or not they are obligations laid down by that law more easily than those already registered for tax purposes in Hungary, the system established outside Hungary. Lastly, it maintains that fines of penalties at issue in the main proceedings constitutes a imposed on companies established outside Hungary on restriction on the freedom to provide services. the ground that they fail to comply with their obligations to submit a tax declaration differ from those applicable to Such a restriction may nevertheless be warranted if it companies established in Hungary which fail to comply is justified by overriding reasons of public interest and, with a similar obligation, and are disproportionate to provided that that is the case, its application is suitable for the seriousness of the infringement committed, thereby securing the attainment of the objective which it pursues constituting a restriction on the freedom to provide and does not go beyond what is necessary in order to services in the EU. attain it. In the present case, the Hungarian Government invoked the need to preserve the integrity of its tax The CJ started by observing that under the law on the regime, essentially relying on grounds based on ensuring taxation of advertisements, a person liable to the tax on the effectiveness of fiscal supervision and the effective advertisements who is not registered with the tax authority collection of tax. as a taxpayer for the purposes of some form of tax must register with the tax authority by submitting the relevant In that regard, the Court has previously accepted that the form within 15 days of commencing the taxable activity. need to ensure the effectiveness of fiscal supervision and EU Tax Alert 15

the effective collection of tax may constitute overriding VAT rate should apply. Segler proceeded to appeal to the reasons in the public interest capable of justifying a ‘Bundesfinanzhof’ (Federal Finance Court of Germany), restriction on the freedom to provide services. It has also arguing that the taxation on the letting of boat moorings at held that the imposition of penalties, including criminal the standard VAT rate infringes upon the general principle penalties, may be considered to be necessary in order to of equality since the provision of places on camping or ensure compliance with national rules, subject, however, caravan sites is subject to the reduced VAT rate. In this to the condition that the nature and amount of the penalty context, the Bundesfinanzhof decided to refer to the CJ for imposed is, in each individual case, proportionate to the a preliminary ruling on the question whether the reduced gravity of the infringement which it is designed to penalise. VAT rate for the letting of places on camping or caravan The CJ observed that that legislation introduces a system sites of Article 98(2) VAT Directive, read in conjunction with of penalties under which a supplier who has not complied point 2 of Annex III, should also cover the letting of boat with that administrative formality may, within a few days, moorings. at intervals of only one day apart, be fined, from the second day, in amounts which are tripled in relation to The CJ began by considering that the aforementioned the amount of the previous fine without the competent Annex III to the Directive sets out an exhaustive list of authority giving the supplier the time necessary to comply supplies and services to which reduced rates may be with its obligations or the opportunity to submit its applied. Also, the CJ pointed out that provisions which observations, or having itself examined the seriousness of are in nature exceptions to a principle (reduced rate the infringement. In those circumstances, such legislation instead of the standard rate) must be interpreted strictly. is disproportionate. The CJ further added that a fine is no Based on the case Baštová (C 432/15), a concept such less disproportionate merely because the authorities of as ‘accommodation’ should be interpreted strictly and the a Member State may, at their sole discretion, reduce its scope of that provision should not be extended to services amount. which are neither included in its wording nor intrinsically linked to that concept. Along these lines, the CJ ruled CJ rules on VAT deduced rate for letting of that the letting of boat moorings is (i) not included in the places on camping or caravan sites (Segler) wording, and (ii) not intrinsically linked to the concept of ‘accommodation’ as its primary purpose is to enable On 19 December 2019, the CJ delivered its judgment in boats to be immobile and secured. Thus, the letting of the case Segler-Vereinigung Cuxhaven eV (C-715/18). boat moorings is not covered under the reduced VAT Segler-Vereinigung Cuxhaven eV (‘Segler’) is a German rate for the letting of places on camping or caravan sites. VAT registered non-profit association aiming to promote Lastly, the CJ rules that this interpretation of the provision the sport of sailing and motorised water sports. Amongst at issue does not undermine the principle of fiscal neutrality the activities of Segler is the provision of boat moorings as the services for the letting of places on camping or to guests of their harbour. During the years at issue caravan sites, on the one hand, and services for the letting (2010 through 2012), Segler applied the reduced VAT rate of boat moorings, on the other, perform different functions for the letting of places on camping or caravan sites on and are thus not in competition with each other. the payments received for the provision of the moorings. Following an audit, the local Tax Office denied the CJ rules on the VAT treatment of land application of the reduced VAT rate, instead applying the registry costs which concern a statutory standard VAT rate. obligation of the seller (Amărăşti Land Investment) This dispute was brought before the ‘Niedersächsisches Finanzgericht’ (Finance Court of Lower Saxony), which On 19 December 2019, the CJ delivered its judgment dismissed Segler’s action and ruled that the short-term in the case Amărăşti Land Investment (C-707/18). provision of boat moorings cannot be classified under the The Romanian entity Amărăşti Land Investment (hereafter ‘short-term letting of camping areas’ within the meaning ‘ALI’) aimed to carry out agricultural activities and of the German VAT provisions. Moreover, it considers purchased land to that end. the provision of boat moorings to fall under the concept of the ‘letting of premises and sites for the parking of The land was not registered in the Land Register and vehicles’, which is excluded from the VAT exemption for was purchased by means of a two-stage process. First a the letting of immovable property. Thus, the standard provisional purchase agreement had been signed between 16

the seller and ALI. Under this agreement ALI as buyer June 2016, the Polish Tax Authorities declared the Polish was obliged to register the plots in the land register, purchaser a ‘missing trader’ as it could not be contacted. while this registration is a legal obligation for the seller. This registration is required to transfer the land in a legally This dispute was brought before the Supreme valid manner. After the required registration the seller and Administrative Court, which took note of the fact that ALI concluded the second stage and had signed a final AGROBET also had other transactions which were not purchase agreement in order to transfer the land. problematic. Furthermore, according to AG Kokott, it ‘seems uncertain’ in the present case whether AGROBET The registry costs were not charged by ALI to the seller. should have suspected its purchaser’s fraudulent nature. Furthermore, in the provisional purchase agreement parties In light of these circumstances, the AG was requested to agreed that the purchase price would not include the give her opinion on the preliminary question whether it is consideration for registration in the Land Register. consistent with EU law, and in particular, the principle of neutrality, for a Member State to make the assessment In the view of the Romanian tax authorities, ALI had and payment of part of a VAT deduction (the undisputed provided a VAT taxed service to the seller by taking on the part) claimed conditional on the completion of a procedure registration in the Land register. Hence, after the purchase applying to all taxable transactions in a given tax period. of the land the tax authorities had issued an additional VAT Particularly when taking into consideration that it is assessment to ALI. clear that a large part of the declared tax liabilities and deductions is legitimate. In the procedure that followed, the Romanian court eventually turned to the CJ for a preliminary ruling. The CJ The Tax Authorities primarily based their view that considered that a buyer who has carried out the necessary deduction for a given period can only be granted as an steps for the first registration of the land in order to comply indivisible whole on Article 179 of the VAT Directive. In with a statutory obligation of the seller, those steps must this regard, AG Kokott considered that Article 179, VAT be deemed to have been carried out on behalf of the seller. Directive only regulates the method of calculation by a According to the judgment of the CJ, this follows from the taxable person, i.e. making the deduction from the total consideration that ALI had provided a service to the seller. amount. However, the substantive right of deduction That the registry costs were not included in the purchase and the time that right arises follow from Article 167 and price of the land does not change this judgment. 168 VAT Directive. The AG added to this that Article 168 explicitly stipulates that the taxable person may deduct AG opines on the right to VAT deduction VAT due in respect of supplies to him of goods or services (AGROBET CZ) carried out by another taxable person. Thus, the right of deduction is to be understood not in relation to the total On 19 December 2019, Advocate-General Kokott issued amount, but in relation to a transaction. her Opinion in the case AGROBET CZ (C-446/18). AGROBET CZ s.r.o. (‘AGROBET’) is a Czech company Furthermore, although Article 183 VAT Directive provides active in the import and of agricultural products and Member States with the choice to either refund excess VAT feed in particular. In February 2016, AGROBET reported or carry it forward to the following period, it is settled case excess VAT in its VAT return. Included in the amounts to law that the right to deduct is a fundamental of the EU VAT be deducted was VAT relating to the purchase of rapeseed system. As a general rule, it may not be limited. Moreover, oil which AGROBET had sold to a Polish company free of in particular, the right is exercisable immediately in respect tax as it concerned an intracommunity supply of goods. of all VAT charged on input transactions. Finally, no appeal The Tax Authorities initiated an investigation because to Article 273 VAT Directive is possible, which provides they had doubts about the transactions concerning the Member States the possibility to impose additional rapeseed oil. Subsequently, the Tax Authorities decided obligations to ensure the correct collection of VAT and to defer the refund of the calculated excess VAT (both prevent tax evasion, given that the part of the excess VAT disputed and undisputed). AGROBET requested to at issue is not related to tax evasion. AG Kokott thus came receive the non-disputed part of the VAT refund. That was to the conclusion that a Member State does not have denied by the authorities as the deduction was indivisible the right to limit in time the total amount of excess VAT if and related to the tax period as a whole. Shortly after, in only a part of it is disputed. The AG did acknowledge that the Tax Authorities require a reasonable period of time to EU Tax Alert 17

investigate in case they have doubt over an amount of tax Second, Stanleyparma, which is required to pay that declared. With that said, however, in the present case, tax, would be treated in the same way as those licence excess VAT which is undisputed and requires no further holders, whose activity, however, is different. According to inspection, must be paid promptly. This follows from the the referring court, there is no justification for the possible principle of neutrality, the function of the taxable trader restriction on the freedom to provide services, since as a mere tax collector for the State and the fundamental the national legislation at issue in the main proceedings rights of the taxable person. In addition, effective fraud pursues a purely economic objective. prevention does not, in the present case, justify a deferral of the refund of the undisputed part of the excess VAT for The CJ started by observing that, in order to determine an unlimited period of time. whether there is discrimination, it is necessary to verify that comparable situations are not treated differently and that Customs Duties, Excises and different situations are not treated in the same way unless other Indirect Taxes such treatment is objectively justified. Having regard to the information provided by the referring court, it appears that CJ rules that Italian tax on betting is not in the applies to all operators who manage bets breach of EU Law (Stanleyparma) collected on Italian territory, without making a distinction on the basis of the place of establishment of those operators, On 20 February 2020, the CJ delivered its judgment such that the imposition of that tax on Stanleybet in case Stanleyparma Sas di Cantarelli Pietro & C., cannot be regarded as discriminatory. It must be Stanleybet Malta Ltd v Agenzia delle Dogane e dei observed that the national legislation at issue in the main Monopoli UM Emilia Romagna — SOT Parma (C-788/18). proceedings does not lay down a tax regime that differs The case deals with the obligation to pay, in Italy, a single according to whether the provision of services is executed tax on betting (‘the single tax’) imposed, principally, on in Italy or in other Member States. Furthermore, as Data transmission centres (‘DTCs’), such as Stanleyparma, regards Stanleybet Malta’s allegation that, under the Italian and also, secondly, on Stanleybet Malta, as jointly and legislation at issue in the main proceedings, it is subject to severally liable. a double taxation, in Malta and in Italy, it must be recalled that, in the current stage of the development of EU law, Stanleybet Malta operates in Italy in the collection of bets, the Member States enjoy a certain autonomy in the area through ‘DTCs’ such as Stanleyparma, on the contractual of taxation provided they comply with EU law, and are basis of a mandate. DTCs, which are situated in locations not obliged therefore to adapt their own tax systems open to the public, place a computer link at the disposal to the different systems of tax of the other Member of gamblers and transmit the data relating to each bet to States in order, inter alia, to eliminate the double taxation their client. Stanleybet Malta, which has been active in resulting from the parallel exercise by those States of their Italy for about twenty years, does not hold a licence or competences in respect of taxation . an authorization. Therefore, the Court concluded that that Stanleybet Malta By a tax adjustment decision of 21 September 2016, the does not suffer, in comparison with a national operator ADM sent to Stanleyparma and, secondly, to Stanleybet carrying out its activities under the same conditions as Malta, as jointly and severally liable, a tax recovery notice. that company, any discriminatory restriction owing to the Stanleyparma and Stanleybet Malta brought an application application to it of national legislation, such as that at issue before the referring court, seeking the annulment of in the main proceedings. Similarly, the CJ ruled that the that decision, in which they submitted that the national Italian legislation does not appear liable to prohibit, impede legislation at issue in the main proceedings established, or render less advantageous the activities of a company in their regard, a restriction on the freedom to provide such as Stanleybet Malta in Italy. services. That court considered that, the fact that DTCs are liable for the single tax is an unlawful restriction on the freedom to provide services, within the meaning of the freedom to provide services, from two perspectives. First, it is not laid down that DTCs that operate on behalf of national licence-holders are liable for that tax, even though their activity is comparable to that of Stanleyparma. EU Tax Alert 18

About Loyens & Loeff Editorial board

Loyens & Loeff N.V. is the first firm where attorneys at law, For contact, mail: [email protected]: tax advisers and civil-law notaries collaborate on a large scale to offer integrated professional legal services in the - Thies Sanders (Loyens & Loeff Amsterdam) Netherlands, Belgium, Luxembourg and Switzerland. - Dennis Weber (Loyens & Loeff Amsterdam; University of Amsterdam) Loyens & Loeff is an independent provider of corporate legal services. Our close cooperation with prominent international law and tax law firms makes Loyens & Loeff Editors the logical choice for large and medium-size companies operating domestically or internationally. - Patricia van Zwet - Bruno da Silva loyensloeff.com

Correspondents

- Gerard Blokland (Loyens & Loeff Amsterdam) - Raymond Luja (Loyens & Loeff Amsterdam; Maastricht University) - Bruno da Silva (Loyens & Loeff Amsterdam; University of Amsterdam) - Patrick Vettenburg (Loyens & Loeff Rotterdam) - Genevieve Vonken (Loyens & Loeff Amsterdam) - Thomas Warnaar (Loyens & Loeff Rotterdam) - Ruben van der Wilt (Loyens & Loeff Amsterdam)

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