Prof. Dr. Rainer Prokisch Maastricht University

Transcription

1 The Influence of the Freedom of Establishment on other Non- Discrimination Clauses Prof. Dr. Rainer Prokisch Maastricht University

2 Facts of the underlying case (BFH of 19 December 2012, no. I R 73/11) Co PE

3 Background: German tax law specific tax rate for non-resident taxpayers with PE in Germany split-rate corporation tax retained profits distributed profits goal: profits should be distributed as soon as possible

4 Different tax treatment of foreign Pes and foreign subsidiaries double taxation avoided by exemption/credit attribution of income profit distribution

5 The freedom of establishment (Article 49, 54 TFEU incl. freedom to set up branches (PEs) free choice of business form

6 CLT UFA v FA Köln-West specific tax rate on PEs is restriction of freedom of establishment cannot be justified by different tax treatment determination of tax rate is a matter of national court

7 The freedom of establishment in the association agreement (Article 44(3)) Each Member State shall grant, from entry into force of this agreement, a treatment no less favourable that that accorded to its own companies and nationals for the establishment of Hungarian companies and nationals as defined in Article 48 and shall grant in the operation of Hungarian companies and nationals established in its territory a treatment no less favourable than that accorded to its own companies and nationals.

8 Legal nature of Association Agreements Framework for the bilateral relations with countries aiming at future accession to the EU former colonies of EU Member States aiming at stabilizing the Balkan states aiming at deepening relationship with countries neighboring the Meditarrean Sea aiming at deepening relationship with Easteuropean and Centralasian countries General: establishment of close economic and political cooperation

9 Case Law of the ECJ on association agreements General: Demirel v Stadt Schwäbisch Gmünd wide scope of power to regulate subject to control by the ECJ Rather restrictive interpretation of nondiscrimination clauses

10 Case Law of the ECJ on the agreement between the EU and Switzerland Polydor doctrine tendency to interpret agreement in consistency with EU fundamental freedoms Case Ettwein : common and uniform interpretation of EU Law and Swiss-EU agreement

11 Freedom of establishment and Article 24(3) OECD Model Convention The taxation on a permanent establishment which an enterprise of a Contracting State has in the other Contracting State shall not be less favourably levied in that other State than the taxation levied on enterprises of that other State carrying on the same activities.

12 PE Non-discrimination Comparability test national treatment No reason for influence of EU law although similar objectives however, should the fact that Hungary was a candidate EU Member State be considered?

13 Conclusions EU fundamental freedoms prohibit restrictive treatment of PEs Non-discrimination clauses of Association Agreements and Tax Treaties only call for national treatment However, national treatment should also cover higher tax rate on PE profits In addition, tendency to apply EU standards on Association agreements German court should have referred the case to the ECJ