Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
The Principle of Non-Discrimination in International and European Tax Law
Niels Bammens
Thesis submitted to the Katholieke Universiteit Leuven (Belgium)
in fulfilment of the requirements for the degree of Doctor of Laws (PhD)
Degree awarded on 18 October
Volume 24 Doctoral Series
Table of Contents
Introduction
Part I: Introduction 3
Chapter 1: Aristotle's Concept of Distributive Justice 5
Chapter 2: Basic Principles of Discrimination 9
Elements of the discrimination analysis 9 2.2. Proposal for an analytical framework 16 2.3. A brief note on ability to pay
Chapter 3: Overview of the Study 25
II Article 24 of the OECD Model Convention
Chapter 4: Origin of Article 24 of the OECD Model Convention 33
Historical roots of the provision 4.2. The League of Nations 38 4.3. The OEEC Fiscal Committee 41 4.3.1. The first report of Working Party no. 4 4.3.2. Reception of the first report 45 4.3.3. The second report 48 4.3.4. The third report 49 4.3.5. The final report 49 4.3.6. Conclusions 51 4.4. The genesis the OECD Model Convention 53 4.5. The current version of Article 24 of the OECD
Model Convention 56
Chapter 5: Article 24(1): Nationality Non-Discrimination 63
5.1. General 63 5.2. No taxation without discrimination? 64 5.3. Nationality 66
Table of Contents
5.3.1. Individuals 67 5.3.2. Other persons 68 5.3.2.1. General 68 5.3.2.2. The nationality of legal entities 69
The position taken in the Commentary 69 5.3.2.2.2. The 2008 update 73 5.3.2.2.3. Transvaal Special Income Tax Court decision of
10 March 1992 79 5.3.2.2.4. 's-Hertogenbosch Court of Appeal decision of
13 December 2002 80 5.4. Entitlement to article 24 81 5.5. The comparability test: "in the same
circumstances" 83 5.5.1. On sameness and similarity 83 5.5.2. Case law 93
Leeuwarden Court of Appeal decision of 7 April 2000 93
5.5.2.2. United Dominions Trust Ltd 94 5.5.2.3. Belgian Supreme Court decision of 30 June 1988 97 5.5.2.4. The Anglo-Swiss Land and Building Company Ltd. 99 5.5.2.5. Biso 109 5.5.2.6. 115 5.5.3. Discrimination "on the basis o f nationality? 5.6. The disadvantage test: "other or more burdensome" 122 5.6.1. General 122 5.6.2. Reverse discrimination 127 5.6.3. Other issues 133 5.6.4. Case law 134
Woodend Rubber and Tea 5.6.4.2. Dutch Supreme Court decision of June 137 5.6.4.3. decision of 14 March 1989 147 5.6.4.4. Conseil d'Etat decision of 28 May 1986 149 5.7. Reciprocity 151 5.7.1. General 151 5.7.2. Case law 155
American Trust Company 155 5.7.2.2. Brown & Williamson Ltd 157 5.7.2.3. Dutch Supreme Court decision of 2 September
1992 158 5.7.2.4. Dutch Supreme Court decision of 20 November
2009 162 5.7.3. Conclusion 163
Table of Contents
5.8. Comparability as a safety valve? 169 5.9. "Other or more burdensome" as a safety
Chapter 6: Article 24(2): Stateless Persons 179
6.1. The 1954 Convention relating to the Status of Stateless Persons
6.2. The OECD Model Convention 179
Chapter 7: Article 24(3): Permanent Establishments 185
7.1. Entitlement to article 24(3): what is "an enterprise"? 188
7.2. The comparability test: "an enterprise carrying on the same activities"
7.2.1. General 191 "Carrying on the same activities" 192
7.2.1.2. Separate entity approach 195 7.2.2. Case law 197 7.2.2.1. Case law on the subject of comparison 197 7.2.2.1.1. Reuters Ltd 197
Brussels Court of Appeal decision of 28 May 1993 204
7.2.2.1.3. Ghent Court of Appeal decision of 17 November 1994 208
Bundesfinanzhof decision of 22 April Bundesfinanzhof decision of 10 March 2005 212
7.2.2.1.6. Verwaltungsgerichtshof decision of 16 February 2006 and 28 November 2007 214
7.2.2.2. Case the object of comparison 219 Swiss Bundesgericht decision of 28 November
2005 220 7.2.2.2.2. Finanzgericht decision of 20 September
1995 222 7.2.2.2.3. AG 223 7.3. The disadvantage test: "taxation ... less favourably
levied" 227 7.3.1. "Taxation" 227 7.3.2. "Less favourably levied" 231 7.3.2.1. Assessment of tax 236 7.3.2.2. Structure and rate of tax 238
Table of Contents
7.3.2.2.1. Progressive scales and the non-resident's worldwide profits 238
7.3.2.2.2. Tax-free thresholds 244 7.3.2.2.3. Special taxes on a non-resident's PE 245 7.3.2.3. Dividends received in respect of holdings owned
by a permanent establishment 7.3.2.4. Withholding tax on dividends, interest and
royalties received by a permanent establishment 255 7.3.2.5. Credit for foreign tax and the extension to
permanent establishments of the benefit of tax treaties concluded with third states 257
7.3.3. Case law 264 7.3.3.1. Assessment of tax 264 7.3.3.1.1. Brussels June 1994 264 7.3.3.1.2. Commerzbank AG v. Revenue
Commissioners 265 7.3.3.1.3. Automated Securities Clearance 269 7.3.3.1.4. 275 7.3.3.2. Structure rate of tax 278 7.3.3.3. Dividends received in respect of holdings owned
by a permanent establishment: UBS AG 280 7.3.3.4. Credit for foreign tax and the extension to
permanent establishments of the benefit of tax treaties concluded with third states 295
Finanzgericht Hamburg decision of 9 August 295 7.3.3.4.2. Dutch Supreme Court decision of 8 February 2002 300 7.3.3.5. Disadvantages caused by the treaty of which
article 24(3) is invoked 309 7.3.3.5.1. Metchem Canada 309 7.3.3.5.2. Brussels Court of First Instance decision of
9 November 2006 311 7.3.4. No extension to personal allowances 317 7.3.4.1. Dutch Supreme Court decision of 19 December
1990 320 7.3.4.2. Dutch Supreme Court decision of September
1991 321 7.3.4.3. Dutch Supreme Court decision of 6 November
1996 323 Antwerp Court of Appeal decision of 2 February
2010 325 7.3.4.5. Conclusion 329
Table of Contents
Chapter 8: Article 24(4): Deductibility 335
8.1. General 335 8.2. The comparability test 338
No express comparability requirement 338 8.2.2. "Under the same conditions" as a comparability
requirement? 345 8.3. The disadvantage test 347 8.4. Domestic rules on thin capitalization 349 8.4.1. General 349 8.4.2. "Interest" 352 8.4.3. Examples 356
Article 54 of the Belgian Income Tax Code 356 8.4.3.2. Article 26 of the Belgian Income Tax Code 364 8.4.4. Case law 370 8.4.4.1. Millennium Infocom Technologies 370 8.4.4.2. Specialty Manufacturing 371
Chapter 9: Article 24(5): Foreign Ownership 377
9.1. Entitlement to article 24(5) 377 9.1.1. General 377 9.1.1.1. The wording of article 24(5) 377
Indirect ownership: Re A Oy and Oy 378 Only the resident company is protected 380
9.1.2.1. Example: imputation systems vs. split-rate systems 380 9.1.2.2. Group treatment 384
Discrimination on the basis of foreign ownership 388 9.1.3.1. the basis of 388
On the sole basis of? 389 9.1.3.3. Application these principles 391
Example: Decision of the Swedish Supreme Administrative Court on the interpretation of "solely" 394
9.2. The comparability test: "other similar enterprises" 400 Similarity as a reference to shareholders'
residence? 403 9.2.2. Similarity as a reference to the applicable tax
regime? 405 9.2.3. Similarity as a reference to all relevant
circumstances other than foreign ownership 408 9.2.4. Case law 409
Table of Contents
Swedish Supreme Administrative Court decision of November 409
9.2.4.2. Dutch Supreme Court decision of 23 December 1992 410
9.2.4.3. Dutch Supreme Court decisions 27 April 1994 411 9.2.4.4. Boake Allen 420 9.2.4.5. DaimlerChrysler India 435 9.2.4.6. UnionBanCal 439 9.2.4.7. Square D 442 9.2.4.8. 445 9.3. The disadvantage test: "other or more burdensome" 448 9.3.1. General 448 9.3.1.1. The origin of the expression 448 9.3.1.2. Interpretation 449 9.3.2. Case law 452 9.3.2.1. Delaware case 452 9.3.2.2. Luxembourg Administrative Court of Appeal
decision of 19 April 2007 460 9.3.2.3. The Swedish Supreme Administrative Court on
the interpretation of "other" 462 9.4. Relationship to article 24(4) 464 9.4.1. General 464 9.4.2. Case law: Andritz 467
Chapter 10: Article 24(6): Taxes Covered 479
10.1. General 479 10.2. Case law: Dutch Supreme Court decision of
November 2000 480
Chapter The Concurrent Application of Different Provisions of Article 24 of the OECD Model Convention 485
Article and article 24(3) 485 Article 24( 1) and article 24(4) 487 Article 24( and article 24(5) 487 Article 24(3) and article 24(4) 490 Article 24(3) and article 24(5) Conclusion 491
Table of Contents
III Non-Discrimination in European Tax Law
Chapter 12: General Overview of the Approach of the European Court of Justice to Non-Discrimination 495
12.1. The Court's Aristotelian understanding of non-discrimination 501
12.1.1. Overview 501 12.1.2. Methodology 503 12.2. Types of discrimination 505
Discrimination in form and discrimination in substance 505
12.2.2. Direct and indirect discrimination 506 12.2.3. Reverse discrimination 508 12.2.3.1. The Court's traditional position 508 12.2.3.2. Later evolution and criticism 510 12.2.4. Quantitative restrictions and measures having
equivalent effect 12.2.5. Dassonville freedoms 517 12.2.6. Conclusion 519
Chapter 13: Non-Discrimination in European Tax Law: General Remarks 521
13.1. Introduction 521 13.1.1. Purpose and scope of the study 521 13.1.2. The case law of the European Court of Justice on
direct taxation 522 13.2. Comparable situations 526 13.3. Equal treatment 527 13.4. Types of discrimination 528
Direct and indirect discrimination 528 13.4.2. Reverse discrimination 530
Is ECJ case law in direct tax matters still based on a discrimination analysis, or has it evolved towards a restriction-based reading of the Treaty? 530
Restrictions: a similar evolution in direct tax case law? 530
13.4.3.2. From discrimination to restriction and back 534 13.4.3.2.1. Introduction: three generations of cases 534
Table of Contents
13.4.3.2.2. The second generation: a restriction-based reading of the Treaty freedoms 535
13.4.3.2.3. The third generation: the return to discrimination 539 13.4.3.3. Most restriction cases are actually discrimination
cases in disguise 542 Discrimination on the basis of the exercise of the
free movement provisions 542 13.4.3.3.2. Examples 549 13.4.3.3.3. Futura 552 13.4.3.3.4. Commission v. Belgium 559 13.4.3.3.5. Conclusion 563 13.4.3.4. Restriction and discrimination are complementary
components of the freedoms 566 13.4.3.5. Conclusion 569
Chapter 14: Case Law on the Comparability Test
14.1. Constructing the comparison I: how to determine the subject and object of comparison 572
14.1.1. The taxation of inbound permanent establishments 572 14.1.1.1. AvoirFiscal 573 14.1.1.2. 579 14.1.1.3. Futura 581
Royal Bank of Scotland 582 14.1.1.5. Saint-Gobain 585 14.1.1.6. 591 14.1.1.7. Conclusion 593 14.1.2. Horizontal comparisons 595 14.2. Constructing the comparison II: what are the
relevant characteristics? 598 Person-related benefits: is the
general rule 600 14.2.1.1. The Schumacker doctrine 600 14.2.1.1.1. Schumacker 600 14.2.1.1.2. Wielockx 607 14.2.1.1.3. Asscher 608 14.2.1.1.4. 610 14.2.1.1.5. Gschwind 618 14.2.1.1.6. DeGroot 621 14.2.1.1.7. Gerritse 627 14.2.1.1.8. Wallentin 633 14.2.1.1.9. D case 635
Table of Contents
14.2.1.1.10. Turpeinen 641 Extension of the Schumacker doctrine to negative
income from immovable property 643 14.2.1.2.1. Ritter-Coulais 643 14.2.1.2.2. Lakebrink 647 14.2.1.2.3. Renneberg 650 14.2.1.3. Schumacker overturned? 656
The problem with Schumacker 656 14.2.1.3.2. The credit system as an alternative solution? 662 14.2.1.3.3. Fractionality and comparability 664 14.2.1.3.4. Conclusion 666 14.2.2. Income-related benefits: comparability is the
general rule 673 Biehl and Biehl II 673
14.2.2.2. Gerritse 674 14.2.2.3. Conijn 675 14.2.2.4. Scorpio 676 14.2.2.5. 677 14.2.2.6. Gielen 678 14.2.2.7. Conclusion 680 14.2.3. The taxation of outbound permanent
establishments 680 14.2.3.1. AMID: comparability is the general rale 681 14.2.3.2. Columbus Container Services 684 14.2.3.3. Belgium 684 14.2.3.4. 687 14.2.4. The tax treatment of resident parent companies
with non-resident subsidiaries: discrimination on the basis of the subsidiary's seat 689
14.2.4.1. IC1 689 14.2.4.2. 691 14.2.4.3. 694 14.2.4.4. Marks & Spencer 698 14.2.4.5. Keller and Rewe: Marks & Spencer confirmed 701 14.2.4.5.1. Keller 702 14.2.4.5.2. Rewe 704 14.2.4.6. 707 14.2.4.7. Holding 710 14.2.4.8. Conclusion 711 14.2.5. The tax treatment of resident subsidiaries with a
non-resident parent company: discrimination on the basis of the parent company's seat
Table of Contents
14.2.5.1. Metallgesellschaft 714 14.2.5.2. XandY 717 14.2.5.3. GLO 718 14.2.5.4. Conclusion 721 14.2.6. The taxation of dividends: the susceptibility to
double taxation as the relevant characteristic 14.2.6.1. Introduction 721 14.2.6.2. Inbound dividends: the susceptibility to double
taxation as the relevant characteristic 722 14.2.6.2.1. Verkooijen 722 14.2.6.2.2. Lenz 724 14.2.6.2.3. Manninen 728 14.2.6.2.4. Are Verkooijen, Lenz and Manninen identical?
Fiscal cohesion and inbound dividends 732 14.2.6.2.5. Kerckhaert-Morres 742 14.2.6.2.6. Orange European Smallcap 751 14.2.6.2.7. Test Claimants in the FII Group Litigation 757 14.2.6.2.8. Conclusion: the position of the European Court
of Justice on inbound dividends 765 14.2.6.3. Outbound dividends: the exercise of taxing
jurisdiction by the source state 767 Test Claimants in Class TV of the ACT Group
Litigation 767 14.2.6.3.2. Denkavit 783 14.2.6.3.3. 786 14.2.6.3.4. Orange European Smallcap 787 14.2.6.3.5. Aberdeen 788 14.2.6.3.6. Conclusion: the position of the European Court
of Justice on outbound dividends 14.2.7. Withholding taxes on other outbound payments 792 14.2.7.1. Scorpio 792 14.2.7.2. Truck Center 795 14.2.8. The influence of information exchange on the
comparability test 14.2.8.1. Talotta 810 14.2.8.2. Information exchange and third countries 817 14.2.8.2.1. FII: the inapplicability of the Mutual Assistance
Directive leads to incomparability 14.2.8.2.2. explained 818 14.2.8.2.3. Commission v. Netherlands: confusion
concerning EEA countries 825 14.2.8.2.4. Commission 828
Table of Contents
14.2.8.2.5. Conclusion 832 The influence of tax treaties on the comparability
test 833 14.2.9.1. D case 833 14.2.9.2. ACT 842 14.2.9.3. Orange European Smallcap 846 14.2.9.4. Interim conclusion: reciprocity and the balance
of tax treaties in the comparability test 850 The importance of the concepts of reciprocity
and the balance of tax treaties in case law of the European Court of Justice 850
14.2.9.4.2. Distinguishing D and ACT from the earlier case law 854
14.2.9.4.3. Has the possibility of horizontal discrimination been created by the evolution in case law of the European Court of Justice? 861
14.2.9.5. Horizontal comparability if the disadvantage is not caused by a tax treaty? 863
14.2.9.5.1. Schweppes 863 14.2.9.5.2. Columbus Container Services 868 14.2.9.6. Conclusion 874 14.2.10. The comparability of charitable organizations 878 14.2.10.1. 878 14.2.10.2. Persche 14.2.10.3. Conclusion 884 14.3. Conclusions on comparability 885
Chapter 15: Case Law on the Disadvantage Test
15.1. Introduction 891 The deceptive simplicity of the disadvantage test
15.1.2. The position of the test in the Court's case law 894 15.2. In general: what is a disadvantage? 895
FII: the disadvantage is inherent in a system that is compatible with the Treaty freedoms 898
15.2.2. Columbus Container Services: an application of the FII nuance 901
15.3. The relevance of offsetting advantages in the state tax system of which is under scrutiny 906
15.3.1. Avoir Fiscal ' 906 15.3.2. 909 15.3.3. Saint-Gobain 912
Table of Contents
15.3.4. CLT-UFA 912 15.3.5. Asscher 914 15.3.6. Talotta 917 15.3.7. Lakebrink 918 15.3.8. Cadbury Schweppes 919 15.4. The relevance of offsetting advantages in another
state 920 15.4.1. Eurowings 920 15.4.2. Verkooijen 922 15.4.3. Lenz 922 15.4.4. De Groot 923 15.5. The relevance of tax treaties in the disadvantage
test 924 15.5.1. AvoirFiscal 925 15.5.2. Manninen 925 15.5.3. 926 15.5.4. ACT 929 15.5.5. Denkavit 930 15.5.6. 932 15.5.7. Thin Cap GLO 933 15.5.8. Commission v. Italy 934 15.6. Conclusion: the Court's position on offsetting
advantages 935 15.7. Procedural remedies to remove the disadvantage 941 15.7.1. Biehl Biehl II 941 15.7.2. Schumacker 942 15.7.3. Gielen 943 15.7.4. Conclusion 946
Chapter 16: The Equal Treatment of Incomparable Situations 949
16.1. Comparability 949 16.1.1. Mertens 949 16.1.2. Burda 951 16.2. The disadvantage test 957 16.2.1. General 957
Deutsche Shell 958 16.3. Conclusion 960
Table of Contents
Chapter 17: Disparities 961
17.1. General 961 17.2. Dislocations 963 17.3. Case law 964 17.3.1. 964 17.3.2. Saint-Gobain 967 17.3.3. 975
Chapter 18: Conclusions on the Approach of the European Court of Justice to Non-Discrimination 985
18.1. On comparability: a plea for fractional taxation 985 18.2. Comparability should be distinguished from
proportionality 988 18.3. How to distinguish justification grounds from
elements of comparability 990 18.3.1. General 990 18.3.2. Fiscal cohesion 994 18.3.2.1. Bachmann 994 18.3.2.2. Later evolution: the requirement of a direct link 1000 18.3.2.3. relaxing the direct link requirement 1005 18.3.2.4. Conclusion 1007 18.3.2.5. From cohesion to comparability? 1009
IV Comparison and Interaction
Chapter 19: A Comparison of Article 24 of the OECD Model Convention and the Non-Discrimination Standard of the European Court of Justice
19.1. Scope of application 1013 Nationality a comparison with
article 24(1) 1015 Inbound PE cases: a comparison with
article 24(3) 1016 19.1.3. Outbound payments: comparison with
article 24(4) 1020
Table of Contents
Discrimination on the basis of the parent company's residence: comparison with article 24(5) 1022
19.1.4.1. General 1022 Boake Allen and
19.1.5. Disadvantage test 1026 19.1.6. Conclusion 1027 19.2. Justification grounds 1030
Chapter 20: The Interaction between the Standard of the European Court of Justice and Tax Treaties 1035
20.1. General 1035 20.2. The interpretation of article 24 of the OECD
Model Convention in EU Member States 1036 20.2.1. law 1037 20.2.1.1. General 1037 20.2.1.2. The comparability non-profit organizations 1044 20.2.1.3. Bundesfinanzhof decision 8 2010 1047
Dutch Supreme Court decision of 8 February 2002 1051
Verwaltungsgerichtshof decision of 16 February 2006 1051
20.2.1.6. The Delaware case 1055 20.2.1.7. Conclusion 1057 20.2.2. Should the interpretation of article 24 be
influenced by ECJ case law? 1057
Summary and Conclusions
Chapter Overview of the Study, Summary and General Conclusions 1067
Analysis of the two standards 21.1.1. Article OECD Model Convention 1067
The standard developed by the ECJ 1070 21.2. Identifying a common principle 1073
The influence of the standard of the European Court of Justice on the interpretation of article 24
Table of Contents
Annex 1: Direct Tax Cases Decided by the ECJ since 1986 1077
Annex 2: Cases Decided by National Courts under Article 24 1081
References 1093