European Tax Law

Lesson 1
Overview and Basics

ECJ: European court of justice

CJEU: court of justice of European union

European Tax Law is learning about tax law with regard to EU and EU’s relation to
Switzerland. The internal market.

case law, cases from ECJ and CJEU

case-based tax law
The tax law is regulated by the ECJ and case law, not by legislations.

the states are sovereign with regard to tax law.

2 important distinctions
Positive integration (secondary community law)
 EU decides an act to harmonize tax law
 directives (fx a VAT-directive, which harmonizes VAT tax laws)
negative integration (primary community law)
 ECJ declares a state’s tax regulation illegal fx because it is discriminating.
 Decisions from ECJ about the 4 freedoms.
 ECJ will check whether the domestic laws are in compliance with the fundamental
freedoms.
 Main part of the course will be decicions from ECJ.

EU fundamental freedoms:
1. goods
2. persons

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 3. service
4. capital
5. establishment

ECJ will check whether the domestic laws are in compliance with the fundamental freedoms.

TEU (treaty on the European union) and TFEU (treaty on the functioning of EU)

the fundamental freedoms are regulated by the TFEU.

state aid  harmonize EU tax Law.

Materials:
TFEU articles about the fundamental freedoms
Some directives
bilateral agreements (Swiss bilateral agreements with EU)
ECJ rulings

1992: Elections about joining the EEA.

EEA is basically the internal market without all the political cooperation.
CH voted against it.
The Swiss economy came in crisis  they got some bilateral agreements with EU. CH is part of
the internal market to a certain extend via the bilateral agreements.
Fx: free movement of persons, CH has access to that. EU-citizens is allowed to work in CH. Also
automatic exchange of information with regard to tax.

Legal sources
Directives are important (positive integration, secondary law (primary is what is in the
treaties))
bilateral agreements (with CH and soon with UK)

Institution

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legislative process
 commission is the executive power
 commission is important with regard to tax law.
 commission can start the procedure.

If a domestic rule says that foreigners are taxed twice as much as local workers it would
discriminate the free movement of persons.

the council = the ministers, if it is a tax question it is the ministers of finance or tax agency

Tax Law in the EU

you pay your taxes domestically.
EU is funded by national contributions.
CH as a federal state: CH has federal taxes, which fund the Swiss state. the VAT goes to the
federal state, not the canton. There are Canton taxes and federal taxes.

There is a discussion about harmonizing corporate taxes.

The goal is to harmonize the tax base (the way they calculate tax rate). The goal is NOT to
harmonize the tax rate in order to keep the competition.

CCCTB = consolidated common corporate tax base (the same calculation for all corporates
within EU)

directives = positive integration.

Parent Subsidiary directive

 member states are not allowed to out taxes on parent-subsidiary situations  to avoid
double taxation  internal market.

CH has a double tax treaty but not a general clause about parent-subsidiary situations.

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competences in tax law
It forces the competent institutions to be efficient and encourage competition.

TFEU art. 114, stk. 1 and 2,

 approximation =…?
 tax law is excluded from the approximation legislations  tax sovereignty

TFEU art. 113

 Indirect taxes = fx VAT
 VAT-directibe  harmonizing VAT laws within EU.

TFEU art. 115

 covers everything else 2
 gives an opportunity to regulate direct taxation.
 “opsamlingsbestemmelse” = residuary

Some member states are against harmonizing direct taxation fx Netherlands and Ireland.

CFC: control foreign corporation/company

 only in cross-boarder circumstances
 fx situations with the freedom of establishment

State aid provision

 TFEU art. 107
 the state can not prohibit some companies from making a subsidiary.
 fx Apple. Ireland has a specific tax treatment with Apple. Apple was granted state aid
by Ireland. tradewar between EU and Apple.

Merger-directive
 if one company can merge within a memberstate the company shall also be able to
merge within EU without tax problems.

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Anti-Tax Avoidance Directive
 prohibits aggressive tax planning
 positive integration.

Procedural aspects
 infringement procedure, TFEU art. 258/259
o launched by the commission (the executive body) in most cases. fx “Commission
vs. Hungary”  infringement case, because the commission brings the case to
the court.
o fx an establishment that infringes the free movement of establishment the
commission will bring the case to the court.
o The ECJ has enforcement possibilities.
 Preliminary ruling procedure
o a local domestic court is not sure and the domestic court asks the ECJ whether
the regulations are in accordance with the EU.
o The cases often start in domestic courts and these courts can ask the ECJ.

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