November 2015 - edition 147EU Tax Alert

The EU Tax Alert is an e-mail newsletter to inform you of recent developments in the EU that are of interest for tax professionals. It includes recent case law of the European Court of Justice, (proposed) direct tax and VAT legislation, customs, state aid, developments in the Netherlands, Belgium and Luxembourg and more.

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Highlights in this edition

Commission announces final decisions in Starbucks and Fiat State Aid investigationsOn 21 October 2015, the Commission announced its final decisions that the advance pricing agreements concluded with Starbucks (the Netherlands) and Fiat (Luxembourg) constitute unlawful State aid. In both cases, the Commission states that the tax burden was unduly reduced by EUR 20 to 30 million over the period under investigation. The Commission requires the Netherlands and Luxembourg to recover such State aid from Starbucks and Fiat respectively.

ECOFIN Council reaches agreement on the automatic exchange of information on tax rulings and APAsOn 6 October 2015, the Council of the European Union reached agreement on a proposal for a Council Directive (‘the New Directive’) amending Directive 2011/16/EU (Directive on administrative cooperation between Member States) and requiring automatic exchange of information on ‘advance tax rulings’ (‘Tax Rulings’) and ‘advance pricing arrangements’ (‘APAs’) between EU Member States (‘MSs’) and, subject to limitations, to the EU Commission.

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Contents

Highlights in this edition• Commission announces final decisions in Starbucks

and Fiat State Aid investigations

• ECOFIN Council reaches agreement on the automatic

exchange of information on tax rulings and APAs

Direct Taxation• CJ rules that Austrian group taxation rules that deny

the amortization of goodwill in case of holdings

acquired in non-resident companies contravene the

freedom of establishment (Finanzamt Linz)

• CJ rules that national legislation that allows a public

administrative body of a Member State to transfer

personal data to another public administrative body

and their subsequent processing, without the data

subjects having been informed of that transfer or

processing, contravenes Directive 95/46/EC (Bara

and Others)

• Commission asks POLAND to stop discriminatory tax

treatment of pensions contributions paid to Individual

Pension Insurance Accounts (IKZE)

• Commission launches a public consultation to help

identify the key measures for inclusion in the re-

launch of the proposal for a Common Consolidated

Corporate Tax Base (CCCTB)

• The Netherlands releases Tax Bill to extend fiscal

unity regime in accordance with EU law

VAT• CJ rules that national rule on limitation periods for

criminal offences must be disapplied if it has an

adverse effect on the fulfilment of the Member States’

obligations under EU law (Taricco)

• AG Wathelet opines on whether the arbitrage

with different VAT tariffs between Member States

constitutes an abusive practice on the obligations

of national tax authorities to prevent double taxation

and on the use of evidence obtained in criminal

proceedings (WebMindLicenses Kft.)

Customs Duties, Excises and other Indirect Taxes• CJ rules on CN classification of Amino acid mixes

(Kyowa Hakko Europe GmbH)

• AG opines that preferential import duty tariff can

be applied to a mixture of crude palm kernel oil

originating in several countries (ADM Hamburg AG)

• European Commission requests GREECE to amend

its legislation granting reduced rates of excise duty to

“Tsipouro” and “Tsikoudià”

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Commission is of the opinion that an inflated price - paid

for green coffee beans to a Swiss based group trading

company - unduly reduces Starbucks Manufacturing tax

base, leaving no margin to pay the royalty.

Fiat

The Commission finds that the APA concluded by Fiat

Finance and Trade Sarl (FFT) endorses a methodology

that is not appropriate for the calculation of taxable

profits reflecting market conditions. In particular, the

Commission finds it artificially lowers taxes paid by FFT

in Luxembourg, by applying a number of economically

unjustifiable assumptions, down-ward adjustments and

a capital base for tax purposes that is much lower than

the company’s actual capital. In addition, the estimated

remuneration applied to this already lower capital for tax

purposes is also lower compared to market rates.

Initial comments by Loyens & Loeff

The Commission’s key message is that artificial and

complex methods used to shift profits where there is

no economic justification will not be accepted. Whether

this particular application of the State aid provisions to

corporate tax planning structures involving APAs will hold

before the European courts, is still uncertain.

Both the Netherlands and Luxembourg governments

issued statements claiming that the APAs granted

do not amount to State aid. Also the two companies

involved disagree with the EU Commission’s analysis.

Nevertheless, the combination of the use of the State

aid provisions and the other European initiatives to

fight ’base erosion and profit shifting’, are likely to

have a serious impact on tax regimes and tax planning

structures that are perceived by the EU to be privileged

and harmful. The transparency initiatives in the corporate

tax field (e.g., Country-by-Country Reporting and the

automatic exchange of rulings in the EU) will also put

more emphasis and pressure on tax planning structures

involving APAs and rulings.

Moreover, the constant political, media and public

attention are making MNEs and governments aware that

it is extremely difficult to fight the widespread perception

that they have struck inappropriate tax deals. Needless

to say, all of these developments will also affect Swiss

based MNEs, with potentially ’sensitive rulings’ in the EU.

Highlights in this edition

Commission announces final decisions in Starbucks and Fiat State Aid investigationsOn 21 October 2015, the Commission announced in

its final decisions that the advance pricing agreements

(APAs) concluded with Starbucks (the Netherlands)

and Fiat (Luxembourg) constitute unlawful State aid. In

both cases, the Commission states that the tax burden

was unduly reduced by EUR 20 to 30 million over the

period under investigation. The Commission requires the

Netherlands and Luxembourg to recover such State aid

from Starbucks and Fiat respectively.

State aid rules require that incompatible State aid is

recovered in order to reduce the distortion of competition

in the EU Single Market. The Commission considers that

APAs should not have the effect of granting taxpayers

lower taxation than other taxpayers in a similar legal and

factual situation.

The two final decisions, concerning Starbucks and Fiat,

confirm that the Commission is determined to challenge

potential State aid elements embedded in APAs,

examining in a very detailed manner the transfer pricing

methods agreed by tax authorities.

Although the full text of the final decisions will not be

published until confidentiality issues have been resolved,

the announcement of the Commission already gives

sufficient guidance to warrant looking anew at existing

APAs in the EU.

Starbucks

The Commission finds that a royalty paid by Starbucks

Manufacturing EMEA BV (Starbucks Manufacturing)

for the use of know-how cannot be justified as it does

not adequately reflect market value. According to the

Commission, only Starbucks Manufacturing is required

to pay for using this know-how whereas no other

Starbucks group company nor independent roasters

to which roasting is outsourced are required to pay a

royalty in essentially the same situation. The Commission

finds that in the case of Starbucks Manufacturing, the

existence and level of the royalty means that a large part

of its taxable profits is unduly shifted. Furthermore, the

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exchange, irrespective of whether they are still valid

on 1 January 2017. MSs can choose not to exchange

information on Tax Rulings and APAs issued, amended

or renewed before 1 April 2016 if the Tax Ruling or APA

relates to a group that had an annual turnover of less

than EUR 40 million in the year preceding the issuance,

amendment or renewal of the Tax Ruling or APA (that is,

small and medium-sized enterprises). This exemption

will not apply to companies engaged in financial or

investment activities.

The terms Tax Ruling and APA are very broadly defined as

any agreement, communication, or any other instrument

or action with similar effects, including agreements

reached in audits, which can be relied upon by taxpayers.

Tax Rulings deal with the interpretation or application of

a legal or administrative tax provision to a cross-border

transaction or with the question whether or not activities

give rise to a permanent establishment in another Member

State and are made in advance of the transaction or the

filing of the tax return covering the period in which the

transaction takes place. APAs establish an appropriate

set of criteria for the determination of the transfer

pricing of cross-border transactions between associated

enterprises or the attribution of profits to a permanent

establishment.

The scope of the above definitions means that not only

rulings and APAs in the traditional meaning of these

terms will be covered by the New Directive, but also

a vast array of other agreements between taxpayers

and tax administrators for dealing with the tax affairs of

multinational enterprises.

Besides certain basic information, such as the identity

of the taxpayers involved, the date of issuance, the start

date and the period of validity of the Tax Ruling or APA,

the information to be exchanged also comprises more

substantive information. Examples of such substantive

information include a description of the transactions

covered, the transaction amount, the method and the

set of criteria used for the determination of the transfer

pricing or the transfer price itself and the identification of

other MSs likely to be concerned and the identification of

taxpayers in those states likely to be affected by the Tax

Ruling or APA. The description of the transactions covered

in the Tax Ruling or APA may be drafted in abstract

terms that do not lead to the disclosure of commercial,

Similar decisions can be expected in the other formal

State aid investigations involving Apple, Amazon and

the Belgian ’excess profit ruling’ system. More formal

State aid investigations in relation to tax rulings can be

expected to follow as the Commission had requested a

substantial number of individual tax rulings from various

Member States earlier this year.

ECOFIN Council reaches agreement on the automatic exchange of information on tax rulings and APAs On 6 October 2015, the Council of the European

Union reached agreement on a proposal for a Council

Directive (‘the New Directive’) amending Directive

2011/16/EU (Directive on administrative cooperation

between Member States) and requiring automatic

exchange of information on ‘advance tax rulings’ (‘Tax

Rulings’) and ‘advance pricing arrangements’ (‘APAs’)

between EU Member States (‘MSs’) and, subject to

limitations, to the Commission.

The New Directive is one of the results of the EU’s efforts

to combat tax avoidance and aggressive tax planning.

On 18 March 2015, the EU Commission launched the

Transparency Package, which contained a number of

initiatives to help MSs protect their tax base and which

also included a proposal for automatic exchange of

information on Tax Rulings and APAs. The New Directive

is the political outcome of the discussion on the EU

Commission’s proposal. The New Directive is also

largely in line with the recommendations on automatic

exchange of information of tax rulings that were made

as part of Action 5 (Countering Harmful Tax Practices) of

the OECD/G20 BEPS project and that were released on

5 October 2015.

The New Directive requires MSs to automatically

exchange information on Tax Rulings and APAs that are

issued on or after 1 January 2017. In addition, information

on Tax Rulings and APAs issued, amended or renewed

between 1 January 2012 and 31 December 2013 will be

subject to information exchange, provided that they are

still valid on 1 January 2014 (i.e., a five year look-back

period instead of the ten year look-back foreseen in the

proposal of the EU Commission). Information on Tax

Rulings and APAs that were issued, amended or renewed

after 1 January 2014 will be subject to information

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Direct TaxationCJ rules that Austrian group taxation rules that deny the amortization of goodwill in case of holdings acquired in non-resident companies contravene the freedom of establishment (Finanzamt Linz)On 6 October 2015 the CJ delivered its judgment in case

Finanzamt Linz v Bundesfinanzgericht, Außenstelle Linz

(C-66/14).This case concerns the Austrian legislation

regarding group taxation which provides for an

amortisation of goodwill, at the level of the parent, only

for resident subsidiaries.

An Austrian group had majority holdings in both resident

and non-resident Austrian subsidiaries. Among those

participations, the group acquired 100% of the shares in

a Slovakian company for which it claimed a depreciation

of goodwill. The local tax authorities rejected such claim

considering that the depreciation of goodwill was only

allowed to companies subject to unlimited tax liability in

Austria. Following a decision favourable to the taxpayer

in a lower instance, the tax office appealed against that

decision based on the lines of arguments: (i) whether

the depreciation of goodwill provided for under Austrian

Law, is compatible with Articles 107 TFEU and 108(3)

TFEU. Such depreciation creates an advantage for the

beneficiary but questions whether that advantage must

be regarded as favouring certain undertakings or the

production of certain goods, (ii) whether the limitation

of goodwill depreciation may nevertheless be justified

either on the ground that it relates to situations that are

not objectively comparable or by an overriding reason in

the general interest.

The CJ dismissed the first question by considering it

that it bore no relation to the subject-matter of the main

proceedings.

As regards the second question, the CJ started by

stating that legislation such as that at issue in the

main proceedings created a tax advantage for a parent

company acquiring a holding in a resident company,

in cases of positive goodwill. By not granting, in those

industrial or professional secrets, or be contrary to public

policy. The Commission is responsible for developing

standard formats to report information on Tax Rulings

and APAs as well as a central database accessible for

MSs. Information must generally be submitted within

three months after the end of each half calendar year.

Information on pre-1 January 2017 Tax Rulings and

APAs must be submitted before 1 January 2018. MSs

may request additional information, including the full text

of the Tax Ruling or APA, under the normal procedures

for information exchange upon request provided for in

Directive 2011/16/EU.

Information on bilateral or multilateral APAs with non-MSs

will not be subject to automatic exchange of information

if this is prohibited under the international tax agreement

pursuant to which the APA was negotiated. In that case,

however, the basic information referred to above does

need to be exchanged, to the extent that it was included

in the request that led to the bilateral or multilateral APA.

The Commission itself will not have access to information

on the identity of the taxpayers involved, the summary

of the content of the Tax Rulings and APAs, including a

description of the transactions covered, the description of

the set of criteria used for the determination of the transfer

pricing or the transfer price itself and the identification of

the taxpayers in other MSs likely to be affected by the

Tax Ruling or APA. It will, however, have access to all

other information. The EU Commission may only use

the information to which it has access to assess MSs’

compliance with the New Directive. It is not permitted

to use such information for other purposes, such as for

State aid investigations.

Before the New Directive can be formally adopted by

the EU Council, the European Parliament must give its

opinion. Following the adoption of the New Directive by

the EU Council, MSs must implement the New Directive

in their national laws before 1 January 2017.

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of the tax system by considering that there was no

direct link between the tax advantage consisting in the

depreciation of the goodwill, on the one hand, and the

tax attribution to the parent company of the results of the

resident company, on the other hand.

CJ rules that national legislation that allows a public administrative body of a Member State to transfer personal data to another public administrative body and their subsequent processing, without the data subjects having been informed of that transfer or processing, contravenes Directive 95/46/EC (Bara and Others)On 1 October 2015, the CJ delivered its judgment in

case Smaranda Bara and Others v Președintele Casei

Naționale de Asigurări de Sănătate, Casa Naţională de

Asigurări de Sănătate, Agenţia Naţională de Administrare

Fiscală (ANAF) (C-201/14). The case concerns the

interpretation of Articles 124 TFEU and Articles 10, 11

and 13 of Directive 95/46/EC of the European Parliament

and of the Council of 24 October 1995 on the protection

of individuals with regard to the processing of personal

data and on the free movement of such data in a case

involving the transfer of personal date between public

administrative bodies without the data subjects having

been informed of that transfer or processing.

The applicants in the main proceedings earn income

from self-employment. The ANAF (National Tax

Administration Agency) transferred data relating to

their declared income to the CNAS (National Health

Insurance Fund). On the basis of that data, the CNAS

required the payment of arrears of contributions to the

health insurance regime. The applicants in the main

proceedings brought an appeal before the national court,

in which they challenged the lawfulness of the transfer of

tax data relating to their income in the light of Directive

95/46. They submitted that the personal data were, on

the basis of a single internal protocol, transferred and

used for purposes other than those for which they had

initially been communicated to the ANAF, without their

prior explicit consent and without their having previously

been informed. The case was referred to the CJ.

circumstances, that tax advantage to a parent company

which acquires a holding in a non-resident company,

that legislation introduces a difference in tax treatment

between parent companies to the detriment of those

which acquire a holding in a non-resident company. That

difference in treatment is such as to hinder the exercise

by the parent company which acquires a holding in a non-

resident company of its freedom of establishment for the

purposes of Article 49 TFEU by deterring it from acquiring

or setting up subsidiaries in other Member States.

Therefore, the CJ concluded that such a difference in

treatment could only be allowed if related to situations

which are not objectively comparable or if justified by an

overriding reason of public interest.

As regards the question whether the situations were

objectively comparable, the CJ recalled that the

comparability of cross-border situations with internal

situations must be assessed having regard to the

aim pursued by the national provisions at stake. In

this particular case, the CJ considered that they were

comparable taking into account that the Austrian

legislation intended to create a tax incentive for the

creation of groups of companies by ensuring equal

treatment between the purchase of the establishment

(‘asset deal’) and the purchase of the holding in the

company that owns the establishment (‘share deal’).

In regard to possible justifications Austria claimed that

the difference at stake could be justified based on the

need to preserve a balanced allocation of the powers to

tax between Member States and the coherence of the tax

system. The CJ started by refusing the first justification.

It stated that legislation such as that at issue in the main

proceedings allowed the parent company to depreciate

the goodwill, irrespective of whether the company in

which a holding is acquired makes a profit or incurs a

loss. Regarding the granting of that tax advantage, that

legislation concerned neither the exercise of the power

to impose taxes in respect of the profits and losses

of the company in which a holding is acquired, nor,

consequently, the allocation of the power to impose taxes

between the Member States. The CJ also refused the

justification based on the need to maintain the coherence

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Commission asks POLAND to stop discriminatory tax treatment of pensions contributions paid to Individual Pension Insurance Accounts (IKZE) On 22 October 2015, the Commission has asked Poland

to change its national tax rules, which treat contributions

to certain private pension accounts opened in Polish

financial institutions more favourably than those opened

in other Member States.

According to the Polish domestic rules, private pension

contributions are only tax deductible when they are

paid into Individual Pension Insurance Accounts (IKZE)

opened by Polish investment funds, exchange maker

houses, insurance establishments, banks and pension

funds. In the Commission’s view, such domestic

payments are, therefore, treated more favourably than

contributions paid into similar financial products and

institutions established in other EU Member States and

EEA States. Such a difference in tax treatment may

constitute an infringement of the freedom to provide

services and the free movement of capital as set out in

EU Treaties. The Commission’s request takes the form

of a reasoned opinion. In the absence of a satisfactory

response within two months, the Commission may refer

Poland to the CJ.

Commission launches a public consultation to help identify the key measures for inclusion in the re-launch of the proposal for a Common Consolidated Corporate Tax Base (CCCTB)On 8 October 2015, the Commission launched a public

consultation to help identify the key measures for

inclusion in the re-launch of the proposal for a CCCTB.

The call for feedback comes as part of the implementation

of the Commission’s Action Plan for Fair and Efficient

Corporate Taxation which was presented in June this

year. A wide range of views is sought from businesses,

civil society and other stakeholders. The Commission

intends to come forward with revised legislation next

year.

The question referred was, in essence, whether

Articles 10, 11 and 13 of Directive 95/46 must be

interpreted as precluding national measures, such as

those at issue in the main proceedings, which allow a

public administrative body in a Member State to transfer

personal data to another public administrative body and

their subsequent processing, without the data subjects

being informed of that transfer and processing.

The CJ started by observing that the tax data transferred

to the CNAS by the ANAF are personal data within the

meaning of Article 2(a) of the directive, since they are

‘information relating to an identified or identifiable natural

person’. In that regard, it stated that in accordance with

the provisions of Chapter II of Directive 95/46, entitled

‘General rules on the lawfulness of the processing of

personal data’, subject to the exceptions permitted under

Article 13 of that directive, all processing of personal data

must comply, first, with the principles relating to data

quality set out in Article 6 of the directive and, secondly,

with one of the criteria for making data processing

legitimate listed in Article 7 of the directive, Furthermore,

the data controller or his representative is obliged to

provide information in accordance with the requirements

laid down in Articles 10 and 11 of Directive 95/46, which

vary depending on what data are, or are not, collected

from the data subject, and subject to the exceptions

permitted under Article 13 of the directive.

According to the Court, in this case it is clear from the

information provided by the referring court that the

applicants in the main proceedings were not informed by

the ANAF of the transfer to the CNAS of personal data

relating to them. Therefore, the transfer of the information

at stake was not carried out in compliance with the

directive.

The CJ further added that the case in the proceedings did

not meet the conditions for the exceptions under Article

13. Therefore, the legislation at stake was considered as

being in breach of Directive 95/46/EC.

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Intermediate Fiscal Unity

The EU/EEA intermediate subsidiary needs to satisfy

certain requirements that correspond with the existing

requirements for fiscal unity subsidiaries, including legal

form (e.g., comparable to Netherlands limited liability

companies), tax residency (outside the Netherlands,

within the EU/EEA), liability to a tax on profits in the EU/

EEA country of residence and absence of a permanent

establishment (PE) in the Netherlands.

The EU/EEA intermediate subsidiary cannot be included

in the Intermediate Fiscal Unity; only the Netherlands

parent company and the Netherlands second-tier

subsidiary held by such intermediate subsidiary. As a

general rule, the EU/EEA intermediate subsidiary is

treated as a regular participation of the Intermediate

Fiscal Unity.

Sister Fiscal Unity

The EU/EEA parent company needs to satisfy certain

requirements that correspond with the existing

requirements for fiscal unity parent companies, including

requirements to the legal form (e.g., comparable to

Netherlands limited liability companies, cooperative

associations or mutual insurance companies), tax

residency (outside the Netherlands, within the EU/EEA),

liability to a tax on profits in the EU/EEA country of

residence and absence of a PE in the Netherlands.

The EU/EEA parent company cannot be included in the

Sister Fiscal Unity; only the Netherlands subsidiaries

held by such parent company (directly or indirectly via

EU/EEA intermediate subsidiaries). In principle, one of

the Netherlands subsidiaries needs to be designated by

the taxpayer as parent company of a Sister Fiscal Unity.

Various aspects need to be considered in determining

which subsidiary to designate as parent company.

The designated parent company needs to meet the

requirements for fiscal unity subsidiaries (e.g., strict

requirement on legal form). The tax book year of the

designated parent company ends at the time the Sister

Fiscal Unity is formed.

This consultation wants to gather views, in particular,

on the extent to which a CCCTB could function as an

effective tool against aggressive tax planning without

compromising its initial objective of making the Single

Market a more business-friendly environment. Feedback

is also expected on the proposed ‘two-step approach’

of the initiative and on the criteria that could determine

which companies should be subject to a mandatory

CCCTB. The consultation will also look at ideas on how

to address the ‘debt bias’ and the type of rules that would

best foster Research & Development activity.

The public consultation will remain open until 8 January

2016.

The Netherlands releases Tax Bill to extend fiscal unity regime in accordance with EU law On 16 October 2015, Netherlands Government released

a Tax Bill to extend the fiscal unity regime in accordance

with EU law, following judgments handed down by the

CJ on 12 June 2014 in the Joined cases SCA Group

Holding BV and others (joined cases C-39/13, C-40-13

and C-41/13). The fiscal unity regime is a consolidation

regime for corporate income tax purposes that provides

for offset of losses and profits between members as well

as non-recognition of gains and losses on transactions

between members.

The Tax Bill extends the fiscal unity regime to allow for

(i) the formation of a fiscal unity between a Netherlands

parent company and a Netherlands second-tier subsidiary

held via one or more EU/EEA intermediate subsidiaries

(Intermediate Fiscal Unity), and (ii) the formation of

a fiscal unity between Netherlands subsidiaries held,

directly or indirectly via EU/EEA intermediate subsidiaries,

by an EU/EEA parent company (Sister Fiscal Unity).

The Tax Bill codifies, to a large extent, a Decree of the

Netherlands State Secretary of Finance of 16 December

2014 (Stcrt. 2014, 38029), that was issued to extend the

fiscal unity regime in anticipation of the Tax Bill. The Tax

Bill also introduces rules to counter unintended effects

of the fiscal unity regime extension. Finally, the Tax Bill

tightens the ownership condition for the formation of a

fiscal unity, such that full legal and beneficial ownership,

including legal title, of at least 95% of the shares in the

subsidiary must be held.

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Entry into force

The Tax Bill may be amended during the course of the

legislative process, and will take effect after publication in

the official Netherlands Government Gazette (Staatsblad).

The Tax Bill includes a two-year grandfathering rule for

existing fiscal unities, with respect to the amendment to

the ownership condition.

How to proceed?

The Tax Bill provides an incentive for international groups

with operations in the Netherlands to investigate whether

a(n) (extended) fiscal unity is available and beneficial.

The Tax Bill is restricted to EU/EEA situations. Cases,

however, are pending before Netherlands tax courts,

in which a fiscal unity is requested in group structures

where parent companies and intermediate subsidiaries

are established outside the EU/EEA. In these cases,

the position that a fiscal unity can be formed is based

on a non-discrimination clause in a bilateral tax treaty. In

addition, the Tax Bill does not include amendments based

on the judgment of the CJ in the case Groupe Steria

(C-386/14). This case may, under circumstances, extend

specific benefits of a domestic fiscal unity to a cross-

border situation and may result in further amendments

to the fiscal unity regime. In either situation, it should be

considered to request a fiscal unity or file an objection, in

order to preserve the taxpayer’s rights.

VAT CJ rules that national rule on limitation periods for criminal offences must be disapplied if it has an adverse effect on the fulfilment of the Member States’ obligations under EU law (Taricco)On 8 September 2015, the CJ delivered its judgment

in the case Ivo Taricco (C-105/14). Mr Taricco and a

number of other persons were charged with having

established a criminal organization or having participated

as a member in it in the period from 2005 to 2009. The

purpose of the criminal organization is said to have been

the commission of the criminal offences of producing

false invoices and submitting fraudulent VAT returns.

The false invoices related to commercial transactions

involving champagne. On the basis of agreements,

Fiscal unity including EU/EEA company with a PE in the

Netherlands

Under current law, a non-Netherlands resident company

with a PE in the Netherlands can be included in a

fiscal unity as parent company, regarding its PE, if its

shareholding in a qualifying Netherlands subsidiary

is attributable to such PE (PE Fiscal Unity). For non-

Netherlands resident companies that reside in the EU/

EEA, the Tax Bill abolishes the attribution requirement.

These companies can, furthermore, form a PE Fiscal

Unity, regarding their PE in the Netherlands, with a

Netherlands subsidiary held via an EU/EEA intermediate

subsidiary.

If an EU/EEA parent company owns multiple PEs in

the Netherlands via (separate) EU/EEA intermediate

subsidiaries, such PEs can be included in a Sister Fiscal

Unity. Moreover, Netherlands subsidiaries owned by that

EU/EEA parent company can also be included in such

Sister Fiscal Unity.

Rules to counter unintended effects of the fiscal unity

regime extension

The Tax Bill introduces rules to counter unintended

effects of the fiscal unity regime extension, including

amendments to the liquidation loss rules and the

interest deduction limitation rules for loans taken up for

investment in participations qualifying for the participation

exemption. The majority of these rules aim to avoid

double deductions for losses incurred on receivables

from, and shareholdings in, EU/EEA parent companies

and EU/EEA intermediate subsidiaries.

Tightening of ownership condition

Under current law, the ownership condition for the

formation of a fiscal unity, that at least 95% of the legal

and beneficial ownership of the shares of the subsidiary

must be held, can under circumstances be satisfied if the

legal title to the shares are held by an entity outside the

fiscal unity (e.g., if the fiscal unity parent company owns

depository receipts over shares of a subsidiary and (de

facto) exercises the voting rights attached to such shares

at its sole discretion). The Tax Bill tightens the ownership

condition such that full legal and beneficial ownership,

including legal title, of at least 95% of the shares in the

subsidiary must be held.

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AG Wathelet opines on whether the arbitrage with different VAT tariffs between Member States constitutes an abusive practice on the obligations of national tax authorities to prevent double taxation and on the use of evidence obtained in criminal proceedings (WebMindLicenses Kft.)On 16 September 2015, Advocate General Wathelet

delivered his Opinion in the WebMindLicenses Kft. case

(C-419/14). A Hungarian software developer transferred

know-how to a Liechtenstein trust, which granted

a licence to exploit the know-how to a Portuguese

entity, Lalib. The trust then transferred the know-how

to a Portuguese entity of the developer, which in turn,

transferred the know-how to a Hungarian entity of the

developer, WebMindLicenses (hereafter WML). WML

entered into an agreement with Lalib to continue the

licensing of the know-how to Lalib. Lalib exploited the

know-how on several websites with adult content which

offer chat and webcam performance services. According

to the Hungarian tax authorities, WML never transferred

the exploitation of the know-how to Lalib and in fact,

exploited the know-how itself. The authorities claim

that the entering into the licensing agreement between

WML and Lalib constituted an abusive practice. In the

subsequent legal proceedings, the national court referred

no less than 17 preliminary questions to the CJ. The AG

reformulated these into four questions, on which he gives

the following conclusions.

First, the AG noted that procuring services from a taxable

person located in a Member State with a lower VAT

rate does not on its own constitute an abusive practice.

Furthermore, a difference in the applicable VAT rate of

4% seems to be insufficient to justify the claim that the

essential purpose of the transaction is a tax benefit.

However, the AG left it up to the referring national court

to investigate whether the essential purpose of the

transaction is a tax benefit.

domestic sales of champagne were falsely recorded as

intra-Community supplies. One of the companies took

receipt of false invoices, deducted the VAT on it and filed

a fraudulent annual VAT return. The parties issuing the

invoices did not submit any annual VAT returns, while

others did submit returns but did not pay the VAT due.

The referring court in this case pointed out that it is ‘quite

likely’ that the prosecution of all defendants will become

time-barred (on 8 February 2018 at the latest) before a

final judgment is given. According to the referring court,

that result was nonetheless foreseeable, because of

a rule laid down in the Italian Penal Code which, by

allowing the limitation period to be extended, following

an interruption, by only a quarter of its initial duration,

is tantamount to not interrupting the limitation period

in most criminal proceedings. In this light, the referring

court expressed the concern that the limitation regime in

Italy is becoming a ‘guarantee of impunity’ for economic

criminals. Given the aforementioned, the CJ was asked

for a preliminary ruling.

First of all, the CJ ruled that it is for the referring court

to determine whether the applicable national provisions

allow the effective and dissuasive penalisation of cases

of serious fraud affecting the EU’s financial interests. If

the national court concludes that the application of the

national provisions has the effect that, in a considerable

number of cases, the commission of serious fraud will

escape criminal punishment, it would be necessary to find

that national measures could not be regarded as being

effective and dissuasive. If needed, the national court

must, according to the CJ, give full effect to Article 325(1)

and (2) TFEU, by disapplying the provisions of national

law, the effect of which would be to prevent the Member

State concerned from fulfilling its obligations.

12 13

proteins. By replacing the cow’s milk protein allergens,

the goods at issue provide the substances necessary for

the development of the immune system and growth of

those children.

By a request dated 12 August 2008 made to the

Bundesfinanzdirektion B (Federal Revenue Office

B), Kyowa Hakko requested the issue of BTIs on the

classification of the goods at issue in the CN. In that

request, it proposed that the goods be classified under

subheading 3003 90 of the CN. On 23 October 2008,

that authority issued BTIs classifying those goods

under a subheading of heading 2106 of the CN, namely

subheading 2106 90 92.

On 24 November 2008, Kyowa Hakko brought a complaint

before the Hauptzollamt, disputing the classification

of the goods at issue in the CN laid down by the

Bundesfinanzdirektion B. In that complaint, it argued that

the goods at issue ought to be classified under heading

3003 of the CN on the ground that they were processed

into goods used principally for therapeutic purposes in

cases of allergy to cow’s milk protein, allergies to other

foodstuffs and diseases of the digestive system and for

prophylactic purposes. By decision of 5 January 2011 the

Hauptzollamt rejected that complaint as unfounded.

On 1 February 2011, Kyowa Hakko brought an action

before the Finanzgericht Hamburg (Finance Court,

Hamburg) against that decision. By a decision of

19 September 2012, that court dismissed the action,

holding that the goods at issue should not be classified

under heading 3003 of the CN.

On 2 November 2012, Kyowa Hakko lodged an appeal

on points of law before the referring court against the

decision of the Finanzgericht Hamburg. In that appeal,

Kyowa Hakko maintained its argument that the goods at

issue should be classified under heading 3003 of the CN.

In the request for a preliminary ruling, the referring

court noted, in essence, that the CN does not provide

any definition of the notion of ‘medicinal product’.

Nonetheless, it is of the view that the goods at issue

cannot be classified as ‘medicinal products’, for the

purposes of heading 3003 of the CN. In that regard,

Second, the AG concluded that the possibility of double

taxation does not preclude the tax authorities of a

Member State to determine the place of service as being

that Member State, since the tax authorities in a Member

State are not bound by decisions from tax authorities in

other Member States.

Third, EU Regulation 904/2010 on administrative

cooperation in the field of VAT does not entail an

obligation for the tax authorities in a Member State to file

a request with the tax authorities of the Member State in

which the taxable person has already paid VAT.

Lastly, the AG concluded that the use of evidence in

tax procedures, which evidence is obtained by way of

monitoring phone calls and seizing and copying e-mails

in a criminal procedure, can only be in accordance with

articles 7 and 8 of the Charter of Fundamental Rights

of the EU if those methods of obtaining evidence are

provided by law, pursue a legitimate purpose and are

proportional. It is up to the referring national courts to

investigate if these requirements are met.

Customs Duties, Excises and other Indirect TaxesCJ rules on CN classification of Amino acid mixes (Kyowa Hakko Europe GmbH)On 17 September 2015, the CJ delivered its judgment

in the case Kyowa Hakko Europe GmbH (C-344/14).

The case concerns the classification in the Combined

Nomenclature (CN) of Amino acid mixes used for the

preparation of foodstuffs for infants and young children

allergic to cow’s milk proteins.

Kyowa Hakko produces amino acid mixes, called

RM0630 and RM0789, which are composed of various

individual amino acids of a very high degree of purity (‘the

goods at issue’). The goods at issue are manufactured

in such a way that they do not contain cow’s milk

proteins. Kyowa Hakko supplies those goods, in bulk,

to another undertaking which uses them, adding to

them carbohydrates and fats, to prepare foodstuffs for

infants and young children who are allergic to cow’s milk

13

preparation of foodstuffs for infants and young children

who are allergic to cow’s milk proteins, must be classified

under heading 2106 of the Combined Nomenclature

as ‘food preparations’ since, because of their objective

characteristics and properties, those goods do not have

clearly defined therapeutic or prophylactic characteristics,

with an effect concentrated on precise functions of the

human organism and, accordingly, are not capable of

being applied in the prevention or treatment of diseases

or ailments and also are not naturally intended for medical

use, which it is for the national court to ascertain.

AG opines that preferential import duty tariff can be applied to a mixture of crude palm kernel oil originating in several countries (ADM Hamburg AG) On 10 September 2015, AG Wahl delivered its Opinion

in the case ADM Hamburg AG (C-294/14). The case

deals with the requirement that products, declared for

release for free circulation in the European Union, for

the application of a preferential treatment, be the same

products as exported from the beneficiary country in

which they are considered to originate.

On 11 August 2011, ADM Hamburg imported a number

of consignments of crude palm kernel oil from Ecuador,

Colombia, Costa Rica and Panama to Germany for

release into free circulation in the European Union. All

those countries are GSP (General System of Preferences)

exporting countries. The oil was transported in different

tanks of a cargo vessel. To benefit from preference, ADM

Hamburg submitted preferential treatment certificates

issued by the abovementioned countries.

The case before the referring court concerns only one

of those consignments (‘the consignment at issue’). The

consignment at issue contained a mixture of crude palm

kernel oil originating in different beneficiary countries.

On 8 December 2011, the Hauptzollamt Hamburg-Stadt

issued an import duty notice. As regards the consignment

at issue, it calculated the import duties on the basis of

the duty rate for third countries, that is, without granting

the consignment the requested preferential treatment.

The reason for denying preferential treatment was, in

essence, that, crude palm kernel oil from different import

that court is of the opinion that those goods, used as a

substitute for milk product allergens for as long as the

immune system of a child allergic to cow’s milk proteins is

not fully developed, do not appear to have a therapeutic

or prophylactic purpose. The goods at issue replace only

a pathogenic component of the normal diet of an infant,

without acting on the allergy to cow’s milk proteins and

without treating or reducing it.

However, although it considered that the goods at issue

must be classified under heading 2106 of the CN and

that the decisions adopted to that effect by both the

Hauptzollamt and the Finanzgericht Hamburg were well

founded, the referring court considered that, having regard

to the different position set out in the decision of the Upper

Tribunal (Tax and Chancery Chamber) of 27 September

2013, it is necessary to obtain a preliminary ruling from

the Court in order to state the correct classification of

those goods in the CN and, accordingly, to ensure a

uniform interpretation of the law in the EU.

In those circumstances, the Bundesfinanzhof (Federal

Finance Court) decided to stay the proceedings and

refer the following questions to the Court of Justice for a

preliminary ruling:

‘(1) Do amino acid mixes such as those at issue in the

present case (RM0630 and RM0789), from which (in

combination with carbohydrates and fats) a foodstuff

is manufactured by which a substance that is vital for

health and present in normal diet but which can in

individual cases trigger an allergic reaction is replaced

and, as a result, allergy-induced health impairments

can be avoided and existing complaints alleviated,

if not cured, constitute medicaments consisting of

two or more constituents which have been mixed

together for therapeutic or prophylactic uses within

the meaning of heading 3003 of the CN?

(2) If the answer to Question 1 is in the negative, do the

amino acid mixes constitute food preparations under

heading 2106 of the CN which, pursuant to note 1(a)

to Chapter 30 of the [CN], are excluded from Chapter

30 because they have no prophylactic or therapeutic

effect beyond the supply of nutrition?’

The CJ ruled that the amino acid mixes such as those

at issue in the main proceedings, which are used in the

14

European Commission requests GREECE to amend its legislation granting reduced rates of excise duty to “Tsipouro” and “Tsikoudià” The European Commission has formally requested

Greece to amend its excise duty schemes for two specific

alcoholic beverages – “Tsipouro” and “Tsikoudià”.

“Tsipouro” and “Tsikoudia” are traditional alcoholic drinks

which are produced in the north of Greece and in Crete.

Both drinks have protected geographical indications.

Currently, Greece applies 50 percent of the ordinary

excise duty rate applied on ethyl alcohol and a super-

reduced rate to “Tsipouro” and “Tsikoudià” (around 6%

of the ordinary excise duty rate) when these drinks are

produced in bulk by so-called “two-day” distillers (vine

growers or producers of other agricultural products).

EU rules provide that the same excise duty rate should

apply to all products made with ethyl alcohol. Exemptions

or derogations are provided explicitly by EU law and

must be strictly interpreted. Greece does not have any

derogation for “Tsipouro” or “Tsikoudià”. The Commission

is of the view that both schemes infringe the relevant EU

excise duty legislation and also favour a domestically-

produced spirit drink over spirit drinks produced in other

Member States. This is an infringement of EU rules on

the free movement of goods.

The Commission’s request takes the form of a reasoned

opinion. In the absence of a satisfactory response within

two months, the Commission may refer Greece to the

Court of Justice of the EU.

consignments from different countries of origin had been

mixed together in a single tank.

After an unsuccessful administrative appeal, ADM

Hamburg brought an action before the Finanzgericht

Hamburg. Since it had doubts as to the correct

construction of the relevant provision of EU law, the

Finanzgericht Hamburg decided to stay the proceedings

and to request a preliminary ruling on the following

question:

‘Is the factual condition laid down in the first sentence

of Article 74(1) of [Regulation No 2454/93] whereby the

products declared for release for free circulation in the

European Union must be the same products as exported

from the beneficiary country in which they are considered

to originate, fulfilled in a case such as the present case,

where several part-consignments of crude palm kernel

oil are exported from different GSP exporting countries,

in which they are considered to originate, and imported

into the European Union not as physically separate

consignments, but are all exported after being poured

into the same tank of the cargo vessel and imported

as a mixture in that tank into the European Union, such

that it can be ruled out that other products (not enjoying

preferential treatment) have been put into the tank of the

cargo vessel during the time the products were being

transported until they were released for free circulation?’

The AG opined that in circumstances such as those

underlying the present case where (i) the products which

have been mixed together are materially, in terms of being

crude palm kernel oil, the same and interchangeable,

(ii) they originate in countries benefiting from the same

preferential treatment, and (iii) there is no doubt as to their

originating status, the requirement of identity between

the products exported and those declared for release for

free circulation in the European Union, as laid down in

Article 74(1) of Regulation No 2454/93, is fulfilled.

15

Correspondents● Gerard Blokland (Loyens & Loeff Amsterdam)

● Kees Bouwmeester (Loyens & Loeff Amsterdam)

● Almut Breuer (Loyens & Loeff Amsterdam)

● Robert van Esch (Loyens & Loeff Rotterdam)

● Raymond Luja (Loyens & Loeff Amsterdam;

Maastricht University)

● Arjan Oosterheert (Loyens & Loeff Amsterdam)

● Lodewijk Reijs (Loyens & Loeff Rotterdam)

● Bruno da Silva (Loyens & Loeff Amsterdam;

University of Amsterdam)

● Patrick Vettenburg (Loyens & Loeff Rotterdam)

● Ruben van der Wilt (Loyens & Loeff Amsterdam)

www.loyensloeff.com

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Editorial boardFor contact, mail: eutaxalert@loyensloeff.com:

● René van der Paardt (Loyens & Loeff Rotterdam)

● Thies Sanders (Loyens & Loeff Amsterdam)

● Dennis Weber (Loyens & Loeff Amsterdam;

University of Amsterdam)

Editors● Patricia van Zwet

● Bruno da Silva

Although great care has been taken when compiling this newsletter, Loyens & Loeff N.V. does not accept any responsibility whatsoever for any

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