eu freedoms & case law
TRANSCRIPT
EU Freedoms and Case Law
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EU Freedoms and Case Law Contents EU Law Introduction
– The 4 Freedoms– Limitations & Results of Conflict– Summary
Tension between EU & UK Policy Objectives
Relevant Case Law – Overview – Conclusion
Case study State Aid
– What is State aid?– Tax rulings– Fiat – Starbucks
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EU Law The 4 Freedoms
Freedom of establishment (Article 49 TFEU)
Free movement of capital (Article 63 TFEU)Freedom to provide
and receive services (Article 56 TFEU)
Free movement of workers (Article 45 TFEU)
• Freedom of establishment and free movement of capital are the most important when looking at applicability to UK tax legislation.
• Have DIRECT EFFECT - Can be relied upon and are directly enforceable in the UK courts
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EU Law Limits of Freedoms A breach of Freedoms can be justified where there is
an acceptable rationale:
Fiscal cohesion (Bachmann [1992] C-204/90), Tax avoidance, Allocation of taxing rights or Fiscal supervision
Where Justified, breach must be proportionate:
Appropriate to the aim and must not go beyond what is necessary to attain the aim
Where breach is not justified or where breach is justified but not proportionate, Court must either;
Reinterpret or disapply legislation
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EU Law Summary FREEDOM IN
POINT
JUSTIFIED? UK LAW STANDS
PROPORTIONATE? REINTERPRET OR DISAPPLY
BREACH NO BREACH
NO YES
NO
YES
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EU POLICY
Creation of internal market - seek to reduce barriers by enforcing equal tax treatment of persons in different member states.
Actions are taken against policies (which cannot be justified) of member states which discourage cross border business.
Onus on member states to prove restrictions are needed and are proportionate to aims.
UK POLICY
Increasing focus on maximising tax revenues. One of its three strategic “primary objectives” since 2010
Little regard given to how freedoms impacted by new legislation
No focus on economic reality
Tension Between EU & UK policy Differing Objectives
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Case Study Overview Discretionary trust (DT) settled in EU member
state (e.g. Cyprus)
DT established EU Company (e.g. Malta)
Existing International business
Malta Co to perform genuine functions & facilitate expansion
Section 720 ITA 2007 and EU Law
Transfer Pricing?
CM&C
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Case study The structure
FAMILY SETTLEMENT
FUTURE BUSINESS ACQUISITIONS
MALTA CO.
100% OF ORDINARY SHARE CAPITAL
100% OF ORDINARY SHARE CAPITAL
EXISTING UK
BUSINESS
EXISTING NON UK
BUSINESS
FUNCTIONS
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Case Study Tax Analysis
Income of Malta Co taxed at 5%
Dividends to Cyprus Co not subject to tax
Future dividends received by Malta co (on future acquisitions) taxed at 5%
S.720 ITA – apply income to UK settlor? – Fisher Case – genuine business.
Transfer Pricing – ensure arms length even though, technically, not in point.
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State AidWhat is State Aid? Article 107 Treaty on the functioning of the
EU
Any Aid grated by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition
includes:
Grants Loans Tax Breaks Cheap use of State Assets
But can be approved by EU Commission
Or via Approved EU Mechanisms e.g. Madeira Tax Advantage
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State AidTax Rulings
Fiat
Starbucks
Belgian Excess Profit Ruling System
Tax Rulings Practices in all Member States
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State AidFiat
ΩΩ
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State AidStarbucks
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