The Compatibility of Anti-Abuse Provisions in Tax Treaties With Ec Law

by Essers, P. H. J.; Bont, Guido De; Kemmeren, Eric

• ISBN13: 9789041196781
• ISBN10: 9041196781
• Format: Hardcover
• Copyright: 1998-09-01
• Publisher: Kluwer Law Intl

Summary

The impact of the European Community (EC) and EC law on taxation is becoming increasingly important. EC law influences not only national tax law but also tax treaties. This book focuses on the question of whether anti-abuse provisions in tax treaties conflict with EC law, especially with the fundamental freedoms contained in the EC Treaty. This book deals with this issue from the perspectives of Austria, France, Germany, Italy, The Netherlands, Spain, And The United Kingdom. Though most problems arise with regard To The limitation on benefits clauses contained in the tax treaties concluded between EC member states And The United States, The book also addresses the compatibility with EC law of other anti-abuse clauses and assesses the consequences of a possible conflict. This title is published in association with EUCOTAX (European Universities Cooperating on Taxes), a network of fiscal institutes of several European universities which initiates and coordinates both comparative education and comparative research on taxation. Its projects and programs include winter courses, guest lectures, joint research projects, international conferences, And The exchange of researchers from various countries.

Table of Contents

Preface	ix
About the Authors and Editors	x
List of Abbreviations	xi
Part I
EC Law: The Framework	1	(16)
Sacha Prechal
Introduction	1	(2)
EC Treaty freedoms	3	(6)
The general scheme	3	(3)
The scheme applied	6	(2)
The Treaty provisions on the free movement of capital	8	(1)
Implications for the anti-treaty shopping clauses	9	(2)
The relationship between tax treaties and EC law	11	(3)
Incompatible anti-abuse clauses and Community law remedies	14	(3)
EC Law: Specific Observations	17	(24)
Eric Kemmeren
Introduction	17	(1)
Powers to conclude tax treaties	17	(8)
Differentiation on the basis of residence in direct taxes and of nationality in tax treaties is permitted	25	(6)
A European touchstone in relation to abuse	31	(6)
General remarks	31	(2)
European law does not cover the abuse of tax rules	33	(4)
Conclusions	37	(4)
Part II
Austria	41	(44)
Gerald Toifl
Anti-abuse provisions in Austrian domestic tax law	41	(3)
Anti-abuse provisions in Austrian tax treaties	44	(5)
Limitation on benefits provision under Article 16 of the DTC Austria-United States	49	(3)
General examination pattern for non-discrimination cases under Community law	52	(19)
Scope of the fundamental freedoms with regard to persons	52	(6)
Comparability of the situation in Community law	58	(5)
Justifications for a difference in treatment in Community law (rule of reason)	63	(8)
Application of the fundamental freedoms to Austrian domestic anti-abuse provisions	71	(2)
Application of the fundamental freedoms on anti-abuse provisions in Austrian tax treaties	73	(5)
Application of the fundamental freedoms on Article 16 of the DTC Austria-United States	78	(7)
France	85	(12)
Patrick Dibout
Rene Offermanns
Introduction	85	(6)
The relation between anti-abuse provisions and EC law	91	(3)
Anti-abuse clauses in relation to tax treaties	94	(3)
Germany	97	(14)
Jorg Manfred Mossner
Introduction	97	(1)
General clauses against tax abuse within German double taxation conventions	98	(1)
Subject-to-tax provisions	99	(1)
Specific anti-treaty-shopping rules	100	(7)
Residence provisions	107	(1)
Beneficial ownership	107	(1)
National anti-treaty-shopping provision in the Income Tax Act	108	(3)
Italy	111	(14)
Franco Gallo
Gaetano Casertano
Introduction	111	(1)
The role of tax matters in the EC Treaty	112	(1)
The role of Article 3b of the Maastricht Treaty	112	(2)
The role of Article 3b and the double tax treaties	114	(2)
The Italian principles of internal tax law with reference to the double tax treaties and EC law	116	(1)
The scope of the double tax treaty and EC law	117	(2)
The Italian ``rule of preference'' under Article 128 of the Italian company tax law and the Italian double tax treaties	119	(1)
The relationship between the beneficial owner rule in the double tax treaties and internal Italian tax law	120	(2)
The resident provision as an anti-abuse rule	122	(1)
Article 5 of the Italy-Australia double tax treaty as an example of an anti-abuse rule: ``an anti-treaty shopping rule that could influence the EC Treaty''	123	(1)
Conclusions	124	(1)
The Netherlands	125	(28)
Eric Kemmeren
Introduction	125	(1)
Residence	126	(4)
Infringement of the EC Treaty?	127	(1)
A strictly internal Dutch matter?	127	(1)
Discrimination/hindrance?	128	(2)
Infringement of the Parent-Subsidiary and Merger Directives?	130	(1)
Substantial interest condition	130	(3)
Beneficial owner	133	(1)
Limitation on benefits	134	(16)
The Luxembourg 1929 holding company	134	(2)
Article 26 of the Netherlands-US tax treaty	136	(1)
Direct stock exchange test	137	(1)
Indirect stock exchange test	138	(3)
Shareholders test	141	(1)
Derivative shareholders test	141	(1)
Activity test	142	(2)
Headquarters test	144	(1)
International shipping and air transport test	144	(1)
Discretionary relief	145	(1)
Consequences of violation of EC law	146	(4)
Conclusions	150	(3)
Flow Charts of Article 26 of the Dutch-US Tax Treaty (Limitation on Benefits)	153	(20)
Eric Kemmeren
Introduction	153	(1)
How to read the flow charts	153	(20)
Spain	173	(16)
Stella Raventos
Introduction. The anti-treaty shopping provisions in the traditional Spanish treaties	173	(1)
The anti-treaty shopping provisions in the most recent treaties	174	(10)
The ``limitation on benefits'' provision in the US treaty	174	(6)
The limitation of benefits in the treaties with Ireland and Portugal	180	(3)
The treaty with Luxembourg	183	(1)
The ``beneficial owner'' clause	184	(1)
The ``thin-capitalization provisions''	184	(3)
The treaty with Mexico	185	(2)
Conclusion	187	(2)
United Kingdom	189	(20)
Philip Baker
The United Kingdom's network of DTCs and the relevance of limitation of benefit provisions	189	(1)
A brief history of the UK's practice with regard to DTCs	190	(1)
UK domestic legislation on treaty abuse	191	(1)
Domestic judge-made anti-avoidance approaches: a general anti-avoidance approach	192	(1)
The compatibility of limitation of benefit provisions with EU law - the UK position	193	(1)
Treaty limitation of benefit provisions	194	(12)
A uniquely British provision: the remittance limitation	195	(1)
Exclusion of tax-privileged entities	196	(2)
Current, standard limitation of benefit provisions: beneficial ownership limitations	198	(1)
Current standard limitation of benefit provisions: special relationship provisions	199	(1)
A new British invention: the main purpose limitation	200	(1)
Special limitations of benefit	201	(3)
Former limitation of benefit provisions	204	(1)
Subject to tax provisions	204	(1)
Arm's-length provisions	204	(1)
Pre-acquisition dividends	205	(1)
Disposal of debts	205	(1)
Some conclusions: the UK's general approach to limitation of benefit provisions	206	(3)
Epilogue	209	(6)
Appendix: Survey of the Quoted Treaty Provisions	215	(70)
Index	285