Search

In this case note, the CFE ECJ Task Force comments on the ECJ decision in MK v. Autoridade Tributária e Aduaneira (Case C-388/19) of 18 March 2021. The Court confirmed its previous case law and held that the Portuguese (optional) regime for taxation of capital gains from immovable property of non-residents was contrary to the free movement of capital under article 63 of the TFEU since non-residents were taxed less favourably than residents.

The Court’s decision in Société Générale reinforces established case law that EU law neither prohibits juridical double taxation nor does it impose an obligation on the residence Member State to prevent the disadvantages that could arise from the exercise of competence thus attributed by the two Member States. The parallel existence of taxing jurisdiction, however, must be distinguished from the exercise of such jurisdiction by each Member State. While Member States are free to determine the connecting factors for the allocation of taxing jurisdiction in tax treaties, in exercising the “power of taxation, so allocated by bilateral conventions for the avoidance of double taxation, the Member States must comply with EU rules and, more particularly, observe the principle of equal treatment”. It is generally accepted in the Court’s case law that both the ordinary credit and exemption (including exemption with progression) methods are permissible to avoid double taxation. In Société Générale, this position was confirmed, specifically as regards the “maximum deduction” under the ordinary credit method in tax treaties, even though this treatment can result in a disadvantage for cross-border income as compared with domestic income. As the disadvantage in Société Générale was due to the difference between gross-basis taxation of dividends in the source Member States (Italy, the Netherlands and the United Kingdom) and net-basis taxation of those foreign-sourced dividends in the residence state (France), it remains to be seen whether or not future cases will bring clarity in light of the Seabrokers decision of the EFTA Court, which examined how expenses can be lawfully allocated to foreign income from the perspective of the residence Member State.

Offering a comprehensive exploration of EU taxation law, this engaging Research Handbook investigates the relevant legal principles in the context of both direct and indirect taxation. The important issues and debates arising from these general principles are expertly analysed, with leading scholars examining the status quo as well as setting out an agenda for future research.

As a reaction to the financial crisis, in 2011, the European Commission developed a proposal for an EU-wide Financial Transactions Tax, with the purported aim of ensuring that the financial sector would contribute to the costs of the crisis. Christiana HJI Panayi looks at how these proposals have developed, and the use of enhanced cooperation between EU Member States, which has occurred due to the lack of unanimous agreement on the proposal. The UK is one of the chief opponents of the Financial Transactions Tax, citing concerns that financial institutions outside of the Member States participating in the Financial Transaction Tax may be subject to it, and worries about its effects on economic growth.