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The increased complexity of international tax rules since the inception of the BEPS project created the need for alternative dispute resolution. This realisation has led both the international community and European Union institutions to expand on the possibilities for intergovernmental mechanisms to address diverging interpretation of treaty rules by tax administrations in treaty partner states. These give rise to many questions on the implementation and integration of the new rules into domestic (court) procedures, their correct interpretation, and best practices in their application by tax officials, lawyers and arbitrators. This book addresses these questions in a holistic manner, starting with a comprehensive analysis of existing tax treaty norms and their practical application in MAP and arbitration procedures (Chapters 1–4). In its second part, it offers a timely expert analysis of primary and secondary EU law rules on tax dispute resolution, detailing the specifics of Directive 2017/1852 as well as their interaction with EU general principles, fundamental rights and internal market norms (Chapters 5–6). Next, Chapters 7–9 consider the taxpayer’s position in the primarily administrative dispute resolution process, focussing on taxpayer rights, the domestic legal remedies relevant to the implementation and review of MAPs and the merits of mediation as a tool for taxpayers to resolve disputes with tax administrations. Finally, the fourth part of this book (Chapters 10–13) considers the relevance for tax disputes of mechanisms found in trade and investment law, both as a source of insight for the improvement of tax-specific procedures and as mechanisms that can be applied directly to tax disputes.

The InvStG 2018 addressed the various concerns raised from an EU law perspective prior to the reform. The reform of investment tax law can therefore be considered a success in this respect. Explicit disadvantages for cross-border situations existing prior to the reform have been almost completely eliminated with the InvStG 2018. Nevertheless, following the mission to critically examine the law from both a primary law and secondary law perspective, this report highlights points with regard to which a certain need for adjustment can be stated. These are all questions of detail, which are expected to concern only a small number of cases. There are no concerns for the large majority of regulations and cases. The tax saving models addressed by the investment tax reform, in particular the models of "Kopplungsgeschäfte", "Zins- & Dividendensurrogate", "Ertragsausgleich Enhancements" and with the Luxembourg SPF, are in principle effectively eliminated by the conceptual countermeasures in the InvStG 2018. Within the scope of the study, only selective tax avoidance options remained in the context of these models. At the same time, the new conception of investment taxation opened up new scope for tax structuring, particularly in the different partial exemption rates and the option-opening documentary requirements for the partial exemption rates, limited tax liability, real estate income and for tax-privileged investors. New tax structuring opportunities could also arise with cryptocurrencies and tokens. In order to avoid individual tax arrangements, the legislator could take up the regulatory proposals outlined in this report. For investment funds, which are particularly important in the mass case law of investment fund taxation, the InvStG 2018 has achieved its goal of legal and administrative simplification and thus a reduction of the compliance burden. These simplification effects have been relativised by the different partial exemption rates and the retroactive exemptions

Poland’s request to link the entry into force of the Pillar 2 Directive to an international agreement on Pillar 1 raises fundamental questions about the European constitutional structure. Beyond the mere legality of such a link, this contribution seeks to respond to some normative concerns related to the creation of such secondary legislation.

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.

This is a short review of an important anniversary volume of the "International Tax Group", which has made many significant contributions to international tax law over the last 50 years.

In the judgment commented on in this article, the Court of Justice clarified the conditions for the identification of a taxpayer in group requests under the DAC (Directive 2011/16) and confirmed that article 47 of the Charter on Fundamental Rights requires the information holder to be given the necessary information to assess the request’s legality.

The taxation of interest in cross-border situations can often give rise to instances of discrimination, many of which can be remedied through a careful consideration of the non-discrimination rules contained in Article 24 OECD MC. This provision operates in tandem with the distributive rules of the tax treaty, but is not, in general, limited by them. A core difficulty of the application of the non-discrimination provision lies in establishing comparability of situations necessary to identify acceptable distinctions drawn in national law from those that are prohibited. This is especially challenging in the context of interest deduction limitation rules, which often do not simply attached consequences to the recipient's residence but to other criteria, which are however closely linked. This chapter proposes a test that builds on the traditional idea of simply adding the protected condition to characteristics of the disadvantaged taxpayer but refining this approach by searching for scenarios in which the "closely linked" criteria can the detached from each other to single out the basis of the discrimination. This test aims to improve on the rather rough traditional approach without the need for reference to a state's alleged discrimination aims and their "legitimacy" within the international tax system. The contribution goes on to show that both Article 24(4) and Article 24(3) OECD MC have an important role to play for cross-border interest payments to ensure equal treatment with respect to deductibility, the level of taxation and the granting of withholding tax credits.

In this CFE Opinion Statement, the CFE ECJ Task Force comments on the decision of 27 January 2022 in European Commission v. Kingdom of Spain (Form 720) (Case C-788/19) on the lack of proportionality of the consequences derived from the failure to provide information concerning assets or rights held in other Member States of the European Union or the European Economic Area.

The contribution investigates whether any kind of value creation based allocation can be justified with the idea of inter-nation equity and explores whether a change of attribution to attribution on the basis of a standard of "value creation" would result in a fairer distribution of taxing rights at the global level

Digitalization of the global economy has forced a rethink of the allocation of taxing rights along the lines of “value creation”. The current international tax system relies on a vast network of double taxation conventions (DTCs) intended to allocate taxing rights between states and avoid double taxation. However, the system’s logic is rooted in the early 20th century and not fit- ting the modern global economy – particularly in so far as it presupposes a threshold physical presence in form of a “permanent establishment” (PE) to permit taxation in the state of source. Today, the traditional thresholds for giving taxing rights to “states of source” hardly reflect the reality of business activity that strongly relies on intangible assets and the provision of remote services, which are not easy to pin down at any particular place. Calls for fundamental changes crystalized in the OECD and G20 initiated BEPS Project launched in 2013 to reform the international tax system with one overall objective: To “ensure that profits are taxed where economic activities take place and value is created.” Yet despite virtual unanimity on that objective, and great number of measures already taken purportedly contributing to it, there is no clarity on its actual meaning. This contribution seeks to shed light on a potential meaning of "value creation" as it relates to (international) income taxation, employing a cross-disciplinary perspective.

This CFE Opinion Statement, submitted to the EU Institutions on 2 December 2020, addresses the General Court decisions in Ireland v. Commission and Apple v. Commission (Joined Cases T-778/16 and T-892/16) on 15 July 2020.

The suggestion to “align international taxation with value creation” first emerged in the context of the OECD BEPS Project aimed at tackling aggressive tax planning strategies resulting in base erosion and profit shifting. The concept of “value creation” was then further relied on in the broader discussion that followed about the impact of digitalization on the global economy generally and the fair allocation of taxes between countries in this new environment. Although the idea – or the guiding principle – that profits should be taxed where economic activities occur and where value is expected to be created initially received a relatively large support, it rapidly became clear (at least to academics) that there would be no obvious answer to the question “where is value being created?” in a manner that would be relevant for (international) tax purposes, inter alia in view of the different models of value creation within corporate entities. Based on 9 thematic reports (offering an interdisciplinary discussion of the concept of value creation mostly from an international perspective) and on 23 national reports (focusing on the meaning of value creation in domestic tax law), this book seeks to contribute to the discussion on whether the concept of value creation is viable, both theoretically and in practice, as a criterion for the allocation of taxing rights under a modernized international tax framework.

There can be no doubt that “taxing income where value is created” has proved to be a powerful rallying cry to instigate a global tax reform effort. A deeper study of the alleged principle’s roots, meaning and compatibility with existing national and international tax rules shows, however, that a catchy slogan does not easily translate into concrete action. Instead, a lack of clarity on the intended meaning has opened a Pandora’s box full of half- baked ideas on how to “improve” on the international tax system. So far, despite many thousands of pages of new guidelines, tax policy proposals, discussion papers, academic analyses and a host of legislative amendments prepared in an uncoordinated fashion, the vision of a significantly “better” tax system cannot be said to be any closer to becoming a reality. This study analyses the theoretical foundations for an idea that almost certainly has not been conceived of in consequence of a deep reflection on such basis. It shows that the concept – despite being less than solidly grounded on a sound theoretical base – should not be dismissed as meaningless. The “true meaning” of value creation will itself be created in the process of its use, if it continues to be invoked by policymakers as real changes find their way into more and more national tax systems and international law norms. Rather than an exogenous transformative principle in its own right, it is an idea that itself is liable to being transformed; as its success as a tool for reaching consensus among more than 100 countries depends on it remaining persuasive, it cannot be shaped into just any form and survive.

Following the introduction of increasingly complex international tax rules through the OECD's Base Erosion and Profit Shifting (BEPS) Project, a stronger focus has recently been placed on mandatory binding dispute resolution mechanisms. Despite its great appeal from the perspectives of effectiveness and economy of procedure, mandatory tax arbitration faces a number of political, practical and also legal difficulties. This chapter, which is dedicated to H. David Rosenbloom, a long-standing champion of tax arbitration, considers those challenges.

The case concerned the Swedish interest deductibility rules. In Sweden, interest payments are generally deductible. As an exception to this rule, interest payments made to an associated company are generally not deductible. Interest may be deductible, however, if the underlying debt is justified on commercial grounds. Interest payments between two Swedish associated companies are always deductible due to the intra-group financial transfer system. The ECJ had to decide whether or not the difference in treatment of interest payments made to other EU companies, in comparison to interest payments made to Swedish companies, can be justified by overriding reasons in the general interest. The ECJ held that the Swedish rules were not compatible with the freedom of establishment. The decision is of particular interest as many EU Member States have introduced similar interest deductibility rules. Further, it is of interest in respect of the proposed source state rules under the OECD’s Pillar Two Blueprint.