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Edition 99 ● December 2011

EU 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.To subscribe (free of charge) see: www.eutaxalert.com

CJ rules that proposed Gibraltar tax system which would leave offshore companies untaxed constitutes State aid (Commission and Spain v Government of Gibraltar and United Kingdom)On 15 November 2011, the Court of Justice (‘CJ’) issued a landmark ruling in the Gibraltar case (C-106/09 P and C-107/09 P) overturning the General Court’s judgement which had annulled the Commission’s 2004 negative decision on the matter. The CJ ruled that the proposed general tax system would grant selective State aid due to the fact that it would leave offshore companies effectively untaxed. (See: Top News)

CJ considers Netherlands corporate exit taxation on unrealized gains a justifiable restriction on the freedom of establishment but the immediate levy/collection of taxes disproportionate (National Grid Indus)On 29 November 2011, the CJ rendered its judgment in the National Grid Indus case (C-371/10). The CJ held that a tax charge on unrealised capital gains upon transfer of the place of effective management of a company is not precluded by the freedom of establishment; the immediate collection of such tax is, however, disproportionate. (See: Top News)

Commission proposes amendments and recast to Interest and Royalty DirectiveOn 11 November 2011, the Commission released a proposal (COM (2011) 714 final) for amendments and recast to the Interest and Royalty Directive with the goal of aligning the scope of the Directive with that of the Parent-Subsidiary Directive and guarantee taxation at least once in a Member State. (See: Top News)

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E U Ta x A l e r t Edition 99 ● December 2011 2

attorneys ● tax lawyers ● civil law notaries

VAT• CJ elaborates on principle of fiscal neutrality with

respect to different VAT treatment of allegedly similar services (The Rank Group)

• CJ rules that Germany incorrectly did not allow the Court of Auditors to perform an audit (Commission v Germany)

• CJ rules that transfer of totality of assets can, in principle, take place when the premises forming part of those assets are not sold but leased (Christel Schriever)

• Advocate General opines that Italian provision for conclusion of cases without a decision on the substance is in line with EU VAT law (Belvedere Costruzioni Srl)

• Advocate General opines that a taxable person may only deduct import VAT that he is legally obliged to pay (Société Véléclair)

• Commission refers the Netherlands to CJ over its VAT rules for travel agents

• Commission refers Italy to CJ over its VAT exemption for ships

Customs Duties, Excises and other Indirect Taxes• CJ rules on the customs debt incurred through the

unlawful introduction of goods (Jestel)• CJ rules on the exemption of excise duties on mineral

oils used for an excavator affixed to a vessel (Sea Fighter)

• Commission requests Italy to review its judicial practice on remission and repayment of duties

• The EU has welcomed the conclusion of negotiations for Russia’s accession to the WTO

• Commission asks the United Kingdom to pay due amounts of customs duties to EU budget

• More efficient cooperation in collecting excise duties • Taxation and Customs: Delivering to Member States,

citizens and businesses post-2014

ContentsTop News• CJ rules that proposed Gibraltar tax system which

would leave offshore companies untaxed constitutes State aid (Commission and Spain v Government of Gibraltar and United Kingdom)

• CJ considers Netherlands corporate exit taxation on unrealized gains a justifiable restriction on the freedom of establishment, but the immediate levy/collection of taxes disproportionate (National Grid Indus)

• Commission proposes amendments and recast to Interest and Royalty Directive

State Aid / WTO• EFTA Court upholds recovery of tax benefits

for Liechtenstein captive insurance companies (Principality of Liechtenstein and others v EFTA Surveillance Authority )

Direct taxation• Commission adopts Regulation laying down detailed

provisions to implement the new Mutual Assistance Directive for the Recovery of Taxes

• Council adopts recast Parent-Subsidiary Directive • Finance ministers of the ‘Euro Plus Pact’ endorse a

report on tax policy coordination • CJ rules that Hungarian rules on transfer tax levied on

the purchase of residential property are in line with EU law (Commission v Hungary)

• Advocate General finds Estonian rules regarding taxation of pensions paid to non-residents in violation of EU law

• Commission adopts Communication on double taxation

• Commission’s 2012 Work Programme includes steps to protect public revenues

• Commission’s Annual Growth Survey gives guidelines for growth-friendly tax policies

• Commission refers the Netherlands to CJ over discriminatory inheritance and gift tax rules

• Commission asks Belgium to end the additional taxation of certain types of income from capital



companies from taxation or reduce their tax burden in particular, even if the latter is the result of a general exclusion of a particular category of income. Member States must thus determine whether the non-taxation or reduced taxation of a category of income would, in fact, mainly benefit a certain sector of industry because of its particular dependency of that type of income, even if such treatment would be legally available to all.

CJ considers Netherlands corporate exit taxation on unrealized gains a justifiable restriction on the freedom of establishment, but the immediate levy/collection of taxes disproportionate (National Grid Indus)On 29 November 2011, the CJ rendered its judgment in the National Grid Indus case (C-371/10). The CJ held that a tax charge on unrealised capital gains upon transfer of the place of effective management of a company is not precluded by the freedom of establishment. No deduction has to be allowed for any decrease in value of assets after the date of emigration. However, the company transferring its place of effective management should be provided the choice between immediate payment of the tax due and deferral of payment until the capital gains are actually realised. The CJ limited the practical effect of its judgment by stating expressly that Member States may charge interest on deferred payment of exit charges and may request the emigrating taxpayer to provide security for the deferred tax payment.

In 2000, National Grid Indus BV (‘National Grid Indus’), a company incorporated under Netherlands law, transferred its place of effective management to the UK without maintaining a permanent establishment in the Netherlands. The only assets of the company were receivables in GBP which, at the moment of the transfer of seat, carried unrealised currency gains. The transfer of the place of effective management of the company triggered Netherlands corporation tax (an ‘exit taxation’) of such currency gains. In the course of the following court procedure, the Court of Appeal in Amsterdam referred the case to the CJ, as it had doubts whether such exit taxation was compatible with EU law.

Top News

CJ rules that proposed Gibraltar tax system which would leave offshore companies untaxed constitutes State aid (Commission and Spain v Government of Gibraltar and United Kingdom)On 15 November 2011, the Court of Justice (‘CJ’) issued a landmark ruling in the Gibraltar case (C-106/09 P and C-107/09 P). It overturned the General Court’s judgement annulling the Commission’s 2004 decision that held Gibraltar’s proposed tax system to be State aid incompatible with the internal market.

The new system, which was intended to replace Gibraltar’s corporation tax by a new general system of taxation on corporations, would have mainly consisted of a payroll tax and a business property occupation tax, both of which together would have been capped at 15% of business profit. The CJ found that despite such profit criterion being alien to both taxes it was not in itself selective. It agreed with the General Court in this respect. However, due to the fact that offshore companies would have effectively remained untaxed under the new general tax from the outset, the CJ held Gibraltar’s choice of a limited basis for assessment to be selective after all. In its view, the absence of another basis for assessment was meant to accommodate the offshore industry based on its special characteristics as it would not pay tax due to lack of staff and property. The CJ found selectivity to be present despite the fact that 99% of Gibraltar-registered companies would be among those left untaxed.

This Grand Chamber decision thus resulted in a far broader interpretation of selectivity than was apparent from previous case law, as it would affect the tax treatment of general categories of income. The CJ emphasized that the regulatory technique used should not matter if it produces the same effect of selectivity in law or in fact. From this judgment, it follows that Member States need to consider whether the tax base of their general tax on corporate profits is broad enough so not to effectively exempt certain



Grid Indus as of the emigration date and, consequently, it is for the United Kingdom to take into account any subsequent value changes.

With respect to the actual levy and collection of the exit tax (i.e. date of payment), the CJ held that the immediate levy/collection was disproportionate and therefore, in breach of EU law. A proportionate measure would be if the Netherlands law offered a company which transfers its place of effective management the choice between immediate payment of taxes and a system of interest bearing deferral of such tax until the date of realisation. The Netherlands may ask for security, as provided for in its national law, for instance, in the form of a bank guarantee.

National Grid Indus thus won the case before the CJ, as the immediate collection as it took place was considered disproportionate. The question now is, whether this can simply be mended only by deeming the amounts paid on the tax assessment as security, or whether the actual tax assessment will be cancelled, given that currently, the law does not provide for such a system as suggested by the CJ.

Commission proposes amendments and recast to Interest and Royalty DirectiveOn 11 November 2011, the Commission released a proposal (COM (2011) 714 final) for a Council Directive on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States. The Directive proposes some amendments and recasts, for the sake of clarity, to the original Interest and Royalty Directive (Directive 2003/49/EC), which has been amended by Directives 2004/66/EC, 2004/76/EC and 2006/98/EC.

The main goal of the proposed amendments is to align the scope of this Directive with that of the Parent-Subsidiary Directive (Directive 90/435/EEC) and guarantee taxation at least once in a Member State. In that regard, it proposes:

• to extend the list of companies to which the Directive applies;

The CJ gave its judgment only two and a half months after the Opinion of Advocate General Kokott had been issued, in which she proposed to declare the Netherlands exit tax a restriction on the freedom of establishment, which could only be justified if it is reasonably not possible to trace the assets transferred due to the company’s emigration (see EU Tax Alert edition no. 96, September 2011).

First, the CJ ruled that a Netherlands company transferring its place of effective management could claim protection under the freedom of establishment set out in Article 49 and 54 of the Treaty on the Functioning of the European Union (‘TFEU’). The CJ reasoned that this was possible due to the fact that National Grid Indus maintained its legal personality under Netherlands law even after the transfer of its place of effective management to the United Kingdom. This is the consequence of the ‘incorporation system’ that the Netherlands adheres to under its company laws. It follows that the tax consequences of the transfer of the place of effective management from Member States using the ‘real seat’ (siège reel) system can be different.

The CJ then held that the Netherlands exit taxation constitutes a restriction on the freedom of establishment. If the company had transferred its place of effective management within the Netherlands, Netherlands corporate income tax would not have been imposed. In such a situation, hidden reserves would have only been subject to tax to the extent actually realised. The CJ held that such restriction was, in principle, justified by the need to maintain a balanced allocation of taxing powers between the Member States. The Netherlands did not have to give up its tax claim on unrealised gains as a result of the transfer of the company’s place of effective management.

The CJ further held that it was proportionate to definitively determine the unrealised gains at the time of transfer of the place of effective management. In deviation from the N case (C-470/04), the CJ held that the Netherlands did not have to take into account any decrease in value of assets after such time. The United Kingdom has the exclusive right to tax the gains on the assets of National



Direct TaxationCommission adopts Regulation laying down detailed provisions to implement the new Mutual Assistance Directive for the Recovery of TaxesOn 18 November 2011, the Commission adopted a new Regulation laying down detailed provisions to implement Council Directive 2010/24/EU of 16 March 2010 concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures (’Mutual Assistance Directive for the Recovery of Taxes’). The main objectives of the new Mutual Assistance Directive for the Recovery of Taxes were to extend the Directive’s scope to all taxes and duties levied by Member States and by their territorial or administrative subdivisions and to improve the capacity of the Member States in cross-border collection of taxes (see EU Tax Alert edition no. 78, April 2010). The Member States are required to implement the new Directive by 31 December 2011.

The Commission’s current implementing Regulation introduced various tools which include, in particular, a uniform instrument to allow debt recovery decisions to be enforced. The aim is to avoid problems of translation and recognition of foreign legal and procedural instruments. Another concrete tool is a uniform notification form that will enable taxpayers in other Member States to be notified of official documents and decisions. These measures are expected to facilitate and accelerate cooperation between Member States’ tax administrations, leading to more efficient revenue collection.

Council adopts recast Parent-Subsidiary Directive On 30 November 2011, the Council of Economic and Finance Ministers (ECOFIN) adopted a directive recasting rules on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States.

• to reduce the shareholding requirement - from 25% to a direct or indirect 10% shareholding – which is to be met by companies to qualify as associated; and

• it clarifies that Member States should grant the benefits of the Directive only where the interest or royalty payments concerned are not exempt from corporate income tax in the hands of the beneficial owner. By stating that the receiving companies should be objectively subject to tax, the Directive aims at guaranteeing that payments are taxed at least once in a Member State.

State Aid/WTOEFTA Court upholds recovery of tax benefits for Liechtenstein captive insurance companies (Principality of Liechtenstein and others v EFTA Surveillance Authority) On 10 May 2011, the EFTA Court upheld a 2010 decision of the EFTA Surveillance Authority concerning Liechtenstein captive insurance companies (Joined Cases E-4/10, E-6/10 and E-7/10).

These companies were allowed a reduction of capital tax and an exemption from coupon tax and business income tax.

The Court held that captive insurance companies did exercise at least some economic activity, as a result of which, State aid rules applied to them. It found that captive insurance companies did not exclusively provide services that were not available from commercial insurers and hence, they competed on the market. The Court also upheld the recovery part of the decision, covering a period of over eight years (November 2001 - December 2009). The start date of the recovery period had been set from the day the European Commission published its decision to start an (EU) investigation into captive insurance in the Åland Islands, an autonomous part of Finland. It did not agree that the regime was existing aid, as it had been introduced as of 1998, the year Liechtenstein acceded to the Agreement on the European Economic Area (‘EEA’).



The Hungarian provisions at issue (Articles 2 and 21(5) of Law XCIII of 1990 (‘Law XCIII’)) provide that when buying a residential property in Hungary, the purchaser may – if he or she sells his or her previous residential property within a certain period – pay the transfer tax on the basis of the difference in value between the acquired property and the sold property instead of the full value of the acquired property provided that the property which had been sold is also situated in Hungary. In the Commission’s view, these provisions result in a less favourable treatment of taxable persons who sell property in another Member State than those who sell property situated in Hungary. Therefore, they discourage the former category of persons from exercising their right to free movement and establishment in Hungary. Hence, the Commission initiated an infringement procedure against Hungary and eventually brought the case before the CJ. The Commission claimed that the Hungarian provisions at issue were in breach of the freedom of movement of Union citizens, the freedom of movement of workers and the freedom of establishment (Articles 21, 45, 49 TFEU) and the corresponding provisions of the Agreement on the European Economic Area (EEA) (Articles 28 and 31 EEA).

As regards the existence of a restriction on free movement, the CJ held that the Hungarian rules at issue are liable to deter persons owning a residential property abroad from establishing themselves in Hungary and as such, they constitute a restriction on the right to free movement. Contrary to the arguments of the Hungarian government and the Opinion of the Advocate General (see EU Tax Alert edition no. 88, January 2011), the CJ ruled that persons who purchase a residential property in Hungary are in a comparable situation whether they move within Hungary by selling their previous residential property situated in Hungary or they move to Hungary from another Member State or EEA State by selling their previous dwelling situated in that State. The CJ emphasized that the comparability of the two situations have to be determined in the light of the objective pursued by the measure at issue.

Finance ministers of the ‘Euro Plus Pact’ endorse a report on tax policy coordination Finance ministers of the Member States participating in the ‘Euro Plus Pact’ (see EU Tax Alert edition no. 91, April 2011) endorsed a report on tax policy coordination responding to the call of the European Council made in June 2011.

The ‘Euro Plus Pact’ includes a specific section on the coordination of tax policies, calling for a structured dialogue between the participating Member States. The report identifies the following issues to be addressed in the dialogue:

• avoidance of harmful practices;• fight against fraud and tax evasion;• exchange of best practices;• international coordination.

It suggests that these elements serve as a starting point for further work under the Pact in the field of taxation. The Council’s high-level working group on tax issues will be the focal point for tax policy coordination. It will be responsible for examining recommendations put forward by the Commission and other relevant bodies, for monitoring progress and reporting to the political level. The finance ministers agreed to forward the report to the European Council with a view to its meeting on 9 December 2011.

CJ rules that Hungarian rules on transfer tax levied on the purchase of residential property are in line with EU law (Commission v Hungary) On 1 December 2011, the CJ rendered its judgment in the Commission v Hungary case (C-253/09) holding that Hungarian rules which make a benefit relating to a tax levied on the purchase of residential property conditional upon the location of another property sold in connection with the purchase, constitute justified restriction on the free movement provisions of the TFEU.



at issue do not infringe the free movement provisions under Articles 45, 49 and 21 TFEU and Articles 28 and 31 EEA.

Advocate General finds Estonian rules regarding taxation of pensions paid to non-residents in violation of EU lawOn 24 November 2011, Advocate General Jääskinen gave his Opinion in the case Commission v. Estonia (C-39/10). The Commission brought Estonia to the CJ in an infringement procedure concerning its rules regarding taxation of pensions paid to non-residents. The Commission claims that the Estonian individual income tax provisions which do not make it possible to grant an exemption from income tax to non-residents who receive half of their income from Estonia and the other half from some other Member State, and whose total income is so small that exemption from income tax would apply to them if they were resident in Estonia, are contrary to the free movement of workers set out in Article 45 TFEU. The Estonian rules at issue provide non-residents with the low income exemption if they earn at least 75% of their income in Estonia in line with Commission Recommendation 94/79/EC of 21 December 1993 on the taxation of certain items of income received by non-residents in a Member State other than that in which they are resident (‘Recommendation’).

The Commission received a complaint from an Estonian national residing in Finland who was denied, in relation to his pension, the usual income-tax-free threshold granted to residents, as well as the supplementary income-tax-free threshold to which pensioners resident in Estonia were entitled. Half his income was received in the form of a pension from Estonia, and the other half as a pension from Finland. As his total income did not exceed the taxable income threshold in Finland, he was not liable to tax there and could not obtain relief for the tax paid in Estonia. If he had received all his income from one and the same Member State, he would have been subject to a lower tax or not taxed at all.

The objective of the Hungarian provisions is to subject to transfer tax, all acquisitions of residential property in Hungary where the basis of assessment of the transfer tax is the market value of the property with preventing, however, that the resources used for the acquisition of the previous property, which had already been subject to a transfer tax, would be charged again. The objective of taxing the capital used for the acquisition of residential property only once is relevant both in the situation where the previous property sold in connection with the purchase is situated in Hungary and where it is situated in another Member State or EEA State. By not extending the benefit of the calculation of the basis of assessment of the transfer tax to those who sell their dwelling situated abroad, the provisions result in less favourable treatment of objectively comparable situations.

The CJ ruled, however, that the restriction entailed by the provisions could be justified by the need to preserve the coherence of the tax system. In this respect, the CJ found a direct link between the benefit relating to the calculation of the basis of assessment and the transfer tax which had previously been levied on the acquisition of the residential property sold in connection with the purchase. Extending the benefit to persons who had not previously paid a transfer tax in Hungary would upset the coherence of the system based on such symmetry. In addition, the provisions at issue are appropriate and proportionate to the aim pursued by them, i.e. avoiding double taxation of the capital used for the purchase of residential property, having regard to the fact that the tax jurisdiction of Hungary does not extend to property transactions carried out in other Member States. It is true that property transactions carried out in other Member States may be liable to charges similar to or even identical with the Hungarian transfer tax at issue, the Court recalled, however, that at the current stage of development of EU law, the Member States have certain autonomy in tax matters and hence, they are not obliged to adjust their tax system to the differing other systems of the Member States, in particular, in order to eliminate double taxation (Columbus Container C-298/05 and Block C-67/08). Hence, the Hungarian rules



is better placed to fully take into account the personal situation of pensioners, and that pensioners usually create additional burdens for the country in which they reside.

To examine whether there is an unjustified difference in treatment, the Advocate General looked at the objective of the contested legislation. The Commission argues that the legislation has the objective to exempt pensioners with low income from taxation, thereby not contributing to public finances. In the Commission’s opinion, the residence of the pensioner is irrelevant to attain the objective.

The obstacle to the freedom of movement of workers lies in the tax consequences of receiving two pensions of almost the same value from two Member States. Estonia treats the non-resident pensioner worse than if he resided in Estonia or if the Estonian sourced pension constituted at least 75% of his worldwide income. Since residents and non-residents are in comparable situations, the difference in treatment constitutes a breach of EU law. The Advocate General argues that the prevention of abuse in the form of double deduction, which would allow escaping any taxation of the income, is no justification for such breach, as the residence State (Finland) takes the total income into account.

Commission adopts Communication on double taxation On 11 November 2011, the Commission adopted a Communication on double taxation pointing out where the main double taxation problems lie within the EU and outlining concrete measures that the Commission plans to take to address them.

Double taxation resulting from the inconsistent interaction of different domestic tax systems is a major impediment and a real challenge for the internal market. It creates barriers to cross-border establishment, activity and investment in the EU, the removal of which is in the interest of business and citizens. This has already been highlighted in the Monti report (see EU Tax Alert edition no. 80, June 2010), the Single Market Act and the EU Citizenship report (see EU Tax Alert edition no. 86, December 2010). The results of recent public consultations on double taxation

In this case, the Advocate General proposed that the CJ should dismiss the action brought by the Commission because the allegation lacks clarity. Since the arguments of the Commission are not sufficiently clear, Estonia has not been able to prepare its defence.

Alternatively, the Advocate General argues that the contested Estonian rules are in breach of EU law. The Estonian government argued that the Commission did not comply with its own Recommendation when it started an infringement procedure against Estonia. In this Recommendation, the position was taken that a non-resident is in the same situation as a resident and therefore, should be treated equally to residents of the source State, only if the non-resident receives at least 75% of its income from the source State. The Advocate General states that the Estonian rules are clearly drafted with the above-mentioned recommendation in mind, but at the same time, mentioned that this in itself is no guarantee that those rules are excluded from every possible risk of being subject of an infringement procedure, since a recommendation is not legally binding. On the other hand, a recommendation serves as an interpretation tool to check whether national legislation has been adopted in line with EU law and may create legitimate expectations which can be invoked during a dispute. The Commission however, indicated that in its Recommendation, it is clearly stated that it would not affect its active policy in ensuring that national legislation of Member States complies with EU law. The Advocate General further notes that the Commission does not call for revising its settled case law on the issue (Schumacker C-279/93, Wallentin C-169/03 and Turpeinen C-520/04) but rather would like to have clarified whether these principles, as expressed in previous case law, would also apply to a new situation where an inactive person receives pensions from various Member States without one being more significant than the other, whereas the previous cases brought before the Court dealt with active persons performing employment in two Member States during a fiscal year. The Advocate General also refers to Article 18 of the OECD Model Convention regarding pensions to underline that pensions are treated differently from regular employment income and which indicates the underlying policy that the residence State



• resolving cross-border double taxation of dividends paid to portfolio investors, an initiative which will follow in 2012;

• extension of the coverage and the scope of DTCs (to triangular situations and to entities and taxes currently not covered by them);

• facilitating more consistent interpretation of DTCs, e.g. by having regard to identical or similar notions existing under EU law and by exploring the possibility of setting up an EU Forum on double taxation consisting of the Member States’ representatives and elaborating a Code of Conduct on double taxation in the latter’s framework; and

• ease and accelerate dispute resolution within the EU, e.g. exploring the possibility of binding dispute resolution scheme within the EU.

Finally, the Communication emphasizes that not only double taxation but also double non-taxation contradicts the very spirit of the Single Market. Therefore, the Communication envisages the launch of a fact-finding consultation procedure in order to determine the full scale of this phenomenon.

Commission’s 2012 Work Programme includes steps to protect public revenues On 15 November 2011, the Commission adopted a Work Programme for 2012 with the title ‘Delivering European renewal’. The Programme sets out how the Commission will build on the ambitious set of existing proposals to respond to the economic crisis with further measures next year. The completion of the financial sector reform in 2012 is one of the main aims of the Programme, with a focus on investor protection. The Commission will also take steps to protect public revenues in areas such as tax havens and VAT fraud. The other priorities mentioned in the Programme relate to the strengthening of the Single Market as the most important vehicle for job creation and growth (e.g. measures on the digital single market, pensions, vehicle emissions, water supplies) and giving the EU an effective voice in the wider world (e.g. trade agreements, support the development of the Southern Mediterranean).

confirmed that taxpayers in the EU are also significantly concerned about these obstacles (see EU Tax Alert edition no. 79, May 2010; edition no. 81, July 2010; edition 83, September 2010).

Double taxation does not fall within the scope of the fundamental freedoms, as long as it results from the parallel exercise of tax sovereignty by the Member States concerned. However, other instruments exist under EU law to tackle certain instances of double taxation. The Communication points, inter alia, to the directives existing in the field of direct taxation, the Arbitration Convention, the achievements of the Joint Transfer Pricing Forum (JTPF) and the proposal for the Common Consolidated Corporate Tax Base (CCCTB). In addition, double taxation conventions (DTC) entered into by the Member States lay down important relief mechanisms. However, these instruments are fraught with insufficiencies, such as:

• Council Directive 2003/49/EC on a common system of taxation applicable to interest and royalty payments made between associated companies of different Member States (the ‘Interest and Royalties Directive’) is limited in scope;

• DTCs do not cover all taxes relevant from a Single Market point of view (e.g. registration duties), they are not interpreted consistently by the Member States (especially, as regards the definitions of royalty, dividends, business income, permanent establishment) and they do not provide for uniform solutions for triangular situations; and

• mutual agreement procedures, both under DTCs and the Arbitration Convention, take too long and often do not succeed in removing double taxation.

Possible solutions to the above include:

• strengthening existing instruments, e.g. the recast of the Interest and Royalty Directive a proposal for which was presented by the Commission simultaneously with this Communication (see news item above);

• resolving double taxation in the sphere of inheritance tax with regard to which, the Commission will shortly present an initiative;



The Member States are currently facing two overarching challenges in the area of tax policy. The first is combating tax fraud and evasion, reducing tax gaps, and improving the efficiency of tax collection. The second challenge is improving the growth-friendliness of the overall structure of taxation. In the light of these, the Commission suggests that, instead of arbitrarily raising rates, Member States should look at how to improve their current tax systems to raise revenues by for example reconsidering tax breaks, broadening tax bases and phasing out hidden tax subsidies. Further, taxes should shift away from areas that impede growth (labour, corporate taxes) towards more growth-friendly taxes (consumption, environment). Remaining cross-border tax obstacles for businesses should be removed by agreeing on proposals such as the Common Consolidated Corporate Tax Base (CCCTB) and the Energy Tax Directive. Combating tax evasion and fraud should also be high on the agenda of Member States. An important goal in this respect is the adoption of a common policy towards uncooperative jurisdictions.

Coordination at EU level is crucial to help Member States meet the challenges described above. Tax coordination, as well as EU legislation, is particularly relevant to address three different issues, namely: (i) removing obstacles to the Single Market and thereby creating a level playing field for businesses and individuals, for example, by tackling double taxation; (ii) limiting and preventing non-taxation and abuse; and (iii) preventing harmful tax competition. As regards the last point, harmful tax competition can only be addressed through international cooperation within the EU as well as in the relationships with third countries. Important in that context is that discussions have started on the promotion of the principles of the Code of Conduct on business taxation towards Switzerland and Liechtenstein.

Another issue regarding harmful tax practices is combating tax arbitrage within the EU. The Commission notes that in recent years, businesses have been engaged in increasingly complex tax engineering, exploiting benefits stemming from the imperfect alignment of the Member States’ tax systems. The Commission is of the view that it is necessary to expand the work of the Code of Conduct Group to ensure that mismatches between tax systems

Annex 1 to the Work Programme for 2012 lists 129 initiatives which the Commission intends to deliver in 2012, and other possible initiatives which it will consider until the end of its mandate. Amongst the planned measures is an initiative concerning good governance in relation to tax havens by which a reinforced strategy will be developed to protect the EU against the challenges of uncooperative jurisdictions outside the EU (including tax havens and aggressive tax planning). Also on the agenda is tackling double taxation on cross-border dividend payments to portfolio investors. The EU should come up with solutions to the double taxation problems caused by the levying of withholding taxes on cross-border dividends paid to portfolio investors. Another objective is developing a Quick Reaction Mechanism against VAT fraud. The procedure for granting derogations in the case of massive VAT fraud phenomena is not sufficiently flexible to ensure a prompt and suitable reaction. The proposed new mechanism for adopting derogatory measures would considerably increase the speed in dealing with these problems. Its ultimate objective is to counter massive fraud schemes before they start having a considerable impact on national budgets.

Commission’s Annual Growth Survey gives guidelines for growth-friendly tax policiesOn 23 November 2011, the Commission released a package as part of its efforts for economic renewal which contains four elements: the 2012 Annual Growth Survey; two Regulations to tighten economic and budgetary surveillance in the euro area; and a Green Paper on Stability Bonds.

The 2012 Annual Growth Survey, which is the starting point for the second European Semester of economic governance, sets out what should be the EU’s priorities for the next year in terms of budgetary policies and structural reforms. In an annex to the 2012 Annual Growth Survey entitled ‘Growth Friendly Tax Policies in Member States and Better Tax Coordination in the EU’, the Commission advises the Member States on how to pursue a differentiated growth-friendly fiscal consolidation and how to improve the quality of their revenues.



In November 2010, the Commission sent a reasoned opinion to Belgium asking it to amend its legislation within two months (see EU Tax Alert edition no. 86, December 2010). Belgian legislation was amended in May 2011 to reflect the CJ’s ruling in the Dijkman and Dijkman case (C-233/09). The amendments, however, only partly corrected the infringement. Non-EEA-source portfolio dividends and interest which have not been received/collected by an intermediary established in Belgium remain liable to the additional taxation. In view of this, the Commission has now sent an additional reasoned opinion to Belgium.

VAT CJ elaborates on principle of fiscal neutrality with respect to different VAT treatment of allegedly similar services (The Rank Group)On 10 November 2011, the CJ delivered its judgment in the joined cases relating to The Rank Group (C-259/10 and C-260/10). The Rank Group operated bingo clubs and casinos in the UK in which customers had access to mechanized cash bingo (‘MCB’) and slot machines. VAT was declared and paid to the tax authorities with respect to the services rendered by means of MCB and slot machines. Subsequently, The Rank Group requested a refund of the VAT on the grounds that different types of MCB and slot machines were treated differently for the VAT exemption of Article 13B(f) of the Sixth EU VAT Directive even though they were identical from a customer’s point of view. According to The Rank Group, this was not in line with the principle of fiscal neutrality.

In respect of services rendered by means of MCB, a VAT exemption only applied under UK rules if the stake was lower than or equal to 50 pence, and the prize lower than or equal to GBP 25. Otherwise, the services were taxable with VAT. Even though the two types of MCB were identical from a customer’s point of view, the UK tax authorities maintained that there was no breach of the principle of fiscal neutrality, because there was no evidence that the different treatment had affected competition between those games.

do not lead to harmful results for tax administrations or business and to reduce the instances of double non-taxation. The Commission adds that if results cannot be achieved by the end of 2012, the Commission will look to its right of initiative as a means of addressing these matters.

Commission refers the Netherlands to CJ over discriminatory inheritance and gift tax rules On 24 November 2011, the Commission announced that it had referred the Netherlands to the CJ for discriminatory rules on inheritance and gift duties. Under Netherlands legislation, country estates located in the Netherlands are fully or partially exempt from inheritance and gift duties, whereas the inheritance or gifts of country estates in other EEA States are taxed on 100% of their market value. In line with the CJ’s judgement in Jäger (C-256/06), the Commission considers this difference in treatment for Netherlands country estates compared to country estates elsewhere in the EEA, to be contrary to the free movement of capital.

On 30 September 2010, the Commission sent a reasoned opinion to the Netherlands (second stage of the infringement procedure under Article 258 TFEU) requesting it to ensure compliance with the EU rules (see EU Tax Alert, edition no. 84, October 2010). However, the Netherlands refused to change its law, hence, the referral to the CJ.

Commission asks Belgium to end the additional taxation of certain types of income from capitalOn 24 November 2011, the Commission officially requested Belgium to abolish additional taxation of certain types of income from capital deriving from outside the EEA and not received/collected by an intermediary established in Belgium. The same income paid by an intermediary established in Belgium is subject only to withholding tax.

Article 63 TFEU prohibits any restriction on the movement of capital or payments between Member States and between Member States and third countries.



Finally, the CJ addressed the argument of the UK tax authorities that there was a justified difference in the VAT treatment, because they had only become aware of the existence of the ‘comparator machines’ later, and that they had acted with due diligence in adopting appropriate measures within a reasonable time in order to put an end to the different VAT treatment. According to the CJ, the principle of fiscal neutrality had to be interpreted as meaning that a Member State which has decided to exempt from VAT the provision of all facilities for games of chance on the basis of Article 13B(f) of the Sixth EU VAT Directive, while excluding from that exemption a category of machines that meet certain criteria, was not allowed to contest a claim for reimbursement of VAT based on the breach of that principle, by arguing that it had responded with due diligence to the development of a new type of machine not meeting those criteria.

CJ rules that Germany incorrectly did not allow the Court of Auditors to perform an audit (Commission v Germany) On 15 November 2011, the CJ gave its judgment in an infringement procedure in the Commission v Germany case (C-539/09). The Commission had referred Germany to the CJ over its refusal to permit the European Court of Auditors to perform an audit in Germany in order to review cross-border administrative cooperation in the field of VAT. The German Federal Ministry of Finance was of the opinion that the audit in Germany had no valid legal basis.

As one of the preliminary remarks, the CJ indicated that there is a link between the collection of VAT revenue in compliance with the applicable Community law on the one hand, and the availability to the Community budget of corresponding VAT resources on the other. With respect to the mechanisms provided for by Regulation 1798/2003, concerning the cooperation between the administrative authorities of the Member States in the field of VAT, the CJ noted that these mechanisms are intended to combat VAT fraud and avoidance. As such, they had a direct and fundamental impact on the effective collection of VAT revenue and, therefore, on the availability to the

As for the slot machines, the application of the exemption was excluded under UK rules if the machine in question qualified as a ‘gaming machine’. According to The Rank Group, the ‘gaming machines’ that it operated were, however, from a customer’s point of view similar to so-called ‘comparator machines’ which, in practice, were being treated as VAT exempt by the UK tax authorities. In this regard, the Commissioners denied that the two types of machines were in competition with each other, and that there existed a relevant practice of treating the ‘comparator machines’ as VAT exempt.

The CJ ruled that a different treatment of services, which were identical or similar from the point of view of the customer and which met the same needs of the customer, was precluded by the principle of fiscal neutrality. According to the CJ, it was not required to establish the actual existence of competition between the services in question, or distortion of competition because of such difference in treatment.

With respect to the assessment of comparability, the CJ ruled that it was irrelevant that two games of chance fell into different licensing categories and were subject to different legal regimes relating to control and regulation was irrelevant. However, differences relating to the minimum and maximum stakes and prizes, the chances of winning, the formats available, and the possibility of interactions between the player and the slot machine were, according to the CJ, liable to have a considerable influence on the decision of the average customer. The CJ, therefore, indicated that such matters were to be taken into account in order to assess whether two types of slot machines were similar in the light of the principle of fiscal neutrality.

In respect of the practice, on the basis of which the UK tax authorities treated the services rendered by means of the ‘comparator machines’ as VAT exempt, the CJ ruled that these services were - regardless of the practice - not exempt under the relevant national legislation, and that a reimbursement of VAT could, therefore, not be reclaimed on the basis of the principle of fiscal neutrality.



According to the CJ, the question whether or not the business premises were transferred is not relevant in the event that the transfer of the stock and fittings of the outlet was sufficient to allow continuation of an independent economic activity. If the continuation of the economic activity, however, required that the transferee used the same premises as were used by the transferor, the CJ ruled that there was, in principle, no reason why possession of those premises could not be transferred by means of a lease contract.

The CJ indicated that the lease contract could be of relevance in the overall assessment for determining whether there was a transfer of a totality of assets, because the purchaser must have had the intention of continuing the business. According to the CJ, the fact that the purchaser had continued to operate the shop for nearly two years confirmed in this regard that its intention was not to immediately liquidate the activity concerned.

Finally, the CJ indicated that the duration of the lease and the procedure for terminating it had to be taken into account in an overall assessment of the transaction transferring the assets, given that it could be relevant for determining whether or not it is possible to carry on the economic activity on a lasting basis. According to the CJ, the possibility of terminating a lease contract of indefinite duration by giving short term notice did not, however, of itself support the conclusion that the transferee intended to liquidate (part of) the transferred business immediately. The application of Article 5(8) of the Sixth EU VAT Directive could, therefore, not be refused on that ground alone.

Advocate General opines that Italian provision for conclusion of cases without a decision on the substance is in line with EU VAT law (Belvedere Costruzioni Srl) On 17 November 2011, Advocate General Sharpston delivered her Opinion in Belvedere Costruzioni Srl case (C-500/10).

Community budget of VAT resources. As a result, the CJ concluded that the Court of Auditors had the power, under Article 248 EC, to carry out the planned audits in Germany concerning administrative cooperation under Regulation 1798/2003, and that Germany had failed to comply with its obligations under that article.

CJ rules that transfer of totality of assets can, in principle, take place when the premises forming part of those assets are not sold but leased (Christel Schriever) On 10 November 2011, the CJ delivered its judgment in the Christel Schriever case (C-444/10).

Ms Schriever ran a retail business, selling sports equipment from premises belonging to her. In 1996, she transferred the stock and fittings of the shop to Sport S. GmbH. Moreover, she leased the premises where the business was carried on to Sport S. GmbH for an indefinite period of time. The parties agreed that the lease contract could be terminated by either party on short notice. Sport S. GmbH ran the shop for nearly two years.

Taking the view that it concerned a transfer of a totality of assets within the meaning of Article 5(8) of the Sixth EU VAT Directive, Ms Schriever did not declare the proceeds of the transfer of the stock and fittings in the 1996 VAT return. The Tax Office was of the opinion, however, that the conditions for a transfer of a totality of assets were not satisfied, because the business premises, which were not among the items sold to Sport S. GmbH, constituted an essential element of the business. Eventually, the case was brought before the Federal Finance Court. The latter asked whether a transfer of a totality of assets within the meaning of Article 5(8) of the Sixth EU VAT Directive could take place in the case a trader transferred the stock and fittings of his retail outlet to a purchaser, and merely leased the premises which he owned to the purchaser. Moreover, the court inquired whether the contractual terms of the lease contract were relevant in this regard.



likelihood of collection had to be weighed against potential revenue and that at some point in time, there had to be legal certainty.

Finally, the Advocate General saw a potential conflict with the principle of fiscal neutrality, because the provision only applied to appeals lodged before the Commissione Tributaria Centrale. As a result, it only applied to appeals that had been lodged before 1 January 2007. For appeals lodged after that date with the competent court,,which was the Corte di Cassazione, a similar provision did not apply. According to the Advocate General, it did not seem acceptable to have different effects depending simply on the date on which the final appeal was lodged. However, the Advocate General concluded that this in itself was not sufficient to hold the disputed provision as being incompatible with Italy’s duty to ensure effective collection of VAT and effective compliance by taxable persons under the VAT system.

Advocate General opines that a taxable person may only deduct import VAT that he is legally obliged to pay (Société Véléclair)On 17 November 2011, Advocate General Kokott delivered her Opinion in the Société Véléclair case (C-414/10).

Société Véléclair imported bicycles into the EU. The customs authorities were of the opinion that the import declaration was incorrect and therefore, decided to impose an assessment for customs duties and anti-dumping duties. The amount of the assessment was taxable with VAT. The amount of VAT had not been paid at the time Société Véléclair was placed under administration at a later stage. Moreover, in view of the fact that the VAT debt had not become definitive within 12 months after the company was placed under administration, it was established that the debt was no longer due. Even though the tax authorities could not claim the amount of the VAT assessment, Société Véléclair asked for a refund of the import VAT. The tax authorities refused the refund on the grounds that the company had not actually paid the VAT. The Conseil d’État was not sure whether this was allowed, and decided to refer preliminary questions to the CJ.

On the basis of an Italian provision, final-instance appeal proceedings brought by the tax authority before the Commissione Tributaria Centrale are to be concluded without a decision on the substance, where the tax authority has been unsuccessful both in first instance and on a first appeal, and where the dispute has been pending for more than 10 years overall. In the case pending before the Commissione Tributaria Centrale, these criteria for automatic conclusion of the proceedings were satisfied. In view of the fact that the case concerned the levy of VAT, and in particular that an automatic conclusion of the proceedings would have resulted in a waiver of VAT due, the referring court was not sure whether this Italian provision was in line with the Member State’s obligation on the basis of Article 4 TEU, and Articles 2 and 22 of the Sixth EU VAT Directive to ensure that VAT is effectively collected. Therefore, the court decided to refer preliminary questions to the CJ.

According to the Advocate General, the referring court wanted to know whether the effect of the Italian provision could be regarded as ‘a general and indiscriminate waiver of verification of taxable transactions’ as censured by the CJ in the case Commission v Italy (C-132/06), or as sufficiently similar to such a waiver to be equally precluded by EU law. In this regard, the Advocate General opined that the disputed Italian provision was, unlike the one in the case C-132/06, of a procedural nature and applied not simply to VAT alone. As a consequence, the disputed Italian provision did not undermine the correct levying and collection of VAT.

Moreover, the Advocate General indicated that it concerned situations in which a first instance and an appeal court had both ruled that the VAT claimed was not in fact due. According to the Advocate General, the tax authority, therefore, had taken appropriate measures for ensuring collection of VAT which it considered due, and that as such the disputed provision could not result in a failure of the Member State to ensure proper enforcement of the VAT system. In this regard, the Advocate General further elaborated that the disputed provision did not appear unreasonable in view of the fact that the cost and



such as the loading and unloading of vessels sailing on the high seas, are incorrectly excluded from the application of the VAT exemption.

Customs Duties, Excises and other Indirect TaxesCJ rules on the customs debt incurred through the unlawful introduction of goods (Jestel)On 17 November 2011, the CJ delivered its judgment in the Jestel case (C-454/10). The case concerns the customs debt incurred though the unlawful introduction of goods into the EU territory.

Mr Jestel auctioned goods originating in China on the internet platform eBay, where he operated two online shops. He acted as intermediary in the conclusion of the contracts of sale of those goods and collected the sales price. The setting of prices and the procuring of the goods was the responsibility of the Chinese supplier. The supplier delivered the goods directly to the purchasers based in Germany by post.

The goods at issue in the main proceedings were shipped to the purchasers without their first being presented to customs and without import duties being levied, apparently on the strength of inaccurate declarations by the supplier as to the contents and value of the shipment.

The Main Customs Office issued a notice of assessment to tax against Mr Jestel for customs duties of approximately EUR 10,000 and VAT on importation of approximately EUR 21,000. It claimed, in particular, that Mr Jestel had participated in the unlawful introduction of goods into the customs territory of the European Union, within the meaning of the second indent of Article 202(3) of the Customs Code. The administrative complaint brought against that notice was not upheld.

According to the Advocate General, Article 17(2)(b) of the Sixth EU VAT Directive in principle did not allow the French tax authorities to make the right to the deduction of import VAT conditional upon the actual payment of the amount of VAT due by the taxable person, even when the taxable person and the person entitled to the refund were the same. The Advocate General indicated, however, that such a condition could be maintained as a transitional measure on the basis of Article 28(3)(d) of the Sixth EU VAT Directive.

Moreover, the Advocate General also opined that VAT was only due within the meaning of Article 17(2) of the Sixth EU VAT Directive if the taxable person was legally obliged to pay the VAT. According to the Advocate General, this implied that the obligation to pay the amount of VAT due, for which a refund was claimed, could be invoked before a court. If that was not the case, such as in the proceedings before the Conseil d’État, the Advocate General was of the opinion that the taxpayer was not entitled to claim a refund of import VAT that he had not yet paid.

Commission refers the Netherlands to CJ over its VAT rules for travel agents The Commission has decided to refer the Netherlands to the CJ over its VAT rules for travel agents as the third stage of the infringement procedure. According to the Commission, the Netherlands has failed to fulfil its obligations under Articles 43, 96, 98, and 306 to 310 of the VAT Directive, by applying a special VAT scheme for travel agents as provided for in resolution No B71/2260 of March 1971.

Commission refers Italy to CJ over its VAT exemption for ships Following the reasoned opinion that was sent to Italy in May 2011, the Commission decided, on 24 November 2011, to refer Italy to the CJ over its VAT exemption for ships. According to the Commission, the VAT exemption provided for by Italy goes further than what is allowed, by granting a VAT exemption to commercial vessels not sailing on the high seas and vessels intended for public bodies. Moreover, the Commission is of the opinion that some services that should be covered by the exemption,



‘(1) Does a person become a debtor liable to pay customs duties because of “participation” in the unlawful introduction of goods into the customs territory of the European Union according to the second indent of Article 202(3) of [the Customs Code] where that person, without being directly involved in the introduction of goods, arranges the conclusion of the contracts to purchase the goods concerned and therefore envisages that the seller will possibly deliver the goods or part of the goods in such a way as to evade import duties?

(2) If appropriate, is it sufficient that he considers this to be conceivable, or does he only become a debtor if he fully expects that this will happen?’

The CJ ruled that the second indent of Article 202(3) of Council Regulation (EEC) No 2913/92 must be interpreted as meaning that a person who, without being directly involved in the introduction of goods, participated in the introduction as intermediary in the conclusion of contracts of sale relating to those goods must be considered to be a debtor of a customs debt incurred through the unlawful introduction of goods into the customs territory of the European Union where that person was aware, or should reasonably have been aware, that that introduction was unlawful, which is a matter for the national court to determine.

CJ rules on the exemption of excise duties on mineral oils used for an excavator affixed to a vessel (Sea Fighter) On 10 November 2011, the CJ delivered its judgment in the Sea Fighter case (C-505/10). The case concerns the exemption of excise on mineral oils for fuel used for an excavator affixed to a vessel and operating independently of the vessel’s engine.

The M/S Grete Fighter is a purpose-built vessel operated by Sea Fighter for marine excavation and construction works. The vessel has permanently affixed digging equipment on the deck of the vessel which operates with its own motor and its own fuel tank. The excavator operates independently of the vessel’s propulsion engine.

The Düsseldorf Finance Court dismissed the appeal brought by Mr Jestel against the decision of the Main Customs Office. It is apparent from the documents before the Court that the Düsseldorf Finance Court held that, first, the introduction of the goods concerned was unlawful under Article 202 of the Customs Code in that it was carried out in breach of certain provisions in Articles 38 to 41 of the Code and in that the exemption, as regards postal consignments, from the obligation to present goods to customs did not apply to goods which had an actual value exceeding EUR 22. Second, Mr Jestel was the debtor liable to pay the customs debt pursuant, inter alia, to the second indent of Article 202(3) of the Code.

The national court, ruling on the appeal on a point of law against that judgment, noted that, according to Mr Jestel, the conclusion of the contracts of sale on eBay and the transmission of the purchasers’ names and addresses to the Chinese supplier, acts which significantly pre-dated the shipping of the goods and which are relevant only as the legal cause of that shipping, do not represent participation in the unlawful introduction of goods within the meaning of the second indent of Article 202(3) of the Customs Code.

The national court noted that the question of whether Mr Jestel expected that the imports at issue in the main proceedings would be unlawful or whether, as he said, he had assumed that they would be carried out in a lawful manner despite some doubts he had entertained in that regard, had not yet been decided. However, that court considered it doubtful that, in circumstances such as those in the main proceedings, a person becomes a debtor liable to pay a customs debt under that provision, even where that person envisages, or indeed expects, that the seller will proceed to introduce the goods concerned unlawfully into the customs territory of the European Union.

In those circumstances, the Federal Finance Court decided to stay the proceedings and to refer the following questions to the CJ for a preliminary ruling:



Commission requests Italy to review its judicial practice on remission and repayment of duties On 24 November 2011, the Commission formally requested Italy to implement proper appeal procedures on requests for remission or reimbursement of customs duties.

Italy does not allow, in certain cases, a judicial review for negative decisions relating to requests for the remission or reimbursement of customs duty. According to Italian highest level of jurisprudence, given the specific circumstances of these decisions, they cannot be contested because they are supposedly of a political nature.

According to the EU’s Customs Code (Article 239), businesses finding themselves in a special situation may request from the national customs administrations a remission or reimbursement of their customs debt. However, if businesses wish to challenge negative decisions by the Italian customs on such matters, Italy does not allow for judicial protection from all of these decisions.

Article 243 of the EU’s Customs Code, as well as general principles of EU law, provide for a right of appeal of any decision issued by a national customs authority. The Commission is of the view that there is no exception to this right, and that businesses must be able to appeal all kind of decisions unfavourable to them. This is a cornerstone of the EU legal order. Therefore, the above-mentioned practice puts Italy in breach of EU law.

The request to Italy takes the form of a reasoned opinion, the second step of the infringement procedure. Should the Italian authorities fail to remedy the above situation within two months; the Commission may refer Italy to the CJ.

The fuel used to replenish the fuel tank of the excavator’s motor comes from the vessel’s main fuel tank. When the excavator is used for digging, the vessel is at anchor, whereas when the excavated material is dumped at sea, it is in motion. Sea Fighter sought reimbursement of duties paid on mineral oils used on the M/S Grete Fighter in the period 1 January 2001 to 30 September 2003.

By decision of 19 February 2004, the East Jutland Customs and Tax Office (Denmark) found that, for that period, Sea Fighter was not entitled to reimbursement of oil and carbon dioxide duties for diesel fuel used for the excavator. It noted in particular that the excavator ran independently of the vessel’s engine.

The National Tax Appeals Commission upheld that decision on 4 March 2005.

Sea Fighter appealed against that decision to the Western Regional Court which found in favour of the tax administration in a judgment of 29 February 2008.

That judgment was the subject of an appeal to the Supreme Court, which decided to stay the proceedings and to refer the following question to the CJ for a preliminary ruling:

‘Is Article 8(1)(c) of Directive 92/81 to be interpreted as meaning that mineral oils supplied for use in an excavator which is affixed to a vessel but which, because it has its own separate motor and fuel tank, operates independently of the vessel’s propulsion engine, in circumstances such as those of the present case, are exempt from duty?’

The CJ ruled that Article 8(1)(c) of Council Directive 92/81/EEC of 19 October 1992 on the harmonisation of the structures of excise duties on mineral oils, as amended by Council Directive 94/74/EC of 22 December 1994, must be interpreted as meaning that mineral oils supplied for use in an excavator which is affixed to a vessel but which, because it has its own separate motor and fuel tank, operates independently of the vessel’s propulsion engine, are not exempt from excise duties.



Between 2005 and 2006, the UK customs authorities allowed imports of fresh garlic from the People’s Republic of China under wrong authorising documents. They erroneously stated that the goods imported were frozen garlic, for which significantly lower import duties apply. The Commission considers that the UK authorities did not act with all due care when issuing the authorising documents and failed to collect the correct amount of duties. They are therefore held financially responsible for the loss of own resources (approximately £ 20 million) to the EU budget.

The Commission is determined to protect the common EU interest. Fair treatment of all Member States must be ensured. If a Member State fails to make available all the money it owes the EU budget, the other Member States would need to pay more as a result.

More efficient cooperation in collecting excise duties On 14 November 2011, the Commission proposed new rules on administrative cooperation in the field of excise duties, which would speed up the collection of the duties and improve Member States’ controls on the revenue. The new Regulation would replace the existing rules to better reflect the introduction of the computerised Excise Movement and Control System (EMCS) in April 2010. Currently, part of the information exchange between Member States on the movement of excise products (alcohol, tobacco and energy products) is still done manually. Computerising this exchange will make it easier and faster to collect the excise duties that are due.

The proposal seeks to revise the rules on administrative cooperation in order to reap the full benefit of the Excise Movement and Control System. In particular, the new Regulation replaces manual procedures with automated procedures wherever this information is electronically available within the EMCS. This includes, for example, information on road controls or interruptions in the movement of goods.

The EU has welcomed the conclusion of negotiations for Russia’s accession to the WTO The unanimous approval on 10 November 2011 by the Members of the Working Party on Russia’s WTO accession brings an end to this 18-year long process and paves the way to formalising the results of these negotiations by the entire Membership of the WTO. The EU now looks forward to a unanimous political endorsement of Russia’s WTO accession at the 8th WTO Ministerial Conference on 15-17 December this year.

The EU acknowledges the major efforts of the Russian Federation as well as its negotiating partners in finding solutions for the most difficult issues, which were resolved in the last weeks and days. The EU is also appreciative of the determination of Georgia and Russia to reach a timely resolution of their sensitive bilateral issues, and welcomes the efforts of the Government of Switzerland for their instrumental role in this respect.

The accession of Russia to the WTO is significant from both a multilateral and bilateral perspective. Russia as well as its trading partners will benefit from Russia’s integration into the global, rules-based system of trade relations. Russia’s accession to the WTO is especially important for the EU, Russia’s largest trading partner. The EU is convinced that this step will give a major boost to further development of its economic relationship with Russia. Russia’s membership in the WTO will also prove an important stepping stone for deepening the bilateral economic integration, including through the conclusion of the ongoing negotiation on the New Agreement.

Commission asks the United Kingdom to pay due amounts of customs duties to EU budgetOn 24 November 2011, the Commission asked the United Kingdom (UK) to pay to the EU Budget the amounts due from the import of fresh garlic, in order to comply with the EU law on customs duties. If the UK fails to act within two months, the Commission may refer the case to the CJ.



The objectives of FISCUS are to protect the financial interests of the EU and Member States, facilitate trade, ensure the safety and security of EU citizens, improve the capacities of customs and tax authorities, and implement EU legislation in these fields. Having assessed the challenges for the years ahead, the Commission proposes that particular focus is also given to fighting fraud, reducing administrative burdens and cooperating with third countries.

FISCUS will also contribute to the EU’s broader objectives by strengthening the Internal Market and the Customs Union, promoting growth and innovation by protecting intellectual property rights at the borders, and contributing to the development of a digital Internal Market.

The proposal also clarifies the rights and obligations of Member States in terms of requests they can submit to each other, information they must provide, deadlines to answer requests, and use of standardised forms for these exchanges. The ultimate objective is to ensure that the process for Member States to collect and retrieve excise duties is as smooth and efficient as possible.

Taxation and Customs: Delivering to Member States, citizens and businesses post-2014EU Customs and Taxation policy make a substantial contribution in helping to raise revenues for the EU and Member States’ budgets every year. In addition, these policies deliver considerable benefits to EU citizens and business, whether it is through blocking unsafe or illegal imports, facilitating smooth trade and a strong Internal Market, or cutting compliance costs and red tape for cross-border companies.

In order to build on this work and be fully equipped to meet future challenges in these fields, on 9 November 2011, the Commission adopted a proposal for the FISCUS programme. With a budget of EUR 777.6 million, the programme will run for seven years as from 1 January 2014.

FISCUS will support the cooperation between customs and tax authorities and other parties, to help maximise their efficiency and avoid mismatches in their work which could hinder the Internal Market. The programme also provides the possibility of country-specific assistance when particular challenges call for such. It will facilitate networking, joint actions and training amongst tax and customs personnel, while also funding cutting-edge IT systems to enable the development of fully-fledged e-administrations in customs and tax. By relying on shared development of IT, every euro spent jointly can generate cost-savings of at least four times as much for Member States.


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Editorial boardFor contact, mail: [email protected]:● René van der Paardt (Loyens & Loeff Rotterdam)● Thies Sanders (Loyens & Loeff Amsterdam)● Dennis Weber (Loyens & Loeff Amsterdam; University of Amsterdam)

Although great care has been taken when compiling this newsletter, Loyens & Loeff N.V. does not accept any responsibility whatsoever for any consequences arising from the information in this publication being used without its consent. The information provided in the publication is intended for general informational purposes and can not be considered as advice.

www.loyensloeff.com

Editors● Patricia van Zwet● Rita Szudoczky

Correspondents● Peter Adriaansen (Loyens & Loeff Luxembourg)● Séverine Baranger (Loyens & Loeff Paris)● Gerard Blokland (Loyens & Loeff Amsterdam)● Alexander Bosman (Loyens & Loeff Rotterdam)● Kees Bouwmeester (Loyens & Loeff Amsterdam)● Joke Brabants (Loyens & Loeff Brussels)● Almut Breuer (Loyens & Loeff Amsterdam)● Alexander Fortuin (Loyens & Loeff Amsterdam)● Mark van den Honert (Loyens & Loeff Amsterdam)● Raymond Luja (Loyens & Loeff Amsterdam; Maastricht University)● Lodewijk Reijs (Loyens & Loeff Eindhoven)● Bruno da Silva (Loyens & Loeff Amsterdam)● Rita Szudoczky (Loyens & Loeff Amsterdam)● Patrick Vettenburg (Loyens & Loeff Eindhoven)

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