A Oy – immediate taxation of capital gains of non-resident PE
November 23, 2017
The case concerns the immediate taxation of capital gains of a non-resident PE of A Oy, a Finish company, that resulted from the transfer of the PE to a company (X), that was also non-resident in Finland, in the course of a transfer of assets. In return, A Oy received shares in X. A Oy was taxed on the capital gains resulting from that transaction for that tax year and the tax was collected in that tax year as well. A Oy brought proceedings before Finish courts arguing that the legislation at issue was an obstacle to the freedom of establishment, as in an equivalent national situation, taxation would not have taken place until the time of realisation of the capital gain, that is, until the disposal of the assets transferred.
The CJEU held that Article 49 TFEU (freedom of establishment) must be interpreted as precluding national legislation, such as that in these proceedings, which, where a resident company, in the course of a transfer of assets, transfers a non-resident PE to a company that is also non-resident, first, provides for the immediate taxation of the capital gains resulting from the transfer, and, second, does not allow deferred collection of the tax, whereas in an equivalent national situation such capital gains are not taxed until the disposal of the transferred assets, in so far as that legislation does not allow the deferred collection of the tax.
This article appears in the JHA November 2017 Tax Newsletter, which also features:
- Commission State Aid Enquiry – UK CFC Provisions
- 2017 Budget – Cross Border Issues
- Advocate General finds Dutch tax consolidation regime to infringe the freedom of establishment
- Belgian rules limiting interest deduction to the extent of dividends received
- Jacobs v French Minister for Finance and Public Accounts (C-327/16)
You can download the whole newsletter as a PDF: November 2017 – Newsletter