A Oy – immediate taxation of capital gains of non-resident PE
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)
As announced in July of last year, the 2020 Budget introduces a new deferred payment plan option for Corporation Tax charged on profits or gains arising from certain transactions between UK companies and EEA companies of the same group of companies.
Reversal of Inverclyde
The 2020 Budget announced provisions to reverse last year’s FTT decision in Inverclyde. In that case, HMRC denied the appellant LLPs’ claims for Business Property Renovation Allowance on the basis that the LLPs did not carry on a business with a view to a profit.
HMRC nudge letters
HMRC continues to fight the good fight in its quest to cut down on tax avoidance and have recently been issuing further “nudge” letters to taxpayers who may have an income source or assets producing gains overseas and consequently an undisclosed outstanding UK tax liability.
ExxonMobil: FTT Decision Released
The FTT decision in Esso Exploration and Production UK Limited and others v HMRC, which relates to pre-2006 claims for Cross Border Group Relief, has now been released.