Exit Taxes

01 July 2013
Author: JHA

C-261/11 Commission v Denmark

The CJEU, following recent case law, concluded that the Danish rules on exit taxation of cross-border transfers of assets within a company are contrary to the freedom of establishment within the meaning of Article 49 TFEU. Under the rules, a transfer of assets internally within a company, but to a permanent establishment outside Denmark having the effect that the assets are no longer subject to Danish tax, is regarded as a sale and is taxed as if the assets had been sold in the year of the transfer. A transfer of assets between a company’s different establishments within Denmark is not taxed. The CJEU affirmed its decision in C-371/10 National Grid Indus, and rejected Denmark’s argument that the rule established in that case is limited to financial assets that are disposed of, or intended to be disposed of, after the cross-border transfer. However, the CJEU confirmed that Denmark can still tax assets that are not intended to be realized, provided the trigger for such taxation constitutes a measure less restrictive to the freedom of establishment than immediate recovery of the Danish tax at the time of transfer.

This article appears in the JHA July 2013 Tax Newsletter, which also features:

  1. ROSIIP GLO: Taxpayers succeed
  2. Retrospective Changes to rules on interim payment applications in tax cases
  3. FII GLO 3rd ECJ reference
  4. Portfolio Dividend Claims: High Court Trial Concludes
  5. Belgium notional interest deduction regime contrary to EU law
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