bluuebunny/crossref_metadata_2025 huggingface dataset:
The Compatibility of Exit Tax Legislation Applicable to Corporate Taxpayers in France, Germany, Italy, The Netherlands, Portugal, Spain and The United Kingdom with the EU Freedom of Establishment - Part 2
Authors: Beare Tony , van Os Pieter , Silvestri Andrea , Pötgens Frank P.G. , Durand Pierre-Henri , Lasarte Guillermo Canalejo , Robert Anne , Dony Aliénor , Scheifele Matthias , Wagner Gunther , Lancellotti Lucia , Romão Filipe , Caldas António Castro , Pichel Paulo , Pombo David López
Published: February 2022

This three-part article discusses the compatibility of exit tax legislation applicable to corporate taxpayers in France, Germany, Italy, the Netherlands, Portugal, Spain and the United Kingdom with the EU freedom of establishment, especially in the light of the ECJ’s landmark National Grid decision. In part 1, which was published in the previous Intertax issue, the authors scrutinized whether a company transferring its tax residence or effecting an outbound cross-border conversion has access to Articles 49 and 54 TFEU under the laws of the Member State. It also addressed whether these laws restrict Article 49, and, if so, whether the restriction can be justified and is appropriate to ensure the attainment of its objective. Part 2 provides a general overview of the proportionality test in connection with exit tax legislation under Articles 49 and 54 TFEU, and subsequently discusses whether the exit tax legislation in France, Germany, Italy and the Netherlands is proportional. Part 3 of this article, to be published in the next Intertax issue, reviews whether the exit tax legislation in Portugal, Spain and the United Kingdom is proportional, addresses which other transactions the ECJ’s exit tax principles apply to, and provides conclusions and recommendations.
Exchange of Information. An Analysis of the Scope of Article 26 OECD Model and Its Requirements: In Search for an Efficient but Balanced Procedure
Authors: Debelva Filip , Diepvens Niels
Published: February 2022

In this article, the authors examine the requirements contained within Article 26 OECD Model. The focus lies on the scope of the article and the principles of relevance, subsidiarity, sovereignty and reciprocity, and the limitations relating to trade secrets and information contrary to public policy.
The Functionality of VAT: A Swedish Perspective
Authors: Rendahl Pernilla
Published: February 2022

The Swedish value added tax (VAT) is based on the VAT directives at EU level. Sweden became a Member State of the EU on 1 January 1995, but the VAT in Sweden was introduced in 1969. A new VAT Act came into force in 1994 and several changes have been made both since 1969 and 1994. The VAT at EU level is generally considered a consumption tax, based on Article 1.2 in the VAT directive from 2006. The similar point of departure in the Swedish implementation of the directive is not found in the VAT Act and vaguely found in the preparatory works to the Swedish VAT Act. It has been discussed whether or not the Swedish VAT is a consumption tax from a legal perspective. One conclusion drawn in the study described in this article is that the Swedish VAT is a hybrid tax, burdening both business and consumption.
Tax Considerations for the European Unions Digital Single Market Strategy
Authors: Cattel Y.C. , Paardekooper W.J.G. , Van Ven M. , van Esdonk A.
Published: February 2022

In this article, the authors analyse the EU concept of the Digital Single Market from an Indirect Tax and Direct Tax perspective. The analysis will focus on the current status quo and will discuss the recently proposed EU plans to design robust Indirect Tax and Direct Tax rules, as well as regulations for the future. The authors propose ideas and solutions that can be taken into account by the Commission and various stakeholders in an open debate to optimize the legislation for all parties involved. These ideas share the same common ground for Indirect Tax and Direct Tax. Where deemed necessary, the authors include Organisation for Economic Co-operation and Development (OECD) initiatives as well.
Some Reflections on the Saving Clause
Authors: Kofler Georg
Published: February 2022

Action 6 of the Organization for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting project deals with tax treaty abuse and proposes inter alia, the inclusion of a seemingly innocuous ‘saving clause’ as new Article 1(3) OECD Model Tax Convention (OECD MC). This clause is aimed at preserving the taxing rights of the residence State. While it changes little with regard to the basic set-up of the OECD MC in one-taxpayer situations, it opens the doors for both Contracting States to tax their residents specifically in two-taxpayer situations which may arise, for example, in cases involving hybrid entities, Controlled Foreign Companies regimes, and transfer pricing adjustments. This article reviews the background of this new OECD MC provision, its longstanding use in US treaty policy, as well as some aspects of its breadth, impact and – intended and arguably unintended – consequences.
Beneficial Ownership and Derivatives: An Analysis of the Decision of the Swiss Federal Supreme Court Concerning Total Return Swaps (Swiss Swaps Case)
Authors: Weidmann Oktavia
Published: February 2022

The recent decision of the Swiss Federal Supreme Court in the Swiss Swaps Case dealt with the question of beneficial ownership in relation to dividends which were economically passed on to third parties by way of derivatives. The court denied a Danish bank, which was the physical holder of the shares and the recipient of the dividends, a withholding tax refund under the Switzerland/Denmark Double Taxation Convention (1973) on the basis that it was not the beneficial owner of the dividends. The court assumes a factual obligation of the Danish bank to pass on the dividends to the total-returns-waps counterparties and suggests an ‘interdependence’ between the receipt of the dividends and passing on the dividends to the swaps counterparties. The court’s decision raises the question whether beneficial ownership should be denied to a person who is the physical holder of the shares and the recipient of the dividends but passes on the benefits of the dividends in the context of a derivatives transaction. After an in-depth analysis of the case, this article illustrates the legal and practical difficulties in attributing beneficial ownership of the dividends to a derivatives counterparty which is neither the legal owner of the shares nor the direct recipient of the dividends beyond clear-cut cases of nominees, agents and conduit companies.
Cooperative Compliance: Tax Risk Management and Monitoring
Authors: Siglé Maarten , van der Hel-van Dijk E.C.J.M.
Published: February 2022

Prompted by the global economic crisis, the attention for tax compliance behaviour of large businesses increased significantly in recent years. Worldwide, stakeholders request more tax transparency from large businesses. Tax authorities use ‘transparency’ as a starting point in so-called cooperative compliance strategies. Tax risk management seems to be an indispensable factor in these strategies. We note that both in the Netherlands and abroad the design of a so-called tax control framework by businesses as well as its use by tax authorities does not seem to be clear. In this contribution we seek to reduce this obscurity around the tax control framework by focussing on the element of ‘tax monitoring’, for which we use the Dutch horizontal monitoring program as a case study.
Report on the 2016 Conference Tax Treaty Case Law Around the Globe
Authors: van Hulten Mart , Jallai Ave-Geidi
Published: February 2022

Each year the international conference Tax Treaty Case Law Around the Globe provides a forum to discuss with outstanding experts of the relevant jurisdictions the most important and interesting tax treaty cases which recently have been decided all over the world. This article provides a report on the 2016 Tax Treaty Case Law Around the Globe conference held in the Netherlands at Tilburg University on 19–21 May 2016 and which covered seven main topic clusters: (1) Scope, tax treaty interpretation and residence; (2) Permanent establishment (PE); (3) Business profits and transfer pricing; (4) Labour income; (5) Beneficial ownership, royalties and capital gains; (6) Relief for double taxation and limitation on benefits (LOB); and (7) Non-discrimination, exchange of information and recovery.
BEPS Action 15: Release of Multilateral Instrument
Authors: Valente Piergiorgio
Published: February 2022

The release of the Multilateral Instrument constitutes an important step towards the most significant re-write of international tax rules in a `century. It is the multilateral convention enabling the simultaneous amendment of more than 3,000 existing bilateral conventions for the avoidance of double taxation. It aims at eliminating loopholes and mismatches among them, which are susceptible to allow aggressive tax planning. In thirty-nine articles, it implements measures indicated in Actions 2, 6, 7 and 14 of the Base Erosion and Profit Shifting (BEPS) Project, regarding hybrid mismatches, treaty abuse, artificial avoidance of permanent establishment status and dispute resolution of international tax disputes.
Reconceptionalization of the Immovable Property Clause in Article 13 Paragraph 4 OECD Model Convention by Means of the Multilateral Instrument?
Authors: Haase Florian
Published: February 2022

One primary function of immovable property law obviously is to define the real property in question and to establish who the owner of that property is. Another primary function of immovable property law is to establish what restrictions and legal rights are attached to real property. By fulfilling these primary functions, immovable property law provides certainty regarding the legal status of real property to owners as well as to third parties. This certainty leads to greater confidence in the legal system as a whole as well as to the property market. Thus, well written immovable property law, and the correct application of it, leads to reduced investigation and transaction charges in relation to real property, which in turn promotes healthy turnover, the latter having a positive impact on the economy as a whole. All this is even truer for the rules that govern the taxation of immovable property, particularly in an international context. Whilst the taxing rights of two or more States are fairly easy to determine when real estate is held directly by taxpayers, problems may arise when real estate is held indirectly through ‘real estate companies’. Some of these problems are addressed by the OECD’s recent achievement, the so-called Multilateral Instrument.
The EU and Third Countries: Any New Tax Opportunities Under Association Agreements?
Authors: Debat Olivier , Sicard Flora
Published: February 2022

Further to the SECIL judgment (C-464/14) delivered by the European Court of Justice (ECJ) in November 2016, this article explores how Association Agreements (AAs) concluded by the European Union (EU) with third countries connect with EU primary law, especially the Treaty on the Functioning of the European Union (TFEU), and discusses their possible implications in tax matters. It investigates the consequences of the variations in purpose and wording of such international instruments and identifies opportunities, uncertainties, shortcomings and potentialities deriving therefrom.
GAARs and Treaties: From the Guiding Principle to the Principal Purpose Test. What Have We Gained from BEPS Action 6?
Authors: Moreno Andrés Báez
Published: February 2022

The issue of General Anti-Avoidance Rules (GAARs) and treaties is a legal problem as old as double tax conventions themselves. However, the Base Erosion and Profit Shifting (BEPS) Project, materialized in fifteen Actions and particularly in the Final Report of BEPS Action 6, involves a radical change in the very physiognomy of the problem. Apart from the inclusion of a Limitation-on-benefits rule in the OECD Model, the most groundbreaking innovation arising from BEPS Action 6 would be the incorporation, also to the Model, of a GAAR (the Principal Purpose Test). This article will examine the pros and cons of the Principal Purpose Testvis á vis the old paradigm. It also seeks to analyse some new problems originating from the very existence of the PPT.
International and European Measures for De-offshoring: Global Ambitions and Local Hypocrisies
Authors: Marino Giuseppe
Published: February 2022

This article discusses the most sophisticated measures put in place in recent years at international level and within the European Union, for deoffshoring the world. Most of them have a common ground in the automatic exchange of information among countries which certainly represents an unimaginable tsunami wave rapidly increasing in power due to the interconnections with anti-money laundering and terrorist financing legislations. However, whether it is more likely than not that in the long run the world will be affected by these innovative forms of cooperation (the sticks), many doubts arise on the rate of success of de-offshoring in the short term. Indeed, each single State of the international community still prefers to take care of its own interest with unilateral measures (the carrots) bringing back home alone its slice of the undeclared financial assets, and doing so, why not, trying to eat the revenue of other States, so inducing to offshoring again. The reality is a never ending story.
Lowering the Permanent Establishment Threshold via the Anti-BEPS Convention: Much Ado About Nothing?
Authors: de Wilde Maarten F.
Published: February 2022

The author examines the lowering of the threshold at which commissionaire, auxiliary, and building site and construction activities qualify as a permanent establishment under the Multilateral anti-BEPS Convention (MLI). With a view to countries planning to implement the provisions in this convention on permanent establishments within their tax treaty networks, the author argues for exercising a degree of caution. Some caution may be worthwhile to be exercised specifically with regard to the MLI provisions on commissionaire and auxiliary activities, as these provisions seem unlikely to have any substantial effect in terms of effectively shifting substantial tax base towards market jurisdictions. Attributing tax base to the market jurisdiction requires a fundamental restructuring of the way in which business profits are divided geographically in international taxation. In the absence of any moves in this direction, it would not seem sensible to alter the reference points for determining tax jurisdiction. Implementing these MLI provisions could meanwhile also prompt countries to seek to claim more of the ‘tax pie’ for themselves than they are entitled to under the existing international profit attribution rules. In that event, it would not seem inconceivable that such action could result in double taxation or double non-taxation, legal uncertainty and problems of an administrative nature – red tape.
International Double Taxation Under VAT: Causes and Possible Solutions
Authors: Artinger Katharina
Published: February 2022

VAT double taxation has increasingly become a concern for cross-border trade. The present contribution defines the term and identifies its causes, dividing them into two groups: double taxation due to divergent rules and double taxation despite identical rules. It then illustrates existing solutions for international VAT double taxation and proposes additional substantive provisions as well as the introduction of a mutual agreement and arbitration procedure into the VAT Directive.
The Dealing at Arms Length Fallacy: A Way Forward to a Formula-Based Transactional Profit Split?
Authors: Greil Stefan
Published: February 2022

The dealing at arm’s length principle (ALP) should ensure the allocation of profits to be aligned with the economic activity that produced the profits. On the one hand, it is, however, a fallacy to compare the conditions in a controlled transaction with the conditions that would have been agreed upon between independent enterprises. On the other hand, there is no economic consistent theory within the ALP to align value creation properly and unambiguous to companies of a multinational group. Instead, the ALP creates possibilities for international tax planning, risks of double taxation, a potential for high tax compliance costs and administration costs. At least the results of the G20/OECD BEPS-Project seem to reduce the international tax planning possibilities in this area. However, the results create new difficulties like the assessment of arm’s length behaviour and the (expected) increasing usage of the transactional based profit split method. Considering this, this article introduces a formulary and transaction based profit split method. This method will not avoid all disadvantages of the ALP. However, it could help to establish an international consistent application in order to minimize profit shifting, to enhance tax certainty for taxpayers and to reduce tax compliance costs and administration costs.
Interest Limitation Rules in the Post-BEPS Era
Authors: Tell Michael
Published: February 2022

The use of debt is, according to the OECD, one of the simplest profit-shifting techniques available in international tax planning, due to the mobility of money. A debt tax planning strategy can be applied without any people or machinery being moved or re-allocated; it can be done by advisors or in-house specialist sitting at their desks. These (lawful) tax planning strategies undermine the fairness and integrity of tax systems, because multinational entities can use Base Erosion and Profit Shifting (BEPS) strategies to gain a competitive advantage over domestic entities, as well as undermining voluntary compliance by all taxpayers, according to the OECD. The focus in the OECD BEPS project and the Anti-Tax Avoidance Directive (ATAD) is to counteract these tax planning strategies to ensure taxation where the value is created (economic activity).

This article focuses on one anti-tax avoidance measure: interest limitation rules as addressed in BEPS action 4 and in ATAD Article 4. The aim of the article is to address the need for interest limitation rules, analyse the recommend approached in BEPS action 4, analyse the minimum interest limitation rule in the EU according to Article 4 in ATAD, and the implications of OECD action 4 and ATAD Article 4. Lastly, the article will discuss alternatives to these interest limitation rules as a way to address BEPS.
Contractual Arrangements and the Delineation of a Transaction: A Duo in Crisis Mode
Authors: Robillard Robert
Published: February 2022

This article highlights the evolving relationship between contractual arrangements and the delineation of a transaction for transfer pricing purposes since the release of the first edition of the transfer pricing guidelines in 1979. It shows that BEPS-related guidance on the matter has created a serious rift between the delineation of a transaction and the relevance of contractual arrangements. This creates uncertainty and ambiguity for Multinational Enterprises (MNEs) and tax authorities.
Countering Harmful Tax Practices in Licensing of Rights: The New License Barrier Rule in Section 4j of the German Income Tax Act
Authors: Quilitzsch Carsten , Ditz Xaver
Published: February 2022

On 2 June 2017, the German Bundesrat passed new legislation on the tax deduction of license fees as business expenses under section 4j of the German Income Tax Act (Einkommensteuergesetz). The authors present the new regulation in detail and conclude that it is not only unnecessary, but also problematic from the perspective of constitutional law and European law in particular.
McBEPS: The MLI  The First Multilateral Tax Treaty that Has Never Been
Authors: Brauner Yariv
Published: February 2022

The article argues that the multilateral instrument (MLI) was primarily devised to preserve the conservative evolution of the international tax regime, based on bilateral tax treaties, reciprocity and competition, and not as a multilateral tax treaty based on which a new coordinative regime shall arise. The article makes the point, however, that despite this main purpose the mere conclusion of the MLI introduces ambivalence into the international tax regime, breaking with its orthodoxy in a meaningful, even if not yet significant manner. The article makes fifteen observations on the MLI in its current status to substantiate this argument.
The Principal Purpose Test in the Multilateral Convention: An in-depth Analysis
Authors: Chand Vikram
Published: February 2022

It is estimated that the Principal Purpose Test (PPT) contained in the Multilateral Instrument (MLI) will be incorporated in almost one thousand one hundred tax treaties. There is no doubt that this test will have wide ramifications for structuring activities that are carried out with tax treaties. In this contribution the author undertakes a detailed analysis of the test. Firstly, the author discusses the background to the PPT. Secondly, the author analyses various elements of the test and provides guidance on interpreting its subjective and objective elements. Thirdly, the author critically comments and expresses his opinion on all the nineteen examples that have been provided in the commentary in relation to the test. In this regard, it is pertinent to note that several of these examples seem to be inspired from Court judgments on the ‘beneficial ownership’ clause and the Exchange of Letters with respect to the anti-conduit rule contained in the US-UK tax treaty. Fourthly, the author analyses the legal consequences of denying treaty benefits in relation to rule and treaty shopping schemes by focussing on the discretionary relief clause. Finally, the author concludes and provides certain recommendations to intermediary entities such as holding, financing and intellectual property (IP) entities. It is pertinent to note that the author will analyse the relationship between the PPT (as well as the guiding principle) and other anti-avoidance rules, treaty and domestic, in a subsequent contribution.
Implementation in Practice of the Principal Purpose Test in the Multilateral Convention
Authors: Gomes Marcus Livio
Published: February 2022

This article discusses the implementation, operation and application of Article 7(1) of the ‘Multilateral Convention’, which contains provisions related to the prevention of treaty abuse, including treaty shopping, that correspond to changes proposed in the Base Erosion and Profit Shifting (BEPS) Action 6 Final Report. The wording of the comparable Covered Tax Agreements between the United Kingdom and China, India, Russia and South Africa, vis-à-vis the wording of Article 7(1) of the Multilateral Instrument (MLI), is analysed, where ‘purpose provisions’ are included with respect to specific benefits, generally royalties, interests and dividends, although there is no ‘catch-all provision’. The provisions in these Double Taxation Agreements might be replaced by the ‘Principal Purpose Test’ provision of Article 7(1). Nonetheless, mismatched choices and unpredictable asymmetries in practice will arise, resulting in further inconsistencies and complexities that may cause uncertainty about which tax treaty wording is of value. To overcome these issues, the compatibility clause in Article 7(2) of the MLI will come into play, supplemented by the lex posterior principle of the Vienna Convention on the Law of Treaties (VCLT).
Tools Used by Countries to Counteract Aggressive Tax Planning in Light of Transparency
Authors: Mosquera Valderrama Irma Johanna , Mazz Addy , Quiñones Natalia , West Craig
Published: February 2022

The aim of this article is twofold. The first aim is to provide a comparative overview of the domestic anti-avoidance rules with specific reference to Brazil, Colombia, South Africa and Uruguay to evaluate the application of these rules to tackle aggressive tax planning. The second aim is to assess whether or not the application of general anti-avoidance rules (GAARs) in these countries is consistent and clear (transparent) for the taxpayer. The main argument is that to tackle aggressive tax planning, countries should have GAARs in accordance with the standard of fiscal transparency as developed in this article (i.e. availability, clarity, simplicity and reliability). Furthermore, the relationship between the taxpayer and tax administration should be enhanced considering mutual trust, legitimate expectations and respect for the taxpayers’ rights. This article provides recommendations to enhance the relationship between tax administration and taxpayers to facilitate a coordinated relationship. Such a coordinated relationship means, on the one hand, that the governments (tax administrations) are provided access to the information regarding the activities of the taxpayer; and, on the other hand, that taxpayers voluntarily disclose the structure and nature of the economic activities or businesses in the country.
Country note: The Creation of a Permanent Establishment Through the Use of Subcontracting  A New Danish Ruling Adds to the Discussion
Authors: Schmidt Peter Koerver
Published: February 2022

In a recent Danish decision, the National Tax Board found that a foreign company should be considered to have a permanent establishment in Denmark, despite the fact that the foreign company had subcontracted all its activities in Denmark to an independent third party. This contribution critically examines the decision in light of the OECD Model Convention with commentaries, including the recently published draft update.
Revolutionary Changes to the Arms Length Principle under the OECD BEPS Project: Have CFC Rules Become Redundant?
Authors: Bronzewska Katarzyna , Majdowski Filip
Published: February 2022

Title question of the article is deliberately provocative. The subject of interactions between Controlled Foreign Company (CFC) regulations and transfer pricing (TP) regulations is a complex topic that has been bringing divergent opinions over many decades (In United States, from where both CFC regime and TP regime originated, the literature on this subject has been present at least since 1969, being no more than one year after the introduction of detailed US TP regulations (1968). CFC regulations – Subpart F – was introduced therein in 1962. See for instance: L. Kauder, Taxation of Domestically Controlled Foreign Corporations: A Comparative Study of Subpart F and Section 482, 14(2) Villanova L. Rev. (1969)). The polemic in this regard has, however, acquired a new dimension together with the OECD’s adoption of modifications to the arm’s length principle as referred to in Article 9 of the OECD Model Convention under the Base Erosion and Profit Shifting (BEPS) project, which led to publishing the 2017 TP Guidelines for Multinational Enterprises and Tax Administration (OECD, 2017 TP Guidelines for Multinational Enterprises and Tax Administration, available at http://www.oecd.org/tax/transfer-pricing/oecdtransfer- pricing-guidelines-for-multinational-enterprises-and-tax-administrations-20769717.htm). These amendments, which involve the expansion of the guidelines on the relationship between (1) the legal title to the asset, and (2) the eligibility of a cross-border group of related entities to recognize the corresponding income generated by that asset, has led to an unobservable earlier approximation of the scope of CFC and TP regimes. It is therefore the study question of this article to verify whether the enhanced TP regulations are capable of replacing CFC regulations.
Controlled Foreign Companies: Selected Policy Issues  or the Missing Elements of BEPS Action 3 and the Anti-Tax Avoidance Directive
Authors: Blum Daniel W.
Published: February 2022

The discussion of controlled foreign corporations (CFCs) in both the Final Report on Action 3 of the OECD’s Base Erosion and Profit Shifting Project and the Anti-Tax Avoidance Directive (ATAD) has failed to address some high-level policy questions that are worth considering in more detail. Depending on the scope of the tax system (worldwide vs. territorial) and the means by which double taxation is avoided (credit vs. exemption), the crucial policy questions revolve around the issue as to which tax base should be protected and in which capacity (i.e. as the residence state or the source state). Moreover, the question as to whether deferral and income diversion should be curtailed as a matter of principle or only if the deferred/diverted income is low taxed in the state of residence of the CFC must be answered. On an operational level, the means by which income is included require careful assessment. Depending on whether a CFC regime pierces the CFC’s corporate veil or applies a deemed dividend approach, the interaction with both the relevant distributive rules and – in case of EU Member States – the EU Fundamental Freedoms, potentially limit the scope of a CFC regime. By tracing back the underlying structural tensions inherent in domestic corporate tax laws and highlighting the policy choices that legislators face along the way to enact coherent CFC regimes that counter both tax deferral and income diversion while respecting the existing network of rules governing the allocation of taxing rights in cross-border situations, this article facilitates a principled discussion and, thus, helps to overcome the widespread BEPS fallacy of accepting the technical outcomes of the BEPS project without questioning the underlying principles.
Tax Treaty Characterization of Income Derived from Cloud Computing and 3D Printing and the Spanish Approach
Authors: Requena José Ángel Gómez
Published: February 2022

The digitalization of the economy is giving rise to several tax issues. Although some problems are typical and have been highlighted by tax experts for many years, with the tremendous growth of the digital economy they have only been exacerbated. Nevertheless, there are specific issues that have arisen due to the digitalization of the economy, such as the nexus issue for permanent establishments, the tax treatment of data collected through the Internet and the appropriate characterization of income derived from new business models.

 This article analyses the tax treatment of two of these models that are widespread, namely cloud-based services and 3D printing services. After noting the relevant characteristics of the tax issues, the article studies the treatment under tax treaties, taking into account the OECD Model Convention and the Commentary thereon, as well as the position of the Spanish tax administration. This study uses the tax treatment of software and digital products, as addressed in the Commentary on Article 12 of the OECD Model, and the Spanish Observation to that Commentary, in order to build a framework of the potential tax treatment among business profits, royalties and capital gains.

Finally, the author defends the characterization of both cloud computing and 3D printing payments as a tool to align tax with the place of value creation through a new interpretation of the concept of royalties in the Commentary on the OECD Model following the approach of the Spanish tax administration.
Comparing Tax Policy Responses for the Digitalizing Economy: Fold or All-in
Authors: de Wilde Maarten F.
Published: February 2022

This article elaborates on the tax policy responses in the area of direct taxation that are currently on the table at both the OECD and EU levels. The digital economy cannot be seen in isolation from the rest of the economy; it is the overall economy that is becoming increasingly digitalized. As any ring-fencing of the digital parts of the economy would seem infeasible, the fact that all the tax reform initiatives contemplated seem to be pursuing that exact objective is rather anomalous. Such a move would seem to bring little to the table other than market distortions, inequities, arbitrary taxation, tax cascading, legal uncertainties, and red tape. When it comes to fixing the broken international tax framework, there seems to be no such thing as a readily available ‘quick fix’. So the real question on the table would seem to be whether we should instead consider breaking away from status quos in company taxation and proceeding to explore genuine and fundamental corporate tax reform.
Virtual Permanent Establishments: Indian Law and Practice
Authors: Nagappan Meyyappan , Unnikrishnan Anandapadmanabhan
Published: February 2022

The virtual permanent establishment (virtual PE) was first proposed to tackle growing concerns that multinationals could artificially avoid PE status by rendering cross border supplies of goods and services through electronic means. The virtual PE concept therefore sought to link taxation with value creation: in most cases, this involved the application of source taxation to non-resident entities that had no physical presence in the source state. With increasing digitalization, the virtual PE concept has become crucial to addressing tax avoidance and base erosion, particularly by multinational enterprises and cross border suppliers of goods and services.

 This article traces the evolution and treatment of the virtual PE concept under Indian law against the background of the broad framework prescribed under international and comparative tax law. Based on an analysis of Indian judicial precedents on the topic, the authors believe that Indian courts have progressively watered down the requirements necessary to trigger the existence of a PE. Although the lowering of thresholds is in the context of digital businesses where the courts have sought to tax income in India through any tangible or physical nexus, the lower thresholds could arguably be applied in other situations. Furthermore recent reservations by India to the revised OECD Model Tax Convention on Income and on Capital (OECD Model) and changes in the domestic tax laws introduced in the 2018 Budget also indicate an intent to lower the threshold for the creation of nexus, for both digital and other businesses operating in the Indian market. This potentially raises the level of uncertainty with regard to many transactions which, in the past, were not questioned as being undertaken by a PE and which may, in certain instances, lead to absurd results.

Additionally, the struggle between adopting a multilateral solution such as the virtual PE appears to be slowly giving way to uncoordinated and unilateral levies, such as India’s recent equalization levy. Several European countries are now considering similar unilateral measures. This would lead to double taxation, have a chilling effect on cross border trade, and undercut the foundation of the international tax order by bypassing a stable and clear treaty network. Therefore, there is a need to address the complexity of the concept of a virtual PE and achieve consensus before the world crosses a tipping point, after which unilateral solutions may become the norm. From an Indian perspective as well, this is crucial if India is to achieve its publicly stated goal of a USD 1 trillion digital economy in the next four years.
Debate: Implications of Digitalization for International Corporate Tax Reform
Authors: Vella John , Devereux Michael P.
Published: February 2022

Digitalization exacerbates the problems faced by the existing system for taxing corporate profit in an international context. It does so by making it much easier for all aspects of a company to be spread around the world: its shareholders and creditors, its operations and its consumers. As many of these problems ultimately stem from the fact that the existing system taxes companies in the location of their mobile factors, this article argues that a more direct and satisfactory response to these problems would be to move to a system in which companies are taxed where their immobile factors are located. The article considers two such possibilities: the location of shareholders and that of consumers. It also considers two specific issues which arise particularly in the context of digital companies, namely two sided markets and free usage.
What are the Drivers of Tax Complexity for MNCs? Global Evidence
Authors: Schanz Deborah , Sureth-Sloane Caren , Hoppe Thomas , Sturm Susann
Published: February 2022

All over the world, firms and governments are increasingly concerned about the rise in tax complexity. To manage it and develop effective simplification measures, detailed information on the current drivers of complexity is required. However, research on this topic is scarce. This is surprising as the latest developments–for example, those triggered by the BEPS project–have given rise to the conjecture that complexity drivers may have changed, thus questioning the findings of prior studies. In this article, we shed light on this issue and provide a global picture of the current drivers of tax complexity that multinational corporations face based on a survey of 221 highly experienced tax consultants from 108 countries. Our results show that prior complexity drivers of the tax code are still important, with details and changes of tax regulations being the two most important complexity drivers. We also find evidence for new important complexity drivers emerging from different areas of the tax framework, such as inconsistent decisions among tax officers (tax audits) or retroactively applied tax law amendments (tax enactment). Based on the tax consultants’ responses, we develop a concept of tax complexity that is characterized by two pillars, tax code and tax framework complexity and illustrates the various aspects that should be considered when assessing the complexity of a country’s tax system.
Country note: First Domestic Decisions on the 2015 Parent-Subsidiary Directive GAAR Implementation: Guiding Principles for EU Member States?
Authors: Aarup Lars Bo , Bundgaard Jakob , Kjærsgaard Louise Fjord
Published: February 2022

Guidelines regarding the interpretation and the scope of the new Parent-Subsidiary Directive general anti-avoidance rule (GAAR) have been awaited ever since the implementation in 2015. Two recent decisions by the Danish Tax Board involving the application of the new Parent-Subsidiary Directive GAAR may contribute towards establishing such interpretation guidelines. The decisions appear to be neither of a principled nature nor sufficiently well justified by the Danish tax administration. No thorough assessment of the individual conditions of the GAAR seems to have been undertaken, as the Danish tax authorities in each decision appear to engage in GAAR considerations solely by arguing that a tax advantage is obtained which would not otherwise have been obtained, had the arrangement or series of arrangements not been put into place.
Hybrid Entity Mismatches: Exploring Three Alternatives for Coordination
Authors: Parada Leopoldo
Published: February 2022

The OECD pragmatic approach regarding hybrid entity mismatches is, without doubt, questionable. However, equally questionable is the absence of alternatives solutions proposed by either academics or tax policy makers , which demonstrates a sort of conformism as regards both the diagnosis of the problems and the solutions thereto, as if matching tax outcomes and taxing income somewhere – no matter where – were indeed the only possible path to deal with hybrid entity mismatches. 

In an attempt to break this inertia, this article argues for coordination in the tax characterization of entities as a straightforward and suitable alternative to replace the current OECD linking rules, and perhaps also, the consequentialist OECD approach to hybrid entity mismatches. For this purpose, three specific alternatives are explored for coordination in the tax characterization of entities, which include (1) supremacy of the tax characterization rules of the source state, (2) supremacy of the tax characterization rules of the residence state and (3) supremacy of the tax characterization rules of the home state. The analysis of these alternatives includes both hypotheticals and specific examples from domestic and supranational laws that are used to illustrate and support their effectiveness. The ultimate aim of this article is to demonstrate that coordination in the tax characterization of entities appears to be not only a more preferable path when compared to the OECD approach of matching tax outcomes, but also a more coherent and less costly alternative for both taxpayers and tax administrations.
The Digital Services Tax and Fundamental Freedoms: Appraisal Under the Doctrine of Measures Having Equivalent Effect to Quantitative Restrictions
Authors: Dimitropoulou Christina
Published: February 2022

This article focuses on the evaluation of the European proposal for a common system of a digital services tax (DST) on revenues resulting from the provision of certain digital activities, specifically in light of its compatibility with the guaranteed free movement of goods and services. The compatibility test targets the whole set of taxable services falling under the scope of the DST proposal. The reason of the present examination stems from the current co-exercise of traditional and digital similar services in the digital single market and the impact that the DST could have on market competition. A high risk is found for the DST to run counter the aim of the digital single market itself. The analysis points out the possible restrictions on the guaranteed free movement of goods and services by the imposition of DST on the taxable services falling under its scope in the framework of the doctrine of measures having equivalent effect to quantitative restrictions (MEQR) and the relevant ECJ case law (including possible justifications for the identified restrictions and proportionality assessment). Pursuant to the above, the article proposes that digital intermediation services be excluded from the scope of the DST until a comprehensive solution is reached.
The OECD BEPS Multilateral Instrument and the Issue of Language
Authors: Resch Richard Xenophon
Published: February 2022

This article discusses the OECD BEPS Multilateral Instrument (MLI) in respect of its policy to implement equally authoritative English and French texts. It evaluates this choice against the background of the policies implemented in the final clauses of all existing bilateral tax treaties and proposes possible solutions to resolve the problems resulting from the MLI final clause. The global tax treaty network is modelled based on a sample of 3,358 tax treaties currently concluded.
On the Liability of the Uninformed Taxable Person in EU VAT
Authors: Nellen Frank J.G.
Published: February 2022

In this contribution, the author analyses the information need of the taxable person in EU value added tax (VAT). He explores the extent to which the taxable person depends, in the course of taxation, on the provision of information that is held by others. In addition, the author discusses EU Court of Justice (ECJ) case law in order to establish whether the taxable person can be held liable for the payment of VAT in case that person is unable to obtain all necessary information.
Taxation of Cryptocurrencies from the Danish and Swedish Perspectives
Authors: Arfwidsson Autilia , Kjærsgaard Louise Fjord
Published: February 2022

The authors analyse the current classification of cryptocurrencies from the Danish and Swedish domestic income tax perspectives. Cryptocurrencies are analysed as they are typically applied in practice, where a categorization is made between coins, utility tokens, security tokens and asset tokens. In particular, it is concluded that despite the economic differences of different cryptocurrencies, they generally fall outside the scope of Danish and Swedish lex specialis regulation on taxation of capital gains and losses from the sale of certain assets, for example, shares and claims in currency. In both countries, there appears to be a presumption that most cryptocurrencies should be taxed as assets held for investment and speculative purposes. It is argued that such an approach is problematic not only in relation to the principle of neutrality, but also because it creates a barrier to realizing the economic potential of cryptocurrencies. The authors conclude that (1) the classification of cryptocurrencies poses challenges and uncertainty for tax purposes due to the lack of a regulatory framework, the absence of common definitions and the diverse technical structure of tokens and coins and (2) the classification for Danish and Swedish tax law purposes should be based on a case-by-case assessment of the specific cryptocurrency.
Arbitration institutes forum: The Changed Landscape of Tax Dispute Resolution Within the EU: Consideration of the Directive on Tax Dispute Resolution Mechanisms
Authors: Pit H.M.
Published: February 2022

With the Council’s adoption of the Directive on Tax Dispute Resolution Mechanisms on 10 October 2017, the resolution of tax disputes among Member States enters a new phase. What originally started in 1976 with a proposal for a directive to settle transfer pricing disputes by means of arbitration has led to the adoption of a directive in 2017 for all disputes among Member States on the interpretation and application of their mutual tax treaties on income and capital. This Directive aims at improving existing dispute resolution mechanisms contained in these tax treaties and the EU Arbitration Convention. To that end, four specific objectives have been defined in the directive’s preamble, which are (1) broadening the scope of application of the EU Arbitration Convention to all disputes concerning the application and interpretation of tax treaties between Member States; (2) ensuring legal certainty for taxpayers; (3) ensuring effectiveness and efficiency; and (4) ensuring transparency. This article examines whether each of these objectives is attained in light of the experiences gained with the EU Arbitration Convention.
Country note: Implementation of the Controlled Foreign Company Rules in the Netherlands
Authors: de Groot I.M.
Published: February 2022

The Anti-Tax Avoidance Directive requires EU Member States to implement Controlled Foreign Company (CFC) rules. In this article the author addresses the implementation of these rules in the Netherlands.
Carpet-Bombing Tax Avoidance in Europe: Examining the Validity of the ATAD Under EU Law
Authors: Govind Sriram , Lazarov Ivan
Published: February 2022

This article examines the compatibility of the Anti-Tax Avoidance Directive (ATAD) with primary EU law on four grounds. First, it argues  that the Directive is incompatible with the general principle of anti-abuse developed by the CJEU. Second, it considers the Directive to not comply with the requirements of Article 115 TFEU as it does not contribute to the ‘establishment and functioning of the internal market’ per accepted case law of the CJEU. Third, the Directive is at odds with the principle of subsidiarity, as the Commission put forward no convincing evidence regarding the need for such a directive at an EU level. Finally, several provisions of the Directive go beyond what is necessary to combat artificial arrangements in a tailor-made fashion, thereby making it incompatible with the principle of proportionality.
Country Note: The Future of the Economic Nexus Standard for US Sales & Use Tax Collection
Authors: Van Brederode Robert F.
Published: February 2022

Under the US Constitution businesses can only be coerced to collect sales and use taxes if they have sufficient nexus with a given state. Until last year, Business-to-consumer sales by out-of-state vendors remained effectively untaxed if the seller did not have a physical presence in the state where the consumer lived. With its landmark Wayfair-ruling the Supreme Court changed its course and widened the door for the States to coerce remote sellers (including those located outside the US) to collect the tax by accepting an economic nexus standard. This article explains the political and constitutional background to the issue of sales tax collection in relation to B2C sales made by out-of-state vendors, discusses the reasoning of the majority and dissenting opinions in the Wayfair ruling, and analyses its implications.