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Double Taxation Relief, Transfer Pricing Adjustments and State Aid Law: Comments

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State Aid Law and Business Taxation

Part of the book series: MPI Studies in Tax Law and Public Finance ((MPISTUD,volume 6))

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Abstract

This contribution examines whether double taxation relief measures and downward transfer pricing adjustments which are granted irrespective of whether or not the income for which such relief is granted has been taxed in another State can constitute State aid under EU law. The question is analysed through three examples where the application of such measures may lead to double non-taxation. The conclusion is drawn that the complete unilateral application of such measures contradicts their purpose and thus is likely to be disproportionate, which may lead to their qualification as State aid.

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Notes

  1. 1.

    See European Commission (2014a); European Commission (2014b); European Commission (2015a); European Commission (2015b); European Commission (2016).

  2. 2.

    CJEU, Joined Cases C-106/09P and C-107/09P Commission v Gibraltar, ECLI:EU:C:2011:732.

  3. 3.

    Rossi-Maccanico (2014); Luja (2014); De Broe (2015).

  4. 4.

    United States Senate-Committee on Finance (2016); United States Department of the Treasury (2016). See also Grinberg (2016).

  5. 5.

    Luja (2014), p. 356; Luja (2015).

  6. 6.

    Consolidated version of the TFEU (2012).

  7. 7.

    Micheau (2014), p. 157; Micheau (2012), p. 211; Lang (2012), p. 411; Lyal (2015), p. 1028.

  8. 8.

    European Commission (1998), pp. 3–9 para. 13.

  9. 9.

    European Commission (1998), pp. 3–9 para. 26.

  10. 10.

    European Commission (2014c), at para. 139.

  11. 11.

    2014 OECD Model Tax Convention on Income and on Capital.

  12. 12.

    European Commission (2014d), pp. 40–41.

  13. 13.

    CJEU, Joined Cases C-78/08 to C-80/08, Paint Graphos and others, ECLI:EU:C:2011:550, para. 49; CJEU, Case C-6/12, P Oy, ECLI:EU:C:2013:525, para. 19.

  14. 14.

    General Court, Case T-399/11, Banco Santander SA v Commission, ECLI:EU:T:2014:938, para. 37; General Court, Case T-219/10, Autogrill España, SA v European Commission, ECLI:EU:T:2014:939.

  15. 15.

    General Court, Case T-399/11, Banco Santander SA v Commission, ECLI:EU:T:2014:938, para. 49.

  16. 16.

    General Court, Case T-399/11, Banco Santander SA v Commission, ECLI:EU:T:2014:938, para. 57.

  17. 17.

    General Court, Case T-399/11, Banco Santander SA v Commission, ECLI:EU:T:2014:938, para. 72.

  18. 18.

    CJEU, Joined Cases C-78/08 to C-80/08, Paint Graphos and others, ECLI:EU:C:2011:550, para. 75.

  19. 19.

    COM(2016) 26 final, 28.1.2016.

  20. 20.

    COM(2016) 26 final, Article 6.

  21. 21.

    Commentary on Articles 23 A and 23 B concerning the methods for elimination of double taxation, paras. 32.1–32.7.

  22. 22.

    Commentary on Articles 23 A and 23 B concerning the methods for elimination of double taxation, para. 32.6.

  23. 23.

    Lang (2009), p. 204.

  24. 24.

    Commentary on Articles 23 A and 23 B concerning the methods for elimination of double taxation, para. 32.6.

  25. 25.

    Commentary on Articles 23 A and 23 B concerning the methods for elimination of double taxation, para. 56.1.

  26. 26.

    Commentary on Articles 23 A and 23 B concerning the methods for elimination of double taxation, para. 56.2.

  27. 27.

    Commentary on Articles 23 A and 23 B concerning the methods for elimination of double taxation, para. 34.

  28. 28.

    Van de Vijver (2015), p. 250.

  29. 29.

    Van de Vijver (2015), p. 250.

  30. 30.

    On the various forms of subject-to-tax clauses, see Burgstaller and Schilcher (2004).

  31. 31.

    One of the proposed measures under BEPS Action 6 is to include a Preamble in the OECD Model which would clearly state that the Contracting States do not intend to create, by the conclusion of the treaty, opportunities for non-taxation or reduced taxation. However, the phrase “through tax evasion or avoidance” is added to this which limits the scope and effect of this statement. See OECD (2015).

  32. 32.

    European Commission (2015c).

  33. 33.

    The corresponding provision is Article 25(2) of the United States-Luxembourg DTC (1996).

  34. 34.

    The only exception to this is the situation where a selective advantage is granted by a Member State through the compulsory implementation of EU legislation where the Member State has no discretion in the implementation; in this case the aid cannot be attributed to the Member State. See General Court, Case T-351/02 Deutsche Bahn v Commission, ECLI:EU:T:2006:104; CJEU, C-460/07 Puffer, ECLI:EU:C:2009:254.

  35. 35.

    Rossi-Maccanico (2014), p. 867.

  36. 36.

    European Commission (2014c), at para. 175.

  37. 37.

    Luja (2014), p. 354.

  38. 38.

    Contrarily, see Gunn (2016).

  39. 39.

    Rossi-Maccanico (2014), p. 861.

  40. 40.

    CJEU, Joined Cases C-78/08 to C-80/08, Paint Graphos and others, ECLI:EU:C:2011:550. See Lyal (2015), p. 1032.

  41. 41.

    Another question in connection with double tax relief mechanisms is whether the fact that different treaties provide for different methods could be considered as a differential treatment of comparable situations which grants selective advantage to certain enterprises. See on this Luja (2004), p. 235.

  42. 42.

    CJEU, Case C-376/03 D, ECLI:EU:C:2005:424, para. 62.

  43. 43.

    CJEU, C-172/03 Heiser, ECLI:EU:C:2005:130, para. 40; CJEU, Joined cases C-106/09 P and C-107/09 P Commission v Gibraltar, ECLI:EU:C:2011:732, paras. 75, 101; CJEU, Joined Cases C-78/08 to C-80/08, Paint Graphos and others, para. 49; General Court, T-210/02 RENV British Aggregates v Commission, para. 49. See on this Szudoczky (2014), pp. 553–560.

  44. 44.

    Similarly, Luja (2004), p. 235.

  45. 45.

    CJEU, Joined Cases C-78/08 to C-80/08, Paint Graphos and others, ECLI:EU:C:2011:550, para. 75.

  46. 46.

    Contrarily, Luja (2004), p. 236.

  47. 47.

    CJEU, Joined Cases C-78/08 to C-80/08, Paint Graphos and others, ECLI:EU:C:2011:550, para. 74.

  48. 48.

    Rossi-Maccanico (2014), p. 857.

  49. 49.

    Avi-Yonah (2007) and based on this Rossi-Maccanico (2014).

  50. 50.

    CJEU, Joined cases C-106/09 P and C-107/09 P Commission v Gibraltar, ECLI:EU:C:2011:732.

  51. 51.

    Luja (2014), p. 355.

  52. 52.

    CJEU, Joined cases C-106/09 P and C-107/09 P Commission v Gibraltar, ECLI:EU:C:2011:732, para. 104.

  53. 53.

    Commission Decision of 8 July 2009 on the groepsrentebox scheme which the Netherlands is planning to implement (C 4/07 (ex N 465/06)), OJ L 288, 4.11.2009, pp. 26–39, paras. 114–117.

  54. 54.

    CJEU, Case C-513/04 Kerckhaert and Morres, ECLI:EU:C:2006:713, para. 22; CJEU, Case C-128/08 Damseaux, ECLI:EU:C:2009:471, paras. 32–33; CJEU, Case C-67/08 Block, ECLI:EU:C:2009:92, para. 30.

  55. 55.

    For example, Article 12 OECD Model.

  56. 56.

    For example, Article 19(1)(a) and (2)(a) OECD Model.

  57. 57.

    Article 10 and 11 OECD Model.

  58. 58.

    An example for such rule is the German treaty override provision which has recently been declared constitutional, see Treaty between Germany and Turkey – German Federal Constitutional Court finds domestic treaty override provision constitutional, IBFD TNS Report, 12 February 2016. Notably, this provision only prevents unintended double non-taxation.

  59. 59.

    European Commission (2016). At the time of writing the public version of the decision is not yet available.

  60. 60.

    C(2015) 563 (final), para. 41. The Commission’s reasoning is described here on the basis of this opening decision, as the final decision is not available at the time of writing.

  61. 61.

    C(2015) 563 (final), para. 25.

  62. 62.

    C(2015) 563 (final), paras. 58–62.

  63. 63.

    C(2015) 563 (final), para. 72 et seqq.

  64. 64.

    C(2015) 563 (final), para. 64.

  65. 65.

    C(2015) 563 (final), para. 98.

  66. 66.

    Koomen (2015), p. 152.

  67. 67.

    C(2015) 563 (final), para. 39.

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Authors and Affiliations

  1. Vienna University of Economics and Business, Vienna, Austria

    Rita Szudoczky

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  1. Rita Szudoczky
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Correspondence to Rita Szudoczky .

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  1. Tax Institute, HEC-University of Liège , Liège, Belgium

    Isabelle Richelle

  2. Max Planck Institute for Tax Law and Public Finance, Munich, Germany

    Wolfgang Schön

  3. Faculté de droit et de crimonologie, Université catholique de Louvain , Louvain-la-Neuve, Belgium

    Edoardo Traversa

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Szudoczky, R. (2016). Double Taxation Relief, Transfer Pricing Adjustments and State Aid Law: Comments. In: Richelle, I., Schön, W., Traversa, E. (eds) State Aid Law and Business Taxation. MPI Studies in Tax Law and Public Finance, vol 6. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-53055-9_9

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