Tax Design Issues in the EU in Respect to Foreign Branches and Controlled Companies

15 Pages Posted: 24 Jul 2013

See all articles by Carlo Garbarino

Carlo Garbarino

Bocconi University - Department of Law

Date Written: July 23, 2013

Abstract

The CCCTB architecture seems to address the major tax design issues relating to foreign business profits in the UE which result from the intrinsic limitations of domestic tax consolidation systems but would intervene in a scenario in which Member States retain prerogatives in developing their own policies in respect to cross-border profits and losses of affiliated companies. The purpose of this article is to shed light on those policies and on the major tax design issues relating to foreign business profits in the UE in light of the case law of the ECJ and of the potential adoption of the CCCTB Directive. The paper first addresses the tax treatment of foreign branches both in the case in which foreign profits are taxable and in the case in which are exempt in the residence-country (section 2) and then discusses the issues related to the tax consolidation of foreign controlled companies (section 3), with additional remarks about the tax design issues faced by host countries whose tax base can be eroded through certain tax planning strategies by resident companies that are controlled by foreign entities (section 4). The paper concludes by describing the common core of rules already existing at EU level and how this rules are conveyed in the CCCTB model which might be approved through enhanced cooperation (section 5).

Keywords: international taxation, comparative taxation, profit shifting, aggressive tax strategies, tax planning, corporate tax, multinationals, CCCTB, exchange of information

Suggested Citation

Garbarino, Carlo, Tax Design Issues in the EU in Respect to Foreign Branches and Controlled Companies (July 23, 2013). Bocconi Legal Studies Research Paper No. 2297465, Available at SSRN: https://ssrn.com/abstract=2297465 or http://dx.doi.org/10.2139/ssrn.2297465

Carlo Garbarino (Contact Author)

Bocconi University - Department of Law ( email )

Via Roentgen, 1
Milan, Milan 20136
Italy

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