CFC Legislation, Passive Assets and the Impact of the ECJ's Cadbury-Schweppes Decision

17 Pages Posted: 22 Feb 2014

See all articles by Martin Ruf

Martin Ruf

University of Tübingen

Alfons J. Weichenrieder

Goethe University Frankfurt - Department of Applied Econometrics and International Economic Policy; Vienna University of Economics and Business; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: November 20, 2013

Abstract

In its Cadbury-Schweppes decision of 12 September 2006 (C-196/04), the Court of Justice of the European Union decided that the UK controlled foreign corporation rules, which were implemented to subject low taxed passive income of foreign affiliates to UK corporate tax, implied an infringement of the freedom of establishment. Consequently, many EU countries including Germany changed their legislation. The paper discusses to which extent the ECJ ruling has impacted on the allocation of passive assets in German multinationals. Using firm level data we find evidence for an increased preference for low-tax European countries compared to non-European countries.

Keywords: Court of Justice of the European Union, corporation tax, foreign direct investment, CFC regulation, passive investment

JEL Classification: H25, H73

Suggested Citation

Ruf, Martin and Weichenrieder, Alfons J., CFC Legislation, Passive Assets and the Impact of the ECJ's Cadbury-Schweppes Decision (November 20, 2013). WU International Taxation Research Paper Series No. 2014 - 02, Available at SSRN: https://ssrn.com/abstract=2398309 or http://dx.doi.org/10.2139/ssrn.2398309

Martin Ruf (Contact Author)

University of Tübingen ( email )

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Tübingen, D-72076
Germany

HOME PAGE: http://www.uni-tuebingen.de/wiwi/steuern

Alfons J. Weichenrieder

Goethe University Frankfurt - Department of Applied Econometrics and International Economic Policy ( email )

United States

HOME PAGE: http://www.uni-frankfurt.de/fb02/weichenrieder/

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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