BEPS and European Union Law

Cahiers de droit fiscal international, Vol. 102a, Sdu: The Hague 2017, p. 65-95.

18 Pages Posted: 11 Jul 2017

See all articles by Sjoerd Douma

Sjoerd Douma

Amsterdam Centre for Tax Law

Date Written: March 15, 2017


The European Union has taken an active role in the past few years which were – in the international tax arena – dominated by the debate around aggressive tax planning, base erosion and profit shifting, tax competition, transparency and corporate social responsibility. The European Council, the Ecofin Council, the European Parliament and the European Commission (EC) have all been very vocal and have indeed taken unprecedented action, driven by the wish to bring the European Union closer to ordinary citizens. The view of the Court of Justice of the European Union (CJEU) on those actions is not clear yet. The present contribution provides an overview an analysis of the measures which have been adopted or which may be adopted in the future, focusing on BEPS Actions 2–10 and 14. Where possible, the limits which the CJEU may impose on those measures – following for instance from EU free movement law – are discussed as well. In particular but not exclusively, close attention is paid to EU State aid law, the influence of the Code of Conduct Group on Business Taxation, the anti-tax avoidance directives and the proposals for a common corporate tax base, dispute resolution and various other non-legislative initiatives.

In respect of hybrid mismatch situations, addressed in BEPC Action 2, it is clear that they are in certain situations vulnerable from a State aid law perspective. From a policy angle, the Code of Conduct Group on Business Taxation has been very instrumental in preparing the proposals which have been proposed and adopted later by the Council in directives (namely the Parent-Subsidiary Directive and the Anti-Tax Avoidance Directives). These directives may seem partly in conflict with EU free movement rules, but it remains to be seen how the CJEU will review these and similar measures, having regard to the low intensity of review of measures adopted by institutions of the Union. With regard to BEPS Action 3 on CFC-legislation, the European Union has done a great deal of work, through directives, in the Code of Conduct Group and by the CJEU. State aid law has so far not been applied, but a risk exists where CFC-legislation can be seen to be discriminatory. Action 4 of the BEPS Project is reflected in many ways in European Union law: EU directives (including the Anti-Tax Avoidance Directive), free movement law and State aid. The Member States will have to take all those levels of law into account when implementation the BEPS recommendations. An enormous amount of work has been done within the scope of BEPS Action 5, both on IP regimes and on exchange of tax rulings. One can say that Action 5 has been implemented faithfully and that the European Commission will monitor observance by the Member States, either through infringement proceedings or by opening new State aid cases. The present contribution also makes clear that the European Union has done quite a lot to implement BEPS Action 6, albeit that the European Commission has rejected LOB provisions for reasons of EU free movement law. It should be expected that the European Commission will closely monitor loyal cooperation and implementation by EU Member States. Action 7 of the BEPS Project has been dealt with by the Code of Conduct Group and by the Commission through a formal Recommendation and through State aid proceedings. In addition, the Anti-Tax Avoidance Directive, as amended, will end hybrid PE mismatches both intra-EU and in third country situations. It will harmonize the definition of PE in the European Union. Also in the area of transfer pricing a lot of EU work has been done by the Commission (through State aid), the Code of Conduct Group and the CJEU. Transfer pricing is a rapidly evolving area of law, also in the EU, and it remains fascinating to see how it will develop. Finally, Action 14 of the BEPS Project recognizes dispute resolution mechanisms should be more effective. The European Commission has taken the commitments of BEPS Action 14 to heart by proposing a Council Directive on Double Taxation Dispute Resolution Mechanisms in the European Union.

In conclusion, it should be noted that the European Union has been very instrumental in driving the implementation of BEPS forward, in many respects. It should be commended for that, although some of the instruments used – in particular State aid – have given rise to much uncertainty in taxpayers and Member States. This uncertainty should end as soon as possible.

Keywords: BEPS, European Union law

JEL Classification: K33, K34

Suggested Citation

Douma, Sjoerd, BEPS and European Union Law (March 15, 2017). Cahiers de droit fiscal international, Vol. 102a, Sdu: The Hague 2017, p. 65-95., Available at SSRN:

Sjoerd Douma (Contact Author)

Amsterdam Centre for Tax Law ( email )

Nieuwe Doelenstraat 15
Amsterdam, 1012 CP

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics