Opinion Statement ECJ-TF 2/2021 on the CJEU Decision of 25 February 2021 in Case C-403/19, Société Générale, on the Calculation of the Maximum Amount of a Foreign Direct Tax Credit

CFE Tax Advisers Europe, 2021

14 Pages Posted: 1 Dec 2021

See all articles by Francisco Alfredo Garcia Prats

Francisco Alfredo Garcia Prats

Universitat de València

Werner C. Haslehner

Universite du Luxembourg

Volker Heydt

Independent

Eric Kemmeren

Tilburg University; Fiscal Institute Tilburg

Georg Kofler

Vienna University of Economics and Business - Institute for Austrian and International Tax Law

Michael Lang

Vienna University of Economics and Business

João Félix Pinto Nogueira

International Bureau of Fiscal Documentation; Catholic University of Portugal; University of Cape Town (UCT)

Christiana HJI Panayi

Queen Mary University of London, School of Law

Emmanuel Raingeard de la Blétière

Independent

Stella Raventos-Calvo

Asociación Española de Asesores Fiscales (AEDAF)

Isabelle Richelle

Independent

Alexander Rust

Independent

Rupert Shiers

Independent

Date Written: September 20, 2021

Abstract

The Court’s judgment in Société Générale reinforces the established case law that EU law neither prohibits juridical double taxation as such nor does it put an obligation on the residence Member State to prevent the disadvantages which could arise from the exercise of competence thus attributed by the two Member States. The parallel existence of taxing jurisdiction, however, must be distinguished from the exercise of such jurisdiction by each Member State: While Member States are free to determine the connecting factors for the allocation of fiscal jurisdiction in tax treaties, “the exercise of the power of taxation, so allocated by bilateral conventions for the avoidance of double taxation, the Member States must comply with EU rules and, more particularly, observe the principle of equal treatment”.

It is generally accepted in the Court’s case law that both the ordinary credit and exemption (also with progression) are permissible methods to avoid double taxation, and the Court in Société Générale has confirmed this position specifically with regard to the “maximum deduction” in the ordinary credit method in tax treaties, even though it can result in a disadvantage for cross-border income as compared with domestic income. As the disadvantage in Société Générale was due to the difference between gross-basis taxation of dividends in the source Member States (Italy, the Netherlands and the UK) and net-basis taxation of those foreign-source dividends in the residence State (France), it remains to be seen if future cases will bring clarity in light of the EFTA-Court’s Seabrokers judgment as to which expenses can be lawfully allocated to foreign income from the perspective of the residence Member State.

The CFE Tax Advisers Europe stresses that in an Internal Market neither (unintended) double non-taxation nor double taxation is acceptable. It therefore calls on all EU institutions to analyze and address the remaining issues of juridical double taxation (including in the context of the upcoming actions amending current corporate tax directives).

Keywords: Taxation, Tax law, European taxation

JEL Classification: K33, K34, F13, E62, D78, E62, F02, F23, F42, H20, H22, H23, H25, H26, H87, O19, O23, O24

Suggested Citation

Garcia Prats, Francisco Alfredo and Haslehner, Werner Christof and Heydt, Volker and Kemmeren, Eric and Kofler, Georg and Lang, Michael and Pinto Nogueira, João Félix and HJI Panayi, Christiana and Raingeard de la Blétière, Emmanuel and Raventos-Calvo, Stella and Richelle, Isabelle and Rust, Alexander and Shiers, Rupert, Opinion Statement ECJ-TF 2/2021 on the CJEU Decision of 25 February 2021 in Case C-403/19, Société Générale, on the Calculation of the Maximum Amount of a Foreign Direct Tax Credit (September 20, 2021). CFE Tax Advisers Europe, 2021, Available at SSRN: https://ssrn.com/abstract=3928435

Werner Christof Haslehner

Universite du Luxembourg ( email )

Luxembourg

Volker Heydt

Independent

Eric Kemmeren

Tilburg University ( email )

Warandelaan 2
Tilburg, Noord-Brabant 5037AB
Netherlands
+31.13.466.8129/2412 (Phone)
+31.13.466.3073 (Fax)

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/kemmeren-3.htm

Fiscal Institute Tilburg ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31.13.466.8129/2412 (Phone)
+31.13.466.3073 (Fax)

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/kemmeren-3.htm

Georg Kofler

Vienna University of Economics and Business - Institute for Austrian and International Tax Law ( email )

Welthandelsplatz 1
Buildind D3
Vienna, VIenna 1020
Austria

Michael Lang

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

João Félix Pinto Nogueira (Contact Author)

International Bureau of Fiscal Documentation ( email )

Rietlandpark, 301
Amsterdam, 1019 DW
Netherlands
+31205540100 (Phone)

Catholic University of Portugal ( email )

Palma de Cima
Lisboa, 1649-023
Portugal

HOME PAGE: http://https://fd.porto.ucp.pt/pt-pt/pessoa/joao-felix-pinto-nogueira

University of Cape Town (UCT) ( email )

Private Bag X3
Rondebosch, Western Cape 7701
South Africa

Christiana HJI Panayi

Queen Mary University of London, School of Law ( email )

67-69 Lincoln’s Inn Fields
London, WC2A 3JB
United Kingdom

Stella Raventos-Calvo

Asociación Española de Asesores Fiscales (AEDAF) ( email )

Spain

Isabelle Richelle

Independent

Alexander Rust

Independent

Rupert Shiers

Independent

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