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The European Commission has launched a public consultation on the double non-taxation of cross-border companies: cases in which divergent national rules and/or inadequate national tax measures in two countries lead to non-taxation.
The Commission believes double non-taxation deprives member states of significant revenues and creates unfair competition between businesses in the single market. It occurs when cross-border companies escape paying taxes due to mismatches between national tax systems.
This may be the case if two countries define entities in different ways, resulting in income not being taxed in either member state. The consultation concerns corporate taxes, non-resident income taxes, capital gains taxes, withholding taxes, inheritance taxes and gift taxes.
To encourage participation by those who may have insight into real-life exploitation of double non-taxation by companies, anonymous contributions will be accepted. The consultation closes on 30 May.
In other European tax news, Brussels has formally requested the UK to amend legislation providing for exit taxes on companies.
The existing rules result in immediate taxation of unrealised capital gains in respect of certain assets when the seat or place of effective management of a company is transferred to another EU/European Economic Area state.
A similar transfer within the UK would not generate any such immediate taxation. and the relevant capital gains would only be taxed once they have been realised.
The Commission considers these to be restrictive provisions, which may breach the freedom of establishment because they make it more expensive to transfer a company seat or place of effective management to another member state than to another location in the UK.
If the UK fails to make a suitable response within two months, Brussels may refer the matter to the European Court of Justice.
