In Brief from International Taxation [May 2021]

May’s news from international taxation among other introduces a follow-up on CJEU cases on dividend distribution, summarises an CJEU opinion on dividend payment to collective investments undertaking and informs about the EU-UK Trade and Cooperation Agreement entering into force as of 1 May 2021. For more read below!

Denmark: Decision on Beneficial Ownership

The Eastern High Court of Denmark has decided in the cases of Skatteministeriet v. TDC A/S (C-116/16) and Skatteministeriet v. NetApp Denmark ApS (C-117/16 Y Denmark ApS) regarding dividend distributions. These cases were referred back to the Danish court by CJEU for an interpretation of whether these cases involve fraud or abuse. Please see the details with respect to both cases in our previous article. The tax exemption of dividend distribution under the Parent-Subsidiary Directive (Council Directive 2011/96/EU) and the claiming of treaty benefits was denied by the Court due to the lack of substance or by disregarding interposed conduit companies.

The Netherlands: an updated version of decrees on a legal merger, split-up/split-off

Updated decrees of the Ministry of Finance with respect to a legal merger, split-up or split-off (“merger/split”) resulting in a net, unrealized loss are applicable since 8 May 2021 (with retroactive effect to 28 April 2021) in the Netherlands. The decrees specify a new condition to cover the situation where a merger/split results in a loss. This new condition requires that a profit split take place to ensure that the unrealised loss is – after the merger/split – not (initially) set off against other profits or profits of the receiving entity/entities.

ECJ opinion on withholding taxes on dividends paid to collective investments undertakings

On 6 May 2021, Advocate General Kokott of the Court of Justice of the European Union (CJEU) gave her opinion in the case of Allianzgi-Fonds Aevn v. Autoridade Tributária e Aduaneira (Case C-545/19) on withholding taxes on dividends paid to collective investment undertakings concluding that Article 63 of Treaty on the Functioning of the EU does not preclude a national rule imposing the withholding tax on dividend distribution by a resident company to a non-resident collective investment undertaking which is not subject to corporate tax in its residence state.

India: Limits for the recognition of Significant Economic Presence of Non-Residents

The Central Board of Direct Taxes (CBDT) has specified the limits for recognition of significant economic presence (SEP) of a non-resident in India for the purpose of attributing income in India. The limits are applicable since 1 April 2022 and relate to the prior year’s total payments on a transaction involving goods, services or property carried out by a non-resident with any person in India, including data or software downloads in India, exceeding INR 20 million or to systematic and continuous soliciting of business activities or engaging in interaction with 300,000 or more users in India.

EU-UK Trade and Cooperation Agreement entered into force on 1 May 2021

The EU-UK Trade and Cooperation Agreement entered into force on 1 May 2021 after its conclusion by the Council of the European Union as of 29 April 2021. The agreement establishes the Free Trade Agreement, a close partnership on citizens’ security and an overarching governance framework to regulate the relationship between the United Kingdom and the European Union. It aims at ensuring a level playing field in areas such as VAT, customs, social security coordination, State aid, tax transparency and anti-avoidance. The agreement has been provisionally applied as of 1 January 2021.

VAT taxation of e-commerce

New value added tax rules on e-commerce were introduced by Belgium. These new rules entering into force on 1 July 2021 imply a significant change of the VAT rules for cross-border business-to-consumer (B2C) e-commerce activities in the European Union. For the full text of Bill no. DOC 55 1820/001, see here (as a PDF and in French and Dutch only). The EU VAT e-Commerce package was also adopted in Germany. The package imposes, amongst other things, an extension of the mini one-shop system to a border one-stop shop system, abolishment of the current import VAT exemption for goods in small consignments of a value below EUR 22 (newly adopted value for exemption is EUR 150), replaces the previous limit of EUR 35,000 with an EU-wide limit of EUR 10,000 for distance selling and the sale of certain services etc. It is expected that the e-commerce package will come into force on 1 July 2021.

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