EC Free Movement of Capital, Income Taxation & Third Countries. Four Selected Issues Book

Preface xi

Chapter 1 Introduction 1

Chapter 2 Relationship between the Free Movement of Capital and the Other EC Treaty Freedoms: A Question of Exclusivity, Parallelism or Causality? 5

1 Introduction 5

1.1 Definition of the Problem 5

1.2 Methodology 6

2 The EC Concept of Capital Movements and the Impact on Direct Taxation 7

3 Relation Between Free Movement of Capital and Freedom of Establishment 9

3.1 Is the Substantive Scope of the Free Movement of Capital Per Se Restricted by the Freedom of Establishment? 9

3.2 Is the Substantive Scope of the Free Movement of Capital Restricted by Means of a Specific Collision Rule? 13

3.3 Is the Territorial or Personal Scope of the Free Movement of Capital Restricted by the Provisions on the Freedom of Establishment? 17

3.4 Provisional Conclusions 19

4 Relation Between Free Movement of Capital and Free Movement of Services 19

4.1 Is the Substantive Scope of the Free Movement of Capital Per Se Restricted by the Free Movement of Services? 19

4.2 Is the Substantive Scope of the Free Movement of Capital Restricted by Means of a Specific Collision Rule? 23

4.3 Is the Territorial or Personal Scope of the Free Movement of Capital Restricted by the Provisions on the Freedom of Services? 25

4.4 Provisional Conclusions 26

5 When Does a Direct Tax Measure, in Terms of Causality, Actually Relate to the Free Movement of Capital? 26

5.1 Introduction 26

5.2 Academic Writing 27

5.3 ECJ Case Law 29

5.3.1 Rule of Remoteness 29

5.3.2 Bachmann Criterion 32

5.3.3 'Centre of Gravity' or 'Predominant Feature' versus 'Entirely Secondary' 35

5.4 Synthesis 37

6 Concurrence Between the Free Movement of Capital and the Freedomof Establishment in a Third-Country Context: The ECJ's Case Law in the Field of Direct Taxation 39

6.1 Introduction 39

6.2 No Simultaneous Application: Test Claimants in the Thin Cap Group Litigation, A and B and Lasertec 39

6.3 Simultaneous Application: FII and Holbock 41

6.4 Conclusion 41

7 Synthesis and Evaluation 42

Chapter 3 Significance of the Standstill Clause under Article 57(1) EC in the Field of Direct Taxation: Lack of Design versus Maintenance of Sovereignty 45

1 Introduction 45

1.1 Definition of the Problem 45

1.2 Methodology 46

2 Background and Purport of the Standstill Provision under Article 57(1) EC 47

2.1 Underlying Considerations 47

2.1.1 Conclusion: Partial Maintenance of Sovereignty but Direct Taxation Not Explicitly Considered 50

2.2 Qualifying Capital Movements 50

2.2.1 Introduction 50

2.2.2 Direct Investment 50

2.2.3 Investment in Real Estate 53

2.2.4 Establishment 53

2.2.5 Provision of Financial Services 54

2.2.6 Admission of Securities to Capital Markets 55

3 The Impact of the Standstill Obligation on Direct Taxation Measures Taken at the Level of the Individual Member States 55

3.1 Introduction 55

3.2 First Condition: The Application of Any Restrictions to Third Countries 55

3.3 Second Condition: Existing on 31 December 1993 under National or Community Law 57

3.3.1 Subsequent Amendments 58

3.4 Third and Fourth Conditions: Specificity of Qualified Restrictions 61

3.4.1 Specificity in Respect of Third Countries 63

3.4.2 Specificity in Respect of Qualifying Capital Movements 64

3.4.3 The ECJ's Approach in FII 65

3.5 Conclusion 65

4 Decision Netherlands Supreme Court in Third-Country Equivalent of Bosal Case 66

5 Synthesis and Evaluation 67

Chapter 4 Substantive Scope of the Free Movement of Capital vis-a-vis Third Countries: Still More Questions than Answers 71

1 Introduction 71

1.1 Definition of the Problem 71

1.2 Methodology 71

2 Free Movement of Capital and Third Countries: Background and Concepts 74

2.1 The Erga Omnes Principle 74

2.2 Direct Effect of Article 56 EC 75

2.3 Concept of Third-Country Capital Movements 78

2.4 Concept of Third Countries 81

2.4.1 Dividing Line between Member States and Third Countries, with Particular Reference to the OCTS 82

2.4.2 Differentiation between Third Countries 88

2.4.3 EEA Countries 88

2.4.4 Candidate Member States 89

2.4.5 Association- and Partnership Agreement Countries 89

2.4.6 Switzerland 90

2.4.7 OCTs 90

2.4.8 Tax Havens 91

2.4.9 OECD Countries 91

2.4.10 ACP Countries 92

2.4.11 DTC- and TIEA Countries 92

3 Application of the Free Movement of Capital vis-a-vis Third Countries Ratione Materiae in the Field of Direct Taxation 93

3.1 Introduction 93

3.2 Restriction of the Free Movement of Capital 94

3.3 Non-discrimination and Comparability 96

3.4 Justification Grounds 99

3.4.1 Introduction 99

3.4.2 Territoriality 101

3.4.3 Fiscal Coherence 104

3.4.4 Tax Avoidance and Evasion 105

3.4.5 Effective Fiscal Supervision 109

3.4.6 Effective Collection of Tax 110

3.4.7 Loss of Income 111

3.4.8 Administrative Difficulties 113

3.4.9 Absence of Compensatory Taxation 113

3.4.10 Lack of Reciprocity 115

4 Synthesis and Evaluation 117

Chapter 5 The Free Movement of Capital in Association- and Partnership Agreements and Direct Taxation 121

1 Introduction 121

1.1 Definition of the Problem 121

1.2 Methodology 122

2 Background and Purpose 123

2.1 General Remarks 123

2.2 Background and Purpose 124

3 Freedom of Establishment 127

3.1 Direct Effect 128

3.2 Scope of Non-discrimination Principle: Inbound versus Outbound Situations 129

3.3 Scope Ratione Materiae in the Field of Company Taxation 132

4 Free Movement of Capital 132

4.1 Introduction 132

4.2 Direct Effect 134

4.3 Scope of Non-discrimination Principle: Inbound versus Outbound Situations 135

4.4 Concept of 'Direct Investment' 136

4.5 Concurrence with the Freedom of Establishment 137

4.6 Transaction on the Capital Account of Balance of Payments 138

4.6.1 Balance of Payments 138

4.6.2 Capital Account and Financial Account 139

4.6.3 Which Transaction on the Balance of Payments of Which Country? 139

4.6.4 Causality 141

4.7 Discrimination and Tax Carve-Out 143

5 Relation Between Article 61(1) of the Czech EA and Article 56 and 57(1) EC 146

6 Synthesis and Evaluation 147

Chapter 6 Summary and Conclusions 149

Abbreviations 157