February 2016 Newsletter

Size: px

Start display at page:

Download "February 2016 Newsletter"

Victoria Mathews
5 years ago
Views:

1 February 2016 Newsletter UPCOMING EVENTS & LIKELY DATES 2016 February Judicial review permission hearing (45% super tax on EU claims) High Court (Administrative Court) hearing March Prudential (DV tax and ACT: portfolio dividends) Court of Appeal hearing May Six Continents (DV tax) High Court (Chancery Division) hearing June FII Litigation (DV tax and ACT: dividends from subsidiaries) Court of Appeal hearing ca Q4 ITC Litigation (VAT on investment management fees) Supreme Court hearing 2017 ca Q1 Littlewoods (compound interest on repaid VAT) Supreme Court hearing

2 2 Summary Judgment Awarded on FID Repayment Claims On 22 January 2016 Henderson J awarded summary judgment to a number of claimants in the FII GLO on their claims for restitution of ACT paid on foreign income dividends (FIDs). The judge found that the FID issue in the FII GLO has now been conclusively determined in the BAT test case and that the claimants FID claims were in an identical position to the BAT claimants. Accordingly, they were entitled to final judgment on that part of their claim, and their applications for summary judgment were largely successful. It was determined in the Sempra Metals case that the time value of ACT between payment and repayment is calculated on a compound interest basis and in FII (High Court) II that the rate was a 10 year moving average of the yield on 10 year gilts compounded 6 monthly (i.e. the rate applied in valuing the FID claims). Those issues are no longer in dispute and therefore the Judge accepted that the claimants claims are to be computed on that basis. However, the issue of whether simple or compound interest should be awarded for the period following repayment of the ACT is still being litigated in the Littlewoods case, which has now been granted permission to appeal by the Supreme Court (see below). The judge therefore concluded that the claimants are not at present entitled to final judgment for that portion of the compound interest claim. That issue has now been put on hold pending determination of the Littlewoods litigation. Supreme Court grants permission to appeal in Littlewoods v HMRC On 23 December 2015, the Supreme Court granted HMRC permission to appeal against the Court of Appeal s decision in Littlewoods v HMRC (compound interest on repaid VAT). We reported on the Court of Appeal s judgment in our May 2015 newsletter. We do not yet know the dates of the Supreme Court hearing, but would expect the hearing to take place in Q1 of 2017 and final judgment to be handed down by around mid We will report on any developments. European Commission unveils its Anti-Tax Avoidance Package On 28 January 2016, the European Commission presented a seven-part draft Anti-Tax Avoidance Package (ATAP). Following the European Commission's strong support for the BEPS (Base Erosion and Profit Shifting) Final Recommendations, published in October 2015, the ATAP seeks to co-ordinate the response by EU Member States to corporate tax avoidance so as to usher in an era of fair taxation. Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, stated:

3 3 "Europeans and businesses that play fair end up paying higher taxes as a result. This is unacceptable and we are acting to tackle it. Today we are taking a major step towards creating a level-playing field for all our businesses, for fair and effective taxation for all Europeans." The ATAP is based on three core pillars: (1) Ensuring effective taxation in the EU; (2) Increasing tax transparency; and (3) Securing a level playing field. To that end, the ATAP includes a number of wide-ranging proposals and recommendations. These include: (i) The introduction of an Anti-Tax Avoidance Directive (ATAD) - The ATAD aims to address tax planning by introducing six legally-binding rules, namely a CFC rule, a switchover rule (to address double non-taxation), rules pertaining to exit taxation, interest limitation and hybrids and a general anti-abuse rule. The Commission aims to have the ATAD adopted within six months so that it may come into effect from 1 January (ii) A Commission Recommendation on Tax Treaties which advises EU Member States to protect their tax base from treaty abuse while complying with EU law. The recommendation draws in part from the Final Recommendation of BEPS Action 6 namely the principal purpose test. (iii) The revision of the Administrative Cooperation Directive - The proposed revised rules, which give effect to BEPS Action 13, will see national authorities exchange tax-related information on the activities of multinational companies on a country-by-country basis (CbC reporting). The Commission hopes to have the new rules in effect from 1 January (iv) The re-launch of the Common Consolidated Corporate Tax Base (CCCTB) proposal - The Commission considers the CCCTB as a key tool to address BEPS concerns. As such, it hopes to adopt a revised CCCTB proposal by autumn (v) A Communication on an EU External Strategy for Effective Taxation - This non-binding instrument sets out the Commission's views on achieving a harmonised approach by EU Member States for tackling base erosion threats from outside of the EU. The Communication calls for various measures such as "tax good governance clauses" in trade agreements between Member States and third countries. The two legislative proposals [(i) and (iii) above] will be presented to the European Parliament for consultation and to the Council for adoption. It is expected that the Council and Parliament will endorse the Recommendation (ii) and that Member States will apply its principles when revising their tax treaties. Finally, the Commission calls upon Member States to endorse the new External Strategy and give "high political priority to their implementation." As a whole, the ATAP represents a monumental shift in the landscape of European tax law. We shall continue to monitor the progress of these new proposals and keep you up to date of the potential impact of these measures.

4 European Commission considers Belgian Excess Profit Scheme to be incompatible with State Aid Rules 4 On 11 January 2016, the European Commission published its decision that the Belgian Excess Profit tax regime was contrary to the EU State Aid rules. Under the standard corporation tax regime in Belgium, companies are taxed on the basis of profits actually earned throughout the tax period. However, the Excess Profit tax regime, in effect since 2005, allows certain multinational enterprises to reduce their tax liability on the basis of binding tax rulings. In essence, the regime makes allowance for profits which the companies would not have earned but for the fact that they are members of a multinational group. It is estimated that some 35 companies benefited from the Excess Profit tax regime enabling them to reduce their corporate tax liability by up to 90% in some cases. The Commission found that the Belgian excess profit regime offered a selective advantage to multinational companies as opposed to other companies which were not members of a multinational group. An interesting point to note is the development of the arm s length principle as a principle of EU State Aid law. Under the arm s length principle, residual profits (referred to in the Belgian legislation as excess profits ) are to be shared amongst group companies in a manner which reflects economic reality. However, the Commission reasons that, by discounting unilaterally the excess profits from the Belgian tax base, Belgium contravenes EU State Aid rules by disregarding the arm length s principle. The Commission estimates that a total of EUR 700m is recoverable. The Belgian Minister of Finance, on 12 January 2016, indicated that Belgium intends to appeal the decision. United Kingdom and 30 other countries sign up to Country-by-Country Reporting On 27 January 2016, 31 countries, including the UK, signed the Multilateral Competent Authority Agreement (MCAA) for the automatic exchange of Country-by-Country reports so as to implement the Final Recommendations of BEPS Action 13. Through Country-by-Country (CbC) reporting, the tax authorities of jurisdictions (party to the MCAA) where a company within a multinational group operates will receive aggregate information annually. This will begin with 2016 accounts and will cover information relating to the global allocation of income and taxes paid, along with other indicators pointing to the location of economic activity within the multinational group. It will also cover information about which entities do business in a particular jurisdiction and the business activities in which each entity engages. The information will be collected by the country of residence of the multinational group, and will then be exchanged through exchange of information supported by MCAA. First exchanges will start in on 2016 information. The 31 jurisdictions signing the MCAA are: Australia, Austria, Belgium, Chile, Costa Rica, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Japan, Liechtenstein, Luxembourg,

5 5 Malaysia, Mexico, Netherlands, Nigeria, Norway, Poland, Portugal, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Switzerland and United Kingdom. JHA Blog JHA s blog is updated with major news and developments in the fields of tax litigation, sanctions law, commercial litigation and arbitration. The blog can be accessed here. CONTACTS NEWSLETTER SIGN-UP Simon Whitehead Paul Farmer Michael Anderson Steve Bousher Philippe Freund Samantha Wilson Katy Howard Alex Psaltis Alice McDonald If you know someone who may be interested in this and future newsletters, please feel free to forward this message to them and/or request that we add them to our mailing list by return . JOSEPH HAGE AARONSON IS AN INTERNATIONAL AFFILIATION OF LEGAL PRACTICES CONSISTING OF JOSEPH HAGE AARONSON LLP (ENGLAND & WALES) AND JOSEPH HAGE AARONSON LLC (UNITED STATES). JOSEPH HAGE AARONSON LLP ( JHALLP ) IS A LIMITED LIABILITY PARTNERSHIP REGISTERED IN ENGLAND & WALES WITH REGISTERED NUMBER OC THE LLP IS AUTHORISED AND REGULATED BY THE SOLICITORS REGULATION AUTHORITY. A LIST OF LLP MEMBERS IS AVAILABLE FOR INSPECTION AT THE LLP S REGISTERED ADDRESS: 280 HIGH HOLBORN, LONDON, WC1V7EE, UNITED KINGDOM. JOSEPH HAGE AARONSON LLC ( JHA LLC ) IS REGISTERED AT 485 LEXINGTON AVENUE, 30 TH FLOOR, NEW YORK, UNITED STATES. JOSEPH HAGE AARONSON DOES NOT PROVIDE LEGAL SERVICES AND ALL LEGAL SERVICES ARE PROVIDED BY JHA LLP AND/OR JHA LLC, EACH OF WHICH IS A SEPARATE AND DISTINCT LEGAL ENTITY. FOR THE AVOIDANCE OF DOUBT, JOSEPH HAGE AARONSON LIMITED (A PRIVATE LIMITED COMPANY REGISTERED IN JERSEY WITH REGISTRATION NUMBER ) ALSO DOES NOT PROVIDE ANY LEGAL SERVICES AND YOUR CONTRACTUAL RETAINER OR ENGAGEMENT WILL BE WITH JHA LLP AND/OR JHA LLC IF THE TERMS OF THE ENGAGEMENT EXPRESSLY SO SPECIFY. THE USE OF THE WORD PARTNER IN CONNECTION WITH THE JOSEPH HAGE AARONSON TRADING NAME DENOTES A MEMBER OF JHA LLP OR JHA LLC, OR A CONSULTANT OR EMPLOYEE OF ONE OF THEM WITH EQUIVALENT STANDING AND QUALIFICATION. THE USE OF THE TERM PARTNER SHOULD NOT BE CONSTRUED AS MEANING THAT ANY FORM OF PARTNERSHIP EXISTS BETWEEN THE TWO SEPARATE ENTITIES OR BETWEEN THE DIFFERENT PRINCIPALS OF THE TWO ENTITIES.

JOSEPH HAGE AARONSON LLP. Littlewoods (compound interest on repaid VAT)

JOSEPH HAGE AARONSON LLP. Littlewoods (compound interest on repaid VAT) LLP UPCOMING EVENTS & LIKELY DATES 2017 Q1 Prudential Supreme Court decision on permission to appeal F EBRUARY FII (FID claims) High Court hearing M AY BAT (super tax on EU claims) Tribunal hearing J ULY