Table of Contents. Part I Introduction. Chapter 1: Aristotle s Concept of Distributive Justice 5. Chapter 2: Basic Principles of Discrimination 9

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1 Part I Introduction Part I: Introduction 3 Chapter 1: Aristotle s Concept of Distributive Justice 5 Chapter 2: Basic Principles of Discrimination Elements of the discrimination analysis Proposal for an analytical framework A brief note on ability to pay 21 Chapter 3: Overview of the Study 25 Part II Article 24 of the OECD Model Convention Chapter 4: Origin of Article 24 of the OECD Model Convention Historical roots of the provision The League of Nations The OEEC Fiscal Committee The first report of Working Party no Reception of the first report The second report The third report The final report Conclusions The genesis of the OECD Model Convention The current version of Article 24 of the OECD Model Convention 56 Chapter 5: Article 24(1): Nationality Non-Discrimination General No taxation without discrimination? Nationality 66 v

2 Individuals Other persons General The nationality of legal entities The position taken in the Commentary The 2008 update Transvaal Special Income Tax Court decision of 10 March s-hertogenbosch Court of Appeal decision of 13 December Entitlement to article The comparability test: in the same circumstances On sameness and similarity Case law Leeuwarden Court of Appeal decision of 7 April United Dominions Trust Ltd Belgian Supreme Court decision of 30 June The Anglo-Swiss Land and Building Company Ltd Biso Saipem Discrimination on the basis of nationality? The disadvantage test: other or more burdensome General Reverse discrimination Other issues Case law Woodend Rubber and Tea Dutch Supreme Court decision of 14 June Bundesfinanzhof decision of 14 March Conseil d État decision of 28 May Reciprocity General Case law American Trust Company Brown & Williamson Ltd Dutch Supreme Court decision of 2 September Dutch Supreme Court decision of 20 November Conclusion 163 vi

3 5.8. Comparability as a safety valve? Other or more burdensome as a safety valve? 175 Chapter 6: Article 24(2): Stateless Persons The 1954 Convention relating to the Status of Stateless Persons The OECD Model Convention 179 Chapter 7: Article 24(3): Permanent Establishments Entitlement to article 24(3): what is an enterprise? The comparability test: an enterprise carrying on the same activities General Carrying on the same activities Separate entity approach Case law Case law on the subject of comparison Reuters Ltd Brussels Court of Appeal decision of 28 May Ghent Court of Appeal decision of 17 November Bundesfinanzhof decision of 22 April Bundesfinanzhof decision of 10 March Verwaltungsgerichtshof decision of 16 February 2006 and 28 November Case law on the object of comparison Swiss Bundesgericht decision of 28 November Finanzgericht Köln decision of 20 September UBS AG The disadvantage test: taxation less favourably levied Taxation Less favourably levied Assessment of tax Structure and rate of tax 238 vii

4 Progressive scales and the non-resident s worldwide profits Tax-free thresholds Special taxes on a non-resident s PE Dividends received in respect of holdings owned by a permanent establishment Withholding tax on dividends, interest and royalties received by a permanent establishment Credit for foreign tax and the extension to permanent establishments of the benefit of tax treaties concluded with third states Case law Assessment of tax Brussels Court of Appeal decision of 30 June Commerzbank AG v. Inland Revenue Commissioners Automated Securities Clearance Saipem Structure and rate of tax Dividends received in respect of holdings owned by a permanent establishment: UBS AG Credit for foreign tax and the extension to permanent establishments of the benefit of tax treaties concluded with third states Finanzgericht Hamburg decision of 9 August Dutch Supreme Court decision of 8 February Disadvantages caused by the treaty of which article 24(3) is invoked Metchem Canada Inc Brussels Court of First Instance decision of 9 November No extension to personal allowances Dutch Supreme Court decision of 19 December Dutch Supreme Court decision of 11 September Dutch Supreme Court decision of 6 November Antwerp Court of Appeal decision of 2 February Conclusion 329 viii

5 Chapter 8: Article 24(4): Deductibility General The comparability test No express comparability requirement Under the same conditions as a comparability requirement? The disadvantage test Domestic rules on thin capitalization General Interest Examples Article 54 of the Belgian Income Tax Code Article 26 of the Belgian Income Tax Code Case law Millennium Infocom Technologies Specialty Manufacturing 371 Chapter 9: Article 24(5): Foreign Ownership Entitlement to article 24(5) General The wording of article 24(5) Indirect ownership: Re A Oy and B Oy Only the resident company is protected Example: imputation systems vs. split-rate systems Group treatment Discrimination on the basis of foreign ownership On the basis of On the sole basis of? Application of these principles Example: Decision of the Swedish Supreme Administrative Court on the interpretation of solely The comparability test: other similar enterprises Similarity as a reference to shareholders residence? Similarity as a reference to the applicable tax regime? Similarity as a reference to all relevant circumstances other than foreign ownership Case law 409 ix

6 Swedish Supreme Administrative Court decision of 19 November Dutch Supreme Court decision of 23 December Dutch Supreme Court decisions of 27 April Boake Allen DaimlerChrysler India UnionBanCal Square D FCE Bank The disadvantage test: other or more burdensome General The origin of the expression Interpretation Case law The Delaware case Luxembourg Administrative Court of Appeal decision of 19 April The Swedish Supreme Administrative Court on the interpretation of other Relationship to article 24(4) General Case law: Andritz 467 Chapter 10: Article 24(6): Taxes Covered General Case law: Dutch Supreme Court decision of 1 November Chapter 11: The Concurrent Application of Different Provisions of Article 24 of the OECD Model Convention Article 24(1) and article 24(3) Article 24(1) and article 24(4) Article 24(1) and article 24(5) Article 24(3) and article 24(4) Article 24(3) and article 24(5) Conclusion 491 x

7 Part III Non-Discrimination in European Tax Law Chapter 12: General Overview of the Approach of the European Court of Justice to Non-Discrimination The Court s Aristotelian understanding of non-discrimination Overview Methodology Types of discrimination Discrimination in form and discrimination in substance Direct and indirect discrimination Reverse discrimination The Court s traditional position Later evolution and criticism Quantitative restrictions and measures having equivalent effect Dassonville extended to other freedoms Conclusion 519 Chapter 13: Non-Discrimination in European Tax Law: General Remarks Introduction Purpose and scope of the study The case law of the European Court of Justice on direct taxation Comparable situations Equal treatment Types of discrimination Direct and indirect discrimination Reverse discrimination Is ECJ case law in direct tax matters still based on a discrimination analysis, or has it evolved towards a restriction-based reading of the Treaty? Restrictions: a similar evolution in direct tax case law? From discrimination to restriction and back Introduction: three generations of cases 534 xi

8 The second generation: a restriction-based reading of the Treaty freedoms The third generation: the return to discrimination Most restriction cases are actually discrimination cases in disguise Discrimination on the basis of the exercise of the free movement provisions Examples Futura Commission v. Belgium Conclusion Restriction and discrimination are complementary components of the freedoms Conclusion 569 Chapter 14: Case Law on the Comparability Test Constructing the comparison I: how to determine the subject and object of comparison The taxation of inbound permanent establishments Avoir Fiscal Commerzbank Futura Royal Bank of Scotland Saint-Gobain CLT-UFA Conclusion Horizontal comparisons Constructing the comparison II: what are the relevant characteristics? Person-related benefits: incomparability is the general rule The Schumacker doctrine Schumacker Wielockx Asscher Gilly Gschwind De Groot Gerritse Wallentin The D case 635 xii

9 Turpeinen Extension of the Schumacker doctrine to negative income from immovable property Ritter-Coulais Lakebrink Renneberg Should Schumacker be overturned? The problem with Schumacker The credit system as an alternative solution? Fractionality and comparability Conclusion Income-related benefits: comparability is the general rule Biehl and Biehl II Gerritse Conijn Scorpio Bouanich Gielen Conclusion The taxation of outbound permanent establishments AMID: comparability is the general rule Columbus Container Services Lidl Belgium Krankenheim The tax treatment of resident parent companies with non-resident subsidiaries: discrimination on the basis of the subsidiary s seat ICI X AB and Y AB Bosal Marks & Spencer Keller and Rewe: Marks & Spencer confirmed Keller Rewe Papillon X Holding Conclusion The tax treatment of resident subsidiaries with a non-resident parent company: discrimination on the basis of the parent company s seat 714 xiii

10 Metallgesellschaft X and Y Thin Cap GLO Conclusion The taxation of dividends: the susceptibility to double taxation as the relevant characteristic Introduction Inbound dividends: the susceptibility to double taxation as the relevant characteristic Verkooijen Lenz Manninen Are Verkooijen, Lenz and Manninen identical? Fiscal cohesion and inbound dividends Kerckhaert-Morres Orange European Smallcap Test Claimants in the FII Group Litigation Conclusion: the position of the European Court of Justice on inbound dividends Outbound dividends: the exercise of taxing jurisdiction by the source state Test Claimants in Class IV of the ACT Group Litigation Denkavit Amurta Orange European Smallcap Aberdeen Conclusion: the position of the European Court of Justice on outbound dividends Withholding taxes on other outbound payments Scorpio Truck Center The influence of information exchange on the comparability test Talotta Information exchange and third countries FII: the inapplicability of the Mutual Assistance Directive leads to incomparability A: FII explained Commission v. Netherlands: confusion concerning EEA countries Commission v. Italy 828 xiv

11 Conclusion The influence of tax treaties on the comparability test The D case ACT Orange European Smallcap Interim conclusion: reciprocity and the balance of tax treaties in the comparability test The importance of the concepts of reciprocity and the balance of tax treaties in case law of the European Court of Justice Distinguishing D and ACT from the earlier case law Has the possibility of horizontal discrimination been created by the evolution in case law of the European Court of Justice? Horizontal comparability if the disadvantage is not caused by a tax treaty? Cadbury Schweppes Columbus Container Services Conclusion The comparability of charitable organizations Stauffer Persche Conclusion Conclusions on comparability 885 Chapter 15: Case Law on the Disadvantage Test Introduction The deceptive simplicity of the disadvantage test The position of the test in the Court s case law In general: what is a disadvantage? FII: the disadvantage is inherent in a system that is compatible with the Treaty freedoms Columbus Container Services: an application of the FII nuance The relevance of offsetting advantages in the state the tax system of which is under scrutiny Avoir Fiscal Commerzbank Saint-Gobain 912 xv

12 CLT-UFA Asscher Talotta Lakebrink Cadbury Schweppes The relevance of offsetting advantages in another state Eurowings Verkooijen Lenz De Groot The relevance of tax treaties in the disadvantage test Avoir Fiscal Manninen Bouanich ACT Denkavit Amurta Thin Cap GLO Commission v. Italy Conclusion: the Court s position on offsetting advantages Procedural remedies to remove the disadvantage Biehl and Biehl II Schumacker Gielen Conclusion 946 Chapter 16: The Equal Treatment of Incomparable Situations Comparability Mertens Burda The disadvantage test General Deutsche Shell Conclusion 960 xvi

13 Chapter 17: Disparities General Dislocations Case law Gilly Saint-Gobain Schempp 975 Chapter 18: Conclusions on the Approach of the European Court of Justice to Non-Discrimination On comparability: a plea for fractional taxation Comparability should be distinguished from proportionality How to distinguish justification grounds from elements of comparability General Fiscal cohesion Back to Bachmann Later evolution: the requirement of a direct link Manninen: relaxing the direct link requirement Conclusion From cohesion to comparability? 1009 Part IV Comparison and Interaction Chapter 19: A Comparison of Article 24 of the OECD Model Convention and the Non-Discrimination Standard of the European Court of Justice Scope of application Nationality discrimination: a comparison with article 24(1) Inbound PE cases: a comparison with article 24(3) Outbound payments: comparison with article 24(4) 1020 xvii

14 Discrimination on the basis of the parent company s residence: comparison with article 24(5) General Boake Allen and Metallgesellschaft Disadvantage test Conclusion Justification grounds 1030 Chapter 20: The Interaction between the Standard of the European Court of Justice and Tax Treaties General The interpretation of article 24 of the OECD Model Convention in EU Member States Case law General The comparability of non-profit organizations Bundesfinanzhof decision of 8 September Dutch Supreme Court decision of 8 February Verwaltungsgerichtshof decision of 16 February The Delaware case Conclusion Should the interpretation of article 24 be influenced by ECJ case law? 1057 Part V Summary and Conclusions Chapter 21: Overview of the Study, Summary and General Conclusions Analysis of the two standards Article 24 of the OECD Model Convention The standard developed by the ECJ Identifying a common principle The influence of the standard of the European Court of Justice on the interpretation of article xviii

15 Annex 1: Annex 2: Direct Tax Cases Decided by the ECJ since Cases Decided by National Courts under Article References 1093 xix

Table of contents. iii. Preface to the Second Edition. Users Manual. vii. Abbreviations. Table of Contents. Keyword Index 1. 1.

Table of contents. iii. Preface to the Second Edition. Users Manual. vii. Abbreviations. Table of Contents. Keyword Index 1. 1. Preface to the Second Edition Users Manual Abbreviations Table of Contents iii v vii ix Keyword Index 1 1. Tax Case Law 1.1. Companies 39 1.1.1. Directives 39 1.1.1.1. Parent-Subsidiary Directive 39 Denkavit