Einde inhoudsopgave
Treaty Application for Companies in a Group (FM nr. 178) 2022/6.3.7
6.3.7 Exit taxation
L.C. van Hulten, datum 06-07-2022
- Datum
06-07-2022
- Auteur
L.C. van Hulten
- JCDI
JCDI:ADS659343:1
- Vakgebied(en)
Omzetbelasting / Plaats van levering en dienst
Voetnoten
Voetnoten
There is no consensus on whether or not art. 13 OECD MTC applies to exit taxation, as there is no change in ownership. If the view is taken that art. 13 OECD MTC does not apply, art. 7, 8, 10, 11, 12, 17 or 21 OECD MTC will apply that will usually also leave the taxing rights of the exit state unaffected (E. Reimer et al., Klaus Vogel on Double Taxation Conventions, Alphen aan den Rijn: Kluwer Law International 2022, p. 1252).
K. Moser, ‘Recent Developments and Challenges Regarding Exit Taxes in the Context of Tax Treaties: Article 13 of the OECD Model and Change of Residence’, Bulletin for International Taxation 2019, vol. 73, no. 10, par. 3.2.
For purposes of the OECD MTC this provision could be changed by simply replacing Member State by Contracting State.
Art. 29, par. 2, CCTB.
R. Szudoczky, ‘Chapter 9: Exit Tax’, par. 4, in D.M. Weber & J. van de Streek (eds.), The EU Common Consolidated Corporate Tax Base – Critical Analysis, Alphen aan den Rijn: Kluwer Law International 2017
As indicated, there is no consensus on whether or not art. 13 OECD MTC applies to exit taxation (E. Reimer et al., Klaus Vogel on Double Taxation Conventions, Alphen aan den Rijn: Kluwer Law International 2022, p. 1252).
Exit taxation is normally considered to be in line with the OECD MTC.1 A domestic rule that deems a person to have alienated its property for capital gains tax purposes is thus not prevented by the application of a tax treaty. Starting from the premises that the gain in value should be allocated to the former residence state, exit taxation is to a large extent a timing issue. Tax treaties generally do not deal with timing issues. The question therefore is whether it would be logical to include a rule on exit taxation in tax treaties. As described in par. 4.3.5.3, to improve the flexibility of international groups as well as to make sure that tax avoidance possibilities are minimized, it could be considered to add a provision to tax treaties that deals with exit taxation.
The rule should at least secure that the same valuation is applied in both the former residence state and the new residence state, which ensures that there can be no mismatches. Existing tax treaty provisions on exit taxes generally only apply to individuals,2 and therefore do not seem helpful. However, perhaps the provision as included in the ATAD1 can be a starting point.3Art. 5, par. 5, ATAD1 reads as follows:
‘Where the transfer of assets, tax residence or the business carried on by a permanent establishment is to another Member State, that Member State shall accept the value established by the Member State of the taxpayer or of the permanent establishment as the starting value of the assets for tax purposes, unless this does not reflect the market value.’4
The provision provides the possibility for the state of arrival to dispute the value established by the exit state. Therefore, there is no guaranteed symmetry in fair market valuation. Member States apparently did not want to accept the principle of mutual recognition for valuation.5 In this regard it should be mentioned that the CCCTB proposal does not contain the phrase ‘unless this does not reflect the market value’.6 This has as an advantage that there would never be double taxation, as the arrival state is obliged to accept the value determined by the exit state.7 This also means there would be no partial or full double non-taxation. To make sure there are no valuation mismatches, which contributes to the objectives of the OECD MTC, it seems advisable to delete the last part of the ATAD provision if it were to be used for tax treaty purposes. It would be logical to include the provision in art. 13 OECD MTC, as that article concerns capital gains.8