Treaty Application for Companies in a Group (FM nr. 178) 2022/4.2.4:4.2.4 Interim conclusion: a group approach in primary EU law

Treaty Application for Companies in a Group (FM nr. 178) 2022/4.2.4

4.2.4 Interim conclusion: a group approach in primary EU law

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

In the following table the discussed CJEU case law is summarized:

Cases

Variant group approach?

Points of attention

Consequences group approach (or the lack of it) with a view to prevent double taxation/tax avoidance?

Points of attention in comparison to the OECD MTC

Cross-border groups and tax groups:Loss compensation

Amongst others Marks & Spencer, Lidl Belgium

Yes

If final losses

Positive (aims to prevent economic double taxation)

Loss compensation is in principle not covered by the OECD MTC

Cross-border groups and tax groups:Other elements of cross-border groups

Amongst others Groupe Steria, X BV and X NV

Yes

‘Per element’ approach

Positive (aims to prevent juridical and economic double taxation)

Tax groups as such are in principle not covered by the OECD MTC

Anti-abuse provisions

Amongst others Deister Holding and Juhler Holding and T Danmark

Yes

All facts and circumstances should be taken into account

Positive (aims to prevent juridical and economic double taxation and tax avoidance)

Not completely clear whether or not a group approach is applied in the OECD MTC in a positive manner for taxpayers

The lack of possibilities to compensate losses within a multinational group across borders can lead to economic double taxation. This can hinder cross-border investments. Additionally, the fact that no comprehensive group approach can be applied with regard to tax groups can lead to juridical and economic double taxation. The CJEU mainly decides in a positive manner for groups of companies: under certain circumstances it can be necessary to take into account losses of a foreign subsidiary to ensure that the freedom of establishment is not hindered. Furthermore, it can be necessary to extend certain domestic benefits for a tax group to cross-border situations. It would fit within the overarching goal of the OECD MTC to stimulate cross-border investments without providing tax avoidance opportunities to better take into account the group situation of an entity. As the OECD MTC in its current format in principle applies a separate entity approach, it is very difficult to amend the OECD MTC to better take account of cross-border loss compensation and tax groups. In my view this would require a drastic switch in approach: rather than the separate entity approach a group approach would be necessary. The group of companies as a whole would be considered as the taxpayer. This will be elaborated in more detail in the next chapters.

The CJEU case law on anti-abuse provisions prescribes a group approach in assessing whether or not there is economic reality within a structure. In my view a similar group approach should be applied for application of the beneficial ownership concept and the PPT. In this manner the anti-tax avoidance mechanism does not lead to overtaxation and undertaxation in a group context. If an overarching group approach, in which a group of companies would be considered the taxpayer, would be applied for tax treaty purposes, the beneficial ownership concept and the PPT would become redundant.

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