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European Commission opens infringement proceedings against member states
International Tax Review
The European Commission has launched infringement actions against member
states over breaches of European tax rules.
The Commission has called on Germany to change its law regarding the VAT
taxation of withdrawals for private use of real estate from business assets.
German law says the withdrawal of land or buildings from business assets is
subject to VAT but according to the EU VAT directive any supplies of
buildings made after their first occupation are exempt form VAT.
Germany must also explain to the Commission why foreign pension funds have
to pay more tax on the dividends and interest they receive than domestic
funds.
If Germany does not amend the relevant rules within two months the
Commission may decide to refer the matter to the European Court of Justice.
Belgium is also under pressure from the Commission for failing to
incorporate the 2005 amendments to the merger directive into national law
and to communicate the national implementing measures. The directive refers
to the common system of taxation applicable to mergers, divisions, transfers
of assets and exchanges of shares concerning companies of different member
states.
Belgium missed the January 1 2007 deadline to notify the Commission of the
national implementing measures. The Commission launched the infringement
action last week after Belgium failed to respond to its letter of formal
notice within two months. A referral to the ECJ is also possible if Belgium
doesn't change its legislation.
The Commission has asked Estonia why foreign pension funds have to pay more
tax on the dividends they receive than domestic funds.
If a member state levies a higher tax on dividends (or interest) paid to
foreign pension funds this may discourage these funds from investing in its
companies.
The Commission has already sent letters of formal notice to the Czech
Republic, Denmark, Spain, Lithuania, the Netherlands, Poland, Portugal,
Slovenia, Sweden, Italy and Finland regarding taxation of outbound
dividends. The Commission is still examining the situation in other member
states and this may result in the opening of further infringement
procedures.
The Commission also sent a letter of formal notice to the Czech Republic
concerning the taxation of dividends paid to companies resident in Iceland.
The Czech Republic exempts domestic dividends paid to parent companies that
hold a participation of 20% or more for at least two years. But dividends
paid to Iceland are subject to a withholding tax of 15%, regardless of the
size of the participation.
Belgium, Italy, the Netherlands and Portugal have all been referred to the
European Court of Justice and the Commission regarding higher taxation of
dividends paid to companies.
"These letters of formal notice are part of a sustained action by the
European Commission to eliminate discriminatory taxation of dividends paid
to shareholders resident elsewhere in the EU and EEA," said EU taxation and
customs commissioner Laszlo Kovacs.
http://www.internationaltaxreview.com/?Page=9&PUBID=210&ISS=24545&SID=701916
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