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Jurisdictional Aspect of the New EU Member States

Jurisdictional Aspect of the New EU Member States. Prof. Dr. Geerten M.M. Michielse Technical Assistance Advisor to the IMF Georgetown University Law Center Washington DC. Basic Issues (“Aqui Communautaire”). Common external tariff (customs duties) Minimum excise duties

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Jurisdictional Aspect of the New EU Member States

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  1. Jurisdictional Aspect of the New EU Member States Prof. Dr. Geerten M.M. Michielse Technical Assistance Advisor to the IMF Georgetown University Law Center Washington DC

  2. Basic Issues(“Aqui Communautaire”) • Common external tariff (customs duties) • Minimum excise duties • (alcoholic beverages, tobacco products and petroleum products) • VAT (minimum rates: 15% - 5%) • Direct taxes • Parent-Subsidiary Directive (90/435/EEC) • Merger Directive (90/434/EEC) • Signatory of Arbitration Convention • State aids and Code of Conduct for Business Taxation • Compliance with ECJ Decisions

  3. Basic Conflict(EU law versus international tax law) • EU law • EU residents should be treated as residents of Member State • International tax law • Traditional distinction between residents and nonresidents (including EU residents)

  4. Compliance with ECJ Decisions(based on EU Treaty freedoms) • Nondiscrimination Art. 12 EU Treaty • Freedom of goods Art. 28 EU Treaty • Freedom of employment Art. 39 EU Treaty • Freedom of establishment Art. 43 EU Treaty • Free movement of capital Art. 56 EU Treaty

  5. Tax Sovereignty • All new EU Members States make the traditional distinction between residents and nonresidents • Individuals: place of habitual abode • Corporations: • effective place of management in Czech Republic • incorporation in Estonia and Hungary • ‘legal seat’ in Poland • headquarters base in Slovenia

  6. Freedom of Employment(main issues) • Personal allowances (Schumacker case) • Poland and Slovenia: comply • Estonia: no allowances • Hungary: credit against tax (liability requirement) • Czech Republic: only basic allowance • Deductibility of pension premiums (Bachmann case) • all countries: limited to resident funds • Splitting system (Werner case) • Special nonresident tax rate (Asscher case)

  7. Freedom of Establishment(main issues) • Profit determination of permanent establishments (Avoir fiscal and Saint-Gobain case) • Czech Republic and Hungary: tax base subject to comparison with resident taxpayers • Estonia: tax event = distribution of profit • Group tax treatment • Poland and Slovenia: only for resident companies

  8. Free Movement of Capital(main issues) • Regarding place of investor • Estonia, Hungary and Slovenia: exemption for resident corporate shareholders • Czech Republic: exemption for redistribution of domestic source dividends • Poland: no exemption • Regarding place of investment • Only in Slovenia different treatment: domestic source dividends exempt, foreign source dividends not

  9. Conclusions • Need for allowing personal allowances in case nonresidents are earning substantially all or all income in source country • Allowing deduction if premium is paid to fund, resident in another EU Member State • Tax treatment of pe’s generally according to ECJ decisions • Taxation of dividends (free movement of equity capital) is basically in line with Art. 56

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