May 31, 2024

Developments in Anti-Abuse Measures And Acquisition Financing in the Netherlands

May 31, 2024/ Ruchelman P.L.L.C.

Last year, Insights published an article by Michael Bennett on cases in which the Dutch tax authorities used Article 10a of Dutch tax law and the concept of fraus legis to challenge deductions for interest expense on certain internal borrowings. The article pointed out that many grey areas and interpretative issues remained. Since that article was published, the Dutch Supreme Court, the Advocate General for the C.J.E.U., and the Advocate General of the Netherlands have issued opinions on three separate cases. In his article in this edition of Insights, Michael Bennett reviews the opinions and points out the ongoing uncertainty surrounding the precise scope of Article 10a and its interaction with fraus legis.

June 28, 2019

C.J.E.U. Judgments on Danish Beneficial Ownership Cases

June 28, 2019/ Ruchelman P.L.L.C.

Earlier this year, the C.J.E.U. released two judgments dealing with the interpretation of the Parent-Subsidiary Directive (“P.S.D.”) and the Interest & Royalties Directive in the E.U. In each case, a structure was meticulously built to comply with national and E.U. law allowing global investors to bring funds to the E.U. in return for dividends and interest that were subject to little or no national tax in any E.U. country. Nothing in the structure was unique, other than the reticence of the Danish tax authorities to grant withholding tax exemptions. To the surprise of many, the C.J.E.U. looked at the structure and concluded that it lacked economic substance and should be disregarded by reason of a general E.U. anti-abuse principal. The internal E.U. recipients of the dividend and interest payments were not considered to be the beneficial owners of the income. Almost 50 years after the Aiken Industries case in the U.S. Tax Court and 25 years after the anti-conduit regulations were adopted by the I.R.S., European substance-over-form rules have now been adopted by judicial fiat. Thierry Lesage and Adnand Sulejmani of Arendt & Medernach SA, Luxembourg, meticulously explain the reasoning of the court and suggest that the court may have erred by conflating anti-abuse rules with beneficial ownership concepts.

January 28, 2019

New Developments on the E.U. V.A.T. Regime of Holding Companies

January 28, 2019/ Ruchelman P.L.L.C.

Like state and local tax in the U.S., where tax exposure can be underestimated by many corporate tax planners, the V.A.T. rules in the E.U. contain many pitfalls. This is especially true when it comes to recovery of V.A.T. input taxes by holding companies. A corporate tax adviser may presume that all V.A.T. input taxes paid by a holding company are recoverable. Yet, despite abundant jurisprudence, debate continues regarding the V.A.T. recovery rights of holding companies. The starting point in the analysis is easy to state: Holding companies that actively manage subsidiaries can recover V.A.T., while holding companies that passively hold shares cannot. The problem is in the application of the theory, where the line between active and passive behavior is blurred by seemingly inconsistent decisions. Bruno Gasparotto and Claire Schmitt of Arendt & Medernach, Luxembourg, explain the rules and how they have been applied by the C.J.E.U.