European Commission challenges Danish, Dutch and Spanish business exit taxes before the European Court

• Author: Daniël Smit
• Position: Tax Manager at Ernst & Young Tax Advisers LLP and Research Associate at Fiscal Institute Tilburg, Tilburg University, the Netherlands
• Pages: 1-8

European Tax Studies 1/2010

News and Commentary - Exit Tax: Comparative Analysis in a EU Perspective (n. 1/2009)

European Commission challenges Danish, Dutch and Spanish

business exit taxes before the European Court

Daniël Smit1

1. Introduction

On 24 November 2010, the European Commission announced its decision to

refer the Netherlands, Spain and Denmark to the ECJ for provisions that

impose an exit tax on businesses2. Under national tax law in Denmark, The

Netherlands and Spain, a business is taxed on its unrealised capital gains if

it i) changes its residence; ii) moves its permanent establishment or iii)

transfers its assets to another Member State. However, comparable

domestic operations are not taxed for unrealised capital gains that may

arise. The Commission is arguing that immediate taxation in these cases,

although justified, is not proportionate. The Commission is of the view that

the said Member States must defer the collection of their taxes until the

moment of actual realisation of the capital gains, rather than upon the

transfer of assets and liabilities (the Commission has presented its view on

exit taxes within the Union elaborately in its Communication dated 19

December 20063). In this contribution, the author analyzes the relevant

case law of the ECJ and its impact on the possible final outcome in the

above infringement procedures.

1 Tax Manager at Ernst & Young Tax Advisers LLP and Research Associate at Fiscal Institute

Tilburg, Tilburg University, the Netherlands.

2 Press release of November 24th 2010, IP/10/1565.

3 Communication from the Commission to the Council, the European Parliament and the

European Economic and Social Committee of December 19th 2006, Exit taxation and the

need for co-ordination of Member States' tax policies, COM(2006)825 final.

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