TAXATION: MORE CO-ORDINATION NEEDED ON CONTROLLED FOREIGN COMPANIES, SAYS FEE.

The European Commission's recent Communication "Towards an Internal Market without tax obstacles"? has prompted a warning from the European accountancy lobby group, the F?d?ration des Experts Comptables Europ?ens (FEE), that a legal challenge to Member States' tax laws on controlled foreign companies for being incompatible with the Internal Market is only a matter of time. And if it is successful, it will result in a considerable revenue loss for those member states that are relying on CFC legislation to remove distortions in the allocation of investment.FEE's newly-released position paper on Controlled Foreign Company Legislations in the EU consists of a comprehensive study of tax laws regarding Controlled Foreign Companies (CFC), and it considers how CFC rules are structured and applied by individual EU Member States. It analyses differences and similarities of national CFC laws, together with the consistency of the current legislation with the fundamental principles of the EC Treaty (in particular with the non-discrimination provision).The accountancy body argues that no CFC legislation should be applicable within the Internal Market, provided that the tax regime of the company subsidiary is in line with the prescriptions of the EU's own Code of Conduct. It also calls for better co-ordination in the tax treaty policy towards non-member...