Wholly Tax Driven Companies = or ≠ Wholly Artificial Arrangements?

Presentation by Blazej Kuzniacki, PhD Candidate, Department of Public and International Law

In several cases regarding income taxation and domestic anti-tax avoidance provisions, the CJEU created a very low threshold for tax avoidance acceptable from the EU law's perspective; namely, all tax driven arrangements are permissible under the EU law, unless they are wholly artificial, i.e. they do not reflect economic reality and serve for escaping the tax normally due on the profits generated by activities carried out on national territory. In the Cadbury Schweppes case was explicitly said by the CJEU that internationally recognized anti avoidance provisions – CFC rules – can be applicable within the EU/EEA only to CFCs being wholly artificial.

Analyzing controlled foreign companies (CFC) schemes of Polish taxpayers reveals that they totally avoided taxation on income entirely generated in Poland. It is indeed striking that Poland, as the State of both income source transferred to a CFC and CFCs shareholders' resident State, is completely deprived of its taxing rights. Bearing in mind that every country, whose infrastructure and state services have been used to generate income, should have a fair share of taxation,  the mentioned state of affairs is unacceptable from the point of view of tax policy, tax equality and tax justice. CFC schemes of Polish taxpayers are structured in a very trivial way and include limited partnerships and limited liability companies established in Poland, Cyprus and in Malta. Since all of them are Member States of the EU, CFCs established in accordance with their domestic company’s law may be combatted by CFC rules only if they are wholly artificial.

This being, the main aim of presentation is to answer the question whether wholly tax driven companies are or are not wholly artificial arrangements?



Coffee, tea and fresh fruit will be served.
You may bring your lunch packet!

Published Mar. 31, 2014 11:09 AM - Last modified Aug. 19, 2016 2:02 PM