Kit Dickson and Tom O’Shea have just published a relevant comment to the opinion of Advocate General Paolo Mengozzi on the case Emerging Markets (C-190/12): “Non-EU Funds Can Be Charged Withholding Taxes, ECJ Advocate General Says in Emerging Markets”, Tax Notes Int’l, February 10, 2014, p. 541.
As the authors point out, “Advocate General Paolo Mengozzi determined that Polish tax rules that imposed a withholding tax on dividends paid to an American fund but that exempted funds established in Poland and in the EU/European Economic Area were compatible with the EU’s free movement of capital provisions because of the absence of exchange of information similar to that available in the EU under Directive 85/611 on the coordination of laws, regulations, and administrative provisions relating to undertakings for collective investment in transferable securities — the UCITS directive. The advocate general advised the European Court of Justice to hold that the Polish tax rules at issue were justified by the need to ensure the effectiveness of fiscal supervision”.
In Kit and Tom’s view, “it is clear that the question of fiscal supervision, including the actual provision of evidence to support the position that conditions in the tax legislation in question can be met by the nonresident, is a key factor on which this and similar cases proceeding through courts in various EU member states will be decided. However, it is important not to forget the purpose and objectives of the legislation in question and whether denying benefits to all nonresidents, no matter whether they meet the conditions set out in the domestic legis- lation, goes beyond what is necessary to meet those objectives. Introducing fiscal supervision criteria, such as exchange of information under the UCITS directive, that appear not to be directly relevant for the legislation in question (for example, if the requirement to be exempt from tax for a resident or EU-based investment fund is not conditional on a UCITS registration of the fund in question) would seem to be a step further than has been taken by the ECJ in the past. Many will watch for the conclusions of the Court with great interest”.
Many tanks for sending me this inspiring contribution, dear Tom and congratulations to your co-author too.