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May 2014 - edition 130EU Tax Alert
The EU Tax Alert is an e-mail newsletter to inform you of recent developments in the EU that are of interest for tax professionals. It includes recent case law of the European Court of Justice, (proposed) direct tax and VAT legislation, customs, state aid, developments in the Netherlands, Belgium and Luxembourg and more.
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Highlights in this edition
ECOFIN postpones amendments to Parent Subsidiary DirectiveOn 6 May 2014, the European Union’s Council of Economic and Finance Ministers (‘ECOFIN’) agreed to postpone the approval of amendments to the Parent Subsidiary Directive (2011/96/EU) (the ‘Directive’) until their next meeting scheduled for 20 June 2014. The discussed amendments to the Directive aim to prevent ‘double non-taxation’ via the use of hybrid financing arrangements.
CJ dismisses UK action for annulment regarding the Financial Transaction Tax (UK v Council of the European Union) On 30 April 2014, the CJ delivered its judgment in case United Kingdom of Great Britain and Northern Ireland v Council of the European Union (C-209/13). The case deals with the action brought by United Kingdom asking for the annulment of Council Decision 2013/52/EU of 22 January 2013 authorising enhanced cooperation in the area of financial transaction tax.
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Contents
Highlights in this edition• ECOFIN postpones amendments to Parent
Subsidiary Directive
• CJ dismisses UK action for annulment regarding
the Financial Transaction Tax (UK v Council of the
European Union)
State Aid / WTO• European Commission releases new State aid
complaint form
Direct taxation• Commission requests the Netherlands to end the
discriminatory taxation of Netherlands-sourced
dividends paid to EU/EEA insurance companies
VAT• AG Sharpston concludes that construction of an
office building by Municipality is a fully taxable self-
supply (Gemeente)
• Commission publishes Explanatory Notes on new
place of supply rules for telecommunications,
broadcasting and electronic services
• Proceedings against Cyprus regarding invoicing
rules closed
Customs Duties, Excises and other Indirect Taxes• CJ rules on the consequences of the refusal to make
own resources available to the European Union
(Commission v UK)
• CJ rules on the powers of customs authorities to
establish the infringement of an intellectual property
right (Sintax Trading)
• CJ rules on Hungarian excise exemption for
privately produced small quantities of spirits
(Commission v Hungary)
• EU challenges Russia in the WTO over pork import
ban
Capital Duty• AG Szpunar opines that Portuguese legislation
which reintroduces stamp duty tax on increases in
the capital of companies through the conversion into
capital of the claims of shareholders is in breach of
Council Directive 69/335/EEC (Ascendi)
4 5
into their domestic laws by 31 December 2015 at the
latest.
CJ dismisses UK action for annulment regarding the Financial Transaction Tax (UK v Council of the European Union)On 30 April 2014, the CJ delivered its judgment in
case United Kingdom of Great Britain and Northern
Ireland v Council of the European Union (C-209/13).
The case deals with the action brought by the United
Kingdom asking for the annulment of Council Decision
2013/52/EU of 22 January 2013 authorising enhanced
cooperation in the area of financial transaction tax
(‘FTT’).
On 22 January 2013, the Council approved a decision
authorising enhanced cooperation between 11 Member
States in the area of FTT. On 14 February 2013, the
Commission adopted a proposal for a Council Directive
implementing enhanced cooperation in the area of FTT.
Article 3(1) of this proposal, provided that ‘the Directive
shall apply to all financial transactions, on the condition
that at least one party to the transaction is established
in the territory of a participating Member State and that
a financial institution established in the territory of a
participating Member State is party to the transaction,
acting either for its own account or for the account of
another person, or is acting in the name of a party to the
transaction.’ The definition of ‘Establishment’, in Article
4 (1) provided that for the purposes of the Directive, a
financial institution shall be deemed to be established
in the territory of a participating Member State where
among others, the following condition was fulfilled:
(g) it is party, acting either for its own account or for the
account of another person, or is acting in the name of
a party to the transaction, to a financial transaction in
a structured product or one of the financial instruments
referred to in Section C of Annex I of Directive 2004/39/
EC issued within the territory of that Member State,
with the exception of instruments referred to in points
(4) to (10) of that Section which are not traded on an
organised platform.
In turn, paragraph 2 to Article 4 sets out that a person
which is not a financial institution shall be deemed to be
established within a participating Member State where,
among others, the following conditions were fulfilled:
Highlights in this editionECOFIN postpones amendments to Parent Subsidiary DirectiveOn 6 May 2014, the European Union’s Council of
Economic and Finance Ministers (‘ECOFIN’) agreed to
postpone the approval of amendments to the Parent
Subsidiary Directive (2011/96/EU) (the ‘Directive’) until
their next meeting scheduled for 20 June 2014. The
discussed amendments to the Directive aim to prevent
‘double non-taxation’ via the use of hybrid financing
arrangements.
The amendments were initially proposed by the
Commission on 25 November 2013. The European
Presidency prepared an updated proposal focusing on
the mandatory limitation of the exemption of payments
received through hybrid financing arrangements. Hybrid
financing arrangements are financing arrangements
that have characteristics of both debt and equity
and consequently, could be treated differently for tax
purposes by the Member States. Pursuant to this
limitation, the Member State where the parent company
is established are required to tax profits distributed by
a subsidiary in another Member State, to the extent
such distributed profits are deductible by the subsidiary.
The Member State where the parent company is
established must refrain from taxing such distributed
profits to the extent such profits are not deductible by
the subsidiary. On 6 May 2014, the ECOFIN discussed
this updated proposal. During the meeting, Malta and
Sweden expressed concerns regarding the wording of
the updated proposal. A technical meeting is to be held
to conduct additional analysis to solve the issues raised.
The original proposal of the Commission also contained
a general anti-abuse rule. This provision was not
included in the updated proposal due to diverging views
and concerns among Member States. By excluding
this provision, the Member States aim to achieve early
progress in the field of hybrid financing arrangements.
The general anti-abuse rule is to be further discussed
among Member States. The intention is that the updated
proposal is placed on the agenda for the ECOFIN
meeting on 20 June 2014. If approved, the Member
States are required to implement the amended Directive
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principle’ and ‘the issuance principle’ are not justified in
the light of any accepted rule of tax jurisdiction under
international law. By its second plea in law, the United
Kingdom claimed that, whereas expenditure linked to
the implementation of enhanced cooperation in the
area of FTT may in principle, under Article 332 TFEU,
be borne only by the participating Member States,
that implementation will also be the source of costs
for the non-participating Member States, because
of the application of Council Directives 2010/24/
EU of 16 March 2010 concerning mutual assistance
for the recovery of claims relating to taxes, duties
and other measures and 2011/16/EU of 15 February
2011 on administrative cooperation in the field of
taxation. The UK claimed that those two directives do
not authorise the non-participating Member States to
seek the recovery of the costs of mutual assistance and
administrative cooperation linked to the application of
those directives to the future FTT.
The CJ started by recalling that the purpose of the
first plea in law is to challenge the effects which the
recourse to certain principles of taxation in respect of
the future FTT might have on institutions, persons and
transactions situated in or taking place in the territory
of non-participating Member States. In that regard,
the CJ considered that the objective of the contested
decision was to authorise 11 Member States to establish
enhanced cooperation between themselves in the area
of the establishment of a common system of FTT with
due regard to the relevant provisions of the Treaties.
The principles of taxation challenged by the UK were,
however, not in any way constituent elements of that
decision.
As regards the action’s second plea in law, whereby
the United Kingdom claims, in essence, that the future
FTT will give rise to costs for the non-participating
Member States because of the obligations of mutual
assistance and administrative cooperation linked to
the application of Directives 2010/24 and 2011/16 to
that tax, which, according to the United Kingdom, is
contrary to Article 332 TFEU, it must be observed that
the contested decision contains no provision related to
the issue of expenditure linked to the implementation of
the enhanced cooperation authorised by that decision.
(c) it is party to a financial transaction in a structured
product or one of the financial instruments referred to
in Section C of Annex I to Directive 2004/39/EC issued
within the territory of that Member State, with the
exception of instruments referred to in points (4) to (10)
of that Section which are not traded on an organized
platform.
The UK relied on two pleas in law in support of its
action. The first plea concerned a claimed infringement
of Article 327 TFEU and of customary international
law insofar as the contested decision authorised the
adoption of an FTT which produces extraterritorial
effects. The second plea, relied on in the alternative,
related to a claimed infringement of Article 332 TFEU,
in that such decision authorised the adoption of an FTT
which will impose costs on Member States which are
not participating in the enhanced cooperation (‘the non-
participating Member States’).
The first plea had two parts, claiming infringement
of Article 327 TFEU and of customary international
law respectively. In the first part of that plea, the UK
claimed that, by authorising the adoption of an FTT
with extraterritorial effects because of ‘the counterparty
principle’ laid down in Article 3(1)(e) of the 2011
proposal, and the ‘issuance principle’ laid down in Article
4(1)(g) and (2)(c) of the 2013 proposal, the contested
decision was in breach of Article 327 TFEU. The UK
claimed that this decision permits the introduction of an
FTT applicable, by reason of the two abovementioned
principles of taxation, to institutions, persons or
transactions situated or taking place in the territory of
non-participating Member States, a fact which adversely
affects the competences and rights of those Member
States.
In the second part of its first plea in law, the United
Kingdom claimed that customary international law
permits legislation which produces extraterritorial effects
only on the condition that there exists between the
facts or subjects at issue and the State exercising its
competences thereon a sufficiently close connection to
justify an encroachment on the sovereign competences
of another State. In this case, the extraterritorial effects
of the future FTT stemming from ‘the counterparty
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dividends received on shares held by insurance
companies established elsewhere in another Member
State or in an EEA country. The Commission considers
the higher taxation of insurance companies established
elsewhere in the EU/EEA to be incompatible with the
free movement of capital under Article 63 TFEU and
Article 40 EEA Agreement.
Insurance companies in the Netherlands are effectively
not taxed on dividends received on shares held in the
framework of unit-linked insurances as they can deduct
the increase of the obligation to pay the dividends
on to their policyholders from the dividends received.
This reduces the corporate tax base concerning these
dividends to zero, while any withholding tax is credited.
However, the Netherlands taxes insurance companies
established in the EU or the EEA which receive
Netherlands dividends on shares held in the framework
of unit-linked insurance on the gross dividends, without
the possibility of a credit.
This request is in the form of a reasoned opinion. In the
absence of a satisfactory response within two months,
the Commission may refer the Netherlands to the CJ.
VAT AG Sharpston concludes that construction of an office building by Municipality is a fully taxable self-supply (Gemeente)On 10 April 2014, Advocate General Sharpston
delivered her Opinion in the case Gemeente
’s-Hertogenbosch (C-92/13). The Municipality
(Gemeente) of ’s-Hertogenbosch) is a local government
authority and is not to be considered a taxable person
for VAT purposes in respect of activities or transactions
in which it engages as a public authority. However, it
also engages in certain economic activities. Only for
its VAT taxable economic activities, is it, in principle,
entitled to deduct input tax on goods and services. In
2000, the Municipality ordered the construction of an
office building on land it owned. The occupation of
the building followed on 1 April 2003. The use of the
building was split up into 94% for activities as a public
The CJ further added that, irrespective of whether the
concept of ‘expenditure resulting from implementation
of enhanced cooperation’, within the meaning of
Article 332 TFEU, does or does not cover the costs
of mutual assistance and administrative cooperation
referred to by the UK in its second plea, it is obvious
that the question of the possible effects of the future
FTT on the administrative costs of the non-participating
Member States cannot be examined as long as the
principles of taxation in respect of that tax have not been
definitively established as part of the implementation of
the enhanced cooperation authorised by the contested
decision. Those effects are dependent on the adoption
of ‘the counterparty principle’ and the ‘issuance
principle’, which, however, are not constituent elements
of the contested decision.
Therefore, the CJ concluded that the two pleas in law
relied on by UK should be rejected and, accordingly, that
the action should be dismissed.
State Aid/WTOEuropean Commission releases new State aid complaint formAs part of the State aid modernisation programme,
the European Commission released a mandatory
complaints form. The form intends to ensure that
complainants provide the Commission with sufficient
relevant information such to handle any complaints, in
order to reduce unsubstantiated complaints. Moreover,
the form reiterates that complaints can only be filed by
interested parties, such as competitors. Complaints by
others will be filed as general market information without
the Commission having to open a time-consuming
complaints procedure.
Direct TaxationCommission requests the Netherlands to end the discriminatory taxation of Netherlands-sourced dividends paid to EU/EEA insurance companiesOn 14 April 2014, the Commission requested the
Netherlands to end the discriminatory taxation of
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expected to allow Member States and businesses to
better prepare for and adapt to the upcoming changes in
time and in a more uniform way.
Proceedings against Cyprus regarding invoicing rules closed On 20 November 2013, the Commission formally
requested Cyprus to transpose its VAT invoicing rules
in accordance with Directive 2010/45/EU. These
rules regulating VAT invoicing had entered into force
on 1 January 2013. Initially, Cyprus did not notify the
Commission of any measures it would take to implement
the Invoicing Directive. However, since Cyprus has
changed its legislation, the European Commission
closed the proceedings against Cyprus on 28 March
2014.
Customs Duties, Excises and other Indirect TaxesCJ rules on the consequences of the refusal to make own resources available to the European Union (Commission v UK) On 3 April 2014, the CJ delivered its judgment in case
European Commission v United Kingdom of Great
Britain and Northern Ireland (C- 60/13). The case
has regard to the refusal of United Kingdom of Great
Britain and Northern Ireland to make import duty
(own resources) to an amount of GBP 20,061,462.11
available to the budget of the European Union.
Pre-litigation procedure
In July 2006, as part of an investigation into imports of
fresh garlic originating in China, the European Anti-
Fraud Office (‘OLAF’) carried out an inspection in the
United Kingdom and informed the Commission that,
in 2005, the UK customs authorities had issued four
erroneous Binding Tariff Information (‘BTIs’), in that
garlic preserved at temperatures of -3oC to -8oC had
been classified as ‘frozen garlic’ (the ‘disputed BTIs’).
Three of the disputed BTIs were used for the import of
fresh garlic from China.
authority (outside the scope of VAT), 5% for VAT taxable
economic activities and 1% for VAT exempt economic
activities.
The Municipality took the position that it was entitled to
deduct all input VAT incurred in respect of the building
on the grounds and that its first occupation of the
building in 2003 constituted a VAT taxable supply to
itself. The tax authorities did not agree with this analysis
and considered that only 6% of the activities of the
Municipality fell within the scope of VAT. Consequently,
the Municipality would only be entitled to deduct 6% of
the input VAT. Eventually, the matter ended up before
the Netherlands Supreme Court, which referred a
question to the CJ for a preliminary ruling. The Supreme
Court asked the CJ if Article 5(7)(a) of the Sixth EU VAT
Directive should be interpreted as meaning that supplies
are made for consideration in cases such as the one at
hand.
The Advocate General opined that the Municipality’s
first occupation of the building should be treated as a
supply made for consideration. Furthermore, according
to the Advocate General, the Municipality was entitled to
deduct VAT in respect of the building to the extent that
the building is used for the Municipality’s VAT taxable
transactions (5%). For the remaining 95%, in respect
of the use for activities as a public authority and VAT
exempt activities, the Advocate General opined that no
deduction was possible.
Commission publishes Explanatory Notes on new place of supply rules for telecommunications, broadcasting and electronic servicesOn 3 April 2014, the Commission published Explanatory
Notes concerning the changes to the place of supply
of telecommunications, broadcasting and electronic
services, which enter into force in 2015. The
underlying reason for these changes is to bring the
VAT treatment of these services in line with one of the
main principles of VAT, that revenues should accrue
to the Member State in which goods or services are
consumed. The Explanatory Notes aim at providing a
better understanding of the EU VAT legislation and are
8 9
Commission. As it was not satisfied with that reply, the
Commission decided to bring the present action.
Findings of the Court
The Court remarks that the United Kingdom does not
deny that the disputed BTIs issued by its customs
authorities contain erroneous information and that the
sum claimed by the Commission represents the total
value of the customs duties that would have been due
if the imported garlic had been declared as fresh garlic
and not as frozen garlic.
On the other hand, the United Kingdom contests the
existence of a customs debt, which, in its opinion,
constitutes a prerequisite for the European Union’s
entitlement to own resources; in the alternative, the
United Kingdom contests the imputability to the UK
customs authorities of the error committed in issuing the
disputed BTIs, in the light of Article 17(2) of Regulation
No 1150/2000.
In those circumstances, it is necessary to determine
whether the United Kingdom was required to establish
the existence of the European Union’s entitlement to
the own resources and, if that is indeed the case, to
examine whether the United Kingdom, in accordance
with the conditions laid down in Article 17(2) of
Regulation No 1150/2000, was released from the
obligation to make those resources available to the
European Union.
First, as regards the obligation to establish the existence
of the European Union’s entitlement to the own
resources, it is clear from Article 2(1)(b) of Decision
2000/597, read in conjunction with Article 8(1) thereof,
that the revenue from Common Customs Tariff duties
are own resources of the European Union which are
collected by the Member States, and that the latter
are obliged to make those resources available to the
Commission.
Article 2(1) of Regulation No 1150/2000 provides that
Member States must establish the European Union’s
entitlement to own resources ‘as soon as the conditions
provided for by the customs regulations have been met
According to OLAF, the UK customs authorities had
made obvious administrative errors by issuing the
disputed BTIs solely on the basis of the description
given by the importers and without requesting samples
or documents which might have assisted them in
determining the correct classification of the goods. The
disputed BTIs were revoked in June 2006.
On the basis of that information and in view of the
fact that imports of fresh garlic (CN heading 0703)
originating in China outside the applicable tariff quota
are subject to customs duties considerably higher
than those for frozen garlic (CN heading 0710), the
Commission found that the customs duties not collected
as a result of that erroneous classification amounted in
total to GBP 20,061,462.11. By letter of 22 March 2007,
the Commission sent a request to the United Kingdom
for information on the imports of garlic originating
in China made between 24 January 2005 and 28
December 2006.
On 22 March 2010, after an exchange of
correspondence with the UK authorities, the
Commission sent the United Kingdom a letter of formal
notice in which it stated its view that the United Kingdom
was financially liable for the loss of own resources and
asked the United Kingdom to submit its observations in
that regard within two months.
In its response of 12 May 2010, the United Kingdom
conceded that it had issued the disputed BTIs indicating
the incorrect tariff heading, but argued that this error had
not led to a loss of own resources because it had not
given rise to any customs debt.
Unconvinced by the arguments presented by the United
Kingdom, the Commission sent it a reasoned opinion
on 25 November 2011, reiterating its position and
asking the United Kingdom to make available to the
Commission the sum of GBP 20,061,462.11 as soon as
possible, together with late payment interest calculated
on the basis of the date of the import declarations and
the date of payment.
The United Kingdom responded by letter of 25 January
2012, denying liability for the sum claimed by the
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Secondly, it is necessary to examine the United
Kingdom’s alternative argument that its liability for the
loss of own resources is precluded on the basis of
Article 17(2) of Regulation No 1150/2000, since the
administrative errors are not attributable to it.
Under the terms of Article 17(1) of Regulation No
1150/2000, Member States are obliged to take all
necessary measures to ensure that the amounts
corresponding to the entitlements established pursuant
to Article 2 of that regulation are made available to the
Commission in accordance with the conditions laid
down in that regulation. Article 17(2) of the regulation
provides that Member States are to be exempted from
that obligation if recovery did not take place for reasons
of force majeure or for other reasons not attributable to
them.
It is clear from the case law of the Court that there is
no need to distinguish between a situation in which a
Member State has established the duties on the own
resources without paying them and one in which it has
wrongfully omitted to establish them.
In particular, the Court held that a Member State which
fails to establish the European Union’s own resources
and to make the corresponding amount available to the
Commission, without one of the conditions laid down in
Article 17(2) of Regulation No 1150/2000 being met, falls
short of its obligations under EU law and, in particular,
under Articles 2 and 8 of Decision 2000/597.
In paragraph 61 of the judgment in Case C-334/08
Commission v Italy, the Court stated that Article 17(2)
of Regulation No 1150/2000, in the version applicable
to the present case, establishes a procedure enabling
a Member State’s administrative authorities either to
declare certain amounts of established entitlements
irrecoverable or to consider the amounts of established
entitlements to be deemed irrecoverable at the latest
after a period of five years from the date on which the
amount has been established.
In that context, the Court stated inter alia in paragraph
65 of that judgment that, in order for a Member State
to be released from its obligation to make available
concerning the entry of the entitlement in the accounts
and the notification of the debtor’.
The United Kingdom contended, however, that
Article 217(1)(b) of the Customs Code precluded it
from entering in the accounts the amounts that the
Commission considers to be due, since the amount
corresponding to the import duties applicable to fresh
garlic originating in China is higher than the amount
determined on the basis of the disputed BTIs issued in
relation to the import of frozen garlic.
That line of argument cannot be accepted. The Court
held that the obligation of Member States to establish
the European Union’s entitlement to own resources
arises as soon as the conditions provided for by
the customs regulations have been met and that,
accordingly, it is not necessary for the entry in the
accounts to have actually been made.
As regards the exemption under Article 217(1)(b) of
the Customs Code, it must be noted that the purpose
of that exemption is to protect the debtor’s legitimate
expectation which is based on the valid BTI held by that
debtor. Accordingly, that provision covers situations in
which the Member States’ customs authorities cannot
make a subsequent entry in the accounts of the duties
in question, but it does not release Member States
from their obligation to establish the European Union’s
entitlement to own resources.
Indeed, according to well established case law of the
Court, if an error committed by the customs authorities
of a Member State results in the debtor not having
to pay the duties in question, it does not affect that
Member State’s obligation to pay duties that should
have been established in the context of making
available own resources, together with default interest.
In the present case, the fact that the UK customs
authorities applied an erroneous tariff to the imports
of fresh garlic originating from China and established
customs duties in an amount lower than that applicable
to those goods does not prejudice the obligation to
establish the European Union’s entitlement to own
resources arising out of those imports.
10 11
Under Article 11 of Regulation No 1150/2000, any
delay in making the entry in the account referred to in
Article 9(1) of that regulation gives rise to the payment
of default interest by the Member State concerned at the
interest rate applicable to the entire period of delay.
Therefore, the United Kingdom failed to fulfil its
obligations under Article 8 of Decision 2000/597 and
Articles 2, 6, 9, 10 and 11 of Regulation No 1150/2000.
Lastly, as regards the infringement of Article 4(3) TEU,
also relied on by the Commission, there are no grounds
for holding that the United Kingdom has failed to fulfil
the general obligations under that provision, which is
separate from the established failure to fulfil the more
specific obligations incumbent upon that Member
State under the provisions referred to in the preceding
paragraph.
In the light of all the foregoing considerations, the CJ
ruled that by refusing to make available the amount of
GBP 20,061,462.11 corresponding to the duties payable
on imports of fresh garlic covered by erroneous binding
tariff information, the United Kingdom of Great Britain
and Northern Ireland failed to fulfil its obligations under
Article 8 of Council Decision 2000/597/EC, Euratom of
29 September 2000 on the system of the Communities’
own resources and Articles 2, 6, 9, 10 and 11 of Council
Regulation (EC, Euratom) No 1150/2000 of 22 May
2000 implementing Decision 2000/597, as amended
by Council Regulation (EC, Euratom) No 2028/2004 of
16 November 2004.
CJ rules on the powers of customs authorities to establish the infringement of an intellectual property right (Sintax Trading)On 9 April 2014, the CJ delivered its judgment in case
Sintax Trading (C- 583/12). The case has regard to the
question whether customs authorities have powers to
establish the infringement of an intellectual property
right upon importation of pirated goods.
Syntax Trading imported into Estonia bottles of bath
products supplied by a Ukrainian company. When
they were imported, Acerra OÜ (‘Acerra’) informed the
to the Commission the amounts corresponding to the
established entitlements, not only must the conditions
laid down in Article 17(2) of Regulation No 1150/2000
be met; the condition that those entitlements must have
been properly entered in the account provided for in
Article 6(3)(b) of that regulation — that is to say, in the B
account — must also have been satisfied.
It follows that, in order to rely on the exemption provided
for in Article 17(2)(b) of that regulation, the United
Kingdom must also have entered the entitlements in
question in the B account. As it is, both in its defence
and in its rejoinder, the United Kingdom stated that it
had decided not to seek post-clearance recovery from
the holders of the disputed BTIs.
In those circumstances, the United Kingdom cannot rely
on an exemption under Article 17(2)(b) of Regulation
No 1150/2000.
In any event, the reason why it is impossible to effect a
recovery is attributable to the UK customs authorities.
Indeed, it is because those authorities issued the
disputed BTIs that the amounts corresponding to the
entitlements in question in the present case prove
irrecoverable.
It follows from the above considerations that, under
Article 2(1) of Regulation No 1150/2000, the United
Kingdom was required to establish the existence of
the European Union’s own resources and, pursuant to
Articles 6, 9 and 10 of that regulation, to make them
available to the European Union. By failing to do so, the
United Kingdom also made itself liable for late payment
interest, in accordance with Article 11 of that regulation.
In that regard, it must be recalled that, according to
settled case law, there is an inseparable link between
the obligation to establish the European Union’s
own resources, the obligation to credit them to the
Commission’s account within the prescribed time-limits
and the obligation to pay default interest, that interest
being payable regardless of the reason for the delay in
making the entry in the Commission’s account.
11
In those circumstances, the Riigikohus decided to stay
its proceedings and to refer the following questions to
the CJ for a preliminary ruling :
‘1. May the “proceedings to determine whether an
intellectual property right has been infringed”
referred to in Article 13(1) of Regulation
No 1383/2003 also be conducted within the customs
department or must “the authority competent to
decide on the case” dealt with in Chapter III of the
regulation be separate from the customs authorities?
2. Recital 2 in the preamble to Regulation
No 1383/2003 mentions as one of the objectives
of the regulation the protection of consumers, and
according to recital 3 in the preamble a procedure
should be set up to enable the customs authorities
to enforce as effectively as possible the prohibition
of the introduction into the European Union customs
territory of goods infringing an intellectual property
right, without impeding the freedom of legitimate
trade in accordance with recital 2 in the preamble
to the regulation and recital 1 in the preamble to
Regulation (EC) No 1891/2004 of 21 October 2004
laying down provisions for the implementation of
Regulation No 1383/2003.
3. Is it compatible with those objectives if the measures
laid down in Article 17 of Regulation No 1383/2003
can be applied only if the right-holder initiates
the procedure mentioned in Article 13(1) of the
regulation for determination of an infringement of an
intellectual property right, or must it also be possible,
for the effective pursuit of those objectives, for the
customs authorities to initiate the corresponding
procedure?’
The CJ ruled as follows:
Article 13(1) of Council Regulation (EC) No 1383/2003
of 22 July 2003 concerning customs action against
goods suspected of infringing certain intellectual
property rights and the measures to be taken against
goods found to have infringed such rights must be
interpreted as meaning that it does not preclude the
customs authorities, in the absence of any initiative
by the holder of the intellectual property right, from
initiating and conducting the proceedings referred to in
that provision themselves, provided that the relevant
decisions taken by those authorities may be subject to
Customs Authorities that those bottles infringed a patent
registered in its name.
As a result, the Customs Authorities suspended the
release for free circulation of the goods concerned
in order to carry out a further investigation which
revealed a strong similarity between the shape of the
bottles imported and Acerra’s patent. Suspecting an
infringement of an intellectual property right it seized the
goods and requested an opinion from Acerra. The latter
confirmed those suspicions.
On that basis, the Customs Authorities found that the
goods infringed an intellectual property right within the
meaning of Regulation No 1383/2003 and therefore, on
11 February 2011, it rejected the application by Syntax
Trading to obtain the release of the goods.
Syntax Trading brought an action against the decision of
the Customs Authorities before the Tallinna halduskohus
(Administrative Court, Tallin), which was confirmed
by a second judgment of 17 February 2011. Finding
procedural irregularities, that court ordered the release
of those goods. On another ground, that judgment
was upheld on appeal by the Tallina ringkonnakohus
(Court of Appeal, Tallin), which held that Article 10
of Regulation No 1383/2003 did not authorise the
customs authorities to give a decision themselves as
to the existence of an infringement of an intellectual
property right. According to that court, in the absence
of proceedings to establish whether there had been an
infringement of Acerra’s intellectual property right, the
Customs Authorities could not detain the goods after
the expiry of the period prescribed to that effect by
Article 13(1) of Regulation No 1383/2003.
Hearing an appeal in cassation by the customs
administration, the Riigikohus (Supreme Court) was
unsure as to whether that interpretation was well
founded, given that Estonian law authorises the
Customs Authorities to conduct, themselves and on
their own initiative, adversarial proceedings in order to
give a decision on the merits as to the existence of an
infringement of an intellectual property right. However,
the referring court wished to know whether national law
was compatible with Regulation No 1383/2003.
12 13
The Court further noted that the Hungarian
legislation, which provides a total exemption for spirits
manufactured from fruit supplied by fruit growers, up to
the amount of 50 litres per year, exceeds the maximum
50% reduction which the directive permits Hungary
to give. Similarly, national rules exempting spirits
manufactured by private individuals from excise duty
are contrary to the directive, since the directive does not
provide for such an exception to the normal rate.
The Court declared that Hungary has failed to fulfil its
obligations under EU legislation relating to excise duties
on alcoholic beverages.
EU challenges Russia in the WTO over pork import ban On 8 April 2014, the EU launched a case in the World
Trade Organisation (‘WTO’) against the Russian ban on
imports of pigs, fresh pork and certain pig products from
the EU.
Russia closed its market to the EU – cutting off
almost 25% of all EU exports – at the end of January
2014. It based its decision on four isolated cases of
African swine fever (‘ASF’) detected in wild boar at the
Lithuanian and Polish borders with Belarus.
This trade ban has exposed the EU farming sector to
significant losses. Bilateral discussions with Moscow
have brought no results to date. Given that there seems
to be no solution forthcoming, the EU has decided to
resort to the WTO’s dispute settlement procedures by
requesting formal consultations with Russia.
Upon joining the WTO in 2012, Russia undertook to
ensure that its measures protecting animal life and
health are based on science, not more trade restrictive
than necessary and applied without discrimination to its
various partners and domestic producers.
However, Russia accepts, for instance, imports from
Belarus and, until recently, Ukraine, despite notified
cases of African swine fever in these countries. In
addition, despite the numerous outbreaks of the disease
that have occurred on its own territory, Russia did
not close its entire market to all domestic products.
appeal ensuring that the rights derived by individuals
from EU law and, in particular, from that regulation are
safeguarded.
CJ rules on Hungarian excise exemption for privately produced small quantities of spirits (Commission v Hungary)On 10 April 2014, the CJ delivered its judgment in case
European Commission v Hungary (C- 115/13). The case
has regard to the question whether excise legislation is
infringed upon to the application of an excise exemption
for private produced small quantities of spirits.
EU law requires Member States to apply excise duty
on ethyl alcohol, for alcoholic beverages other than
wine and beer, of a minimum amount of EUR 550
per hectolitre of pure alcohol. However, Hungary is
authorised to apply a reduced rate of excise duty on
alcohol manufactured by distilleries from fruit supplied
by fruit growers for the personal use of the latter. The
preferential rate of excise duty cannot, however, be less
than 50% of the standard national rate of excise duty on
alcohol. Moreover, application of that rate is limited to 50
litres of alcohol per year per fruit-growers’ household.
The Commission took the view that Hungary had not
complied with EU rules on excise duties on alcoholic
beverages and brought infringement proceedings
before the CJ. The excise duty on spirits manufactured
in a distillery on behalf of a fruit grower is set, in that
country, at 0 HUF up to a maximum of 50 litres per year,
which amounts to a total exemption. In addition, spirits
manufactured by a private person in his own distillery
are exempted from excise duty up to a maximum annual
volume of 50 litres when the spirits are intended for the
personal consumption of the household.
In its judgment, the Court noted that the directive on
excise duty on alcoholic beverages determines the
cases in which those drinks may be exempted from
excise duty or made subject to reduced rates of duty.
The directive does not allow Member States to introduce
preferential rules whose scope goes beyond what is
permitted by the European legislature.
13
through the conversion into capital of the claims of
shareholders, for which it paid stamp duty tax. Ascendi
claimed the restitution of this tax, arguing that the
Portuguese legislature could not introduce, in 2001, a
stamp duty tax over capital increase in the capital of
companies, which had been abolished in 1991.
The first question dealt by the AG was whether the CJ
was competent to decide on this question due to the
fact that the question was referred by an Arbitration
Court. In particular, the question analysed was whether
the special nature of this Arbitration Court allowed
it to make preliminary references to the CJ. The AG
considered that the answer to this question was in the
affirmative. Considering the nature of the Arbitration
Court in Portugal, which constitutes a true mechanism
of appeal as alternative to the traditional judiciary Courts
and not a mere supplementary means of appeal, the
AG considered that the Arbitration Court fulfilled all
the requirements to be entitled to make references for
preliminary rulings to the CJ.
As regards the substance of the question referred to
the CJ, the problem, in essence, was to determine
whether Article 7 (2) of Directive 69/335 allowed
the reintroduction of a tax on transactions covered
by Art. 4 (1) (c) which, although subject to tax as of
1 July 1984, were subsequently exempt from such
tax. According to the AG, the fundamental issue was
to determine whether Article 7 (2) of the Directive
constitutes a standstill clause which merely allows
Member States to keep in force taxation which was
applicable as of 1 July 1984 or, as an alternative
suggested by the Portuguese Government. It authorises
Member States to freely abolish and reintroduce
taxation on capital increases depending on their
concrete tax policy orientations.
The AG concluded that clearly the first option was the
correct one. First of all, because from the outset, the
EU legislation had the aim of abolishing any taxation
on capital increases, which was the taxation merely
accepted as an exception on the basis of the possible
loss of tax revenue of Member States. In addition,
the AG remarked that Article 7 (2) constitutes a true
standstill clause which is emphasised by the nature
of such provision, in particular, by the reference to the
Therefore, by refusing imports from EU regions
unaffected by the disease, Russia would seem to
be applying double standards, treating EU products
differently from other trading partners and from those
produced domestically.
In requesting consultations, the EU has formally initiated
a WTO dispute. Consultations give the EU and Russia
the opportunity to discuss the matter and to find a
satisfactory solution without resorting to litigation. If
consultations do not reach a satisfactory solution within
60 days, the EU may request the WTO to set up a panel
to rule on the legality of Russia’s measures.
Capital DutyAG Szpunar opines that Portuguese legislation which reintroduces stamp duty tax on increases in the capital of companies through the conversion into capital of the claims of shareholders is in breach of Council Directive 69/335/EEC (Ascendi) On 8 April 2014, AG Szpunar delivered his Opinion
in case Ascendi Beiras Litoral e Alta, Auto Estradas
das Beiras Litoral e Alta, S.A. v Autoridade Tributaria
e Aduaneira (C-377/13). The case has regard to the
compatibility of the Portuguese stamp duty legislation
with the capital duty Directive.
Portuguese Decree-Law No 322-8/2001 of 14
December 2001, introduced stamp duty on any
increases in the capital of capital companies through
the conversion into capital of the claims of shareholders
in respect of ancillary services provided previously
to the company, even if those ancillary services had
been provided in cash. However, as at 1 July 1984,
Portuguese legislation subjected those increases in
capital, made in that way, to stamp duty at the rate of
2%, and that, at the same date, it exempted from stamp
duty capital increases made in cash. In 1991 all capital
increases, irrespective of the form, were exempt from
stamp duty tax.
Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras
Litoral e Alta SA (‘Ascendi’), made four capital increases
14
law in force as of 1 July 1984. If the legislature had
wanted to leave the options to Member States to freely
introduce and abolish taxes, it would not have subjected
such possibility to the circumstance of such tax being
applicable on 1 July 1984.
Therefore, the AG concluded that the Portuguese stamp
duty tax on these transactions is in breach of the Capital
Duty Directive.
15
Correspondents● Gerard Blokland (Loyens & Loeff Amsterdam)
● Kees Bouwmeester (Loyens & Loeff Amsterdam)
● Almut Breuer (Loyens & Loeff Amsterdam)
● Robert van Esch (Loyens & Loeff Rotterdam)
● Sarah Van Leynseele (Loyens & Loeff Brussel)
● Raymond Luja (Loyens & Loeff Amsterdam;
Maastricht University)
● Arjan Oosterheert (Loyens & Loeff Amsterdam)
● Lodewijk Reijs (Loyens & Loeff Rotterdam)
● Bruno da Silva (Loyens & Loeff Amsterdam;
University of Amsterdam)
● Patrick Vettenburg (Loyens & Loeff Rotterdam)
● Ruben van der Wilt (Loyens & Loeff Amsterdam)
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Editorial boardFor contact, mail: eutaxalert@loyensloeff.com:
● René van der Paardt (Loyens & Loeff Rotterdam)
● Thies Sanders (Loyens & Loeff Amsterdam)
● Dennis Weber (Loyens & Loeff Amsterdam;
University of Amsterdam)
Editors● Patricia van Zwet
● Bruno da Silva
Although great care has been taken when compiling this newsletter, Loyens & Loeff N.V. does not accept any responsibility whatsoever for
any consequences arising from the information in this publication being used without its consent. The information provided in the publication is
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