May 2014 - edition 130EU Tax Alert

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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.

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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)

www.loyensloeff.com

About Loyens & LoeffLoyens & Loeff N.V. is the first firm where attorneys at

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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

intended for general informational purposes and can not be considered as advice.

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