CFE ECJ Task Force: Opinion Statement ECJ-TF 1/2019 on the ECJ Decision of 31 May 2018 in Hornbach-Baumarkt (Case C-382/16), Concerning the Application of Transfer Pricing Rules to Transactions between Resident and Non-Resident Associated Enterprises

Eric Kemmeren, The members of the Task Force are: Alfredo Garcia Prats, Werner Haslehner, Volker Heydt, Eric Kemmeren, Georg Kofler (Chair), Michael Lang, Jürgen Lüdicke, João Nogueira, Pasquale Pistone, Albert Rädler†, Stella Raventos-Calvo, Emmanuel Raingeard de la Blétière, Isabelle Richelle, Alexander Rust and Rupert Shiers

Research output: Contribution to journalArticleProfessional

Abstract

CFE Tax Advisers Europe welcomes the Court’s decision in Hornbach-Baumarkt (Case C-382/16) (Hornbach ) as an important clarification of the conditional compatibility of arm’s length-based domestic transfer pricing legislation with the freedom of establishment. Hornbach follows and confirms the previous doctrine formulated in SGI (Case C-311/08). It did not adopt the Advocate General’s approach, which would have denied comparability of domestic and cross-border situations in transfer pricing cases and, hence, prevent scrutiny of domestic transfer pricing legislation under the fundamental freedoms.
CFE Tax Advisers Europe welcomes the requirement that Member States have to grant taxpayers the opportunity to provide evidence “of any commercial justification” for non-arm’s length transactions, with the result that a denial of that opportunity through automatic transfer pricing adjustments would render these incompatible with EU Law. In that context, it is further welcomed that “commercial justifications” may include “economic reasons resulting from its position as a shareholder of the non-resident company”. The Hornbach decision, at least in cases of non-arm’s length transactions, such as interest-free loans or gratuitous guarantees aimed at replacing equity, clearly suggests that such a shareholder interest in the financial success of the foreign subsidiary may serve as such justification.
Original languageEnglish
Pages (from-to)7
Number of pages446
JournalEuropean Taxation
Volume59
Issue number9
Publication statusPublished - 2019

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Pricing rules
European Court of Justice
Transfer pricing
Residents
Task force
Justification
Tax
Shareholders
Legislation
Loans
Cross-border
Equity
Foreign subsidiaries
Compatibility
Economics
Denial
Guarantee

Cite this

Kemmeren, E., & The members of the Task Force are: Alfredo Garcia Prats, Werner Haslehner, Volker Heydt, Eric Kemmeren, Georg Kofler (Chair), Michael Lang, Jürgen Lüdicke, João Nogueira, Pasquale Pistone, Albert Rädler†, Stella Raventos-Calvo, Emmanuel Raingeard de la Blétière, Isabelle Richelle, Alexander Rust and Rupert Shiers (2019). CFE ECJ Task Force: Opinion Statement ECJ-TF 1/2019 on the ECJ Decision of 31 May 2018 in Hornbach-Baumarkt (Case C-382/16), Concerning the Application of Transfer Pricing Rules to Transactions between Resident and Non-Resident Associated Enterprises. European Taxation, 59(9), 7.
Kemmeren, Eric ; The members of the Task Force are: Alfredo Garcia Prats, Werner Haslehner, Volker Heydt, Eric Kemmeren, Georg Kofler (Chair), Michael Lang, Jürgen Lüdicke, João Nogueira, Pasquale Pistone, Albert Rädler†, Stella Raventos-Calvo, Emmanuel Raingeard de la Blétière, Isabelle Richelle, Alexander Rust and Rupert Shiers. / CFE ECJ Task Force: Opinion Statement ECJ-TF 1/2019 on the ECJ Decision of 31 May 2018 in Hornbach-Baumarkt (Case C-382/16), Concerning the Application of Transfer Pricing Rules to Transactions between Resident and Non-Resident Associated Enterprises. In: European Taxation. 2019 ; Vol. 59, No. 9. pp. 7.
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title = "CFE ECJ Task Force: Opinion Statement ECJ-TF 1/2019 on the ECJ Decision of 31 May 2018 in Hornbach-Baumarkt (Case C-382/16), Concerning the Application of Transfer Pricing Rules to Transactions between Resident and Non-Resident Associated Enterprises",
abstract = "CFE Tax Advisers Europe welcomes the Court’s decision in Hornbach-Baumarkt (Case C-382/16) (Hornbach ) as an important clarification of the conditional compatibility of arm’s length-based domestic transfer pricing legislation with the freedom of establishment. Hornbach follows and confirms the previous doctrine formulated in SGI (Case C-311/08). It did not adopt the Advocate General’s approach, which would have denied comparability of domestic and cross-border situations in transfer pricing cases and, hence, prevent scrutiny of domestic transfer pricing legislation under the fundamental freedoms. CFE Tax Advisers Europe welcomes the requirement that Member States have to grant taxpayers the opportunity to provide evidence “of any commercial justification” for non-arm’s length transactions, with the result that a denial of that opportunity through automatic transfer pricing adjustments would render these incompatible with EU Law. In that context, it is further welcomed that “commercial justifications” may include “economic reasons resulting from its position as a shareholder of the non-resident company”. The Hornbach decision, at least in cases of non-arm’s length transactions, such as interest-free loans or gratuitous guarantees aimed at replacing equity, clearly suggests that such a shareholder interest in the financial success of the foreign subsidiary may serve as such justification.",
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Kemmeren, E & The members of the Task Force are: Alfredo Garcia Prats, Werner Haslehner, Volker Heydt, Eric Kemmeren, Georg Kofler (Chair), Michael Lang, Jürgen Lüdicke, João Nogueira, Pasquale Pistone, Albert Rädler†, Stella Raventos-Calvo, Emmanuel Raingeard de la Blétière, Isabelle Richelle, Alexander Rust and Rupert Shiers 2019, 'CFE ECJ Task Force: Opinion Statement ECJ-TF 1/2019 on the ECJ Decision of 31 May 2018 in Hornbach-Baumarkt (Case C-382/16), Concerning the Application of Transfer Pricing Rules to Transactions between Resident and Non-Resident Associated Enterprises', European Taxation, vol. 59, no. 9, pp. 7.

CFE ECJ Task Force: Opinion Statement ECJ-TF 1/2019 on the ECJ Decision of 31 May 2018 in Hornbach-Baumarkt (Case C-382/16), Concerning the Application of Transfer Pricing Rules to Transactions between Resident and Non-Resident Associated Enterprises. / Kemmeren, Eric; The members of the Task Force are: Alfredo Garcia Prats, Werner Haslehner, Volker Heydt, Eric Kemmeren, Georg Kofler (Chair), Michael Lang, Jürgen Lüdicke, João Nogueira, Pasquale Pistone, Albert Rädler†, Stella Raventos-Calvo, Emmanuel Raingeard de la Blétière, Isabelle Richelle, Alexander Rust and Rupert Shiers.

In: European Taxation, Vol. 59, No. 9, 2019, p. 7.

Research output: Contribution to journalArticleProfessional

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Kemmeren E, The members of the Task Force are: Alfredo Garcia Prats, Werner Haslehner, Volker Heydt, Eric Kemmeren, Georg Kofler (Chair), Michael Lang, Jürgen Lüdicke, João Nogueira, Pasquale Pistone, Albert Rädler†, Stella Raventos-Calvo, Emmanuel Raingeard de la Blétière, Isabelle Richelle, Alexander Rust and Rupert Shiers. CFE ECJ Task Force: Opinion Statement ECJ-TF 1/2019 on the ECJ Decision of 31 May 2018 in Hornbach-Baumarkt (Case C-382/16), Concerning the Application of Transfer Pricing Rules to Transactions between Resident and Non-Resident Associated Enterprises. European Taxation. 2019;59(9):7.