In its Judgment of 25 April 2013 in case C-64/11 Commission v Spain (press release), the Court of Justice of the EU has pushed for the further consolidation of the EU single fiscal territory by preventing any discriminatory tax treatment between companies that transfer their place of residence inside a Member State (domestic transfer) and those that transfer it to another EU Member State (EU transfer).
In the case at hand, Spanish corporate taxation law makes unrealised capital gains form part of the basis of assessment for the tax year, where the place of residence or the assets of a company established in Spain are transferred to another Member State. This rule has been challenged by the Commission as a restriction of freedom of establishment in that it puts the companies which have exercised that freedom at a cash-flow disadvantage.
The CJEU has indeed found that the immediate taxation of unrealised capital gains on the transfer of the place of residence or of the assets of a company established in Spain to another Member State amounts to a restriction on the freedom of establishment since, in such cases, a company is penalised financially as compared with a similar company which carries out such transfers in Spanish territory--in respect of which capital gains generated as a result of such transactions do not form part of the basis of assessment for corporate taxation until the transactions are actually carried out.
The CJEU has struck down such restriction as disproportionate in considering that Spain could preserve its powers in taxation matters by means of measures which are less harmful to the freedom of establishment. The CJEU considers it possible, for example, to request payment of the tax debt following the transfer, at the point at which the capital gains would have been taxed if the company had not made that transfer outside of Spanish territory. Moreover, the mechanisms of mutual assistance which exist between the authorities of the Member States are sufficient to enable the Member State of origin to assess the veracity of declarations made by companies which opt to defer payment of the tax. Thus, the Court clearly finds that the right to the freedom of establishment does not preclude capital gains generated in a territory from being taxed, even if they have not yet been realised, but it does preclude a requirement that that tax be paid immediately.
In this Judgment, the CJEU is clearly pushing for a suppression of tax borders within the EU and for an effective treatment of corporate changes of residence within the single market as domestic transfers. The CJEU strongly relies on the effectiveness of the current mechanisms of administrative cooperation in the field of taxation (as sufficient to enable Member States to exercise effective monitoring of transferred companies). These cooperation mechanisms (timidly created in 1977 by Council Directive 77/799/EEC) were revamped in 2011 by means of Council Directive 2011/16/EU and its Implementing Regulation 1156/2012.
Directive 2011/16 had to be transposed into national laws by 1 January 2013 but, as of today, several Member States have not yet communicated any implementing measures to the Commission--including Belgium, Czech Republic, Germany, Greece, Italy, Hungary, Poland and Portugal. This means that Member States need to get up to speed and effectively implement measures of administrative cooperation in tax matters if they want to keep (or improve) the effectiveness of their tax systems in the (growing) EU single fiscal territory.
As indicated in Directive 2011/16, Member States need to use their 'power to efficiently cooperate at international level to overcome the negative effects of an ever-increasing globalisation on the internal market'. Surely, developments and best practices generated in this inter-institutional cooperation setting will be relevant in the (likely?) future creation of a single EU tax authority.