CJEU – Recent Developments in Direct Taxation 2019

1. S. 276Introduction

The question of the applicability of the Parent-Subsidiary Directive (“PSD”) with respect to companies resident in Gibraltar is extremely relevant because of the beneficial domestic tax regime of that jurisdiction. Although Gibraltar is not an EU Member State, the Treaties apply to it by way of Article 355(3) of the Treaty on the Functioning of the European Union (“TFEU”), since the United Kingdom is responsible for Gibraltar’s external relations. It is in this context that the Court of Justice of the European Union (“CJEU” or “the Court”) has to decide upon the applicability of the exemption from withholding tax provided under the PSD regarding payments made from an EU Member State to a parent company that is resident in Gibraltar. Advocate General (“AG”) Hogan has delivered an opinion in the case GVC Services (Bulgaria) in an attempt to assist the Court.

The AG argues in his opinion that, although the PSD does not cover Gibraltar companies, national legislation which imposes withholding taxes on dividend distributions made to a parent company resident in Gibraltar is nevertheless incompatible with EU law and more specifically with the freedom of establishment. Upon ...