Taxation of Controlled Foreign Companies in Context of the OECD/G20 Project on Base Erosion and Profit Shifting as well as the EU Proposal for the Anti-Tax Avoidance Directive – An Interim Nordic Assessment

Building blocks	BEPS	ATA Directive	Sweden	Norway	Finland	Iceland	Denmark
(1) Rules for defining a CFC	• Foreign entity	• Foreign entity	• Foreign entity	• Foreign entity	• Foreign entity	• Foreign entity	• Foreign and domestic entities
	• Broad definition	• > 50% of the capital, voting rights, or profits	• ≥ 25% of the capital or voting rights	• ≥ 50% Norwegian ownership of the capital or voting rights	• ≥ 50% Finnish ownership of the capital, voting rights, or profits	• ≥ 50% Icelandic ownership of the capital and voting rights, or control	• Group has Decisive influence (> 50% voting rights)
	• Legal and economic ownership test
(2) Exemptions and threshold requirements	• Tax rate exemption	• Low-tax condition, < 40%	• Low-tax condition, < 55%	• Low-tax condition, < 2/3	• Low-tax condition, < 3/5	• Low-tax condition, < 2/3	• No low-tax condition
	• Optional use of lists, for example, a white list	• Exemption for the listed entities	• White/gray list	• White/black list	• Black list	• Black list	No exemption for genuine activities in the EU/EEA
		• Exemption for the financial undertakings in the EU/EEA	• Exemption for genuine activities in the EU/EEA	• Exemption for genuine activities in the EU/EEA	• Exemption for genuine activities in the EU/EEA/treaty countries	• Exemption for genuine activities in the EU/EEA	• Possibility of exemption for entities within the financial sector
		• EU/EEA exemption, unless establishment is wholly artificial or entity engages in non-genuine arrangements	• Exemption for shipping activities	• Exemption for entities in the treaty countries with mainly non-passive income	• Exemption for the treaty countries, unless black-listed	• Exemption for entities in the treaty countries with mainly non-passive income
					• Exemption for shipping and industrial activities
(3) Definition of CFC income	• A definition should be included	• Income condition, CFC income > 50%	• No general income condition	• No general income condition, but size of passive income relevant if treaty country	• No general Income condition	• No general income condition, but size of passive income relevant if treaty country	• Income condition, CFC income > 50%
	• Jurisdictions have flexibility to define	• Explicit definition of CFC income	• Entity approach	• Entity approach	• Entity approach	• Entity approach	• Explicit definition of CFC income
	• Entity or transactional approach	• Entity approach					Asset condition, CFC assets > 10%
							• Entity approach
(4) Rules for computing income	• Rules in parent company’s jurisdiction	• Corporate tax rules in the parent company’s member state	• Swedish tax rules	• Norwegian tax rules	• Finnish tax rules	• Icelandic tax rules	• Danish tax rules
	• Losses only deductible against profits of the same CFC or other CFCs in the same jurisdiction	• CFC’s losses should not be included in the parent’s tax base, but shall be set off against CFC’s income in subsequent years	• CFC’s losses can only be set off against CFC’s positive income in subsequent years	• CFC’s losses can only be set off against CFC’s positive income in subsequent years	• CFC’s losses can only be set off against CFC’s positive income in subsequent years	• CFC’s losses can only be set off against CFC’s positive income in subsequent years	• CFC’s losses can only be set off against CFC’s positive income in subsequent years
			• Max. 3 years carry forward		• Max. 10 years carry forward
(5) Rules for attributing income	• Attribution threshold tied to the control threshold	• Attribution threshold tied to the control threshold (> 50%)	• Attribution threshold tied to the control threshold (≥ 25%)	• Attribution threshold tied to the control threshold (≥ 50% Norwegian ownership)	• Attribution threshold tied to the control threshold, but 25% min. requirement	• Attribution threshold tied to the control threshold (≥ 50% Icelandic ownership)	• Attribution threshold tied to the control threshold (decisive influence)
	• Attribution based on the proportion of ownership	• Attribution based on the entitlement to profits	• Attribution based on the proportion of the share capital	• Attribution based on the proportion of ownership`	• Attribution based on the share of the total profits	• Attribution based on the proportion of the share capital	Attribution based on the proportion of the share capital
	• Apply tax rate of the parent jurisdiction		• Application of ordinary Swedish tax rate	• Application of ordinary Norwegian tax rate	• Application of ordinary Finnish tax rate	• Application of ordinary Icelandic tax rate	• Application of ordinary Danish tax rate
(6) Rules to prevent or eliminate double taxation	• Ordinary indirect credit relief	• Relief for foreign taxes not explicitly mentioned	• Ordinary indirect credit relief	• Ordinary indirect credit relief	• Ordinary indirect credit relief	• No credit relief	• Ordinary indirect credit relief
	• Also, relief for the CFC tax in intermediate companies	• Exemptions for dividends/gains on shareholding in the CFC	• No relief for CFC tax in Intermediate companies	• No relief for the CFC tax in Intermediate companies	• No relief for the CFC tax in Intermediate companies	• No relief for the CFC tax in intermediate companies	• No relief for the CFC tax in intermediate companies
	• Exemptions for dividends/gains on shareholding in the CFC		• Rules in place to avoid double taxation with respect to dividends/gains on shares in the CFC	Rules in place to avoid double taxation with respect to dividends/ gains on shares in the CFC	• Rules in place to avoid double taxation with respect to dividends/gains on shares in the CFC	• Exemption for dividends on shareholding in the CFC	• Rules in place to avoid double taxation with respect to dividends/ gains on shares in the CFC

Lingua:: Inglese

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Taxation of Controlled Foreign Companies in Context of the OECD/G20 Project on Base Erosion and Profit Shifting as well as the EU Proposal for the Anti-Tax Avoidance Directive – An Interim Nordic Assessment

Peter Koerver Schmidt

Categoria dell'articolo: Article

Pubblicato online: 10 dic 2016

Pagine: 87 - 112

Ricevuto: 27 apr 2016

Accettato: 26 mag 2016

DOI: https://doi.org/10.1515/ntaxj-2016-0005

Parole chiaveCFC legislation, BEPS, Anti-Tax Avoidance Directive, comparative law, EU law, tax treaties

© 2016 P. K. Schmidt

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

j_ntaxj-2016-0005_tab_001_w2aab3b8ab1b7b1ab1b5b3Ab2

Parole chiave
CFC legislation, BEPS, Anti-Tax Avoidance Directive, comparative law, EU law, tax treaties