Brussels attacks barriers to capital flows

The European Commission formally requested the United Kingdom in May 2011 to amend its legislation to better take into account the rulings of the EU's Court of Justice on the tax treatment of controlled foreign corporations (CFCs).

Despite the 2006 Court's ruling in the Cadbury Schweppes case, the UK is still not complying with EU law on freedom of establishment and free movement of capital. In particular, the UK continues to tax in the UK profits of subsidiaries established in the EU or in Member States of the European Economic Area (EEA). Under EU law, profits of CFCs - which are subsidiaries of companies established in EU Member States or in EEA countries - should not be subject to additional taxation in the country of the parent company if the subsidiaries are engaged in genuine economic activities.

European Commission: Press Release: IP/11/606: Taxation: Commission requests UK to further amend its treatment of controlled foreign corporations (CFCs) http://europa.eu/rapid/pressReleasesAction.do?reference=IP/11/606&format=PDF&aged=0&language=EN&guiLanguage=en

ESO: Background information: Reforms 'may fail European law test' http://www.europeansources.info/record/reforms-may-fail-european-law-test/

ESO: Background information: Cadbury judgment could usher in a territorial gain http://www.europeansources.info/record/cadbury-judgment-could-usher-in-a-territorial-gain/

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