In wake of ECJ ruling, EU member states amend exit tax regimes

Following the decision of the European Court of Justice (ECJ) in the case of National Grid Indus BV v Inspecteur van de Belastingdienst Rijnmond C-371/10, several EU member states have amended their exit tax regimes. In addition, the EU commission has issued formal requests to a number of member states to revise their existing exit tax regimes.

The countries that have issued new decrees or legislation after the National Grid Indus case include France, the Netherlands, Italy, Norway and Portugal, while a handful of other member states, such as Ireland and the UK, either have already issued draft legislation or are anticipated to issue draft legislation in the near future.

The key issue behind National Grid Indus is whether imposing exit taxes restrains businesses from exercising their right to freedom of establishment within the EU and therefore is non-compliant with EU law. National Grid Indus BV was incorporated and effectively managed in the Netherlands until December 2000. The Company subsequently transferred its place of effective management to the UK. At the time of the transfer, the Company held an unrealized gain relating to a UK-denominated receivable owed to its UK parent company. Dutch tax authorities attempted to charge tax on the amount of this unrealized gain, as was required under Dutch tax law. The Company, however, appealed to the Amsterdam Regional Court of Appeal, which referred the case to the ECJ…

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