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
| Dec 10, 2016
About this article
Article Category: Article
Published Online: Dec 10, 2016
Page range: 87 - 112
Received: Apr 27, 2016
Accepted: May 26, 2016
DOI: https://doi.org/10.1515/ntaxj-2016-0005
Keywords
© 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
| 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 |