STRUCTURING CORPORATE CAPITAL GAINS TAX SySTEM IN THE EUROPEAN UNION

368 Pages·2016·2.6 MB·English

by  Per Personal

Anu Torkkeli
STrucTuring corporATe cApiTAl gAinS TAx SySTem in The
ekonomi och SAmhälle
296
europeAn union. A compArATive FinniSh perSpecTive
economicS And SocieTy
This study examines the corporate capital gains taxa- tax system analysis, the future options for corporate capital
tion in Nordic countries, European Union and Finland. The gains taxation are discussed as well as challenges related
main perspective is in the corporate income tax law, but to the changes in the corporate income taxation such as
because of the multidisciplinary subject of the corporate correct level of harmonization so that individual countries
capital gains taxation, this study also has an economic per- still have their own fscal policy.
spective. Before analyzing the taxation itself, the basic con- This study offers the value-added to the society in a
cepts for the study are introduced such as the concept of couple of different ways. The study extensively analyzes
capital, income and capital gain. Also the tax framework the international corporate capital gains taxation models.
of this study is introduced by describing the most signifcant In addition, the study not only discusses the corporate capi-
features and issues in corporate income taxation and in tal gains purely from the legal point of view but also has a
corporate capital gains taxation. strong focus on the underlying features behind the corpo-
Corporate capital gains taxation is discussed by start- rate capital gains taxation system: features of the good tax-
ing with Nordic countries, continuing with European Union ation system, economics and competitiveness, signifcance
member states and fnally ending up with Finland. A rough and role of the corporate capital gains in the economics.
comparative summary is created at the end of each of these The conclusions of the study are made in a concrete way,
sections. Recent changes having taken place until January because a proposal for the focus of future development of
2015 in the corporate capital gains taxation are also in- the corporate capital gains taxation at the EU level and
cluded in the study. Taxation is investigated based on the the proposal for a future corporate capital gains taxation
existing tax law literature, and the analysis is fulflled with model in Finland as an individual Nordic country and EU
the help of the selected case law. After the international member state is developed. STrucTuring
corporATe cApiTAl
gAinS TAx SySTem
in The europeAn
union
A compArATive FinniSh perSpecTive
HANKEN
SCHOOL OF ECONOMICS Anu Torkkeli
HELSINKI
ARKADIANKATU 22, P.O. BOX 479
00101 HELSINKI, FINLAND
TEL [phone]. FAX [phone]
ISBN 978-952-232-300-2 (printed) VAASA
ISBN 978-952-232-301-9 (PDF) KIRJASTOKATU 16, P.O. BOX 287
ISSN-L 0424-7256 65101 VAASA, FINLAND
ISSN 0424-7256 (printed) TEL [phone]. FAX [phone]
ISSN 2242-699X (PDF)
Ekonomi och samhälle
Economics and Society
Skrifter utgivna vid Svenska handelshögskolan
Publications of the Hanken School of Economics
Nr 296
Anu Torkkeli
Structuring Corporate Capital Gains Tax System in
the European Union
A Comparative Finnish Perspective
Helsinki 2016
<
Structuring Corporate Capital Gains Tax System in the European Union – A
Comparative Finnish Perspective
Key words: taxation, international taxation, features of good tax systems, tax exemption,
income, capital, capital gains, corporate reorganizations, group of companies
© Hanken School of Economics & Anu Torkkeli, 2016
Anu Torkkeli
Hanken School of Economics
Department of Commercial Law
P.O.Box 479, 00101 Helsinki, Finland
Hanken School of Economics
ISBN 978-952-232-300-2 (printed)
ISBN 978-952-232-301-9 (PDF)
ISSN-L 0424-7256
ISSN 0424-7256 (printed)
ISSN 2242-699X (PDF)
Juvenes Print – Yliopistopaino Oy, Tampere 2016
i
PREFACE
This Doctoral Thesis is the end result of my drive and motivation to fulfill my
professional skills in the finance and internal business management career. I enrolled
to the doctoral studies of Hanken School of Economics in 2003 once having received
the Master’s Degree in Economics and Business Administration at Helsinki School of
Economics and Business Administration. One of the last courses in my finance Master’s
studies increased my interest into taxation topics among finance. The course, Finance
and Taxes, offered a cross-functional view to finance, taxes and economics. That course
was my first thorough step towards corporate taxation.
Because of having done a decision to complete a second Master’s Degree in Helsinki
School of Technology and focus on that first, I postponed the active period of starting to
work with the Doctoral Thesis. After having completed the Master’s Degree in
Technology in 2007, I re-created the plans for the next forthcoming years to complete
my Doctoral Thesis. Because of being in the growth path in my professional career in
group finance and accounting of international group companies, I only had a very
narrow bandwidth to work with the doctoral thesis in my free time. Therefore, I needed
to create milestones to keep up the self-discipline to gradually move the contents
forward. The busiest years in completing the Doctoral Thesis took place in 2012–2014,
and I am happy to myself being able to put the needed attention to studies in my free
time.
Professor Matti Kukkonen, the supervisor of my Doctoral Thesis, offered the critical
guidance throughout the process of the completion of the Doctoral Thesis. He not only
had good ideas and knowledge, but also skills to systematically approach the
wholeness. The scheduled meetings with him at Hanken School of Economics
supported me to keep the deadlines and go ahead towards next milestones of the
contents. Professor Matti Kukkonen also borrowed crucial related literature, when I
had issues getting books borrowed from libraries. And best of all, the positive,
encouraging and realistic attitude of Professor Matti Kukkonen in the position of the
supervisor supported me to believe that I may at some day reach the Doctoral Degree.
Professor Esko Linnakangas and Professor Jaakko Ossa offered their professional
experience to me with the help of improvement proposals as a result of the pre-
examination.
Library of Parliament made an excellent boost to my studies by offering a research
premise for one semester in the evenings inside the library. That was the first semester
when I really intensively started to progress with the Doctoral Thesis. This premise
eased a lot of the practicalities with the literature storing possibility. Personnel at the
Library of Parliament and Library of Hanken School of Economics supported me a lot
in using electronic databases and searching specific books from libraries abroad.
Personnel at Library of Hanken School of Economics kindly supported me in
converting the Doctoral Thesis to the final format allowed in publishing.
Finally, I am proud of having a family that has had creative ideas when discussing
about the progress of Doctoral Thesis and has encouraged me to complete this journey
in my professional career.
Helsinki 31.7.2015
Anu Torkkeli
ii
KEY TERMS
Acquisition cost/price Lock-in effect
All those costs that are sacrificed until If the capital gains tax rate declines
the asset can be used in the real income with the holding period of stock, it can
generation are included in the result in a lock-in effect that hinders the
acquisition cost in taxation. In this re-allocation of capital towards more
study, acquisition cost can refer productive uses.
depending on the context in question to
either the original acquisition cost or
the carrying value. Acquisition price is
mainly used to refer to the original Loss carryforward rule
acquisition cost.
Rule that allows for carrying forward
losses and deducting those from
respective gains.
Anti-abuse provision/rule
Provision/rule created in a tax system
to tackle abuse of the capital gains Object
taxation.
In the company reorganizations refers
to the buyer company.
Capital gain and loss
Difference between the sales price of an Participation exemption
asset and book value of the asset in
accounting. Tax exemption of the capital gain on a
qualifying share participation in a
company. The qualifying share
participation is defined in the respective
Company corporate income tax law.
Limited liability company or any other
corresponding company defined in the
respective regulation related to the Partnership
capital gains taxation.
Form of enterprise driven by natural
persons.
Corporate tax rate
Synonym for corporate income tax rate Related parties (and relationship)
Entities or people who has a
relationship with the company.
Group
Group of companies.
iii
Reorganization Tax avoidance
Domestic or cross-border merger, An action taken by the taxpayer to avoid
division, transfer of assets or exchange the payment of taxes.
of shares.
Tax exemption
Shell company
Exemption of the corporate capital
A company that mainly owns cash and gains tax.
other liquid assets.
Tax harmonization
Subject
Utilizing same taxation principles in
In the company reorganizations refers different countries.
to the seller company.
Trading company
Tax arbitrage
A company that sells the product or
Artificial situation, in which the service but does not own it.
taxpayer tries to receive as much as
possible monetary benefit under the
existing taxation regulations.
Write-off
A reduction in the value of an asset,
such as write-down, value depreciation,
impairment, amortization.
iv
ABBREVIATIONS
ABL BHF
Bekendtgørelse af lov om den Bundesfinanzhof (in English: The
skattemæssige behandling af gevinster Federal Fiscal Court)
og tab ved afståelse af aktier m.v.
(aktieavancebeskatningsloven) (in
English: Capital Gains Tax Act)
BITA
Business Income Tax Act (in Finnish:
ACE Laki elinkeinotulon verottamisesta,
EVL)
Allowance for corporate equity
BKA
AGCT
Bookkeeping Act (in Finnish: KPL,
Act on group contribution for tax kirjanpitolaki)
purposes (in Finnish: Laki
konserniavustuksesta verotuksessa)
BKD
Art. Bookkeeping decree (in Finnish: KPA,
kirjanpitoasetus)
Artikel (in Dutch), article (in English)
CA
AVAT
Companies Act (in Finnish:
Act on the valuation of assets for tax Osakeyhtiölaki, OYL)
purposes (in Finnish: Laki varojen
arvostamisesta verotuksessa)
CBIT
BA Comprehensive business income tax
Bookkeeping Act (in Finnish:
Kirjanpitolaki, KPL)
CCCTB
Proposal for a Council Directive on a
BGBl Common Consolidated Corporate Tax
Base
Bundesgesetzblatt
v
CFC EU
Controlled foreign companies European Union
CFCA EUCIT
Controlled Foreign Corporation Act EU-wide corporate income
CoA FIFO
Constitution Act First In, First Out
DFSA GAAP
Danish Financial Statements Act Generally accepted accounting
principles
EBIT
GAAR
Earnings before interest and taxes
General Anti-Abuse Rules
EC
GmbH
European Commission
Gesellschaft mit beschränkter Haftung
(in English: company with limited
liability)
ECJ
European Court of Justice
HAO
Hallinto-oikeus (in English:
EEA Administrative Court)
European Economic Area
HE
EFTA Hallituksen esitys (in English: Proposal
of the Board)
European Free Trade Association
vi
HST KHO
Home state taxation system Korkein hallinto-oikeus (English:
Supreme Administrative Court)
IAS
KILA
International Accounting Standard(s)
Kirjanpitolautakunta (English:
Accounting Board)
IFRS
International Financial Reporting KKunA
Standard(s)
Asetus kunnallishallituksesta
kaupungissa 1873 (in English: Decree
on the municipal government in a
IL town)
Inkomstskattelag (in English: Income
Tax Act)
KM
Komiteanmietintö (in English:
IRAP Committee Report)
Imposta regionale sulle attività
produttive (in English: regional tax on
productive activities) KStG
Körperschaftsteuergesetz (in English:
Corporate Income Tax Act)
IRES
Imposta sul reddito delle società (in
English: corporate income tax) KVL
Keskusverolautakunta (English: Central
Tax Board)
ITA
Income Tax Act (in Finnish:
Tuloverolaki, TVL) L
Lög um tekjuskatt (in English: Income
Tax Act)
KGL
Kursgevinstloven (in English: Capital
Gains Act) LIFO
Last In, First Out
vii
LO SL
Lääninoikeus (in English: County Skatteloven (in English: Tax Act)
Court)
SNA
MKunA
System of National Accounts
Asetus maalaiskuntain
kunnallishallinnosta 1898 (in English:
Decree on the municipal administration
in a parish) SOU
Statens offentliga utredningar
MNE
Multinational enterprise SRN
Skatterättsnämnden (in English: Tax
Board)
NOU
Norsk offentlig utredning
St. Meld
Meldingar til Stortinget (in English:
OECD Proposals to Parliament)
Organization for Economic Cooperation
and Development
TFEU
Treaty on the Functioning of the
Ot.prp European Union
Odelstingsproposisjoner (in English:
proposal for a law)
TCA
Tax Credit Act (annulled) (in Finnish:
RÅ Laki yhtiöveron hyvityksestä,YHL
(kumottu))
Regeringsrättens årsbok (in English:
yearbook of The Supreme
Administrative Court)
TOL
Tulo- ja omaisuusverolaki 888/1943 (in
SE English: Income and Property Tax Act)
Societas Europaea