X‐GmbH v Finanzamt Stuttgart – Körperschaften: Abuse of Tax Law and Exchange of Tax Information in EU law

Abstract

AbstractThe Court of Justice of the European Union has taken an evolutionary approach to the understanding of an EU standard for the prevention of abuse of tax law under EU primary law (the free movement of capital) in a landmark case regarding the rules on German controlled foreign companies (CFC rules). This case note contrasts the narrow understanding of wholly artificial arrangements under Cadbury Schweppes Overseas Ltd v Commissioners of Inland Revenue with a seemingly broader one in X‐GmbH v Finanzamt Stuttgart – Körperschaften. The note then examines the link between the genuine exchange of tax information with third countries as a way of ensuring effective fiscal supervision, and the prevention of tax avoidance. Finally, the significance of X‐GmbH is highlighted to all the Member States in respect of the transposition of Articles 6, 7 and 8 of the Anti‐Tax Avoidance Directive, and for third countries, and the compatibility of the UK's diverted profits tax with EU law.