( T A X 4 0 0 2 )
EXAM & ANSWERS
First sit Resit
Academic Year
Exam Answers Exam Answers
2007 /2008 ✓ ✓ ✗ ✗
2008 /2009 ✓ ✓ ✓ ✗
✗ ✗ ✗ ✗
✓ ✗ ✓ ✗
2011 /2012 ✓ ✗ ✓ ✗
✓ ✓ ✗ ✗
✓ ✓ ✓ ✓
✓ ✓ ✓ ✓
✓ ✓ ✓ ✓
, International and European Tax Law
2007/2008 (first sit)
Question 1
Question 1.1
Explain the role and relevance of domestic law for the interpretat ion and application of double tax
conventions which fo llow the OECD Model Convention 2005.
Motivate your answer with reference to applicable law, but be as conc ise as possible.
[max. 1 page; max. 4 points]
• Domestic law creates taxing rights, DTCs limit and allocate those rights;
• Domestic law is relevant for definitions in DTC's
Explicit: art. 4(1) & 6(2) OECD MC 2005
- General interpretation: recourse to domestic law if terms not defined in DTC, normal interpretat ion
(VCLT) does not provide answer and context does not otherwise require (art. 3(2)0ECD MC 2005)
• OECD MC terms and definitions originate historical ly from domest ic law and have in turn impacted
domestic law (Cf. Avery Jones et al. (2006) IBFD Bull. 220 ff.)
• Mon istic v Dualistic constitutional order and possibility to tax treaty override
Question 1.2
With in the EU, Directive 2003/48/EC (Savings Directive) is in force that governs the taxation of interest
payments between certain residents of EU Member States.
a) Explain the goal, purpose and tax policy objectives of Directive 2003/48/EC (Savings Directive). Be as
concise as possible in your answer.
[max. Yi page; max. 2 points]
See preamble and art. 1 Dir.:
• Anti-tax avoidance/evasion
Information sharing
• Final System envisaged is exclusive resident state taxation
• Relieve distort ions in Internal Market regarding interest payments on savings.
b) Assume that the double tax convention in force between Italy and Austr ia fo llows the OECD Model
Convention 2005. How much tax should Austria withhold on interest paid by an Austrian bank to an
individual resident in Italy, conside rin g both the double tax convention and the Savings Directive?
Motivate your answer with reference to applicab le law, but be as concise as possible .
[max. 1 page; max. 2 point s]
• The Directive overrides the DTC;
• Austria is allowed a WHT in Directive
• Austria is state of source (DTC) and also paying state (Dir.)
• Italy is state of residence beneficial owner (DTC & Dir.)
• DTC allows 10% W HT (art. 11 OECD MC 2005);
• Directive imposes 15% WHT.
, International and European Tax Law
2007 /2008 (first sit)
Question 2 - Case
The German company Roland GmbH produces Gennany
chocolate angels. Roland GmBH has a distribution
RolandGmbH
centre with offices and a warehou se fac ility located
in Breda/Netherlands. The distribution centre
serves the West-European market. Roland GmbH
also holds a 10% participation of shares in Fase BV,
a Dutch resident company. Fase BV produces
similar merchandise and the participation was NL
acqu ired in the current year {Yl) with the final goal
in mind to take over the Dutch competitor in the Fase BV
future. Roland Gmb H received €60.000 as dividend
in Yl.
Question 2.1
Fase BV withheld a dividend withho lding tax at a rate of 25% on the gross dividend income . Roland Gmb H
turns to you for advice how much of the tax wou ld be refunded by the Netherlands if Roland applies for it?
Motivate you r answer with reference to applicable law, but be as concise as possible. Note: You are not
expected to know Dutch tax law.
[max. 1 page; max. 3 poi nts]
• How much tax w ill be refunded by the Dutch fiscal authorities?
• Domestic Law: dividend tax of 25%
• Art icle 10(2): The NL are allowed to levy a WHT of 15% (not 5% as minimum holding requirement of 25%)
• PSDdoes not apply: minimum holding requirement 20%
• However, Art. 10(4): if applicable, Art. 10(2) would not be applicable (but Article 7)
• Conditions:
Receiving company has a PE in the state of the paying company
Holding should be attributed to t he PE (and not to the receiving company)
• Applicat ion to the case
- A distribution centre is a PE if it not only provides storage but also sells the goods (here there are
offices next to the warehouse facility, what indicates that there are business activities that are not
only of auxiliary nature)
Is the hold ing attributable to the PE?
o This depends on the activities of the PE and whether the holding serves the activities of the PE
or of the head office
o Yes, if the products of Fase BV are distributed in future by t he PE
o No, if the production will be distributed by the head office using other group members
• Legal consequences:
If yes: Article 7 applies, no W HT may be levied by the NL, refund of the whole WHT
If no: Art icle 10(2) applies, the NL may levy 15%, refund of 10% of the WHT
EXAM & ANSWERS
First sit Resit
Academic Year
Exam Answers Exam Answers
2007 /2008 ✓ ✓ ✗ ✗
2008 /2009 ✓ ✓ ✓ ✗
✗ ✗ ✗ ✗
✓ ✗ ✓ ✗
2011 /2012 ✓ ✗ ✓ ✗
✓ ✓ ✗ ✗
✓ ✓ ✓ ✓
✓ ✓ ✓ ✓
✓ ✓ ✓ ✓
, International and European Tax Law
2007/2008 (first sit)
Question 1
Question 1.1
Explain the role and relevance of domestic law for the interpretat ion and application of double tax
conventions which fo llow the OECD Model Convention 2005.
Motivate your answer with reference to applicable law, but be as conc ise as possible.
[max. 1 page; max. 4 points]
• Domestic law creates taxing rights, DTCs limit and allocate those rights;
• Domestic law is relevant for definitions in DTC's
Explicit: art. 4(1) & 6(2) OECD MC 2005
- General interpretation: recourse to domestic law if terms not defined in DTC, normal interpretat ion
(VCLT) does not provide answer and context does not otherwise require (art. 3(2)0ECD MC 2005)
• OECD MC terms and definitions originate historical ly from domest ic law and have in turn impacted
domestic law (Cf. Avery Jones et al. (2006) IBFD Bull. 220 ff.)
• Mon istic v Dualistic constitutional order and possibility to tax treaty override
Question 1.2
With in the EU, Directive 2003/48/EC (Savings Directive) is in force that governs the taxation of interest
payments between certain residents of EU Member States.
a) Explain the goal, purpose and tax policy objectives of Directive 2003/48/EC (Savings Directive). Be as
concise as possible in your answer.
[max. Yi page; max. 2 points]
See preamble and art. 1 Dir.:
• Anti-tax avoidance/evasion
Information sharing
• Final System envisaged is exclusive resident state taxation
• Relieve distort ions in Internal Market regarding interest payments on savings.
b) Assume that the double tax convention in force between Italy and Austr ia fo llows the OECD Model
Convention 2005. How much tax should Austria withhold on interest paid by an Austrian bank to an
individual resident in Italy, conside rin g both the double tax convention and the Savings Directive?
Motivate your answer with reference to applicab le law, but be as concise as possible .
[max. 1 page; max. 2 point s]
• The Directive overrides the DTC;
• Austria is allowed a WHT in Directive
• Austria is state of source (DTC) and also paying state (Dir.)
• Italy is state of residence beneficial owner (DTC & Dir.)
• DTC allows 10% W HT (art. 11 OECD MC 2005);
• Directive imposes 15% WHT.
, International and European Tax Law
2007 /2008 (first sit)
Question 2 - Case
The German company Roland GmbH produces Gennany
chocolate angels. Roland GmBH has a distribution
RolandGmbH
centre with offices and a warehou se fac ility located
in Breda/Netherlands. The distribution centre
serves the West-European market. Roland GmbH
also holds a 10% participation of shares in Fase BV,
a Dutch resident company. Fase BV produces
similar merchandise and the participation was NL
acqu ired in the current year {Yl) with the final goal
in mind to take over the Dutch competitor in the Fase BV
future. Roland Gmb H received €60.000 as dividend
in Yl.
Question 2.1
Fase BV withheld a dividend withho lding tax at a rate of 25% on the gross dividend income . Roland Gmb H
turns to you for advice how much of the tax wou ld be refunded by the Netherlands if Roland applies for it?
Motivate you r answer with reference to applicable law, but be as concise as possible. Note: You are not
expected to know Dutch tax law.
[max. 1 page; max. 3 poi nts]
• How much tax w ill be refunded by the Dutch fiscal authorities?
• Domestic Law: dividend tax of 25%
• Art icle 10(2): The NL are allowed to levy a WHT of 15% (not 5% as minimum holding requirement of 25%)
• PSDdoes not apply: minimum holding requirement 20%
• However, Art. 10(4): if applicable, Art. 10(2) would not be applicable (but Article 7)
• Conditions:
Receiving company has a PE in the state of the paying company
Holding should be attributed to t he PE (and not to the receiving company)
• Applicat ion to the case
- A distribution centre is a PE if it not only provides storage but also sells the goods (here there are
offices next to the warehouse facility, what indicates that there are business activities that are not
only of auxiliary nature)
Is the hold ing attributable to the PE?
o This depends on the activities of the PE and whether the holding serves the activities of the PE
or of the head office
o Yes, if the products of Fase BV are distributed in future by t he PE
o No, if the production will be distributed by the head office using other group members
• Legal consequences:
If yes: Article 7 applies, no W HT may be levied by the NL, refund of the whole WHT
If no: Art icle 10(2) applies, the NL may levy 15%, refund of 10% of the WHT
