Corporate Income Taxation in Europe

Corporate Income Taxation in Europe

The Common Consolidated Corporate Tax Base (CCCTB) and Third Countries

Edited by Michael Lang, Pasquale Pistone, Josef Schuch, Claus Staringer and Alfred Storck

This topical book is the first publication that focuses on the impact of the CCCTB project on relations between the European Union and third countries. Although the CCCTB system will only be applicable within the European Union, it will also have wide-ranging impacts for non-resident companies.

Chapter 7: Transfer of assets to third countries

Daniel Gutmann

Subjects: law - academic, corporate law and governance, european law, tax law and fiscal policy, law -professional, corporate law


The transfer of assets between a head office (HO) to and from a permanent establishment (PE) of the same company is a standard practice of business life. From a “traditional” income tax perspective, such a transfer triggers numerous questions: how this transfer should be dealt with from a transfer pricing perspective; how it affects the allocation of profits to the PE; to what extent and under which conditions (including timing conditions) such a transfer should be considered to be a sale and, consequently, a taxable capital gain. The latter issue is probably the most sensitive one, as it goes without saying that the state where the asset was originally located may well lose its taxing right on future capital gains on said assets. It may therefore be tempted to exercise its taxing power immediately upon the transfer, which is also a good way to deter companies from relocating their high-value intangibles in low-tax countries. Comparative law shows a great diversity in the way countries treat transfers of assets to/from HO to PE.1 This is probably why the OECD Model does not directly deal with all these issues. Only the Commentary do so, by stating that exit taxation is not incompatible as such with the Model. The Commentary on Article 7 provides that: there may be a realization of a taxable profit when an asset, whether or not trading stock, forming part of the business property of a PE situated within a State’s territory is transferred to a PE or the HO of the same enterprise situated in another State.

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