Double taxation treaties play a vital part in the international relations between states regarding taxation matters. Since double taxation can occur as soon as a person has income in more than one state, it is very important that there can be effective remedies to the problems that can occur in these situations. Double taxation treaties are necessary in most situations created by international trade and they are even more important in such a free flowing economic co-operation such as the EU, where the trade between the Member States is not only free but also very frequent. Most double taxation treaties are based on the Model Treaty created by the OECD. Even states not members of the organization use it as a model for their treaties. This means that treaties between Member States of the EC are often rather similar, but many times have been drafted without consideration taken to EC law. This can create problems since the European Court of Justice (ECJ) has stated in its case law that even though the Member States are solely competent when it comes to direct taxation, that competence must be used in accordance with EC law. Since double taxation treaties are directed at flows of income and capital between states, it is most probable that they can run afoul of EC law. After some judgments of the ECJ the situation is clearer now, but there are still some possible future problems. Examples of such problems are trailing taxes, limitations of benefits and the most favoured nation (MFN) principle. The latter has been before the Court, but there are many questions surrounding the MFN principle that has not been answered satisfactorily. Even if more cases are brought before the Court and it gives more guidance on how the Member States shall conclude treaties with each other, it is still preferable with proper EC legislation on the subject. It must also be mentioned that the ECJ has shown reluctance to disrupting the tax treaty networks in place and has been reluctant to dismiss rules based on the OECD Model Treaty. Several different solutions to these problems have been put forward, ranging from doing almost nothing and just letting the development in the case law have its way to a complete regulation of these issues through legislation by the EC. The two most interesting solutions presented are a Multilateral EU Tax Treaty or an EU Model Tax Treaty. Both of these two different methods would mean that the problems would have a proper solution in that it would implement common rules that would be applicable over the whole of the EU.

<p>Double taxation treaties play a vital part in the international relations between states</p><p>regarding taxation matters. Since double taxation can occur as soon as a person has</p><p>income in more than one state, it is very important that there can be effective remedies</p><p>to the problems that can occur in these situations. Double taxation treaties are</p><p>necessary in most situations created by international trade and they are even more</p><p>important in such a free flowing economic co-operation such as the EU, where the</p><p>trade between the Member States is not only free but also very frequent.</p><p>Most double taxation treaties are based on the Model Treaty created by the OECD.</p><p>Even states not members of the organization use it as a model for their treaties. This</p><p>means that treaties between Member States of the EC are often rather similar, but</p><p>many times have been drafted without consideration taken to EC law. This can create</p><p>problems since the European Court of Justice (ECJ) has stated in its case law that</p><p>even though the Member States are solely competent when it comes to direct taxation,</p><p>that competence must be used in accordance with EC law. Since double taxation</p><p>treaties are directed at flows of income and capital between states, it is most</p><p>probable that they can run afoul of EC law.</p><p>After some judgments of the ECJ the situation is clearer now, but there are still some</p><p>possible future problems. Examples of such problems are trailing taxes, limitations of</p><p>benefits and the most favoured nation (MFN) principle. The latter has been before</p><p>the Court, but there are many questions surrounding the MFN principle that has not</p><p>been answered satisfactorily. Even if more cases are brought before the Court and it</p><p>gives more guidance on how the Member States shall conclude treaties with each</p><p>other, it is still preferable with proper EC legislation on the subject. It must also be</p><p>mentioned that the ECJ has shown reluctance to disrupting the tax treaty networks in</p><p>place and has been reluctant to dismiss rules based on the OECD Model Treaty.</p><p>Several different solutions to these problems have been put forward, ranging from</p><p>doing almost nothing and just letting the development in the case law have its way to</p><p>a complete regulation of these issues through legislation by the EC. The two most interesting</p><p>solutions presented are a Multilateral EU Tax Treaty or an EU Model Tax</p><p>Treaty. Both of these two different methods would mean that the problems would</p><p>have a proper solution in that it would implement common rules that would be applicable</p><p>over the whole of the EU.</p>

<p>The European Court of Justice, the ECJ, has the governing function in the Union as a guardian of law and justice. Even today, with a Union of 15 memberstates, statistics show that the ECJ and the Court of First Instance have increasing difficulties in fulfilling their tasks. This situation is chiefly a cause of an increasing number of cases raised. Due to this, profound changes have to be made in order to preserve common lawagreements in a future expansion of the Union. The purpose of this paper is to exam which changes the Courts have to make in order to meet an increased amount of cases that an enlarged Union would mean.</p>

The European Court of Justice, the ECJ, has the governing function in the Union as a guardian of law and justice. Even today, with a Union of 15 memberstates, statistics show that the ECJ and the Court of First Instance have increasing difficulties in fulfilling their tasks. This situation is chiefly a cause of an increasing number of cases raised. Due to this, profound changes have to be made in order to preserve common lawagreements in a future expansion of the Union. The purpose of this paper is to exam which changes the Courts have to make in order to meet an increased amount of cases that an enlarged Union would mean.

Recently, the potential conflict between intellectual property law and competition law within the European Union has become political as many of the Member States see the economic Holy Grail through the so called knowledge economy, an economy to which intellectual property is inextricable linked. The general rule in EC-law is that a holder of an intellectual property right is not obliged to license the use of that right to others. However, the law can intervene in certain specific circumstances, forcing an owner to license his right. Remedies of this kind are called compulsory licenses and have as their purpose to work as a safety valve, hindering the possible abuse of the exclusiveness following an IPR. An analysis of the EC Commission’s Microsoft Decision reveals that the Decision is inconsistent with settled case law from the European Court of Justice in a number of respects. The Decision is unclear and it will be difficult, close to impossible to predict how this approach will be applied in future cases. The Decision taken by the Commission in Microsoft states a new legal and economic policy for Europe, a paradigm applying a new standard on when a compulsory license could be ordered. The analysis show that this paradigm represent a considerable loosening of the circumstances when a remedy of a compulsory license could be ordered and, as a consequence, introduces a considerable degree of legal uncertainty. This uncertainty can have a substantial effect on innovations by market leaders around the whole world who market their products in Europe.

Abstract The freedom of establishment in Articles 43 and 48 EC is a fundamental freedom within the EU meaning that companies are free to set up secondary establishments in any other Member State. The freedom of establishment is an important means to achieve the com-pletion of the internal market and therefore it is important that this freedom is protected. Member States are obliged to legislate in accordance with the objectives of the fundamental freedoms, still Member States are restricting Articles 43 and 48 EC by applying discrimina-tory national legislation regarding direct taxation. In the Cadbury Schweppes judgment from September 2006 the ECJ found the British CFC legislation to be contrary to Community law. The purpose of CFC legislation is to prevent tax avoidance by conferring additional tax upon companies having subsidiaries in low tax states. According to the judgment in Cadbury Schweppes, if the CFC rules are too general in its application they are violating the freedom of establishment. Hence, the CFC legislation must be aimed specifically at “wholly artificial arrangements” aimed at circumventing national tax normally payable. Therefore it is of importance, in the context of applying CFC rules, to clarify the difference between use and abuse of freedom of establishment. It is also important to note that the CFC rules ap-ply even when a subsidiary is established outside the EU. The concept of abuse of Community law has been developed through case law and prohib-its companies to improperly use the provisions of Community law in order to circumvent national legislation. Even if an establishment in another State is made to avoid tax in the State of origin, it is not necessarily abuse of the freedom of establishment since companies are allowed to choose to establish subsidiaries in the Member States with least restrictive rules. The ECJ stated that establishing subsidiaries with the sole purpose to benefit from the lower tax regime do not constitute an abuse of the freedom of establishment as long as the subsidiaries pursue genuine economic activity. The criteria for what is regarded as eco-nomic activity has been discussed in both value added tax and direct tax cases. The re-quirements so far is that the subsidiary established has to be physically present in the host State on a durable basis and have staff and equipment to a certain degree. The ECJ has as-sessed the criteria similarly in value added tax and direct tax cases and stated that the activ-ity has to be considered per se and without regard to its purpose or result. The activity also has to be based on objective factors and be ascertainable by third parties. The Cadbury Schweppes case is the first case in the area of CFC legislation and the Court has provided little guidance regarding what constitutes a “wholly artificial arrangement”. As a consequence of this judgement some Member States have already changed their CFC legis-lation to comply with Community law. Nevertheless, there are cases pending before the ECJ that are further questioning the application of CFC rules and how to define a “wholly artificial arrangement”. The judgement of these cases may result in more changes in the na-tional legislation of the Member States. The future development of the difference between use and abuse of freedom of establishment is important for the protection of the principle of legal certainty. A clarification of what constitutes a “wholly artificial arrangement” will improve the foreseeability for companies and their cross-border transactions will be more efficient. / Sammanfattning Etableringsfriheten i artiklarna 43 och 48 EG är en av de grundläggande friheterna inom EU som innebär att företag är fria att etablera dotterbolag i andra medlemsländer. Etable-ringsfriheten är ett viktigt medel för att uppnå målen med den gemensamma marknaden och därför är det viktigt att denna frihet respekteras. Medlemsländerna är skyldiga att lag-stifta i ljuset av de grundläggande friheterna, trots det finns diskriminerande skattelagstift-ning som strider mot artiklarna 43 och 48 EG. I Cadbury Schweppes domen från september 2006 fann EG-domstolen att de brittiska CFC reglerna strider mot gemenskapsrätten. Syf-tet med CFC regler är att förhindra skatteundandragande genom att löpande beskatta in-komster från dotterbolag etablerade i lågbeskattade länder. CFC regler som tillämpas gene-rellt är enligt Cadbury Schweppes domen i strid med etableringsfriheten. Därmed måste CFC reglerna tillämpas specifikt på ”konstlade upplägg” som har som enda syfte att undvika na-tionell skatt. Det är därför viktigt att klargöra skillnaden mellan bruk och missbruk av eta-bleringsfriheten. I detta sammanhang är det viktigt att poängtera att CFC reglerna är till-lämpliga även på dotterbolag som är etablerade i ett icke-medlemsland. Konceptet om missbrukande av EG-rätten har utvecklats i praxis och förbjuder företag att missbruka bestämmelserna i gemenskapsrätten för att kringgå nationell lagstiftning. Även om ett dotterbolag har etablerats i ett medlemsland enbart för att utnyttja den låga skatteni-vån är det nödvändigtvis inte missbruk av etableringsfriheten eftersom företag har rätt att etablera dotterbolag i det land som är mest fördelaktigt ur skattehänseende. EG-domstolen har fastställt att etablering av dotterbolag enbart för att utnyttja en mer fördelaktig skattere-gim inte utgör missbruk av etableringsfriheten om dotterbolaget bedriver verklig ekono-misk verksamhet. Kriterierna för vad som anses utgöra verklig ekonomisk verksamhet har diskuterats i såväl mervärdesskatterättsliga som företagsskatterättsliga mål. Hittills uppställ-da krav är att det etablerade dotterbolaget måste vara varaktigt fysiskt närvarande i värdsta-ten samt till en viss grad ha personal och utrustning så att tredje part kan förvissa sig om dess ekonomiska verksamhet. Utvärderingen av den ekonomiska verksamheten måste ske självständigt utan hänsyn till dess syfte och resultat. Cadbury Schweppes är det första målet angående CFC lagstiftning och EG-domstolen har endast tillhandahållit begränsad vägledning om vad som utgör ett ”konstlat upplägg”. Som en konsekvens av denna dom har några medlemsländer redan ändrat sin CFC lagstiftning så att den överensstämmer med EG-rätten. Icke desto mindre finns det en del oavgjorda mål som ytterligare ifrågasätter CFC reglernas tillämpning och definitionen av ”konstlade upplägg”. Avgöranden i dessa mål skulle kunna resultera i att medlemsländerna måste göra ytterligare ändringar i sin lagstiftning. Den framtida utvecklingen av vad som är skillnaden mellan bruk och missbruk av etableringsfriheten är viktig för rättssäkerheten. Ett klargö-rande om vad som utgör ett ”konstlat upplägg” kommer att öka förutsebarheten för före-tag vilket leder till en effektivisering av deras gränsöverskridande transaktioner.

The European Union (EU) is built on the principle of freedom of establishment, meaning that companies have the possibility to establish themselves as a company or by setting up a secondary establishment in other Member States. This right has been confirmed by the European Court of Justice through case law. A basic feature in domestic tax legislation is that losses are allowed to be set off against profits when calculating the tax liability of a company. At the moment cross-border loss compensation within the EU is restricted, unfeasible or just accepted on a temporary basis. This lack of recognition of loss-offset gives the fact that double taxation may occur and claims form two or more national tax systems leads to uncertainty in the way a company will be taxed. Depending on whether the secondary establishment is a subsidiary or a branch, the rules relating to loss compensation differs. Taxation of secondary establishments is based on the principle of whether or not they are considered as a resident or a non-resident of the state. In regards to taxation of secondary establishments, the PE is considered to be a non-resident and a subsidiary considered to be a resident. However, the European Court of Justice approach of non discriminatory treatment and equal treatment that has been developed and seen in the history of case law leads to the question if the Marks &amp; Spencer ruling that concerned secondary establishments in form of subsidiaries can be applied to permanent establishments. The most vital difference between a subsidiary and a permanent establishment is connected to the taxation of the two. The subsidiary is considered to become a resident of the establishing state while the permanent establishment is seen as a non-resident. This legal difference between the two leads to different treatment under tax law. Taxation under a tax treaty leads to the situation where one of the contracting states will either credit or exempt the income deriving from the permanent establishment. Permanent establishments are often taxed under the method of exemption. In the Marks &amp; Spencer case it was held that losses and profits were two sides of the same coin. Applying this statement to permanent establishments gives the notion that if a contracting state exempts an income, there will be a set off of the symmetry of having losses and profits within the same tax system. This lead to the fact that if applying the Marks &amp; Spencer ruling on permanent establishments that are taxed under the exemption method, allowing terminal losses to be taken into account at the head office will set off the symmetry. Therefore it can be considered as the Marks &amp; Spencer ruling shall not apply to permanent establishments.

The free movement of goods constitutes one of the fundamental principles of the European Union and entitles goods entrance to the internal market. Sweden had before 1995 few monopolies concerning the import, export, manufacturing, distribution and retail on alcohol, and had to as a result of entering EU abolish four of these. The monopoly on retail, Systembolaget, was retained, and is still today strictly controlled by limited number of stores as well as restricted openly-hours. Systembolaget contributes an important part of the Swedish Alcohol Policy, which main purpose is to limit the accessibility of alcohol in Sweden. Another essential purpose is to prevent alcohol to reach people under the age of twenty, and this is upheld by strict age-controls when purchasing alcohol from Systembolaget. Lately it has been argued that the Swedish prohibition of private import of alcohol con-stitutes a restriction of the free movement of goods and in breach of Article 28 EC. The exception of such restriction is presented in Article 30 EC and allows Member States to obtain national trade barriers if a justification based on the protection of the public health could be made. The Commission is of the opinion that the Swedish prohibition constitute such a restriction referred to in Article 28 and is not willing to accept the justification to protection of the public health. The Swedish government however, is reluc-tant to remove the prohibition and argues that consumers that require a certain product can import alcohol through Systembolaget. An elimination of the ban would undermine the core purpose with Systembolaget which is to protect the public health and prevent alcohol to be distributed to people under the age of twenty. According to the Alcohol Act a person who has turned twenty can legally import alco-hol to Sweden when he is travelling with the goods if those products are for his personal use. A proposal has been presented to a redefinition of private import, which would in-clude situation where the buyer is not personally travelling with the goods, yet the transportation is carried out on the buyer’s behalf. Such purchases are often referred to distance purchase, and in those situations should the excise duty be laid down in the coun-try where the good was released for consumption. In distance sales the seller is respon-sible for the transportation of the goods but also to pay excise duty on the products in the country of destination. A redefinition of private import to include transportation made on the buyer’s behalf could create problems since there is no actual contract between the seller and the transporting-company. Problems can then arise since the seller has no possibility to control that the buyer is of the legal age or guaranteeing that the alcohol is for that person’s use / Den fria rörligheten av varor utgör en grundstomme inom den Europeiska Unionen, vilken erkänner varor från medlemsstaterna tillträde till den gemensamma marknaden. Sverige hade fram till 1995 fem olika monopol som reglerade importen, exporten, tillverkningen, distributionen och försäljningen av alkohol, men var tvungen som ett led i inträdet till EU att avveckla fyra av dessa. Kvar återstod försäljningsmonopolet, Systembolaget, vilket än idag är strikt reglerat genom begränsat antal butiker och öppet-tider. Systembolaget utgör in viktigt beståndsdel i den svenska alkoholpolitiken, vilken har till syfte att begränsa alkoholen och dess skadeverkningar i Sverige. Ett viktigt mål är också att motverka att alkoholen når ut till ungdomar under 20år, varvid strikta kon-troller av ålder sker vid köp på Systembolaget. På senare tid har det diskuterat huruvida det svenska förbudet mot privat införsel av alkohol skall anses vara förenligt med den fria rörligheten av varor och den uppställda artikel 28 i EG-fördraget. Där stadgas det att inga importrestriktioner skall hindra varor tillträde till den gemensamma marknaden. Det uppställda undantaget i artikel 30 berättigar medlemsstaterna att behålla en sådan restriktion om det kan anses nödvändigt till skyddet för den allmänna hälsan. Kommission har i ett motiverat yttrande upplyst Sve-rige att förevarande förbud utgör en sådan restriktion som avses i artikel 28 och att förutsättningarna att behålla ett sådant förbud inte kan anses uppfyllda. Den svenska regeringen anser att förbudet fyller en viktig funktion genom att begränsa tillgängligheten av alkoholen på den svenska marknaden, samt upplyser att en konsument som önskar importera särskilda produkter kan göra detta genom Systembolaget. Att tillåta konsumenter att importera fritt skulle försvaga det ursprungliga syftet med Systembolaget, vilket är att skydda den allmänna hälsan och minska risken för att alkohol blir tillgänglig för ungdomar. Enligt Alkohollagen kan en person som har fyllt 20 fritt importera alkohol till Sverige under förutsättning att denne reser in med varorna till Sverige och att dessa varor är för hans personliga nyttjande. En föreslagen utvidgning av definitionen privat import kan komma att inkludera varutransporter vilka sker för köparens räkning, ofta kallade distans köp. Detta skiljer sig då nämnvärt från distansförsäljning där säljare står för transporten, och är skyldig att betala punktskatt i destinationslandet för dessa varor. Vid distans köp skall ingen beskattning ske i destinationslandet, under förutsättning att dessa avgifter har betalts i varans ursprungsland. En utvidgning av definition av privat import till att innefatta varutransporter organiserade av köparen kan skapa problem då inget riktigt kontrakt föreligger mellan säljaren och transportbolaget. Svårigheter kan då uppstå för säljarens då denne saknar möjlighet att kontrollera att köparen är av påstådd ålder och att alkoholen är avsedd för dennes personliga konsumtion.

<p>Recently, the potential conflict between intellectual property law and competition law within the European Union has become political as many of the Member States see the economic Holy Grail through the so called knowledge economy, an economy to which intellectual property is inextricable linked.</p><p>The general rule in EC-law is that a holder of an intellectual property right is not obliged to license the use of that right to others. However, the law can intervene in certain specific circumstances, forcing an owner to license his right. Remedies of this kind are called compulsory licenses and have as their purpose to work as a safety valve, hindering the possible abuse of the exclusiveness following an IPR.</p><p>An analysis of the EC Commission’s Microsoft Decision reveals that the Decision is inconsistent with settled case law from the European Court of Justice in a number of respects. The Decision is unclear and it will be difficult, close to impossible to predict how this approach will be applied in future cases.</p><p>The Decision taken by the Commission in Microsoft states a new legal and economic policy for Europe, a paradigm applying a new standard on when a compulsory license could be ordered. The analysis show that this paradigm represent a considerable loosening of the circumstances when a remedy of a compulsory license could be ordered</p><p>and, as a consequence, introduces a considerable degree of legal uncertainty. This uncertainty can have a substantial effect on innovations by market leaders around the whole world who market their products in Europe.</p>

<p>The European Union (EU) is built on the principle of freedom of establishment, meaning that companies have the possibility to establish themselves as a company or by setting up a secondary establishment in other Member States. This right has been confirmed by the European Court of Justice through case law.</p><p>A basic feature in domestic tax legislation is that losses are allowed to be set off against profits when calculating the tax liability of a company. At the moment cross-border loss compensation within the EU is restricted, unfeasible or just accepted on a temporary basis. This lack of recognition of loss-offset gives the fact that double taxation may occur and claims form two or more national tax systems leads to uncertainty in the way a company will be taxed. Depending on whether the secondary establishment is a subsidiary or a branch, the rules relating to loss compensation differs.</p><p>Taxation of secondary establishments is based on the principle of whether or not they are considered as a resident or a non-resident of the state. In regards to taxation of secondary establishments, the PE is considered to be a non-resident and a subsidiary considered to be a resident. However, the European Court of Justice approach of non discriminatory treatment and equal treatment that has been developed and seen in the history of case law leads to the question if the Marks & Spencer ruling that concerned secondary establishments in form of subsidiaries can be applied to permanent establishments.</p><p>The most vital difference between a subsidiary and a permanent establishment is connected to the taxation of the two. The subsidiary is considered to become a resident of the establishing state while the permanent establishment is seen as a non-resident. This legal difference between the two leads to different treatment under tax law. Taxation under a tax treaty leads to the situation where one of the contracting states will either credit or exempt the income deriving from the permanent establishment. Permanent establishments are often taxed under the method of exemption.</p><p>In the Marks & Spencer case it was held that losses and profits were two sides of the same coin. Applying this statement to permanent establishments gives the notion that if a contracting state exempts an income, there will be a set off of the symmetry of having losses and profits within the same tax system. This lead to the fact that if applying the Marks & Spencer ruling on permanent establishments that are taxed under the exemption method, allowing terminal losses to be taken into account at the head office will set off the symmetry. Therefore it can be considered as the Marks & Spencer ruling shall not apply to permanent establishments.</p>