With regard to legal double taxation in the field of direct taxation, for example, the same taxpayer could still “pay comparable taxes in two … States in relation to the same object and for identical periods”, even if the State of residence “… as a deduction from that resident`s income tax, an amount equal to the income tax paid in [the other Contracting State]` (Article 23b(1) of the OECD MC). This is particularly the case where the amount of tax levied by the State of residence was greater than the amount of tax levied by the other Contracting State. However, given that the overall tax burden in such a cross-border situation is the same as the tax burden that would weigh on the State of residence if there were no cross-border situation, it is at least not clear that such a situation is problematic from the point of view of free movement. Before the launch of the BEPS project, the impact of EU law on the phenomenon of double non-taxation did not attract much attention. In fact, the discussion seems to be still in its infancy. However, in view of the similarity between double taxation and double non-taxation (both of which must be perceived as a situational and relative phenomenon within the meaning of UNION law), it is appropriate to analyse the intensive discussions on double taxation and UNION law that have taken place in the past and to examine, on this basis, whether the arguments put forward in this respect can also contribute to: verifying whether double non-taxation is indeed incompatible. with EU law in general and with state aid rules in particular. The author analyses the interaction between double the non-tax result and the use of hybrid companies in an approach that is not closely linked to a particular tax jurisdiction.
To this end, the analysis includes case studies and examples from a number of jurisdictions that focus on the international tax context, including the application of tax treaties. The statement is made unintentionally by the OECD that double non-taxation can lead to “a reduction in the total tax paid by all parties concerned, which harms competition, economic efficiency, transparency and fairness”.3 From the point of view of the internal market, the first two aspects in particular are legally remarkable because the EU is aware of the perceived economic policy of an “open market economy with free”. competition, Promoting efficient allocation of resources” (Article 120 TFEU). Therefore, the TFEU contains, inter alia: Provisions to avoid distortions of competition caused by Member States (Articles 106 to 107 TFEU). Therefore, while it is true that competition and economic efficiency may be affected by the fact that a cross-border transaction bears a lower tax burden than a comparable national transaction, the question arises whether the provisions of the Treaties relating to undistorted competition prohibit such preferential treatment of cross-border situations. Given that it is generally accepted that Article 107 TFEU has the potential to challenge the traditional pillars of Member States` tax systems5, the phenomenon of double non-taxation should no longer be understood as a purely political issue, but (and for lawyers in the first place) as a legal issue. From the point of view of EU law, it is therefore essential to examine whether the measures proposed by the OECD (and in some cases already implemented by EU Member States) are compatible with EU law (in particular with fundamental freedoms). However, it is necessary to examine not only whether those measures are justified and proportionate, but also whether (at least some) of those measures may even be required by law. This interpretation is plausible in so far as freedom of movement (and therefore perhaps also fundamental freedoms) is affected where a cross-border transaction imposes a higher tax burden than a comparable domestic transaction. However, if the result is reversed, i.e. a cross-border transaction entails a lower tax burden than a comparable national transaction, the internal market requirement of the free movement of persons is clearly not infringed.
On the contrary, since any form of taxation hinders economic activity in one way or another, there is nothing better for free movement than a taxpayer, a certain income, a transaction or an activity that remains untaxed. If so, why does the European Commission consider double non-taxation to be as incompatible with the internal market as double taxation? Double taxation is a tax principle that refers to income tax paid twice on the same source of income. This can happen when income is taxed at both the business and personal level. Double taxation also occurs in international trade or investment when the same income is taxed in two different countries. This can happen with 401k loans. Very interesting article in particular on double non-taxation and State aid. Typical effects that hybrids seek to achieve are double deductions (where a deduction is claimed under the same contractual obligation for income tax purposes in two or more different countries), deduction/no inclusion (if there is a deduction in one country but no corresponding inclusion in taxable income in another country) and foreign tax credit generators (which generate foreign tax credits, which would otherwise not be available.  See e.B. Taxation in the European Union, SEC(96) 487 final. (20 March 1996), p.
13 (`The internal market is clearly not compatible with the double taxation of the same taxable amount or with any taxation`). The issues of double non-taxation and hybrid companies have taken on particular importance in a context where transformations within the tax world seem to be leading to international engagement, which is most evident in the OECD`s Base Erosion and Profit Shifting (BEPS) project. In the first in-depth systematic review of the BEPS 2 Action Plan on hybrid enterprises, this recent book provides a critical overview of the OECD`s approach and proposes a robust alternative methodology based on the tax policy objectives of simplicity, coherence and ease of administration. The Commission wishes to draw on the expertise and experience of all interested parties to express their views on double non-taxation issues and possible solutions. All stakeholders – citizens, businesses, Member States, tax administrations, intergovernmental, non-governmental and professional organisations, tax professionals and universities – are invited to comment on this issue. Very interesting indeed. However, it seems to me that double non-taxation within the EU can only be a problem for `companies`, i.e. companies and entrepreneurs, because only these can be bound by state aid rules. I do not see on what legal basis the intervention of the European Union could be maintained in situations of double non-taxation for natural persons in a private capacity (e.B.
a dividend distributed by a Maltese company, a country which does not levy withholding tax on such income paid to a non-resident UK taxpayer who is taxed only on the basis of a transfer under UK national tax law, does not transfer the dividend to the UK). In this context, it is understandable that the European Commission considers that double non-taxation is not compatible with the concept of the internal market. Given that the resulting distortions of competition are mainly caused by the non-harmonised tax systems of the Member States, it is even questionable whether the TFEU State aid rules prohibit such preferential treatment for cross-border companies and oblige Member States to avoid situations of double non-taxation. Proponents of double taxation point out that without dividend taxes, wealthy individuals may well live off the dividends they receive by owning large amounts of common stock, but essentially pay no tax on their personal income. .