The European Commission today proposed changes to the EU‘s company law. With this proposal, the Commission intends to establish at EU level uniform procedures to facilitate company relocations, mergers and divisions across national borders. The new rules also contain vague provisions to combat abuses. For example, the exit state must prohibit artificial transactions aimed at obtaining unjustified tax advantages or undermining the legal or contractual rights of employees, creditors or shareholders. However, the Commission proposal does not define what an artificial transaction is. Today’s Commission proposal is its response to rulings by the European Court of Justice that grant companies extensive rights to mobility in the internal market.
MEP Sven Giegold, financial and economic policy spokesperson of the Greens/EFA group commented:
“The company law proposals lead to a promotional programme for tax and social dumping in Europe. As long as we have very different tax and social systems within the EU, it is harmful to facilitate company relocations in the internal market. We first need a common European corporate tax law and minimum social standards in Europe.
Without defining when an arrangement is artificial and therefore harmful for competition, the measures against abusive transactions remain a toothless tiger. The case law of the European Court of Justice to date allows letterbox companies with a single employee and is therefore completely inadequate in the fight against tax and social dumping. A European programme for company relocations is in fact thwarting efforts to harmonise taxes in Europe.”
Overview over the Commission proposals:
http://europa.eu/rapid/press-release_IP-18-3508_en.htm
Proposal of the European Commission for amendments to the Company Law Directive:
https://ec.europa.eu/info/sites/info/files/placeholder_12.pdf
Background:
Article 86g Examination by an independent expert
- The expert shall draw up a written report providing at least:
(a) a detailed assessment of the accuracy of the reports and information submitted by the company carrying out the cross-border conversion;
(b) a description of all factual elements necessary for the competent authority, designated in accordance with Article 86m(1), to carry out an in-depth assessment to determine whether the intended cross-border conversion constitutes an artificial arrangement in accordance with Article 86n, including at a minimum the following: the characteristics of the establishment in the destination Member State, including the intent, the sector, the investment, the net turnover and profit or loss, number of employees, the composition of the balance sheet, the tax residence, the assets and their location, the habitual place of work of the employees and of specific groups of employees, the place where social contributions are due and the commercial risks assumed by the converted company in the destination Member State and the departure Member State.
Article 86n In-depth assessment
Member States shall ensure in order to assess whether the cross-border conversion constitutes an artificial arrangement within the meaning of Article 86c(3), that the competent authority of the departure Member State carries out an in-depth assessment of all relevant facts and circumstances and shall take into account at a minimum the following: the characteristics of the establishment in the destination Member State, including the intent, the sector, the investment, the net turnover and profit or loss, number of employees, the composition of the balance sheet, the tax residence, the assets and their location, the habitual place of work of the employees and of specific groups of employees, the place where social contributions are due and the commercial risks assumed by the converted company in the destination Member State and the departure Member State.