Tax: Exit Charges Go Back to ECJ

The Supreme Court of Amsterdam has recently referred a case to the European Court of Justice (ECJ) on the legitimacy of tax exit charges. Such charges can arise when a company seeks to migrate from one EU Member State to another. A number of Member States have such rules which generally apply to unrealised gains on individuals or companies when (a) they cease to be resident for tax purposes in the relevant state and (b) the unrealised gains relate to assets which are not connected to operations in the relevant state. The issue has always been whether such charges infringe the EU right to freedom of establishment and, despite previous ECJ case law and a 2006 Commission Report on the subject, the Supreme Court of Amsterdam determined that the legitimacy of such charges remains unclear in the case of corporate entities. The ECJ's ruling is likely to have implications for exit charge regimes across the EU, including the UK rules which are set out in the Taxation