Article 5 of the Anti-Tax Avoidance Directive (ATAD) seems at first glance to be a codification of the exit taxation case law developed by the Court of Justice of the European Union, mainly in the landmark judgments in the cases National Grid Indus (C-371/10, 29 November 2011) and DMC (C-164/12, 23 January 2014).
And yet this provision constitutes a major development within EU tax law, which is illustrated by the fact that the deadline for transposition falls one year later than the one applicable to the other provisions of the ATAD. The main reason is without doubt the shift from case law regarding the question whether and under which conditions Member States may impose exit taxes on unrealized capital gains, to a directive prescribing that the Member States have to subject such unrealized capital gains to exit taxation (although it is not determined how the capital gains should be taxed and how the applicable tax rate should be determined). Additionally, the exit taxation provision includes a ‘step-up’ for tax purposes in order to avoid double taxation of the unrealized capital gains on the assets that are transferred across the border.
This contribution analyses the structure of the exit taxation provision of the ATAD in the light of the existing case law in this domain.EC Tax Review