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EU: IP regimes under scrutiny in Europe


Bob van der Made

The EU's Code of Conduct Group for business taxation is reviewing the existing intellectual property (IP) regimes in nine EU member states from a harmful tax practices viewpoint, particularly with regard to the point of substantial economic activity in the member state that grants the relief (the third criterion of the Code Group). At the request of the ECOFIN Council of June 20 2014, the Code Group continues to analyse the third criterion and assess or consider all existing patent boxes in the EU, including those already assessed or considered before, by the end of 2014 "against the background of international developments" including the OECD's BEPS initiative. The European Commission, which assists the work of the Code Group, meanwhile has gathered information already under EU state aid law with respect to one member state and written informally to others. The OECD has started looking into harmful tax practices again under BEPS Action 5 as well, and the Code Group is now looking to fall in behind the OECD work on the same topic, where possible.

The next Code Group meeting will be held on September 16 2014, and will discuss progress on this issue. If no broad consensus can be reached within the Code Group with the European Commission, however, on how to deal with the IP regimes which are considered harmful by the Commission, the issue is likely to be moved up to the ECOFIN Council (EU-28 Finance Ministers). Spurred in particular by strong and unrelenting voices of concern from Germany about the use of IP boxes in the EU, a fierce political debate might ensue in ECOFIN in October or November on the sustainability of IP regimes in Europe altogether. Germany's Minister of Finance, Wolfgang Schäuble, was quoted by Reuters in July 2013 already as saying: "We have to look at this practice and discuss it in Europe (…). That's no European spirit. You could get the idea they are doing it just to attract companies."

The Code Group brings together the 28 directors-general of the national ministries of Finance, national fiscal attachés based in Brussels, and European Commission officials, on a two-monthly basis. Its recommendations are soft law based on broad consensus and are politically binding on the member states. The Code Group has been quite successful ever since its establishment in 2007 owing to its continued opacity and non-transparency. The only real substantial reporting on the Code Group are six-monthly EU presidency progress reports to the ECOFIN Council. No other formal announcements other than meeting agendas are published.

Bob van der Made (


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