Centre for Tax Law Workshop

University of Cambridge,

Centre for Tax Law Workshop on Tuesday 5th April 2011

The Old Kitchens, Queens’ College Cambridge

Topic: CFC, Norwegian ACE and Dutch Box III; Is there a Connection?

Speakers - Ole Gjems-Onstad, Professor in Tax Law, Norwegian School of Management; Assisting Professor, University of Oslo

Professor Doctor Gerard T.K. Meussen, Radboud University Nijmegen, Tax law Department, The Netherlands

Peter Harris, Centre for Tax Law, Faculty of Law, University of Cambridge

There is a real possibility that an independent review will recommend an Allowance for Corporate Equity ("ACE") for the UK. At a previous CTL workshop an expert economist (Sørensen) discussed the pros and cons of such an approach. He was influential in the development of the current Norwegian system, which applies such an allowance at the shareholder level. This has not been without difficulties, including complex consequences for the taxation of gains on the disposal of shares. It is timely to listen to a Norwegian legal expert on those difficulties and the future prospects of this system in Norway. The Norwegian system focuses on the taxation of individual shareholders. At some level, it seems the Dutch tax individual shareholders only on the return to equity that the Norwegians don't tax, i.e. the Box III notional income system. The Dutch system has been in place for more than a decade and it is timely to hear from a Dutch legal expert as to the reasons for the implementation of this system and practical difficulties with it. An interesting feature of this system is that it does not involve the taxation of gains on the disposal of shares.

The Norwegians have Controlled Foreign Corporation (CFC) rules, but the Dutch do not. Is there a connection between this position and the position of each country with respect to the taxation of individual shareholders? Might it be possible to design a robust tax system that combined the approaches of both countries and that did not have CFC rules? Would there be tax treaty implications? Both countries have had difficulties at the interface of their taxation of individual shareholder and small business. Is it possible to incorporate the best of these approaches and nevertheless address such issues? Is it possible at the same time to reconcile the taxation of dividends and gains on the disposal of shares?

10.10 Session 1 (50 minutes) Norwegian Shareholder Level ACE (Allowance for Shareholder Equity) [Prof. Gjems-Onstad] • Background • Brief Overview of Corporate Tax Base and Rates • Taxation of Individual Shareholders; the ASE • Interface with Debt Financing • Taxation of Gains on the Disposal of Shares by Individuals • Interface with Taxation of Small Business (comparison with sole proprietors) • Taxation of Corporate Shareholders (dividends and gains on disposal of shares) • Taxation of Foreign Shareholders • Taxation of Foreign Dividends • Interface with Controlled Foreign Corporation rules

11.15 Session 2 (85 minutes) Norwegian ASE (continued for 30 minutes) [Prof. Gjems-Onstad]

11.45: Dutch 4% Deemed Income from Shares (Box III) [Prof. Meussen] • Background • Brief Overview of Corporate Tax Base and Rates • Taxation of Individual Shareholders; Box II and Box III • Interface with Debt Financing • Taxation of Gains on the Disposal of Shares by Individuals; Box II not Box III • Interface with Taxation of Small Business (comparison with sole proprietors) • Taxation of Corporate Shareholders (dividends and gains on disposal of shares) • Taxation of Foreign Shareholders • Taxation of Foreign Dividends and Gains on Disposal of Foreign Shares • Why no Controlled Foreign Corporation rules

12.40 Lunch

13.30 Session 3 (60 minutes) Dutch Box III (continued for 25 minutes) [Prof. Meussen]

13.55: Combine the Systems? [Open Discussion led by Dr Harris] • Corporate level ACE? • Shareholder level Box III? • Interface with Debt Financing • Interface with Taxation of Small Business; Look Through? • Taxation of Gains on the Disposal of Shares; None? • Taxation of Corporate Shareholders (dividends and gains on disposal of shares); None? • Taxation of Foreign Shareholders; None? • Taxation of Foreign Dividends and Gains on Disposal of Foreign Shares; None? • Controlled Foreign Corporation rules; None?

14.45 Session 4 (40 minutes) Combine the Systems? (continued) [Open Discussion led by Dr Harris]

If you would like to attend this workshop please email ctl@law.cam.ac.uk for a booking form by midday Friday 1st April.