Implementing the ATAD's CFC rules by Poland contrary to EU primary law: A solitary example or the beginning of infamous trend?

Abstract

This article demonstrates that after the seemingly incorrect implementation of Articles 7–8 of the ATAD, the Polish CFC rules have become blatantly incompatible with the free movement of capital to the extent of their application to companies from third countries (the Polish black list). This study, moreover, confirms the thesis that the incompatibility of the Polish CFC rules was most likely caused by two elements of the ATAD: (1) minimum level of protection in Article 3; and (2) the option under Article 7(1)(a) which leaves the decision regarding the exemption from taxation of the CFC’s income if a CFC is established outside the EU/EEA and carries on a substantive genuine business activity there to Member States themselves. The analysis also reveals that the CJEU appears to consider that the lack of a factual possibility to exchange of tax information can justify the irrefutable presumptions of tax avoidance or tax evasion by reference to the need to ensure effective fiscal supervision only in respect of the relations between the Member States and third countries. Accordingly, not only the ATAD, but also the CJEU’s case law trigger a hidden form of protectionism of Member States at the cost of third countries.