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CFC legislation, passive assets and the impact of the ECJ’s Cadbury-Schweppes decision

Martin Ruf and Alfons Weichenrieder ()

No 1315, Working Papers from Oxford University Centre for Business Taxation

Abstract: In its Cadbury-Schweppes decision of 12 September 2006 (C-196/04), the ECJ decided that the UK CFC rules, which were implemented to subject low taxed passive income of foreign affiliates to UK corporate tax, implied an infringement of the freedom of establishment. Consequently, many EU countries including Germany changed their legislation. The paper discusses to which extent the ECJ ruling has impacted on the allocation of passive assets in German multinationals. Using firm level data we find evidence for an increased preference for low-tax European countries compared to non-European countries.

Keywords: European Court of Justice; corporation tax; foreign direct investment; CFC regulation; passive investment (search for similar items in EconPapers)
JEL-codes: H25 H73 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-acc, nep-eur, nep-law and nep-pub
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