Volume 20 (2011)

Volume 20 (2011) / Issue 2

Reinout Kok, 'Compatibility of Exit Taxes and Community Law' (2011) 20 EC Tax Review, Issue 2, pp. 62–74


In 2010, the pressure on exit taxes in the field of corporate income taxation has increased. In this article, it will be investigated which kind of exit taxes exist in the field of corporate income tax. The Dutch corporate income tax will be used as an example. First, the author analyses the exit taxes from a domestic legislation and a tax treaty point of view. Dutch legislation provides for an immediate taxation over the hidden reserves of the assets/liabilities of a company that migrates and, as a result, is no longer effectively taxable in the Netherlands. Subsequently, it is being investigated whether levying an exit tax is a forbidden infringement on the freedoms of the Treaty on the Functioning of the European Union (TFEU). The author comes to the conclusion that the exit tax forms an infringement on the freedom of residence, but that the preservation of the balanced allocation of taxing power forms a justification. However, the exit tax provisions are not proportional: a mechanism with, for example, a preservative assessment would be more proportional. However, because of the unclarity regarding the application of the proportionality principle by the ECJ, it could be that the ECJ will accept an immediate taxation upon exit and will not force the Netherlands to introduce a preservative assessment mechanism in the field of corporate income tax.

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ISSN: 0928-2750
ID: ECTA2011007