Today’s report summarises the main findings and conclusions of the Expert
Group on Removing Tax Obstacles to Cross-border Venture Capital Investments.
The group was set up by the Commission in 2007, as one of a series of measures
aimed at facilitating cross-border venture capital investment in the EU, to the
benefit of SMEs.
There are two main problems identified in the report, and possible solutions
Firstly, the local presence of a venture capital fund manager in the Member
State into which an investment is made may be treated as a taxable presence
("permanent establishment") of the fund or of the investors in that
State. This could lead to double taxation if the return on the investment is
also taxed in the country or countries where the fund or investors are located.
The experts propose that a venture capital fund manager should not be
considered as creating a taxable presence for the fund or investors in the
Member State where the investment is made. This would reduce double tax
problems for cross border venture capital investment.
Secondly, it was found that venture capital funds may currently be treated
in very different ways for tax purposes by the different Member States. A fund
may, for example, be treated as transparent in one State and non-transparent in
another. Again, this can lead to cases of double taxation. The experts
therefore suggest that EU Member States should agree on a mutual recognition of
the tax classification of venture capital funds.
The report will be presented by the Commission to Member States’ tax
authorities for input into the ongoing work of looking at how to improve the
Internal Market for SMEs. The Commission will also take this issue into
consideration in its broader efforts to tackle double taxation (see
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