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Conflicts between Directives that Require Taxation of Income and Tax Treaties: The Effectiveness of the EU Primacy-based Conflict Rule; Vergouwen, T. M., Intertax; 2024-01, Volume 52 (4), p. 262

Directives in the area of direct taxation can obligate EU Member States to tax income. This obligation can conflict with obligations under tax treaties to not tax income. With respect to such a conflict, the question arises as to how it should be resolved. In this article, this question is addressed from the perspective of EU law, more specifically the primacy of EU law's conflict rule. Pursuant to this conflict rule, tax treaty provisions whose application within a legal order of an EU Member State is incompatible with a provision of a directive, must be set aside by an EU Member State court. Whereas this conflict might seem to provide an effective tool for resolving conflicts between directives requiring taxation and tax treaties requiring non-taxation, the prohibition of reverse vertical direct effect, in addition to Article 351 TFEU (for pre-accession tax treaties with third states), entails that it is, in fact, an ineffective tool for resolving such conflicts. This is because it follows from this prohibition that a directive cannot set aside a tax treaty on the basis of the primacy-based conflict rule if this results in an obligation for a taxpayer such as a higher tax burden.

The Double Layer Test versus the VAT Neutrality Principle; Sánchez-Sánchez, Ángel; Intertax, 2024-01, Volume 52 (2), p. 139

With the Morgan Stanley judgment, the Court of Justice of the European Union (CJEU) established what is known as the double requirement (or double layer test) in order to exercise the right to deduct VAT in cases of cross-border transactions carried out by taxable persons. In this work, the author examines this test and its possible incompatibilities with a number of fundamental VAT principles through different cross-border transaction scenarios. The analysis elucidates problems that may arise, and proposals are advanced to address them. These solutions involve eliminating the double requirement or, alternatively, implementing an intra-Community transfer for services regime that is equivalent to that which already exists for goods.

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