Browsing by Author "Espo, Carita"

Common investment vehicle (CIVs) is a widely used structure, yet relevantly little dealt topic in the case law. In a nutshell, a CIV is a legal structure used for investing. It usually consists of three separate levels, which are investors, an intermediary vehicle and an investment object. The idea is to pool the assets of private investors and invest those pooled assets to the investment object which varies. The structure creates benefits, for example it enables investing big amounts of money and thus creates new investment objectives to the private investors. Due to the intermediary level, the structure may create double taxation, which would not occur in case of direct investment. Thus, special tax measures are often needed for the elimination of multiple taxation. The European Union’s State aid regulation (among others) determines what kind of CIV tax measures can be enacted. Even though the direct taxation of Member States is not harmonized, the prohibition of State aid, imposed in the Article 107(1) of the Treaty on the Functioning of the European Union, limits internal legislative power. The State aid prohibition in the Article 107(1) TFEU consist of four separate and cumulative conditions, the most important being a selectivity condition. It is also in the CIV context, when the selectivity condition analysis usually determines the outcome. The Court has concluded that the selectivity of a tax measure can be justified, for example on the basis of tax neutrality. Yet, it is not utterly clear, whether the purpose of achieving tax neutrality is unconditional and suffices itself. Furthermore, the Article 107(3) TFEU may justify the investments made to risk finance investments, which consequently may justify the measure applied for the investment structure. The common investment structure is a very little dealt topic in the State aid case law of the European Union. But why so? Due to the wide use of the CIV structure it is simply impossible that any CIV measures would not have been enacted. The answer seem to lie in the relation between the State aid and fundamental freedoms regulations. Unfortunately, the relation of these two set of rules is anything but complete. Nonetheless, it seems that the fundamental freedoms often overrule the State aid regulation. However, both regulation aim to ensure free competition on the single market and thus, at least generally speaking, the desired purpose is achieved no matter which one of the rulings applied.