Addressing issues of entity reoranizations and transfers in accordance with the practice of the Court of Justice of the European Union

Upon joining the European Union, Union legislation became a part of the Lithuanian national tax legislation. On July 23, 1990 Council Directive 90/434/EEC on a Common System of Taxation Applicable to Mergers, Divisions, Transfer of Assets and Exchange of Share Concerning Companies of Different Member States was adopted. Provisions of the Directive were implemented in the Chapter IX of the Law on Corporate Income Tax in Lithuania. Reorganizations and transfers are more and more common in practice. Their implementation raises practical as well as academic issues, such as: 1) Would it be suitable to address the Directive as well the practice of the Court of Justice when there is no international element in the case discussed? 2) Would it be possible in the cases of tax avoidance in the course of international reorganization or transfer taxing income of a tax payer and what legal provisions should be applied by the tax authorities in such case? 3) Is a restriction implemented in the national Law on Corporate Tax to transfer securities acquired during the reorganization or transfer valid? Having made an in-depth analysis the author of the article draws the following conclusions: 1) Lithuanian administrative courts, dealing with tax disputes, where provisions of the Lithuanian Law on Corporate Income Tax are applicable (but the case falls out of the scope of the Directive) should also follow decisions and preliminary rulings of the Court of Justice. Lithuanian administrative courts may also apply to the Court of Justice for a preliminary ruling when provisions of the Law on Corporate Income Tax are applicable; however the case is not in the scope of the Directive. 2) In the case of tax avoidance in the course of international reorganization or transfer a general anti-avoidance principle established in the Law on Tax Administration should be applied. 3) Provisions of the Law on Corporate Income Tax restricting transfer of securities acquired during reorganization or transfer are not in line with the Directive and the principles of the European Union law. In the case a tax payer suffers additional tax liabilities due to the breach of the mentioned restriction, his position could be reasonable defended by the direct application of the Directive as well as the practice of the Court of Justice of the European Union