Our tax litigation team has represented shareholders of the company, engaged in the public utilities, energy and trade in petroleum products before the European Commission.
Our clients received interest on bonds, issued by the Estonian company. The interest was recharacterized and taxed as dividends by applying the GAAR, while Lithuanian national legal acts provide that the interest on the bonds is not subject to personal income tax. Since the GAAR was applied to transactions, which are not wholly artificial, we have submitted a complaint to the European Commission regarding the initiation of the infringement procedure against Lithuania because such application of the GAAR is contrary to the settled case-law of the CJEU and violates the free movement of capital.
It was the first tax case at the EU level regarding Lithuanian GAAR.