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Tax Issues that Arise in Cross-border Venture Capital Investment
In its Communication of 7 December 2011, "An Action Plan to Improve Access to Finance for SMEs" the European Commission (EC) stated that in 2012 it will complete an examination of the tax obstacles that hinder cross-border venture capital investment with a view to presenting solutions in 2013 that would aim to eliminate any such obstacles if this can be done without facilitating tax avoidance and evasion.
Taxand welcomes this initiative, and has provided combined feedback on the EC's public consultation addressing problems that arise in the direct tax field when venture capital is invested across borders.
Ideally, VC-structures within EU-countries should be mutually recognised and accepted. Tax consequences should be predictable and symmetrical. However, given the extensive harmonisation which would be required and the alternatives that exist in practice to face the related tax issues, we do not consider that this harmonisation is really necessary.