Exit Tax in the World of International Migration of Companies and Individuals

Abstract

Globalization of the world economy enables companies and individuals to move across borders and seek new opportunities and business options in other countries. To do so persons may need to transfer residency or shift assets of permanent establishment. The adverse side of such a migration lies in the loss of tax revenues from taxation of capital gains that occur when shifted assets are sold in new country, frequently low-tax jurisdiction. Original home country can prevent loss of tax revenues from taxation of capital gain by imposition of an exit tax. Despite rationale of exit tax its impact in globalized world might be controversial, as it represents barrier to free movement of capital and persons and freedom of establishment, which was mirrored especially in a number of controversial decisions of the CJ EU. This paper investigates presence of the exit tax in the OECD and EU Member States and focuses on the most problematic provision – timing and possibility to defer payment of exit tax until the asset is sold which can soften adverse effect of exit tax on international movement of persons. This is subject of harmonisation of anti-tax-avoidance measures in the EU however the OECD anti- avoidance package (BEPS) does not include exit tax.

Keywords: international mobility, companies, capital gains, exit tax, tax avoidance harmonisation

JEL Classification: F22, F60, H26, K33, K34