Capital Flows and regulations in the European Union

1. Daniela Castro Sebastien De Knoop Nicolas Murcia Cameron Trenfield Lynn Van den Maegdenbergh Capital flows in the Single Market

2. Introduction “ As the European Union is growing, several objectives must be considered within the single market to reach a true political and economic community of 27 Member States as t he free movement of capital is one of the fundamental principles of the Union”

3. Timeline 1957 Treaty of Rome Article 67: Full liberalization of “Capital Movements” 1988 Single European Act Directives: Effective integration of “Capital Movements” 2008-2010 Lisbon Program Objectives: Effective integration of “Financial Services” Free Movement of Capital MANDATORY 1990 1997-1998 Madrid European Council Capital Markets: Regulatory framework 01/1999 €

14. The Formation of a “European Company” For the completion of an internal market, “ companies […] should be able to plan and carry out the re-organisation of their business on a Community scale. […] Such re-organisation presupposes that existing companies from different Member States are given the option of combining their potential by means of mergers.” (Council Regulation (EC) No 2157/2001 of 8 October 2001)

17. New organizational structure

26. GDP Facts European consumers owe more than US$1.18 trillion or nearly 1/10th of EU gross domestic product and this market is growing at 8% a year. Britain and Ireland are among countries where borrowing is the most popular. On average, Lithuanians and Slovakians owe less than US$148 while cash-rich spenders in Britain and Ireland owe more than US$4,440.

29. Purchasing Property in another Member State The free movement of capital includes the rights of citizens and businesses to purchase shares in companies established in a different Member State and to purchase properties * Exceptions with new member states

30. World Property Investment Hot Spot

31. Fiscal Aspects of the Free Movement of Capital Economic Stakeholders Private Individuals

34. Taxation: Parent companies & Subsidiaries The distribution of profit coming from and to a company whose main centre of management is located in a different Member State Council Directive 90/435/EEC (23 July 1990) With amended Directives 2003/123/EC and 2006/98/EC The Member State in which the parent company resides either cannot tax distributed profits or can offer corporate tax deductions to profits made by the parent company’s subsidiaries (located outside of the Member State but within the EU)

35. Common System of Taxation Directive 90/434EEC (July 23 rd 1992) Set common regulations for taxation on mergers, divisions and contributions of assets Capital Gains are not taxable at the time of a transaction When a merger entails the transfer of an asset from one member state to another, the former must renounce all taxing rights Member States do not apply the provisions of the Directive when taxing a direct or indirect shareholder of certain corporate taxpayers.

47. External Capital

48. Foreign Direct Investment

49. World Destinations

50. Intra and Extra Flows

51. Conclusion The free movement of capital, like the three other fundamental freedoms of the EU, has enabled its Member States to achieve new levels of prosperity. The fluidity of capital has facilitated transactions amongst any individual or entity in the EU. The increased amount of cooperation forges stronger relationships amongst Member States and provides a platform to further improve agreements.

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