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Taxation and Customs Union

Venture Capital Investments

Report of the Venture Capital Tax Expert Group

The report of the Venture Capital Tax Expert Group on Removing Tax Obstacles to Cross-Border Venture Capital Investments (VC Tax Expert Group) was published on 30 April 2010. See also the press release (IP/10/481 ), and the questions and answers (MEMO/10/160 ). The report identifies the main tax barriers to cross-border investments of Venture Capital in the EU and recommends how to overcome these barriers.

The report contains two main recommendations for action:

  • the State into which a Venture Capital (VC) fund invests should never treat the activities of the VC fund manager as constituting a permanent establishment (PE) of the fund (because that State would then have greater taxing rights)
  • to prevent double taxation, all Member States should recognise the tax classification of a VC fund applied by the Member State in which the fund is established (as transparent or non-transparent, trading or non-trading and subject to tax or not subject to tax)

The report also contains recommendations such as that VC funds should be allowed to claim withholding tax relief entitlements on behalf of their investors.

The Commission in its new economic strategy Europe 2020 says it will propose actions to develop innovative financing solutions, including making an efficient European venture capital market a reality. For more information on Commission policy dealing with the venture capital industry please refer to the website of the European Commission's Directorate-General for Enterprise and Industry.


At present, there is no integrated European venture capital market - the regulatory situation varies widely from country to country and the market is fragmented along national lines. The EU is seeking to unify the venture capital market in order to provide innovative small businesses with easier access to financing. To achieve this, it is promoting cross-border venture capital investments.

In a Communication of 2006 " Financing of SME growth – Adding European Value ", the Commission outlined the actions that it should take in order to create a single market for Venture Capital funds. The Commission announced that it would set up both an industry expert group to examine the legal and regulatory barriers to cost-efficient market access for venture capital fund managers and a group of tax experts to identify cases of cross-border double taxation and reflect on ways to overcome them.

The industry expert group issued its report in March 2007.

The VC Tax Expert Group was established in May 2007 and consisted of 33 representatives of business and national administration in EU Member States. The representatives were appointed in their personal capacity as experts in their field. The VC Tax Expert Group had a mandate to identify cases of double taxation and other direct tax related obstacles encountered by cross-border VC investments; and to consider possible ways of overcoming such obstacles.

The Competitiveness Council in May 2008 recognised the importance of clarity and certainty in the field of taxation for the development of a dynamic EU-wide VC market, with a view to identifying and eliminating double taxation and legal or administrative uncertainty within national jurisdictions, and supported the efforts of the expert group on removing tax obstacles for this type of investments.


European Commission's Directorate-General for the Internal Market and Services: Expert Group on Alternative Investment Funds