Company Taxation & EU Regulatory Policy Bulletin 78

Printable Version
AML CFT, Company taxation, EU, VAT (Value Added Tax), European Union Commission, double taxation, roadmap, transfer pricing, business taxation

G7 Reach Agreement on Global Minimum Company Taxation Level

On 1 July 2021, in an historic agreement, 130 countries approved a statement providing a framework for reform of the international tax rules. These countries are members of the OECD/G20 Inclusive Framework on BEPS (“IF”), comprising 139 countries.  IF members that have not joined in the statement are: Barbados, Estonia, Hungary, Ireland, Kenya, Nigeria, Peru, St. Vincent and the Grenadines, and Sri Lanka.

The statement sets forth the key terms for an agreement of a two-pillar approach to reforms and calls for a comprehensive agreement by the October 2021 G20 Finance Ministers and Central Bank Governors meeting, with changes coming into effect in 2023.

  1. Pillar One of this agreement is a significant departure from the standard international tax rules of the last 100 years, which largely require a physical presence in a country before that country has a right to tax.
  2. Pillar Two secures an unprecedented agreement on a global minimum level of company taxation which has the effect of stipulating a floor for tax competition amongst jurisdictions – this is likely to be 15%.

Read a more detailed write-up on the statement together with KPMG observations prepared by KPMG’s EU Tax Centre.

EU Council & Parliament Reach Provisional Compromise on CbCR Public Disclosure

Representatives of the current Council of the EU Presidency from Portugal reached a provisional agreement with the EU Parliament negotiating team on the proposed directive on public country-by-country reporting of tax information disclosure (CbCR). Under the agreement, Multinational Enterprises or standalone enterprises with a total consolidated revenue of more than €750 million in the last two consecutive financial years will be required to disclose publicly their income tax information in each Member State, whether headquartered in the EU or not. Additionally, the enterprises will be required to disclose income tax information from any third country listed in the EU Blacklist and Greylist of non-cooperative jurisdictions for tax purposes. Reporting will be required to take place within 12 months from the date of balance sheets for financial years in questions. The directive will provide for a complete and final list of information required to be disclosed.

EU Launch Consultation on Fighting the Use of Shell Entities for Tax Purposes

The European Commission has launched a public consultation questionnaire on tax avoidance and fighting the use of shell entities for tax purposes. The questionnaire responses will be used to prepare a proposal for a directive planned to be published in the last quarter of 2021. The Inception Impact Assessment concerning the proposed initiative sets out that the Commission aims to address “the use of legal entities with no or minimum substance and no real economic activities, by taxpayers operating cross-border to reduce their tax liability.” The directive will aim to establish minimum standards on tax related substance to decide whether entities in a Member State are deemed shell entities and, if so, to deny them tax advantages in the Member State in order to tackle the erosion of the tax base of the Member States by tax avoidance and evasion.

EU Tax Observatory to Identify Means to Combat Tax Avoidance in the EU

The EU Tax Observatory, a European Union project with a EU grant budget of EUR 1.2 million, is aimed at identifying and analysing means of combatting tax avoidance practices, and supporting the fight against tax abuse through academic research, analysis and data sharing. The EU Tax Observatory was launched on 1 June by Commissioner Gentiloni, FISC Chair Paul Tang and other EU officials, will be led by Professor Gabriel Zucman, and based at the Paris School of Economics. Professor Zucman is a French economist, currently an Associate Professor of Economics at the University of California, Berkeley, and is known for research on tax havens and corporate tax havens, and the accumulation, distribution, and taxation of global wealth.

The launch of the Tax Observatory was one of the planned actions contained in the Commission’s 2020 Tax Package, to tackle the fight against tax evasion and avoidance and to promote fairer taxation in the EU and beyond. The Tax Observatory’s research will complement the Commission’s reflection process on the future of taxation in the EU, which will conclude in a Tax Symposium on the “EU tax mix on the road to 2050” in 2022. A report issued by the Tax Observatory at the launch sets out simulations for amounts that could be collected in tax revenues based on taxing multinational companies, under three scenarios: the EU imposing minimum company taxation, an international minimum taxation, and unilateral taxation. The report estimates that 25% minimum tax would increase corporate income tax revenues in the European Union by about €170 billion in 2021.

Slovenia Sets Out Priorities for the EU Presidency: Mid-July Proposal on Digital Levy

The Republic of Slovenia is taking over the rotating presidency of the European Union on 1 July. The Slovenian Presidency of the Council will focus on a number of priority areas in the economic and taxation sphere. Particular focus is given to the post-pandemic economic recovery, strengthening the rule of law throughout Europe, anti-money laundering, the Capital Markets Union Package, implementation of the Basel III standards and the EU budget for 2022.

Priorities in the direct tax area include proposal for EU digital levy, at present scheduled for mid-July, which is part of the EU Own Resources Package. Further work is expected on EU Commission legislative proposals regarding shell companies, debt-to-equity tax bias (DEBRA), BEFIT- the new company taxation proposal as well as the forthcoming update on the EU blacklist scheduled for the ECOFIN Council of October 2021. An update and revision of the mandate of the Code of Conduct Group for Business Taxation has also been planned by the Slovenian presidency.

 

Source: Malta Institute of Taxation Click here, CFE Tax Advisors Europe Click Here and KPMG Click Here

Please contact David Marinelli should you wish to discuss any matter relating to your Malta registered company.