EU Digital Tax and Compliance Bulletin 63

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US Launches Investigations into Countries with Digital Taxes

The Office of the US Trade Representative has announced the US will be carrying out investigations under Section 301 of its 1974 Trade Act concerning digital services taxes that have either been adopted or are being considered at political level by a number of countries worldwide. The jurisdictions listed include: Austria, Brazil, the Czech Republic, the European Union, India, Indonesia, Italy, Spain, Turkey, and the United Kingdom.

A similar investigation was carried out by the US in 2019 into the French digital services tax, following the French digital tax being signed into law on 24 July 2019. Threats of retaliatory tariffs escalating into a trade war were avoided after an agreement was reached in January 2020, in which the US agreed to suspend the imposition of tariffs on French goods whilst France agreed not to collect the digital tax until the end of 2020, subject to an OECD agreement by the end of year.

EU Council Reaches Agreement on DAC6 Reporting Extension

Political agreement was reached on 3 June by Member States’ representatives at the Permanent Representatives Committee meeting concerning the Commission proposal for a directive to defer deadlines for exchange of information under the administrative cooperation directive as a result of the coronavirus crisis.

The amended proposal agreed by COREPER will provide the option for Members States to postpone deadlines imposed by the EU Directive on Administrative Cooperation for reporting of relevant cross-border arrangements by 6 months. Certain Member States have already indicated their intention to introduce legislation transposing the extension to the reporting deadline into domestic law.

Council of EU Publishes Overview of Member States’ Preferential Tax Regimes

The Council of the European Union has published an overview produced by the Code of Conduct Group (Business Taxation) concerning the preferential tax regimes of the Member States.

The overview was produced in line with 2016 Council conclusions on the future of the Code of Conduct Group, with a view to increase public access to information on the work of the Group, and to release documents related to decisions and activities of the Group.

The overview details the work process of the Code of Conduct Group concerning the preferential tax regimes, including the identification of regimes, the description of the measures by the Group, the classification of whether measure are harmful or not, and the steps taken thereafter concerning the abolition, rollback or amendment of the regime in line with recommendations of the Group.

EU Commission to Extend Temporary State Aid Framework to SMEs

The European Commission is consulting Member States concerning a proposal to expand the Temporary State Aid Framework adopted in March to assist Member States in dealing with the economic impact of the COVID-19 outbreak to now include specific provisions allowing Member States to support micro and small enterprises.

The Commission is proposing to allow Member States to provide public support to micro and small companies, even if they would have been classified as being in financial difficulty at the end of 2019, to support innovation and start-up companies that may have been in a loss-making high-growth phase.

US Withdraws from International Digital Tax Negotiations

On 17 June US Trade Representative Robert E. Lighthizer confirmed that the US was withdrawing from OECD Inclusive Framework discussions on taxation of the digital economy. The decision was communicated to European Finance Ministers in a letter last week, igniting fears of a trade war between the EU and US.

The OECD published a public statement in response to the developments, with OECD’s Secretary-General, Angel Gurría, stating “All members of the Inclusive Framework should remain engaged in the negotiation towards the goal of reaching a global solution by year end…Absent a multilateral solution, more countries will take unilateral measures and those that have them already may no longer continue to hold them back. This, in turn, would trigger tax disputes and, inevitably, heightened trade tensions. A trade war, especially at this point in time, where the world economy is going through a historical downturn, would hurt the economy, jobs and confidence even further. A multilateral solution based on the work of the 137 members of the Inclusive Framework at the OECD is clearly the best way forward.”


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

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