EU Tax Package Tax & Compliance Bulletin 66

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European Commission Unveils New Tax Package (1)

The European Commission has now published its Tax Package for “fair and simple taxation”, designed to address issues experienced in EU taxation arising in the course of “a ‘taxpayer’s journey’: from registering your business, to reporting, payment, verification, dealing with disputes.” The Tax Package is comprised of the following:

Tax Action Plan

The Action Plan consists of 25 steps to be taken by the Commission designed to make taxation “fairer, simpler and more adapted to modern technologies”.

As concerns indirect taxation, the Action Plan includes steps to:

  1. create a single VAT registration; modernise VAT reporting;
  2. update VAT rules for financial services and the sharing economy;
  3. extend the scope of the VAT One-Stop-Shop; monitor VAT transactions in real time through Eurofisc;
  4. launch an E-Commerce package for excise goods; evaluate and revise the special VAT scheme for travel agents;
  5. review and align VAT rules for passenger transportation with the EU Green Deal; and create a dispute resolution mechanism for VAT disputes.

The Commission’s Action Plan concerning direct taxation matters includes steps to:

  1. extend the automatic exchange of information to crypto assets and e-money;
  2. introduce digital solutions to levy taxes at source to facilitate tax payment/collection;
  3. harmonise tax residence criteria to avoid double (non)-taxation; improve technological tools for the exchange and sharing of tax information;
  4. establish a Cooperative Compliance framework to discuss means to resolve common cross-border tax issues; implement a standing committee for dispute resolution;
  5. examine the use of tax data by tax administrations; create an EU Tax Observatory examining issues of tax avoidance and evasion;
  6. create a Transfer Pricing Expert Group; and review and issue recommendations concerning taxpayers’ rights and tax obligations.

In the fall of 2020 the Commission will publish its plans for business taxation for the 21st century, which will aim to complement the work being undertaken by the OECD on addressing challenges of the digital economy and minimum taxation. In early 2021, it will also set out plans for revising EU rules on energy taxation and introducing a WTO-compatible carbon border adjustment mechanism.

European Commission Unveils New Tax Package (2)

The European Commission has now published its Tax Package for “fair and simple taxation”, designed to address issues experienced in EU taxation arising in the course of “a ‘taxpayer’s journey’: from registering your business, to reporting, payment, verification, dealing with disputes.” The Tax Package is comprised of the following:

Revision of the Directive on Administrative Cooperation – “DAC7

The Commission has issued a proposal for a Council Directive to revise the Directive on Administrative Cooperation to extend EU exchange of information rules to information on income generated by sellers on digital platforms.

Platforms will be required to report on the provision of services, the sale of goods, rental of property, rental of any mode of transport and investment, and lending in the context of crowdfunding.

The Directive aims to reduce administrative burdens on platforms by simplifying reporting requirements, enabling platforms to report in one single country of their choosing, once per year, allowing national tax authorities to identify where tax should be paid through the exchange of information. The Directive also sets out rules concerning joint tax audits.

Executive Vice-President Valdis Dombrovskis stated that “In the future, EU countries should automatically exchange information about revenues that sellers generate by using online platforms. The idea is also to strengthen and clarify rules in areas where national governments work together to fight tax abuse, for example, joint tax audits.”

European Commission Unveils New Tax Package (3)

The European Commission has now published its Tax Package for “fair and simple taxation”, designed to address issues experienced in EU taxation arising in the course of “a ‘taxpayer’s journey’: from registering your business, to reporting, payment, verification, dealing with disputes.” The Tax Package is comprised of the following:

Communication on Tax Good Governance in the EU & Beyond

The Commission’s Communication discusses means to improve the EU’s role in promoting tax good governance and tax transparency, which it aims to achieve by reforming the Code of Conduct on Business Taxation and making improvements to strengthen the EU’s List of Non-Cooperative Jurisdictions for Tax Purposes. The Communication also outlines the EU’s plan to meet its 2030 Sustainable Development Goals by assisting developing countries in the area of taxation.

The Commission aims to update the scoreboard used to select the jurisdictions that are screened by the Code of Conduct Group, and to review the criteria that jurisdictions must comply with, to update these are to take into account developments in tax evasion practices. Additionally, the Commission aims to expand the mandate of the Code of Conduct Group to examine conditions leading to unfair tax competition and aggressive tax planning within the European Union, such as tax residency rules allowing for double non-taxation, tax exemptions without appropriate safeguards and special citizenship schemes. It also plans to introduce the parameter of minimum effective taxation.

In the fall of 2020 the Commission will publish its plans for business taxation for the 21st century, which will aim to complement the work being undertaken by the OECD on addressing challenges of the digital economy and minimum taxation. In early 2021, it will also set out plans for revising EU rules on energy taxation and introducing a WTO-compatible carbon border adjustment mechanism.

European Commission Recommends Financial Assistance be Linked to Tax Jurisdiction Blacklist

The European Commission has recommended EU Member States not to approve financial aid to companies that have a link to countries listed on the EU List of Non-Cooperative Jurisdictions for Tax Purposes, the “Blacklist”, or to companies which have been convicted of serious financial crimes. The Commission in its recommendation suggests a number of conditions that Member States could apply concerning restrictions on financial support. It also contains suggested criteria for carve outs and implementation of the recommendation.

Discussing the recommendation, Paolo Gentiloni, Commissioner for the Economy, said: “Fairness and solidarity lie at the heart of the EU’s recovery efforts. We are all in this crisis together and everyone must pay their fair share of tax so that we can support and not undermine our collective efforts to recover. Those who deliberately bypass tax rules or engage in criminal activity should not benefit from the systems they are trying to circumvent. We must protect our public funds, so that they can truly support honest taxpayers across the EU.”

Member States are asked to inform the Commission concerning any conditions imposed in line with the recommendation. A report compiling details of the measures will be produced by the Commission in 2023, three years from the date the Recommendation was adopted.

EU Carbon Border Adjustment Mechanism Consultation

Following on from an inception impact assessment published in March as part of its work to progress the EU Green Deal, the EU has now launched a public consultation concerning the Carbon Border Adjustment Mechanism. The Mechanism will aim to prevent carbon leakage caused by offshore production and carbon intensive imports, to ensure import prices reflect their carbon footprint, in order to achieve EU climate goals. In addition, technical consultations with specialised stakeholders and an impact assessment will be carried out by the Commission.

The consultation sets out that a “Carbon Border Adjustment Mechanism (CBAM) would ensure that the price of imports reflects more accurately their carbon content. This measure will be designed to comply with World Trade Organization rules and other international obligations of the EU. This measure would be an alternative to the current free allocation of allowances or compensation for the increase in electricity costs that address the risk of carbon leakage, because of carbon pricing in the EU’s Emissions Trading System (ETS).” 

The consultation will run until 28 October and input can be provided via the European Commission Have Your Say webpage.

EU Energy Taxation Directive Consultation

The European Commission has launched an online public consultation concerning changes to the Energy Taxation Directive. This follows from an inception impact assessment published earlier in the year which set out that a legislative proposal is planned for June 2021, which will aim to align the “taxation of energy products and electricity with EU energy and climate policies” and to update “the scope and structure of rates as well as …use of optional tax exemptions and reductions by Member States”.

The consultation background document sets out that since the adoption of the Energy Taxation Directive in 2003 energy markets and technologies have experienced significant developments and the EU’s international commitments have evolved considerably. It discusses an evaluation published in September 2019, that concluded:

“The wide range of exemptions and reductions de facto, favours the consumption of fossil fuel, the Directive does not adequately promote greenhouse gas emission reductions, energy efficiency, or alternative fuels (hydrogen, synthetic fuels, e-fuels, advanced biofuels, electricity, etc. and the ETD does not achieve anymore its primary objective in relation to the proper functioning of the internal market.” 

The consultation will run until 14 October and input can be provided via the European Commission Have Your Say webpage.

 

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.