EU Taxation & Compliance Bulletin 56

Printable Version

EU to impose taxation rules on Member States:

Speaking at an event in Brussels, the newly appointed Director for Direct Taxation and Tax Coordination in the European Commission Benjamin Angel indicated that the Commission is considering using the powers of Article 116 of the Treaty of the Functioning of the European Union to bypass the unanimity requirement to decision making in taxation.

Under this provision, the European Parliament and the Council can issue directives in areas which cause distortions of the Single Market in accordance with the ordinary legislative procedure. In practice, if the Commission proposes use of this procedure, it will require qualified majority from the outset to adopt directives in the taxation area, should distortions of the Single Market be established as a reason.

EU list of Non-Cooperative Jurisdictions Updated:

On 18 February 2020 EU Finance Ministers updated the EU list of non-cooperative tax jurisdictions. In summary:

  • 12 jurisdictions (American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, US Virgin Islands, Vanuatu, Cayman Islands, Palau, Seychelles and Panama) have been added to the list of non-cooperative tax jurisdictions;
  • 12 jurisdictions (Armenia, Antigua and Barbuda, Bahamas, Bermuda, Belize, British Virgin Islands, Cabo Verde, Cook Islands, Marshall Islands, Montenegro, St Kitts and Nevis, Vietnam) have been completely delisted; and
  • 13 jurisdictions remain on the “grey list”

G20 Communiqué: Overcome Remaining Differences for Further Progress:

No significant progress was made at this weekend’s G20 meeting in Riyadh, as concerns the taxation challenges of the digitalisation of the economy. Reportedly, there were tensions between the US Secretary of Treasury and his European counterparts, with European Commission officials tweeting that the US was not engaging and Secretary Mnuchin had left the room without taking the floor.

The official Communique of the G20 states that the leaders encourage further progress on both Pillars to overcome remaining differences and reaffirm their commitment to reach a

consensus-based solution with a final report to be delivered by the end of 2020. The next meeting of the Inclusive Framework is scheduled for this summer in Berlin.

European Semester Recommendations Endorsed by Council:

The Council of EU has endorsed the European Semester recommendations on the economic policy in the EU. The recommendations are of particular concern for the Euro area and are expected to be adopted by the European Council (heads of states and governments) in March.

The Recommendations call for better coordination of fiscal policies, in particular by addressing efforts in simplifying and modernising the tax systems. The report calls to address tax fraud, evasion, and avoidance, through measures against Aggressive Tax Planning, taking account of the on-going discussions at the OECD Inclusive Framework on the remaining BEPS issues, in order to make tax systems more efficient and fairer.

OECD Release Digital Tax Economic Analysis:

In a webcast streamed on 13 February 2020, the OECD released details of an economic analysis and impact assessment concerning the Pillar 1 and Pillar 2 proposals for taxation of the digital economy being negotiated by the Inclusive Framework on BEPS.

The preliminary findings of the analysis being undertaken through the work of the Framework indicate that the combined effect of the Pillar 1 and 2 proposals would lead to an increase of around 4% in global corporate income taxation revenue for both low, middle and high-income economies.

EU Commission Publishes Anti-Money Laundering Roadmap:

The European Commission has published a Roadmap concerning future anticipated steps in its “new comprehensive approach to preventing and combating money laundering and terrorism financing”.

The Commission states in the Roadmap that the “package adopted by the Commission in July 2019 highlighted a number of deficiencies in the implementation of the EU anti-money laundering framework” and that “even full implementation of the latest anti-money laundering provisions introduced by the 5th AML Directive…would not remedy the current weaknesses”. According to the European Commission: “more harmonisation at EU level, and possibly central EU mechanisms/bodies to strengthen the preventive framework in light of the cross-border nature of much money laundering in the EU and of the integration of the internal market.” are needed.

Proposal for DAC Directive Codification Published:

The European Commission has published a proposal for the codification of Directive 2011/16/EU of 15 February 2011 on administration cooperation in the field of taxation (“DAC”) with the aim of “simplifying and clarifying the law of the Union so as to make it clearer and more accessible to citizens”.

The codification will not modify the content of the acts, but will merely consolidate them whilst making only necessary amendments for the purposes of codification. As such, the accelerated legislative procedure is able to be used, for the fast-track adoption of codified instruments.

OECD Release Transfer Pricing Guidance on Financial Transactions:

The OECD has released Transfer Pricing Guidance on Financial Transactions, further to follow-ups in BEPS Action 4 and Actions 8 – 10. It is the first time the OECD’s transfer pricing guidance has included guidance on the transfer pricing aspects of financial transactions. The guidance aims to improve consistency in interpreting the arm’s length principle and reducing double taxation and disputes.

February EU Infringement Package Published:

The European Commission has published its February infringement package setting out the legal action being pursued against various Member States by the Commission for non-compliance with obligations under EU law.

Letters of formal notice were sent to Cyprus, Hungary, the Netherlands, Portugal, Romania, Slovakia, Slovenia and Spain for failing to implement the 5th Anti-Money Laundering Directive. The countries will have two months to notify the Commission that the Directive has been implemented, or will thereafter be issued with reasoned decisions.

Germany was issued with a letter of formal notice for failing to have in place proper IT systems for the implementation of the VAT quick fixes package, which entered into force on 1 January 2020. Germany has indicated it will only have the necessary IT infrastructure in place by the end of 2021. Germany will have two months to respond, before being issued with a reasoned decision.

The Commission has also referred Portugal to the Court of Justice for failing to amend legislation concerning the rate of tax levied for registration of second-hand imported vehicles, issued a letter of formal notice to Malta for failing to levy the correct rate of VAT on sales of yachts and to Latvia for taxing more highly cars registered in other Member States by Latvian tax residents.

 

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.