Malta and EU Tax and Compliance Policy Bulletin 87

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Malta and EU Tax and Compliance Policy Bulletin 87

David Marinelli

December 1, 2022

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ECOFIN Updates List of Non-Cooperative Jurisdictions

Anguilla, Bahamas and Turks and Caicos have been added to the EU list of non-cooperative jurisdictions for tax purposes, on the basis of their failure to enforce the economic substance requirements that apply to zero tax jurisdictions. The following is the revised list of countries that have refused to engage with the EU or to address tax good governance shortcomings (situation on 4 October 2022).

American Samoa, Anguilla, Bahamas, Fiji, Guam, Palau, Panama, Samoa, Trinidad & Tobago, Turks & Caicos, US Virgin Islands, and Vanuatu

EU Approves Windfall Energy Profits Tax

The European Union leaders approved a regulation with measures aimed at redistributing the energy sector’s surplus revenues to final customers. The package includes a windfall tax on excess profits of certain energy companies, infra-marginal revenue cap on non-fossil fuel energy companies as well as measures to reduce consumption of electricity. The EU stopped short of setting a cap on gas prices, as requested by some Member states.

The windfall energy profits tax, or in the EU language, “a mandatory temporary solidarity contribution on the profits of businesses active in the crude petroleum, natural gas, coal, and refinery sectors”, would be calculated on excess profits, as determined under national tax rules in the fiscal year starting in 2022 and/or in 2023, which are above a 20% increase of the average yearly taxable profits since 2018. The windfall levy will apply as a top-up tax to regular taxes and levies applicable in all member states.

EU recommends Dialogue with a Number of Jurisdictions

The EU Council shall recommend to certain states to engage with the EU to bring their tax practices in line with EU law and policy, notably:

In the area of tax transparency: Turkey, Barbados, Botswana, Dominica, Seychelles;
In the area of fair taxation: Costa Rica, Hong Kong, Malaysia, Qatar, Uruguay
On technological – economic zones with preferential taxation: North Macedonia, Jamaica, Jordan, Armenia;
In the area of preferential tax regimes/ holding companies: Russia.

The EU expressed regret that some jurisdictions failed to fulfil their commitments to the Code of Conduct Group with regard to economic substance requirements and invites these jurisdictions to engage with the Code of Conduct Group in order to resolve the remaining issues.

EU Commission Publishes BEFIT Call for Evidence

The European Commission has published a call for evidence on establishing a new corporate income taxation framework in Europe (Business in Europe: Framework for Income Taxation or BEFIT), setting out the policy context and the key objectives of the initiative. This consultation follows on the discussions organised by the European Commission with key stakeholders within the Platform for Tax Good Governance, where CFE presented its preliminary views on the matter.

EU Parliament’s Draft Report on Tax-Related Revelations

The European Parliament heard the findings of MEP Niels Fuglsang (S&D, DK) who presented in the draft report of October 2022. The draft paper discusses the “Lessons learnt from the Pandora Papers and other revelations”.

Key-findings include recommendations for EU Member states to introduce cooling-off periods for tax authority officials in order to address the issue of revolving doors between legislators, authorities, multinational companies and global professional services firms in the tax advisory area; as well as full implementation of EU’s Whistleblower Directive of 2019, among other issues.

The report, once adopted by the European Parliament in a form of a resolution, shall be directed at the Council of EU and the European Commission.

EU Adopts Revised Code of Conduct on Business Taxation

EU Finance ministers approved the revised Code of Conduct on Business Taxation, setting out stricter criteria for evaluation of harmful tax regimes. The revised code of conduct introduces scrutiny on ‘tax features of general application’, thus expanding the existing focus on ‘preferential measures’.

Per the revised rules, when assessing whether a tax feature of general application of a Member State is harmful, the evaluation will focus on tax features of general application which are not accompanied by appropriate anti-abuse provisions, and which lead to double non-taxation or allow the double or multiple use of tax benefits in relation to the same expense, income or transactions. The Code also introduces scrutiny on the tax measures of general application of the tax system that affect the location of business activity in the European Union.

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

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

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