February 28, 2023
Malta: Changes to the cooperation with other jurisdictions on tax matters regulations:
The Cooperation with Other Jurisdictions on Tax Matters Regulations (SL 123.127) have been revised by LN 8 of 2023. The numerous amendments introduced by this measure include the introduction of a definition of “joint audit” and a new provision regulating joint audits; clarification of the notion of “foreseeable relevance” in Regulation 12; as well as provisions addressing automatic exchange of information reported by Platform Operators and penalties imposed on Platform Operators for failure to comply with reporting obligations.
The Director-General for Taxation and Customs Union at the European Commission, Gerassimos Thomas, issued a newsletter setting out some of the more notable EU tax policy developments to track this year.
Other proposals under negotiation at Council level to watch in 2023 include:
The European Union formally adopted the directive on minimum taxation of multinational groups, after Poland granted its consent in the formal written procedure on 15 December and Hungary agreed to support the Commission proposal on 12 December, under auspices of the Czech Presidency of the EU.
This makes the European Union a leader in the international adoption of the OECD/ G20 agreed Pillar Two, which aims to introduce 15% minimum taxation for international groups via complex mechanisms of international tax law. On adoption, EU ministers reaffirmed the commitment to the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy and invited all members of the OECD/G20 Inclusive Framework on BEPS to live up to their commitment on both pillars.
Member states must implement the Directive by 31 December 2023. It will apply to MNEs and domestic groups with a combined financial revenue of over 750 million Euro per year.
The anticipated proposal for legislative developments addressing VAT in the Digital Age was published on 8 December 2022. The VIDA package puts forward measures for addressing:
The proposed amendments to the legislation:
The CJEU has found, in case C-694/20 delivered on 8 December 2022, that Article 8ab(5) of Directive 2011/16, as amended, infringes the right to respect for communications between a lawyer and his or her client, guaranteed in Article 7 of the Charter of Fundamental Rights, in so far as it provides, in essence, that a lawyer-intermediary, who is subject to legal professional privilege, is required to notify any other intermediary who is not his or her client of that other intermediary’s reporting obligations.
Read the judgement here.
Benjamin Angel, Director in the European Commission in DG TAXUD, stated that the European Commission will try to establish a legal definition of aggressive tax planning, thus providing clarity to tax professionals on the so-called ‘grey zone’ in tax planning. Whereas DAC6 already mandates reporting of aggressive tax planning arrangements, the SAFE proposal would potentially seek to provide a clear definition of what is aggressive tax planning and, as such, would be made illegal. This will depend on establishing clear, workable, predictable rules which tax advisers would be able to understand and abide by ex ante.
These remarks were made in a key-note speech delivered at CFE’s 15th European Conference on Tax Advisers’ Professional Affairs in Zagreb, Croatia, which took place last Friday on 2 December 2022 organised in cooperation with the Croatian Chamber of Tax Advisers (HKPS), on the topic of “Targeting the “Bad Apples” : Enablers of Tax Avoidance – Is it Still a Substantial Problem in Europe?”.
The European Court of Justice last week ruled in joined cases C-37/20 & C-601/20 WM and Sovim SA v Luxembourg Business Registers that a provision in Luxembourg’s national legislation implementing the EU Anti-Money Laundering Directive (Directive (EU) 2018/843) rules requiring that information contained in the beneficial ownership registry be made accessible online for all members of the public was invalid.
The Court held that the provision was invalid in light of its serious interference with the fundamental rights to respect for private life and to the protection of personal data, enshrined in Articles 7 and 8 of the Charter of Fundamental Rights of the European Union. The Court held that the interference of the anti-money laundering legislative provision with the above rights guaranteed by the Charter was neither limited to what was strictly necessary nor proportionate to the objective pursued by the anti-money laundering legislation. As such, the Court has by its decision struck down the requirement under AML rules that Member States must ensure that information on the beneficial ownership of companies and of other legal entities incorporated within their territory is accessible in all cases to any member of the general public.
At the first meeting of the Economic and Financial Affairs Council for 2023, Finance Ministers discussed the priorities for the Swedish Presidency of the Council of the European Union from 1 January until 30 June 2023. The Swedish Presidency priorities as concerns taxation are as follows:
The European Commission will shortly launch a public consultation on amendments to legislation on administrative cooperation in the area of VAT. The European Commission’s public consultation webpage sets out that “According to the latest estimates, in 2020 the EU as a whole lost €93 billion in VAT revenue due to fraud and other economic contingencies. Administrative cooperation on VAT among EU countries is key to reducing this loss. The Commission therefore plans to amend existing EU rules on administrative cooperation and combating fraud in this field. The aim is to strengthen the tools tax administrations have at their disposal.”
The consultation will take place in Q1 of 2023 and will be open for input via the Have Your Say website.
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