Malta and EU Tax and Compliance Policy Bulletin 88

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Malta and EU Tax and Compliance Policy Bulletin 88

David Marinelli

February 28, 2023

Uncategorized

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.

European Union: Anticipated EU Tax Developments in 2023:

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.

In March 2023, the Commission will table a proposal for reform of the EU Customs Union seeking to strengthen its integrity by more effectively enforcing EU rules and standards at external border for goods;
The much-anticipated BEFIT proposal will be unveiled, with a view to reducing remaining obstacles for cross-border investment in the Single Market as part of a broader effort to accompany the EU’s economy through the twin digital and green transition and reforming and simplifying business taxation within the EU;
A proposal seeking to implement the Pillar 1 global tax deal into EU law will be introduced once sufficient progress has been made at international level;
A legislative initiative to clamp down on enablers of tax abuse will be introduced;
A proposal to improve withholding tax relief procedures for cross-border businesses in the EU will be introduced.

Other proposals under negotiation at Council level to watch in 2023 include:

VAT in the Digital Age proposals – seeking to align VAT rules with the digital economy and simplify VAT registration and e-invoicing throughout the EU;
DAC8 proposal – seeking to increase reporting and transparency requirements for crypto-assets and transactions;
Unshell proposal – seeking to reduce the use of shell companies in the EU.

EU Adopts Minimum Tax Directive:

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.

European Union – VAT in the digital age proposal:

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:

real-time reporting of intra-EU transactions;
the rules for passenger transport and accommodation platforms;
single VAT registration in the EU.

The proposed amendments to the legislation:

European Union – DAC6 requirement to notify other intermediaries breaches lawyer-client confidentiality:

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.

European Union - EU Seeks to Define Aggressive Tax Planning:

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?”.

ECJ Rules Public Access to Beneficial Ownership Registry Information Invalid:

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.

ECOFIN: Swedish Presidency Priorities:

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:

A review of the Energy Taxation Directive is under way, as the current directive is outdated and is not coordinated with other EU measures. The Presidency will continue discussions in the Council. The Presidency will also continue the work on the proposal for new VAT rules for the digital age.
In the area of direct taxation, priority will be given to measures aiming to prevent tax evasion, tax avoidance, aggressive tax planning and harmful tax competition, such as updating the EU list of non-cooperative jurisdictions. In addition, the Presidency will work to ensure greater tax transparency and to reinforce the exchange of relevant information within the EU. The Presidency stands ready to advance the work on further strengthening EU administrative cooperation on taxation.
In the financial area, the Presidency will seek to continue the fight against international crime by advancing the efforts to tackle money laundering and the financing of terrorism. This will involve advancing the negotiations on establishing a new EU body in this area and on the ‘rulebook’.

European Union - EU Consultation on Administrative Cooperation in VAT:

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.

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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