Malta and EU Tax and Compliance Policy Bulletin 92
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Malta and EU Tax and Compliance Policy Bulletin 92
August 30, 2024
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EU Council of Ministers Approves FASTER Directive
The Council of the EU, in composition of EU’s finance ministers, (ECOFIN), approved the European Commission proposal on a directive establishing faster withholding tax relief (WHT) procedures and common tax residency certificate (eTRC) from 1 January 2030. CFE Tax Advisers Europe welcomed this initiative of the European Commission, and in its representations urged the EU to be bolder and envisage a more ambitious implementation timeline.
Currently, many EU Member states tax dividends and interest paid to foreign investors, resulting in double taxation. Double tax treaties aim to resolve this, but complicated relief procedures make the process lengthy, costly, and susceptible to fraud. The Directive aims to reduce administrative burden and facilitate the relief procedure.
U.S. Will Not Support Global Minimum Wealth Tax
The proposals for 2% minimum tax on wealthiest individuals does not have the support of the United States government, U.S. Secretary of Treasury Janet Yellen said for The Wall Street Journal. “The notion of some common global arrangement for taxing billionaires with proceeds redistributed in some way — we’re not supportive of a process to try to achieve that. That’s something we can’t sign on to.”, Yellen said speaking about the G20 plan which has acquired support from other global players such as Brazil and France. The plan was floated by the EU-financed Tax Observatory and its director Gabriel Zucman, who proposed 2% annual tax applied to the wealth of circa 3,000 billionaires to generated $250 billion in revenue each year.
ECOFIN: No Agreement on ViDA
Economic and Finance Ministers met on 21 June 2024 for the final meeting in their ECOFIN configuration under the Belgian Presidency of the Council of the EU. Belgium hands over the Presidency to Hungary on 1 July 2024.
At the meeting, agreement was unable to be reached on the value added tax in the digital age (ViDA) package, despite progress in discussions between the Member States reportedly being made. The proposals have three main objectives: the introduction of Digital Reporting Requirements (DRR) and e-invoicing for cross-border transactions; updating the VAT treatment of the platform economy; and, a single EU VAT Registration, The proposals aim to tackle VAT fraud, support businesses and promote digitalisation. Report sindicate that Estonia blocked agreement on the suite of ViDA proposals on the basis of objections over liabilities that would be imposed on digital platforms for short-term accommodation and passenger transport companies, such as Airbnb and Bolt. Estonian Finance Minister Mart Vorklaev said to Bloomberg ahead of the meeting that Estonia’s position was that: “We are against taxing any service provider only because they provide their services via digital platforms”.
EU Presidency Note on UN Zero-Draft Terms of Reference for a UN Framework Convention on International Tax Cooperation
The Presidency of the Council of the EU discussed the United Nations ‘Zero-Draft‘ terms of reference for a United Nations Framework Convention on International Tax Cooperation at the ECOFIN meeting on 21 June. The Presidency also published an Information Note summarising the developments and EU Statement and EU Position on the first substantive session held to negotiate the terms of reference. As stated in the Note, the Belgian Presidency made a proposal for the EU position after consulting with Member States, which was then approved on 25 April 2024.
The Note confirms that the EU position sets out that the EU: “emphasises the importance of a rules-based international order, inclusive and equitable tax cooperation, and fostering global dialogue to create policy synergies. The EU supports aligning the proposed Convention with existing international tax initiatives to avoid duplication and ensure coherence. The EU and its Member States advocate for consensus-based decision-making to include all countries’ perspectives and stress the importance of supporting the Sustainable Development Goals (SDGs) through effective tax policies”.
EU Hungarian Presidency: Taxation Priorities
Belgium handed over the Presidency of the Council of the European Union to Hungary on 1 July 2024. In relation to taxation, Hungary set out in its Presidency Programme that its high priority areas are: fighting tax evasion, ensuring legal certainty for taxpayers, and supporting the international engagement of the European Taxation. The programme refers to use of information, digitalisation and simplification to enhance the competitiveness of European businesses.
On the first day of the Presidency, Hungarian Prime Minister, Viktor Orbán, wrote an opinion piece in the Financial Times opining that to improve competitiveness in the EU and encourage investment, EU Member States should follow the Hungarian competitiveness strategy of maintaining low corporate tax rates, diversifying trade and investment relationships, as well as implementing flat personal income tax and abolishing inheritance tax for close relatives.
OECD Director Discusses Future of Business Taxation
The Oxford University Centre for Business Taxation held its Summer Tax Conference on the topic of “Business Taxation: Where are we and where are we going?” on 21 June in Oxford.
Notably, Manal Corwin, Director of the Centre for Tax Policy at the OECD gave a keynote at the conference. The keynote highlighted that over the last two decades, multilateral cooperation on tax matters has accelerated through OECD initiatives, with 147 member countries in the Inclusive Framework on BEPS and 171 in the Global Forum on Transparency. Ms Corwin emphasised that the BEPS project introduced 15 action points with 4 minimum standards, benefiting developing countries, although challenges remain in accessing and using CbCR data effectively. She noted that Pillar Two (Global Minimum Tax) took effect on January 1, 2024, with 36 jurisdictions implementing it and 20+ planning for 2025 or later. She also discussed that Pillar One (Amount A) is progressing with a nearing completion package. Increasing revenues from various taxes was highlighted as critical for SDG financing needs, and ongoing collaborative international cooperation essential. She stated there are concerns about the current application and template of CbCR, which need further examination.
ECOFIN: Approves Position of the EU on UN Framework Convention on Tax Cooperation
Economic and Finance Ministers met on 16 July 2024 in their ECOFIN configuration, the first under the Hungarian Presidency of the Council of the EU. Ministers agreed the EU position for the second substantive session to negotiate the terms of reference for the United Nations ‘Zero-Draft‘ for a United Nations Framework Convention on International Tax Cooperation.
The position emphasises “that there is a need for greater clarity in the terms of reference on the procedures that will be followed by the intergovernmental negotiating committee”, argues strongly in favour of transparent consensus decision making processes, stresses that no early protocol should be discussed until the negotiations on the Framework Convention are concluded and sets out the importance for “work on the issues are as complementary and coordinated as possible with the ongoing work at other international fora. We should avoid inconsistencies or undermining that work, or inadvertently creating new issues and/or mismatches. Both the commitments in the Framework Convention including any commitments in respect of potential early protocols should avoid conflicting content with topics already under negotiation in other international fora, or those where there are already internationally agreed standards”.
EU Commission July Infringement Package
As part of its July infringement package, the Commission has taken the following infringement decisions:
Anti-Money Laundering Directive – The Commission sent a letter of formal notice to Hungary (INFR(2023)2098) for incorrectly transposing the Anti-Money Laundering Directive, the second concerning the Directive issued to the Member state.
Internal Market Freedoms – The Commission has sent a letter of formal notice to Spain (INFR(2024)4009) concerning restrictions in national rules concerning pension schemes, whereby it allows domestic but not cross-border individual transfers of pension rights in supplementary pension schemes and prohibits contributing to occupational and personal pension schemes beyond the maximum deductible amounts for tax purposes
Free Movement of Capital – The Commission sent a letter of formal notice to the Netherlands (INFR(2024)4017) for failing to extend the Dutch tax levy reduction scheme to foreign investment funds, which are comparable to domestic investment funds.
Freedom to Provide Services – The Commission referred Belgium to the Court of Justice of the European Union (INFR(2015)4212) for maintaining discriminatory conditions for applying the tax exemption of remuneration received from savings deposits.
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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