CFE’s Tax Top 5 July 2016

 

             

   25 July 2016

  1. Commission proceeds against Austrian requirement for non-residents to have fiscal representative

On 22 July 2016, the European Commission has asked Austria to change its rules which require non-resident taxpayers to appoint representatives to administer their tax affairs on their behalf. The Commission considers that these rules result in discriminatory treatment on the grounds of nationality and are contrary to the right to free movement of goods, capital, services and people in the TFEU and EEA Treaties. The request takes the form of a reasoned opinion, the second step in EU infringement proceedings. Failing a satisfactory reaction within two months, the Commission may decide to refer the matter to the EU Court of Justice (CJEU).

  • Press release, infringement package (see bottom of page): EN (several EU languages)
  1. CJEU: Belgium may grant more advantageous tax credit treatment to third country investments than to investments in another member state

On 30 June 2016, the CJEU rendered its judgment in the Belgian preliminary ruling case C-176/15, Riskin and Timmermans. According to some Belgian tax treaties signed with third countries, taxes deducted at source in these countries could be credited unconditionally against taxes to be paid in Belgium, while Belgium, in its double tax treaty with Poland, did not grant the same unconditional treatment to taxes levied at source in Poland. Following the opinion of the Advocate-General, the Court accepted this difference in treatment.

  • Judgment: EN (All EU languages)
  • Advocate-General opinion, 12 April 2016: DE (several EU languages available, not EN)
  1. CJEU: German law may limit inheritance tax reduction to cases where the assets had been taxed in Germany before

On 30 June 2016, the CJEU delivered its judgment on the German inheritance tax case Feilen (C-123/15). Under German law, where an estate includes assets that had already been inherited during the ten years prior to the acquisition, and inheritance tax was levied in Germany in respect of that earlier acquisition, there can be a reduction in inheritance tax under certain conditions. Where inheritance tax had been levied in another member state, such reduction is not granted. The Court concluded that the restriction on the movement of capital resulting from this rule is justified by the need to preserve the coherence of the tax system.

  • Judgment: EN (all EU languages)
  • Advocate-General opinion: EN (all EU languages)
  1. Commission asks Austria not to charge VAT on resale rights on works of art

On 22 July 2016, the European Commission has requested Austria to change its rules on the VAT treatment of resale rights on works of art. Resale rights – which give rise to what are commonly known as ‘royalties’ – constitute an intellectual property right which allows an artist to receive a percentage of the sale price of a work of art when it is resold. In Austria, VAT is charged on the resale of works of art. As there is no contractual relationship of any kind between the buyer and the artist, the Commission considers that such a provision is an infringement of the VAT Directive. The CJEU has already required (C-16/93, Tolsma) that there must be a legal relationship between the provider and the recipient for the service to be taxable. The request takes the form of a reasoned opinion. In the absence of a satisfactory reaction within two months, the Commission may decide to refer the matter to the CJEU.

  • Press release, infringement package (see bottom of page): EN (several EU languages)
  1. CJEU accepts Portuguese withholding tax on foreign financial institutions but rejects discriminatory deductions treatment

On 13 July 2016, the CJEU decided in the Portuguese preliminary ruling case Brisal et. al, C-18/15, that the application of a withholding tax at source to the income of non-resident financial institutions, while no such withholding tax is levied on domestic financial institutions, may be justified. However, business expenses directly related to the activity in question must be deductible if such opportunity is given to resident financial institutions.

  • Judgment: EN (All EU languages)
  • Advocate-General Opinion : EN (All EU languages)
  1. CJEU condemns obstacles to repayment of Romanian car tax levied in violation of EU law

On 30 June 2016, the CJEU rendered its judgment in the Romanian preliminary ruling case Câmpean, C-200/14, on conditions for the repayment of taxes levied in violation of EU law, i.e. a pollution tax on motor vehicles. The Court stated that the repayment of this tax may not be made more difficult than repayment of taxes levied in violation of domestic law; neither may a member state impose less favourable conditions on the repayment that relate specifically to that tax, or provide that the repayment is made by instalments over five years and contingent on the availability of funds received in respect of another tax.

  • Judgment: EN (All EU languages)
  • Advocate-General opinion: EN (All EU languages)
  1. OECD advises on reform of Italian tax administration

On 19 July 2016, the OECD published a report containing recommendations on reforming the Italian tax administration, with a focus on increasing voluntary taxpayer compliance and tax administration´s service to taxpayers. Non-compliant taxpayers should receive earlier notices and be sanctioned quicker. The analysis was carried out upon request of the Italian government. Historically, while compliance was low, tax administration´s focus was on audit and control, with many tax debts uncollectable. As the OECD points out, information technology, data analytics and related administrative simplifications can and should be at the centre of these reform efforts.

  • OECD press release: EN
  • OECD Report, January 2016: EN
  • OECD key findings and recommendations, February 2016: EN
  1. OECD overview on initiatives in international tax coordination, transparency and cooperation

For the meeting of the G20 Finance Ministers on 23/24 July in Chengdu/China, the OECD has prepared an overview on the current state of play of its various initiatives aiming at international tax coordination, transparency and cooperation such as BEPS, the Common Reporting Standard in automatic exchange of bank account information and the Global Forum´s peer review process, putting an emphasis on the inclusiveness of the processes, i.e. the involvement of non-OECD countries.

  • Report: EN

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The selection of the remitted material has been prepared by Piergiorgio Valente / Filipa Correia / Rudolf Reibel

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20 July 2016

  1. Commission proposes changing anti-money laundering rules and considers tax planning reporting rules for tax advisers

On 5 July 2016, the European Commission issued a Communication “on further measures to enhance transparency and the fight against tax evasion and avoidance”, explaining two proposed legislative changes, to the Anti-Money Laundering and the Administrative Cooperation Directive, to enhance access to beneficial ownership information, and considering mandatory reporting rules for tax advisers and “promoters” of tax planning schemes. The Communication is a reaction to the “Panama Papers” revelations on secret offshore companies of April 2016.

The legislative changes would require that member states have to allow access to their beneficial ownership registers, set up for anti-money laundering purposes, also to tax authorities.

The Commission also proposes that existing, not only new, accounts should be subject to due diligence controls under anti-money laundering rules, to prevent accounts that are potentially used for illicit activities from escaping detection. Passive companies and trusts should also be subject to greater scrutiny and tighter rules.

Apart from improving access to beneficial ownership information, the Commission will examine how member states could automatically exchange information on beneficial owners of companies and trusts with a potential tax impact.

On mandatory reporting rules for tax advisers and promoters of tax planning schemes, the Commission intends to carry out a public consultation in autumn 2016. It will also work on a possible global approach, going beyond the OECD (BEPS 12) Recommendations of October 2015 which refrained from recommending whether countries should introduce such mandatory disclosure regimes or not.

The Commission is planning to present an EU list of non-cooperative jurisdictions in 2017. It has asked the EU Council´s Code of Conduct Group to consider possible countermeasures against listed jurisdictions.

While the Communication stresses the need to protect whistle-blowers in certain areas including taxation, the Commission will, for the time being, limit itself to monitoring national provisions for protecting whistle-blowers.

  • Commission press release: EN (All EU languages available)
  • Communication COM(2016)451: EN (DE, FR available)
  • Proposed changes to the Administrative Cooperation Directive: EN
  • Proposed changes to the Anti-Money Laundering Directive: EN
  • Commission Questions & Answers: EN
  1. EP adopts report on tax policy, demanding EU-level professional rules for tax advisers

On 6 July 2016, the plenary of the European Parliament adopted the report of its TAXE 2 Special Committee on “tax rulings and other measures similar in nature or effect”. The non-legislative report follows up on the TAXE report of November 2015, commenting on the measures that have or have not been taken since. The range of tax policy issues includes blacklisting of jurisdictions and measures to be applied to those, patent and knowledge boxes and R&D tax regimes, measures aimed at banks, tax advisers and other professionals, the protection of whistle-blowers, and the improvement of the work of the Code of Conduct Group on harmful tax competition.

The CFE has provided input to the process, commenting in particular on the call for measures to prevent conflicts of interests of tax advisers and stressing that sanctions against professionals may only be imposed for proven illegal behaviour.

  • Text adopted: EN (All EU languages)
  • CFE Opinion Statement FC 9 and PAC 2/2016: EN
  1. Council formally adopts Anti-Tax Avoidance Directive

The EU Ecofin Council of 12 July 2016 has formally adopted the Anti-Tax Avoidance Directive (ATAD) on which political agreement had been reached this June.

The member states will have until 31 December 2018 to transpose the Directive into national law, except for the exit taxation rules, for which they will have until 31 December 2019. Member states that have targeted rules that are equally effective to the interest limitation rules may apply them until the OECD reaches agreement on a minimum standard, or until 1 January 2024 at the latest.

  1. EU and Monaco sign exchange of tax information agreement

On 12 July 2016, the EU and Monaco signed a new tax transparency agreement, under which they will automatically exchange information on the financial accounts of each other’s residents from 2018.

Under the new agreement, EU member states will receive the names, addresses, tax identification numbers and dates of birth of their residents with accounts in the Principality, as well as other financial and account balance information. The agreement is in line with the new OECD/G20 “common reporting standard” for the automatic exchange of information. It marks the latest in a series of treaties the EU has signed with Switzerland, Liechtenstein, San Marino and Andorra.

  • Commission press release: EN (FR available)
  • Council press release: EN (all EU languages)
  1. Commission renews mandate of VAT Expert Group

On 5 July 2016, the European Commission has called for applications from organisations or individuals for membership in the VAT Expert Group for the Group´s next 3-year term starting in October 2016. The Group was initially set up in 2012 to advise the Commission on the preparation of VAT legislation and policy initiatives, and on their implementation. CFE has been member of the VAT Expert Group from the beginning. The Group shall now consist of a maximum of 40 members. There will be a member and observer status, the latter being only consultative. Deadline for applications is 14 September 2016.

  • Call for applications: EN
  • Commission decision on the setting-up of the VAT Expert Group: EN
  • List of current members (see Annex): EN
  1. EU VAT Committee publishes guideline on e-services supplied through a telecommunications network, interface or portal

The EU VAT Committee has published its guideline on Art.9a of the VAT Implementing Regulation dealing with e-services supplied through a telecommunications network, an interface or a portal such as a marketplace for applications. The guidance was adopted at the VAT Committee´s meeting on 24 March 2016. The VAT Committee is an expert group consisting of representatives of EU member states and the European Commission. Its guidelines on the application of the VAT Directive are not legally binding, but provide an indication to what degree member states agree on the interpretation of that Directive.

  • List of guidelines (last updated on 1 July 2016), see page 208: EN

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The selection of the remitted material has been prepared by Piergiorgio Valente / Filipa Correia / Rudolf Reibel

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    11 July 2016

  1. OECD – BEPS Action 7: New Discussion Draft released

On July 4 2016, the OECD released a discussion draft on Action 7 (“preventing artificial avoidance of PE

status”) of the BEPS Action Plan in order to develop additional Guidance on the issue of allocation of profits

to permanent establishments (PEs).

This discussion draft includes selected questions on the allocation of profits on the following cases:

  1. a)  dependent agent PEs, including those created through commissionaire and similar arrangements; and
  2. b) warehouses as fixed places of business PEs.

The deadline to provide comments on the Discussion Draft was set for September 5, 2016.

A Public Consultation is scheduled for October 11 and 12, 2016 in Paris.

Discussion Draft: Link

  1. OECD – BEPS Actions 8 – 10: New Discussion Draft Released

On July 4, 2016, the OECD released a new Discussion Draft on Actions 8 – 10 (“assure that transfer pricing

outcomes are in line with value creation”) of the BEPS Action Plan.

Public comments are invited on this Discussion Draft which deals with the clarification on the guidance on

the transactional profit split method.

In particular, the Discussion Draft develops two different methodologies to splitting profits: transactional

profit splits of actual profits and transactional profit splits of anticipated profits.

The Document also proposes further draft guidance on the correct application of transactional profit split

methods.

Deadline to provide Comments: September 5, 2016.

A Public Consultation is scheduled for October 11, 12, 2016 in Paris.

Discussion Draft: Link

  1. OECD BEPS – Public review of BEPS Conforming Changes to Chapter IX of the OECD Transfer

Pricing Guidelines (Transfer Pricing Aspects of Business Restructurings)

On July 4, 2016 the OECD released a document for Public Review inviting interested stakeholders to review

the conforming changes to Chapter IX of the OECD Transfer Pricing Guidelines, “Transfer Pricing Aspects of

Business Restructurings”.

The conforming changes to Chapter IX found in the document have been agreed by Working Party No. 6 of

the Committee on Fiscal Affairs and they will be included in a new internal version of the Guidelines which

are expected to be finalized by the end of 2016.

The main purpose of the changes carried out is to:

  1. align the existing general guidance in Chapter IX on risk and recognition of controlled transactions with

the guidance contained in the revised Chapter I resulting from the 2015 BEPS Reports;

  1. refine the existing guidance in Chapter IX with the updates carried out to the rest of the Guidelines in

connection with the 2015 BEPS Reports.

Deadline to provide Comments: August 16, 2016.

Document for Public Review: Link

  1. EU – TAXE II Committee issues a Study on Tax Challenges of the Digital Economy

The document was prepared by the Policy Department A for the TAXE II Committee, and provides an

analysis on the tax challenges of the digital economy in light of the OECD BEPS (Base Erosion and Profit

Shifting) Deliverables and Project.

The paper issues policy recommendations for further tax reforms in order to tackle tax avoidance and

Harmful competition.

Report: Link

  1. BEPS – Country by Country Reporting implementation: US

On June 29, 2016, the IRS released its final regulations (TD 9773) on annual country-by-country (CbC)

reporting.

New Provisions: Link

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The selection of the remitted material has been prepared by Piergiorgio Valente / Filipa Correia / Karima Baakil

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    04 July 2016

  1. BEPS – OECD releases further Guidance on the implementation of Country by Country Reporting

The Guidance released on June 29 provides:

  • Transitional filing options for MNEs that voluntarily file in the Parent jurisdiction;
  • Guidance on the application of CbC reporting to investment funds;
  • Guidance on the application of CbC reporting to partnerships; and
  • The impact of exchange rate fluctuations on the agreed EUR 750 million filing threshold for MNE groups.

        Guidance: Link

  1. BEPS – New Inclusive Framework

On June 30 the OECD representatives of more than 80 countries and jurisdictions have gathered in Kyoto for

the first meeting of the new inclusive framework to tackle Base Erosion and Profit Shifting.

Thirty-six countries and jurisdictions have already formally joined the new inclusive framework on BEPS, and

have committed to implement the BEPS package, bringing to 82 the total number of countries and   

        jurisdictions participating on an equal footing in the Project. The other 21 countries and jurisdictions attending

the Kyoto meeting are expected to join the inclusive framework in the coming months.

In addition, the Multilateral Competent Authority agreement for the automatic exchange of Country-by-

Country reports was signed by Argentina, Curacao, Georgia, Korea, and Uruguay during the meeting

(signatories number is now: 44 countries).

Press Release: Link

  1. OECD – Multilateral Convention on Mutual Administrative Assistance in Tax Matters

On June 28, the Dominican Republic and Nauru become the 97th and 98th jurisdictions to join the Multilateral   

        Convention on Mutual Administrative Assistance in Tax Matters becoming the 97th and 98th jurisdictions to

join the Convention.

Nauru’s instrument of ratification was deposited, as such, the Convention will enter into force for Nauru on

the  1st of October 2016.

Press Release: Link

  1. EU – LuxLeaks whistleblowers get suspended jail terms

Two whistleblowers,  former employees of PricewaterhouseCoopers, (Antoine Deltour and Raphaël Halet)

involved in the LuxLeaks tax scandal were fined (€1,500 and €1,000) and given suspended jail sentences (12-

and nine-month suspended sentences respectively) for leaking documents that exposed tax breaks for major

international companies being given by the Luxembourg government.

Both were charged with theft and breaking professional secrecy and trade secrecy rules by the Luxembourg

prosecutor’s office. The third defendant, Edouard Perrin, a French journalist was acquitted and charged as an

accomplice.

Press Release: Link

  1. CFE Fiscal Committee issues an Overview on the Activities carried out in 2016 (Jan – May)

The Fiscal Committee prepared a new Opinion (attached) summarizing the main activities carried out in 2016

(Jan – May).

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The selection of the remitted material has been prepared by Piergiorgio Valente / Filipa Correia / Rudolf Reibel

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