CFE’s Tax Top 5 – Nov

 

 

 

                                                                                                                                                   

30 November 2015

 

1.      TAXE Committee adopts final report / possible follow-up Committee

 

On 25 November 2015, the European Parliament´s plenary adopted the TAXE Special Committee´s “Report on tax rulings and other measures similar in nature or effect”. The report concludes the original work of the TAXE.

The lengthy report addresses a wide range of tax policy issues and tries to accommodate a wide spectrum of different views: Criticising tax advisers and other professionals for designing and implementing tax avoidance schemes, it also stresses the ambivalent position of some member states complaining about base erosion while preventing better coordination of tax systems. The report remarks that all tax planning should be within the boundaries of the law and applicable treaties and that the best response to aggressive tax planning is good legislation and international coordination.

Tax rulings are recognised as a useful tool for providing legal certainty and reducing risk; recourse to legitimate tax rulings should thus not be discouraged. The MEPs deplore the compromise on exchange of tax rulings information reached in the EU Council on 6 October, which falls short of main elements of the Commission´s original proposal, such as the submission of the exchanged information to the Commission, let alone further demands by the EP: MEPs had suggested to extend the exchange to domestic rulings, with no limits to retroactivity, thus including all rulings which are still valid. Governments granting illegal state aid should be sanctioned; as MEPs point out, the obligation of recipients to pay back benefits granted illegally might even be considered a reward of member states for having taken an illegal decision.

The report encourages the EU to go further than the BEPS solutions in coordination and convergence and the avoidance of harmful tax competition. It also expresses its support for mandatory publication of country by country tax information which should also contain information on tax rulings.

As to transfer pricing, the report identifies the lack of guidance and comparable transactions as the main difficulties in the application of the arm´s length principle and points at the lack of an effective dispute resolution mechanism.

The Parliament favours a mandatory CCCTB, acknowledging the introduction of firstly a CCTB, including a interim regime for temporary cross-border loss offset, as envisaged by the Commission.

 

On tax advisers, the report identifies a conflict of interest for tax firms that advise both private clients and governments on tax planning opportunities, and asks the European Commission to propose a code of conduct at EU level to prevent such conflicts of interest. The report is also critical towards the presence of Big Four representatives in European Commission advisory groups like the Platform for Tax Good Governance and the Joint Transfer Pricing Forum. The CFE commented on the draft report in August 2015.

 

On 26 November 2015, the EP´s Conference of Presidents of political groups decided to set up a temporary committee to follow up on the work done by the TAXE Special Committee. The new committee will last six months. Its precise mandate will be decided on 2 December, while the group leaders have suggested that both scope and composition should be the same as for the TAXE Committee.

 

–        Resolution adopted, 25.11.2015: EN (all EU languages)

–        Press release : Extension of mandate, 26.11.2015: EN

 

 

2.      Netherlands will appeal against state aid decision in Starbucks case

 

On 30 November 2015, media reported that the Netherlands will appeal against the European Commission´s decision of 21 October 2015, ordering the country to claim back taxes worth approximately € 30 million that had been granted to the company through a tax ruling considered illegal state aid.

 

 

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

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23 November 2015

 

1.      Commission asks the Netherlands to amend LOB clause in Double Tax Treaty with Japan

 

On 19 November 2015, the European Commission asked the Netherlands to amend the Limitation on Benefits (LOB) clause in the Dutch-Japanese Tax Treaty for the Avoidance of Double Taxation which entered into force on 1 January 2012. The Commission believes that, on the basis of previous cases such as C-55/00 Gottardo and C-466/98 Open Skies, a member state concluding a treaty with a non-EU/EEA country cannot agree better treatment of companies held by shareholders resident in its own territory than for comparable companies held by shareholders resident elsewhere in the EU/EEA. Similarly, it cannot agree better conditions for companies traded on its own stock exchange than for companies traded on stock exchanges elsewhere in the EU/EEA. Under the current terms of the LOB clause, some of the latter entities suffer higher withholding taxes on dividends, interest and royalties received from Japan than similar companies with Dutch shareholders or whose shares are listed and traded on recognised stock exchanges, which include certain EU and even third-country stock exchanges. The Commission’s request takes the form of a reasoned opinion. The Netherlands have two months time to respond to the Commission´s request.

 

–        Press release : November infringement package: EN (all EU languages)

 

 

2.      Commission asks Spain to end  discrimination of foreign non-profit entities and their contributors

 

On 19 November 2015, the European Commission asked Spain to amend its rules on the taxation of certain income obtained by foreign non-profit entities and of certain contributions to such entities. Currently, Spanish non-profit entities can benefit from certain tax exemptions: Taxpayers who contribute financially to those entities have access to several tax incentives in respect of their contributions. However, this does not apply to foreign non-profit entities that derive comparable income from Spain, but which are established in another EU/EEA state without a branch in Spain.

The Commission considers this to be discriminatory and a restriction of the free movement of capital and has asked Spain to amend its rules. The request takes the form of a reasoned opinion, leaving the country two months to provide the Commission with a satisfactory response.

 

–        Press release : November infringement package: EN (all EU languages)

 

 

3.      Germany asked to amend inheritance tax rules on allowances for widow(er)s living abroad

 

On 19 November 2015, the European Commission asked Germany to amend its inheritance tax rules permitting German tax authorities to grant a special maintenance allowance to surviving spouses or registered partners of a deceased individual only if either one or both of them are tax residents in Germany. Surviving spouses or registered partners who inherit an estate or an investment located in Germany are not entitled to such allowance if both the deceased and the heir are tax resident in another EU member state. The Commission considers this to be an unjustified restriction on the free movement of capital which may deter other EU nationals from investing their capital in German properties and investments. The Commission’s request takes the form of a reasoned opinion. Germany now has two months to respond to the Commission.

 

–         Press release : November infringement package: EN (all EU languages)

 

 

4.      OECD: MAP workload increasing while resolution time remains unchanged

 

On 23 November 2015, the OECD released its updated statistics on mutual agreement procedures (MAPs) in the 2014 reporting period. The aggregate numbers show an increase by 19% of both new cases and pending cases in 2014. Since 2006, new and pending cases have more than doubled to now 2266 and 5423 cases, respectively.

Largest contributors of new cases are Germany, the US, Belgium and France. These four countries also have the highest number of pending cases.

The average cycle times for cases completed, closed or withdrawn remains almost unchanged at 24 months.

More than 90% of OECD member countries’ MAP inventories are cases with other OECD member countries. The statistics also list cases involving “partner economies”, including China.

The lack of efficiency in MAPs was a reason for the OECD to propose new measures on dispute resolution as part of the BEPS project (BEPS Action 14). However, in its final Recommendations on BEPS published on 5 October 2015, the OECD did not manage to reach agreement on including mandatory and binding dispute resolution as a standard. Around 20 countries have nevertheless committed themselves to set up a binding mechanism.

 

–         Press release: EN (FR available)

–         Dedicated website : EN (FR available)

–         BEPS 14 Final report : EN

 

 

5.      TAXE Committee interviews further multinationals and asks for extension of its mandate

 

On 16 November 2015, a group of multinationals was questioned by members of the European Parliament´s TAXE Special Committee about their international tax strategies: Google, Facebook, Amazon, HSBC Bank, Barclays, Philip Morris, IKEA, Coca-Cola, Walt Disney, McDonald’s and Anheuser-Bush InBev followed the Committee´s invitation.

Questions were not limited to tax rulings but also concerned transfer pricing practices more generally, the OECD BEPS Recommendations, mandatory public country-by-country reporting on profits, taxes and subsidies, a common consolidated corporate tax base (CCCTB) and activities in jurisdictions like Bermuda and the Cayman Islands.

The companies had declined a previous invitation to appear before the TAXE Committee, sparking controversy about possibilities to bar them from the EU Transparency (lobby) Register and exclude them from the possibility to meet with MEPs.

CFE President Henk Koller was interviewed by the TAXE Committee on 16 April 2015.

Prior to the meeting, Parliament’s political group coordinators decided to ask the EP Conference of Presidents (the EP President and political group leaders), to propose prolonging the committee’s mandate by six months. The coordinators feel that they need more time to access and analyse documents and also to monitor legislative initiatives in the corporate taxation field.

 

–         Press release: EN (FR available)

–         Video recording, extracts from the hearing, Panel I (Google, Facebook, Amazon, HSBC Bank and Barclays): All EU languages (choose interpretation)

–         Panel II (Philip Morris International, IKEA, Coca-Cola, The Walt Disney Company, McDonald’s and Anheuser-Bush InBev): All EU languages (choose interpretation)

 

 

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

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16 November 2015

 

 

1.      International tax adviser bodies present Model Taxpayer Charter for greater fairness in taxation

 

On 13 November 2015, the CFE, together with two other international professional bodies of tax advisers, together representing more than 500,000 tax advisers worldwide, presented a proposal for a Model Taxpayer Charter.

The overriding purpose of the Charter is to foster a relationship of mutual trust, respect and responsibility between taxpayers and the state in order to reduce the cost of compliance, increase the quality and efficacy of willing compliance, and ensure that all taxpayers are treated equally. The aim is to strike a fair balance between rights and responsibilities to make the Charter acceptable and beneficial to both governments and taxpayers.

The Charter comes with a Final Report concluding a research work which started in 2011.

 

–         Model Taxpayer Charter, Charter and Final Report: EN

–         Press release: EN (DE IT NL versions available)

 

2.      EU finalises negotiations on new tax transparency agreement with Andorra (and other countries)

 

On 4 November 2015, the EU and Andorra initialled the text of a new tax transparency agreement under which Andorra and EU member states will automatically exchange information on the financial accounts of each other’s residents from 2018, in line with the OECD/G20 standard for automatic exchange of information. EU member states will receive the names, addresses, tax identification numbers and dates of birth of their residents with accounts in Andorra, as well as other financial and account balance information. The new agreement should be formally signed in early 2016, following authorisation by the EU Council and the Andorran government. The EU has already signed a similar agreement in May 2015 with Switzerland (IP/15/5043) and in October with Liechtenstein (IP/15/5929) and initialled the text of a similar one with San Marino. Negotiations are also being finalised with Monaco.

 

–         Press release : EN

 

3.      EU Savings Tax Directive repealed

 

On 11 November 2015, the EU Council repealed the EU Savings Tax Directive to avoid an overlap with the EU Administrative Cooperation Directive, which, since the inclusion of the OECD/G20 standard on automatic exchange of bank account information in December 2014, also covers the taxation of private savings income that was previously dealt with by the Savings Tax Directive.  The provisions on automatic exchange will be effective as of 2016. Transitional measures apply for Austria which has been allowed to introduce automatic exchange of information one year later.

 

–         EU Council press release: EN

–         Text adopted: EN

–         Consolidated version of EU Administrative Cooperation Directive: EN

 

4.      State Aid: Commission approves French tax incentives to encourage investment in SMEs

 

On 5 November 2015, the European Commission decided that two schemes planned by France with the aim of facilitating investment in innovative SMEs are in line with the EU state aid rules:

(1)    The wealth tax-SME scheme entails a reduction of 50 % up to a limit of € 18 000 p.a. in wealth tax for individual taxpayers who subscribe to the capital of innovative SMEs by way of mutual funds for innovation or local investment funds.

(2)    The scheme for exceptional depreciation of investment by businesses in SMEs supplements the wealth tax-SME measure. It enables undertakings, whatever their size, to spread the depreciation of investments in SMEs over a period of five years.

Both schemes, of a maximum duration of ten years, concern innovative SMEs which, at the time of the initial investment, have been active in their market for less than ten years following their first commercial sale.

The Commission´s examination showed the aid to be necessary to stimulate investment that would not be provided by the market unprompted, leading to a ‘funding gap’ for certain innovative SMEs. The lack of funding derives from the information asymmetry between investors and entrepreneurs, attributable to the relatively early stage of development and innovative nature of the undertakings concerned.

 

–         Press release: EN (FR available)

 

 

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

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10 November 2015

 

 

1.      Commission presents 2016 work programme / standard VAT declaration to be abandoned

 

On 27 October 2015, the European Commission presented its work programme for 2016.

The text announces “a set of measures to enhance transparency of the corporate tax system and fight tax avoidance, including by implementing international standards on base erosion and profit-shifting”, but contains no clear statement on whether companies should publish country by country tax information. The CCCTB proposal will be replaced by a new (CCTB) proposal mainly aimed at a mandatory tax base.

The Commission will also present an action plan on VAT with initiatives on VAT rates and e-commerce and a Communication setting out a definitive VAT regime. It intends to withdraw a number of VAT proposals, including the standard VAT declaration, where Council discussions have resulted in a compromise that “has fully denatured the substance of the Commission proposal” and has “run counter to simplification, harmonisation and burden reduction objectives” of the original proposal.

 

–         Work Programme (COM(2015)610): EN/DE/FR

–         Dedicated website (links to background documents) : EN

 

2.      OECD publishes 9th edition of Model Tax Convention with Commentaries

 

On 30 October 2015, the OECD published the 9th edition of the full version of the OECD Model Tax Convention on Income and on Capital, containing the text of the 2014 Model Convention as well as the Commentaries, non-member economies positions, OECD Council recommendation, historical notes and a detailed list of conventions between OECD countries and background reports.

 

–         Press release: EN

–         Full version (read-only): EN

–         2014 Model Tax Convention (articles only): EN

 

3.      OECD updates international VAT/GST Guidelines

 

On 6 November 2015, representatives of more than 100 countries present at the OECD Global Forum on VAT in Paris endorsed the updated OECD International VAT/GST Guidelines.

The OECD International VAT/GST Guidelines set standards on VAT-neutrality and on destination-based taxation of cross-border services to businesses (B2B) and final consumers (B2C). The changes include recommended rules for the collection of VAT on cross-border services, including internet downloads, to private consumers (B2C Guidelines). Foreign sellers should be obliged to register and remit tax on sales of e-books, apps, music, videos and other digital goods in the jurisdiction where the final consumer is located. The Guidelines also include a mechanism to ensure the effective collection of VAT by tax authorities from foreign sellers, helping governments to protect VAT revenues and levelling the playing field between domestic and foreign suppliers.

The Guidelines are a response to governments` concerns over the rising volume of cross-border services and online downloads on which no VAT is paid. In 2014, B2C e-commerce sales were estimated to exceed € 1.3 trillion, an increase of nearly 20% from 2013.

 

–         Statement of Outcomes: EN

–         Updated International VAT/GST Guidelines: EN

 

4.      CJEU judgment on VAT classification of a company set up by a public body and its services rendered to this body

 

On 29 October 2015, The EU Court of Justice (CJEU) rendered its judgment in the Portuguese pre­liminary ruling case C-174/14, Saudaçor on the VAT treatment of a company set up and owned by the Azores Autonomous Region and rendering to that Region advisory services on health system matters. While the Court classified the services rendered as economic activity in the meaning of the VAT Directive, it asks the referring court to ascertain whether the company carries out that activity as a public authority. When defining ‘other bodies governed by public law’, reliance cannot be made on the concept of public bodies in the Directive for the award of public procurement contracts.

 

–         Judgment: EN (All EU languages)

 

5.      New single market strategy: Commission keeps an eye on restrictions to tax advisory services like ownership rules or multi-disciplinary activities

 

On 28 October 2015, the European Commission published a Communication titled “Upgrading the Single Market: more opportunities for people and business”. Among other issues such as support of SMEs, the collaborative economy, insolvencies, discrimination of consumers, standardisation, public procurement, IP rights and simplified VAT rules for small e-businesses (already announced in May 2015 in its Digital Single Market Communication), the Commission addresses obstacles to access and exercise of regulated professions.

For 2016, the Commission announced both soft law measures (guidance to member states on how to assess the proportionality of national requirements) but also legislative action in the form of a “services passport initiative” for “key business services” which include accountants. Under the “services passport” regime, cross-border service providers should be able to use harmonised notification forms that contain all information that may be requested by the destination member state. Such proposal would also address legal form and shareholding requirements and restrictions to multidisciplinary activities. Restrictions to ownership of tax firms and multi-professional firms exist in at least 10 EU member states.

The Communication also mentions insurance requirements for cross-border services as a possible target for measures. Such requirements exist for tax advisers in at least 9 EU countries.

 

–         Communication COM(2015)550, 28.10.2015: EN (DE FR available)

–         Press release : EN (All EU languages)

 

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

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02 November 2015

 

1.      TAXE Committee – Special Committee on Tax Rulings votes recommendations

The report – prepared by co-rapporteurs Elisa Ferreira (S&D, PT) and Michael Theurer (ALDE, DE) – was approved by 34 votes to 3, with 7 abstentions.

Multinationals have been invited to attend a Meeting on November 16th, 2015.

With regard to: Country-by-country reporting, Common Corporate Tax Base, Committee members recommend introducing country-by-country reporting for multinational companies on financial data including profits made, taxes paid and subsidies received. They also advocate introducing clear definitions of “economic substance” and other determining factors of corporate tax bills.

Common agreement is also needed on what is allowed in terms of tax rulings and advanced ‘transfer pricing agreements’. The best way to achieve this and put an end to preferential regimes, mismatches between national tax systems and also most of the issues leading to tax base erosion at European level is a compulsory EU wide common consolidated corporate tax base (CCCTB), which should be introduced as soon as possible, they said.

On Transparency: MEPs urge EU member states to systematically share their national rulings and other tax information that has an impact on other member states. They insist that the European Commission should also receive this information, to enable it to play its proper role as competition watchdog to the full.

·         Further information:

–          Draft report and amendments

–          Press release before the vote

–          Press release after the vote

–          Joint press conference by TAXE chair Alain Lamassoure; ECON rapporteur Markus Ferber; TAXE rapporteurs Elisa Ferreira & Michael Theurer

–          Interview with TAXE chairman Alain Lamassoure – “Tax rulings: ‘virtue is coming into fashion'”

–          “Tax rulings: Killing the toxic practices in Europe” – EuroparlTV report

–          Results of roll-call vote

 

2.      EU and Liechtenstein sign new tax transparency agreement

 

On 28 October 2015, the European Union and Liechtenstein signed an agreement on the automatic exchange of financial account information aimed at improving international tax compliance.

The agreement represents an important step in ongoing efforts to clamp down on tax fraud and tax evasion. It upgrades a 2004 agreement that ensured that Liechtenstein applied measures equivalent to those in an EU directive on the taxation of savings income in the form of interest payments.

Under the agreement, the EU and Liechtenstein will automatically exchange information on the financial accounts of each other’s residents, starting in 2017 for information collected in 2016. The aim is to address situations where a taxpayer seeks to hide capital representing income or assets for which tax has not been paid.

 

–          EU- Liechtenstein agreement on the automatic exchange of financial account information

–          Statement by member states relating to the EU-Liechtenstein agreement

–          Press release on 2014 directive on the automatic exchange of information

–          OECD global standard for the automatic exchange of financial account information

 

3.      VAT – Update of the Report on National Rules applied for the use of mini one-stop shop

 

Both the Overview and the Report on National Rules applied for the use of mini one-stop shop have been updated.

 

–    VAT: the report on national rules applied for the use of the mini one-stop shop and the overview have been updated

–     http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/telecom/one-stop-shop-guidelines_en.pdf

 

4.      UK – HMRC launches new Consultation on Patent Box: substantial activities

 

Aim of the consultation: analyze the changes to the design of the UK Patent Box to comply with a new international framework for preferential tax regimes for intellectual property (IP) set out by the Organisation for Economic Co-operation and Development (OECD).

 

Consultation document

  • Publication date: 22 October 2015
  • Closing date for comments: 4 December 2015

Consultation Documents :

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/469969/Patent_Box_substantial_activities.pdf

 

 

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

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