CFE’s Tax Top 5 – November 2017

   Brussels, 20 November 2017

  1. European Commission publishes preliminary State Aid decision on U.K. CFC regime.

The European Commission published its Preliminary State Aid Decision as part of the investigation into the U.K.’s Controlled Foreign Company (CFC) legislation and whether it is in contravention of EU state aid rules. The investigation was announced on 26 October 2017.

Specifically, the European Commission is looking into UK’s group financing exemption for certain financing income (i.e. loan interest payments) that are exempt from the remit of the CFC rules.

The Commission investigation focuses on a legislative scheme regarding a Group Financing Exemption introduced by the UK’s Finance Act 2012 and effective from 1 January 2013. This scheme exempts from UK corporate taxation financing income received by an off-shore subsidiary from another foreign group company, which allows a UK based multinational company to provide for financing to a CFC group member via an offshore shell without taxing this income. In the absence of the Group Financing Exemption, interest income paid on loans to subsidiaries when that interest is paid into an off-shore jurisdiction would have been subject to tax.

The UK would ordinarily be able to tax such interest income, as the CFC rules would catch it by disregarding the offshore company and allocating such income to the UK parent. This possibility provided with the UK Group Financing Exemption, according to the EU Commission, is providing for selective advantage to multinational group companies when compared with other UK resident entities that do not operate cross-border. According to ECJ settled case-law, national anti-abuse provisions must not be selective and must be compliant with the State aid rules still. The Commission rely on the interpretation of the UK general corporate tax as reference system, under which standalone and multinational group companies are in a comparable factual and legal situation for purposes of corporate tax as per the Paint-Graphos case-law.

  1. The 10th Meeting of the OECD Global Forum on Transparency & Exchange of Information for tax purposes takes place in Cameroon

The Global Forum, which now has 147 members adopted the first report on the status of implementation of the AEOI Standard. The Report follows the beginning of exchanges of information between 50 jurisdictions under the new standard on automatic exchange of information, with a further 53 countries set to commence exchanges in September 2018. The principle of annual implementation reports and peer reviews were agreed at the meeting to ensure effective implementation and a level playing field.

Peer reviews of Curaco, Denmark, India, Isle of Man, Italy and Jersey were also published at the meeting, bringing to 16 the number of second round peer reviews carried out by the Forum based on its international standard of transparency and exchange of financial account information on request.

  1. Commissioner Pierre Moscovici addresses European Parliament

Commissioner Moscovici addressed the plenary hearing of the European Parliament on 14 November at Strasburg to address the information on tax avoidance schemes which has recently come to light as part of the so-called ‘Paradise Papers’. In his address he highlighted a number of legislation initiatives of the European Commission aimed at clamping down on aggressive tax planning practices. Commission Moscovici identified the following legislative initiatives as being imperative in this regard:

  • The Tax Intermediaries Directive, which he hopes will be adopted within 6 months;
  • The EU Blacklist of tax havens, which he urged Member States to agree at the next meeting of ECOFIN on 5 December;
  • The CCCTB proposals which would ensure a convergence of tax rules limiting opportunity for aggressive tax planning practices. He urged for more speedy discussions in relation to this and encouraged agreement in 2018.

The Commissioner also urged for progress on the Commission’s proposals to publicly disclose beneficial ownership of companies under the Money Laundering Directive and for mandatory country-by-country public reporting.

  1. Jersey assessing introduction of a substance rule in light of Paradise Papers investigation

On November 8, following the release of the Paradise Papers, the government of Jersey stated that it intended to consider the introduction of a “substance test” in the context of foreign registered companies claiming tax residency in the State. It further stated that it does not want abusive tax avoidance schemes operating in Jersey.

  1. CFE Conference ‘Tax is Going Digital- Are Tax Advisers Ready?’ on 24 November in Prague, Czech Republic

CFE, the European association of tax advisers, and the Czech Chamber of Tax Advisers (KDPČR) are delighted to invite you to the 10th Professional Affairs Conference ‘Tax is Going Digital – Are Tax Advisers Ready?’.

We hope that you will join us on 24 November 2017 in Prague, the Czech Republic as we discuss digitalisation of tax services, opportunities for the tax profession arising therefrom and the evolution of artificial intelligence. Please follow this link for further information on the programme, registration, accommodation and social programme details.

Brussels, 13 November 2017

  1. ECOFIN Council Conclusions of 7 November- no agreement on VAT collection on digital services

The Council of the EU sitting as ECOFIN discussed proposals aimed at improving the VAT collection on digital services and facilitating conduct of electronic commerce and online businesses, but failed to reach agreement on the proposals. The Estonian EU presidency confirmed that the issue would be revisited in December.

EU finance ministers adopted conclusions on EU’s financial commitments to climate change, allocating EUR 20.2 billion from Member states to help developing countries reduce their greenhouse emissions and cope with the impact of climate change.

  1. EU blacklist to include 53 non-cooperative jurisdictions

The EU blacklist of non-cooperative jurisdictions for tax purposes will include 53 jurisdictions (countries and territories) that could be subject to sanctions if they did not cooperate with the European Commission in changing their tax rules. The European Commission sent inquiry letters to 92 jurisdictions earlier this year, on basis of criteria set out by the Council of EU back in November 2016. These criteria centre on the notion of fairness of tax rules: countries and territories should refrain from offering preferential tax measures and arrangements that facilitate offshore profit shifting for tax avoidance purposes. The EU blacklist is forthcoming this December.

EU Commissioner Moscovici expects the European list of non-cooperative jurisdictions to be more ambitious than the existing one drawn by the OECD, which includes one country: Trinidad and Tobago.

  1. EESC published Opinion on the taxation of the collaborative economy

The European Economic and Social Committee (“EESC”) published an analysis of the various tax policy choices that are incumbent on the growth of the collaborative economy. This Opinion (available in all EU languages) was commissioned by the Estonian EU presidency.

At the outset, the Opinion clearly distinguishes between the digitalised economy, the collaborative (‘gig’) economy and the platform economy on basis of their differing scope and degree of inclusiveness. The EESC considers important to assess the policy choices related to the taxation of the collaborative economy in its entirety, rather than aligning such policy options fully with the ones made about the taxation of the digitalised economy.

It is suggested in this Opinion that the European Union must not miss out on an opportunity provided by the collaborative economy to bring and facilitate innovation. The EESC stresses the extent to which such policy choices bear on the systemic relations between business, investment and markets. It is further suggested that the collaborative economy should not be ring-fenced from the rest of the economy. Albeit calling for a unified European approach regarding the taxation of the digital economy in general, the EESC Opinion stresses that the existing framework of tax rules and principles should be adapted to new situations arising in the collaborative economy, in order to ensure consistent treatment of all economic operators, irrespective of the format of their activities, digital or traditional. Finally, the Commission and Member States are urged to work together in case of adoption of overall legal framework for the collaborative economy in order to achieve adaptation and standardisation of the tax rules that apply to these new forms of economic activity.

  1. New EU measures published for more efficient cross-border tax debts recovery

The European Commission published in Official Journal of the EU the technical modifications to Regulation 1189/2011 which aim to facilitate cross-border recovery of tax debts.

On 16 March 2010 the Council of the EU adopted Directive 2010/24/EU concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures. Subsequently, on 18 November 2011, the EU Commission adopted implementing Regulation 1189/2011 laying down detailed rules in relation to certain provisions of this Directive.

Practical arrangements for the implementation of the EU Council Directive on tax recovery assistance (Directive 2010/24/EU) are laid down in Commission Implementing Regulation (EU) No 1189/2011 of 18 November 2011. This implementing Regulation of 2011 has been amended by Commission implementing Regulation 2017/1966 of 27 October 2017.

  1. CFE Conference ‘Tax is Going Digital- Are Tax Advisers Ready?’ on 24 November in Prague, Czech Republic

CFE, the European association of tax advisers, and the Czech Chamber of Tax Advisers (KDPČR) are delighted to invite you to the 10th Professional Affairs Conference ‘Tax is Going Digital – Are Tax Advisers Ready?’.

We hope that you will join us on 24 November 2017 in Prague, the Czech Republic as we discuss digitalisation of tax services, opportunities for the tax profession arising therefrom and the evolution of artificial intelligence. Please follow this link for further information on the programme, registration, accommodation and social programme details.

Brussels, 6 November 2017

  1. EU Commission launches public consultation on fair taxation of the digital economy

On 26 October 2017 the European Commission published a Questionnaire on the fair taxation of the digital economy. The objective of the questionnaire is to obtain input from interested stakeholders on how best to define an approach to the taxation of the digital economy, which is based on fairer and more effective taxation and create a level playing field across businesses.

The Questionnaire follows the publication of the Communication on “A Fair and Efficient Tax System in the European Union for the Digital Single Market” on 21 September containing proposed short-term solutions for more effective taxation of the digital economy.

  1. OECD publishes responses received to public consultation the challenges of the digitalised economy

The OECD has published the responses received to the public consultation of the challenges of the digitalised economy. As part of the ongoing work being carried out by the OECD Taskforce on the Digital Economy a public consultation was held on 1 November at University of California, Berkeley. The public discussion examined in particular:

Digitalisation, Business Models & Value Creation

  • This session discussed the impact of digitalisation on business models with a particular focus on structures of business models, data collection and analysis and the role of user-engagement and customer participation.

BEPS Implementation

  • This panel discussed the implementation of BEPS and specifically the impact of BEPS measures on highly digitalised business models.
  • It also discussed the implementation and impact of new guidance and mechanisms to apply VAT/GST on foreign suppliers of intangible services.

Policy Challenges and Tax options

  • This panel assessed the range of potential tax options available to deal with the direct tax challenges of the digital economy.

The Discussions are available online at this LINK

  1. Paradise Papers Published

The International Consortium of Investigative Journalists (“ICIJ”) published a fresh batch of leaked documents related to off-shore activities of individuals and companies named “Paradise Leaks”. The disclosures reportedly contain information related to tax avoidance schemes employed by Apple, Nike and Facebook, fund flows into off-shore structures, use of off-shore trusts for tax avoidance purposes, companies incorporated in secrecy jurisdictions, entities that hold assets and investments in shares and stocks as well as private individuals shielding their identity. 14.4 million files were obtained by the German newspaper Süddeutsche Zeitung, and subsequently shared with ICIJ. The ‘Paradise Papers’ leaks come as world’s second biggest data leak with 1.4 TB of data, preceded only by the “Panama Papers” in 2016 amounting to 2.6 TB. The Lux Leaks files of 2014 amounted to 4.4 GB of tax rulings from Luxembourg.

The data reveal investment payments from the private estate of Queen Elizabeth II into a Cayman Islands fund, off-shore dealings of President Donald Trump cabinet members and donors, Russian portfolio investments in Facebook, Twitter and tech start-ups by individuals close to President Vladimir Putin, as well as a tax avoiding Cayman Islands trust managed by an aide to the Canadian Prime Minister Justin Trudeau.

Following the publications of previous leaked documents, new transparency initiatives at global and EU level have been pursued, including formation of EU Parliament’s Committees of Inquiry, new beneficial ownership transparency requirements. Additionally, at EU level, the EU Commission commenced State aid investigations into multinational companies’ tax arrangements with EU governments on basis of ‘market information’ contained in the LuxLeaks revelations.

  1. ECOFIN Meeting 7 November

EU Finance Ministers will meet in Brussels tomorrow, 7 November. Top of the tax agenda is a discussion on the new EU proposals to reform the EU VAT system published by the European Commission in October. It is hoped that agreement can be reached on these proposals.

As a result of the so-called Paradise Papers the Ministers will now also discuss the proposed EU Blacklist of non-cooperative jurisdictions.

  1. November tax events and seminars

CFE Professional Affairs Conference on 24 November in Prague, Czech Republic

CFE, the European association of tax advisers, and the Czech Chamber of Tax Advisers (KDPCR) are delighted to invite you to the 10th Professional Affairs Conference ‘Tax is Going Digital – Are Tax Advisers Ready?We hope that you will join us on 24 November 2017 in Prague, the Czech Republic as we discuss digitalisation of tax services, opportunities for the tax profession arising therefrom and the evolution of artificial intelligence.

Please follow this link for further information on the programme, registration, accommodation and social programme details.

Accountancy Europe is hosting ATO seminar on GST on 13 November

Accountancy Europe is hosting on 13 November in Brussels the Australian Tax Office (ATO) information seminar on the goods and services tax (GST) law changes that apply from 1 July 2018 to low value imported goods sold to consumers in Australia.  The Australian Taxation Office (ATO) is organising a series of business information seminars in key locations around the world. The international sessions are designed for online marketplaces, merchants and re-deliverers that supply these goods, and also for advisers and tax professionals.

Please follow this link for registration and further information on this information seminar.