CFE’s Tax Top 5 August 2016

 

29 August 2016

  1. US criticise European Commission over state aid investigations

On 17 August 2016, the United States` Treasury issued a white paper expressing its concerns over the European Commission´s change of policy in the state aid treatment of tax rulings, warning against the major impact that the recovery of the aid would have on US companies and, where the payments give rise to creditable foreign taxes, on the US budget and ultimately citizens. The paper argues that the Commission’s policy change was unforeseeable by the relevant companies and EU member states, and that reclaiming tax for past periods could create an unfortunate precedent for tax policymakers around the world. Moreover, it explains that the Commission’s approach goes against US tax treaties and international transfer pricing guidelines broadly accepted, and undermines the work done as part of the BEPS project, to which the Treasury expresses its commitment.

The Commission reacted instantly, rejecting any allegation of bias. A European Commission decision on the Irish tax rulings granted to Apple is expected very soon.

  • US Treasury website article, 24 August 2016: EN
  • US Treasury letter to Commission President Juncker, 11 February 2016: EN
  • White paper, 24 August 2016: EN
  1. Advocate-General: Spanish rules on amortisation of goodwill for acquisition of foreign companies are illegal state aid

Already on 28 July 2016, EU Court of Justice´s Advocate-General Wathelet has issued his opinion on the joined cases C-20 and 21/15, World Duty Free Group and Santusa, concluding that the Spanish provisions allowing tax resident companies to amortise the goodwill from the acquisition of certain shareholdings in foreign companies are illegal state aid. The European Commission had come to the same conclusion but lost the appeal case before the EU General Court, and had in turn appealed to the CJEU. According to the Advocate-General, the fact that the regime is open to large number of companies does not change the assessment that it is a selective measure, as it derogates from the normal tax rules, benefiting certain companies over others in a comparable situation.

  • Advocate-General opinion: 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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22 August 2016

  1. UK considers penalties for advisers promoting tax avoidance

On 17 August 2016, the UK tax administration (HMRC) released a discussion document titled: “Strengthening tax avoidance sanctions and deterrents”, proposing a new penalty for enablers of tax avoidance schemes which are defeated by HMRC and changes to the existing penalty legislation for users of such schemes. According to the document, the fine imposed on advisers could be as much as the avoidance scheme helped its users save. Comments are invited until 12 October 2016. HMRC envisages issuing a response document to be released still this year.

Discussion document: EN

  • Euractiv article, 17.8.2016:EN

 

  1. OECD consults on recommendations on hybrid mismatches involving branch structures

On 22 August 2016, the OECD issued a Discussion Draft on countering hybrid mismatches taking the form of branch mismatch structures. The OECD Final Recommendations of October 2015 on BEPS Action 2 suggest domestic rules in either the payer or payee jurisdiction to neutralise the tax effects of hybrid mismatches, specifically targeting payments that give rise to the following outcomes:

  • deduction / no inclusion outcomes, where the payment is deductible under the rules of the payer jurisdiction but not included in the ordinary income of the payee;
  • double deduction outcomes, where the payment triggers two deductions in respect of the same payment; and
  • indirect deduction / no inclusion outcomes, where the income from a deductible payment is set-off by the payee against a deduction under a hybrid mismatch arrangement.

The new Discussion Draft specifically addressing branch structures identifies five basic types of arrangements and sets out recommendations for domestic rules to counter these. Comments have to be submitted by 19 September 2016.

  • Discussion draft: EN
  • Press release: EN
  1. Tax information exchange: bank accounts and beneficial ownership

In 17 August 2016, the UK tax administration (HMRC) released an updated list of 45 countries that have committed to share information on beneficial owners of companies.

The OECD, on 19 August, updated its list of now 83 countries that have signed the Multilateral Competent Authority Agreement on implementing the Common Reporting Standard on exchange of financial account information.

  • HMRC list on beneficial ownership information exchange, 17.8.2016: EN
  • OECD list on the Common Reporting Standard, 19.8.2016: 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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16 August 2016

  1. EU Council lawyers question legality of EP Panama Committee

On 8 August 2016, press reported that EU Council lawyers have produced a non-public opinion criticising that the legal basis for setting up the European Parliament´s “Panama” investigatory Committee has not been clearly defined, and that member states, when applying their own tax laws, are not accountable to the European Parliament. Reportedly, the document which is not an official Council opinion states that member states are not obliged to co-operate with the PANA Committee and could even challenge the Parliament´s decision to set up the Committee.

  • Der Spiegel Article, 8 August 2016: DE

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

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9 August 2016

  1. Commission updates list of cross-border VAT rulings

The European Commission has published an updated list of cross-border VAT rulings. The 18th and most recent ruling of June 2016 relates to storage services for oil products and concerns the Netherlands and Belgium. The cross-border VAT rulings project was set up in 2013 and allows taxpayers to obtain a ruling agreed between two or more participating member states. To date, 18 member states participate in this project.

  • List of rulings: EN
  • List of participating member states and more information on cross-border VAT rulings: EN
  1. No interim relief for businesses who profited from Belgian excess profits regime

On 19 July 2016, the EU General Court refused to grant Belgium interim relief from its obligations to claim tax arrears from multinationals who benefitted from the Belgian “excess profits” tax regime, which the Commission considers to be unlawful state aid, and to inform the Commission of the beneficiaries and the amounts of tax savings resulting from the regime. The substantive appeal is yet to be decided.

  • Court order: EN (available in several EU languages)
  • Case information: Excess profits tax: EN
  1. OECD Global Forum publishes new peer reviews on Switzerland i.a.

On 26 July 2016, the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes has published 10 new country peer reviews. Among these countries is Switzerland which was found to be “largely compliant” with the OECD standard. Ukraine completed the “phase 1” review relating to the legal and regulatory framework, and will move to “phase 2”, reviewing the information exchange practices. To date, the Global Forum has issued 101 ratings to countries having completed both phases.

  • Press release: EN
  • List of all ratings issued : 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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1 August 2016

  1. Commission consults on VAT for e-publications

The European Commission has opened a public consultation on reduced VAT rates for electronically supplied publications. As the Commission points out, since the entering into force of the new VAT place of supply rules for electronic services on 1 January 2015, VAT is levied where the customer is based. As suppliers of e-services are no longer able to benefit from a low VAT rate in their state of establishment, the Commission considers that there is no longer a need to limit tax competition among member states by preventing e-publications from being taxed at the same rate as printed publications. The Commission is thus considering allowing member states more flexibility. Comments can be sent until 19 September 2016.

  • Consultation website: EN (FR DE available)
  1. OECD consults on addressing BEPS involving interest in the banking and insurance sectors

On 28 July 2016, the OECD released for comments a Discussion Draft on a sector-specific approach to banks and insurance companies with regard to BEPS through interest deductions.

In October 2015, the OECD Final Recommendations on BEPS Action 4 set out a common approach including a ‘fixed ratio rule’ which limits an entity’s net interest deductions to a set percentage of its tax-EBITDA and a ‘group ratio rule’ to allow an entity to claim higher net interest deductions, based on a relevant financial ratio of its worldwide group.

That report held that countries could exclude banks and insurance companies from these rules, due to the particularities of these sectors, i.e. the fact that banks and insurance companies typically have net interest income rather than net interest expense, the different role that interest plays in banking and insurance compared with other sectors, and the fact that banking and insurance groups are subject to regulatory capital requirements, leading to a lower overall BEPS risk for these companies.

The Discussion Draft now proposes a specific treatment for this sector, including holding companies, group service companies and companies engaged in non-regulated financial or non-financial activities.

For entities in a banking or insurance group other than banks and insurance companies, the Discussion Draft recommends applying the fixed ratio rule and group ratio rule.

Comments should be submitted by 8 September 2016.

  • Press release: EN
  • Discussion Draft: EN
  • OECD BEPS timetable for planned stakeholder input: EN
  1. CJEU accepts Italian limitations to right to VAT deduction

On 28 July 2016, the EU Court of Justice (CJEU) delivered its judgment in the Italian preliminary ruling case Astone (C-332/15), stating that a member state may generally provide for a limitation period for exercising the right to deduct VAT. National law may also allow the tax authorities to refuse VAT deduction when a person has fraudulently failed to fulfil most of his formal requirements.

  • Judgment: EN (all EU languages)
  1. CJEU: Human rights do not prohibit VAT on lawyers´ services

On 28 July 2016, the CJEU delivered its answer to a request for a preliminary ruling (C-543/14) from the Belgian Constitutional Court concluding that neither the European Convention of Human Rights nor the EU Charter of Fundamental Rights prevent legal services provided by lawyers from being subject to VAT. This is irrespective of whether the recipient of the services qualifies for legal aid. Belgium had been allowed to continue such VAT exemption under a transitionary provision but had abolished the exemption with effect from 2014. Belgian bar associations and Human Rights groups had argued that the price increase resulting from this VAT change hampers access to justice.

  • Judgment: EN (All EU languages)
  • Opinion of Advocate-General Sharpston, 30 March 2016: EN (All EU languages)
  1. State Aid: Commission authorises Belgian alternative income tax regime for diamond traders

On 29 July 2016, the European Commission concluded that planned Belgian corporate tax provisions applicable to the wholesale diamond sector are in line with EU state aid rules, as they do not selectively favour certain companies and therefore involve no state aid within the meaning of EU rules.

The country had requested clearance from the Commission in 2015 for its plans to introduce this specific regime which takes account of the difficulty for the Belgian tax administration to assess and correct the value of diamond inventories through tax audits, and of the fact that diamonds at wholesale level are bought and sold as commodities, which adds to the complexity of tracing individual stones in traders’ accounts. The new Belgian “Diamond Regime” seeks to address this difficulty by introducing a method to calculate the income tax base of diamond traders as a fixed percentage of turnover.

The changes are estimated to lead to a tripling of income tax revenues from diamond traders.

  • Press release: EN (FR DE NL available)
  1. Commission publishes new report on implementation of VAT MOSS rules

On 26 July 2016, the European Commission has published an updated report on the national implementation of the EU MOSS (mini one stop shop) rules that apply to electronic, telecom and broadcasting services to consumers in the EU. Among other, the report covers use and enjoyment rules, VAT rates and B2C invoicing obligations. The update is dated 1 April 2016.

  • MOSS report (Excel file) : EN
  • Overview: EN
  1. Free VAT e-learning modules in 15 languages

The European Commission has made its twelve e-learning modules on the EU VAT rules available in 15 languages.

  • All modules : EN
  1. List of EP “Panama” Committee co-ordinators and co-rapporteurs

On 27 July 2016, the European Parliament´s PANA “Committee of Inquiry on money laundering, tax avoidance and tax evasion” published a list of co-ordinators and co-rapporteurs from the Parliament´s different political groups. On 12 July, the Committee had elected Werner Langen (EPP, Germany) Chairman for a term ending on 8 June 2017. As Vice-Chairs, the Committee elected Ana Gomes (S&D, Portugal), Pirkko Ruohonen-Lerner (ECR, Finland), Fabio De Masi (GUE/NGL, Germany) and Eva Joly (Greens/EFA, France). The next meeting is scheduled for September.

  • List of PANA chairs and co-ordinators: 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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