CFE’s Tax Top 5 January 2018

 

Brussels, 29 January 2018  

EU removes eight countries from the tax ‘blacklist’

The Council of the European Union has removed eight jurisdictions from the EU list of non-cooperative jurisdictions for tax purposes at the ECOFIN Council meeting of 23 January. Following commitments made at high political level to remedy the EU concerns, the EU finance ministers agreed to move these countries to a separate “grey” list, where they will be subjected to close scrutiny: Barbados, Grenada, Republic of Korea, Macao SAR, Mongolia, Panama, Tunisia and the United Arab Emirates. The decision leaves 9 countries on the list of 5 December 2017, initially comprising of 17 jurisdictions.

EU Commissioner Moscovici urged the Member states to publish content of the commitment letters sent to the EU by jurisdictions that are now on the grey list. Moscovici stated that these letters must be made public, so that everyone can judge these commitments. The Commissioner submitted that the credibility of this process depends on such transparency, with the Member states bearing the onus of this responsibility.

Council discusses VAT proposals

The Council of the EU discussed the Commission proposals in the VAT area. The European Commission presented the proposals aimed at simplifying the VAT requirements for small companies and establishing new rules for the VAT rates on 18 January 2017. One is seeking to reform VAT rates and the other to lessen the administrative burden for small enterprises. The proposals are part of the ongoing work being carried out under the 2016 Action Plan aimed to modernise the system of VAT within the EU. The proposals are subsequent to the proposals on the ‘cornerstones of a new definitive single EU VAT area published in October 2017. The proposals will now be transferred to the European Parliament to discuss and the Council to negotiate and finalise.

The proposals are described by the Commission as the final steps in the overhaul of the VAT rules to create a single EU VAT area with the aim of clamping down on VAT fraud.  The new rules seek to give Member States more flexibility to set new VAT rates, and put Member States on more equal footing in terms of derogations.  The current rules only allow Member States to apply reduced VAT rates to two categories, and to apply specific derogations to certain reduced rates. Under the new rules the a simplified list will be created showing the products which will always be subject to the standard rate, as opposed to the current list containing lists of goods and services subject to reduced rates.  All goods currently subject to the standard rate can continue to so. In order to ensure a consistent level of public revenues a weighted average VAT rate of 12% will apply to Member States.

EU Commission publishes 2017 tax policies survey

The European Commission has published the 2017 annual survey that evaluates tax policies of the Member states. With a backdrop of ensuring the fairness and robustness of national tax systems, Member states’ tax policies were surveyed against these priorities: ensuring compliance, reducing inequalities, boosting employment, and facilitating investment. With regards to the fight against tax avoidance and tax evasion, the survey indicates that the cross-border nature of these phenomena necessitate a common response at EU level, and similarly, calls for better a coordination of national tax policies amongst EU Member states.

The survey indicates that tax reforms will help create an investment – friendly environment, which is also dependent on enhancing efficiency of corporate tax systems through introduction of the CCCTB and addressing the debt-equity financing bias. The challenges and opportunities arising from the digitalisation of the economy reflect the way traditional business model operate, resulting in risks for the traditional tax base in absence of modified taxing rules. The results of the survey encourage Member states to simplify and clarify their tax rules in relation to the collaborative economy as a means of harnessing the new innovative business models.

OECD published comments received on the CRS mandatory disclosure rules

The OECD published the comments received on the discussion draft that concerns new rules requiring disclosure of CRS avoidance arrangements and offshore structures. The model rules are intended to target promoters and service providers with a material involvement in the design, marketing or implementation of CRS avoidance arrangements or offshore structures. The proposed rules would require such intermediaries to disclose information on the scheme to their national tax authority. The rules contemplate that information on those schemes (including the identity of any user or beneficial owner) would then be made available to other tax authorities in accordance with the requirements of the applicable information exchange agreement.

CFE submitted comments to this OECD consultation on behalf of the Global Tax Advisers’ Cooperation Forum.

European Parliament Committee vote in support of the Tax Intermediaries Directive

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) supported on 24 January on the Commission proposal for a Council Directive amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements. The ECON Committee opinion was adopted by 50 to 2 with 5 abstentions. The Tax Intermediaries Directive remains one of the priorities of the Bulgarian EU presidency in the area of direct tax and is expected to be at the agenda of the 13 March ECOFIN Council meeting.

 

  Brussels, 22 January 2018

EU Commission publishes new VAT proposals concerning VAT rates

On 18 January the European Commission issued two sets of proposals, one seeking to reform VAT rates and the other to lessen the administrative burden for small enterprises. The proposals are part of the ongoing work being carried out under the 2016 Action plan aimed to modernise the system of VAT within the EU. The proposals are subsequent to the proposals on the ‘cornerstones of a new definitive single EU VAT area published in October 2017.  The proposals will now be transferred to the European Parliament to discuss and the Council to negotiate and finalise.

The proposals are described by the Commission as the final steps in the overhaul of the VAT rules to create a single EU VAT area with the aim of clamping down on VAT fraud.

The new rules seek to give Member States more flexibility to set new VAT rates, and put Member States on more equal footing in terms of derogations.  The current rules only allow Member States to apply reduced VAT rates to two categories, and to apply specific derogations to certain reduced rates. Under the new rules the a simplified list will be created showing the products which will always be subject to the standard rate, as opposed to the current list containing lists of goods and services subject to reduced rates.  All goods currently subject to the standard rate can continue to so. In order to ensure a consistent level of public revenues a weighted average VAT rate of 12% will apply to Member States.

The new proposals seek to increase harmonisation of rates and make it a less restrictive system.  Member states will be allowed to apply:

  • Two separate reduced rates below the standard rate of 15% to 5% at the lowest.
  • One reduced rate lower than the above mentioned reduced rate that can be as low as 0%
  • One VAT exemption (or ‘zero rate’)

For more information please see The European Commission Press Release

EU Commission publish proposals to reduce VAT compliance costs for SMEs

In addition to the proposals on VAT rates the European Commission also published proposals seeking to simplify VAT rules for small enterprises. The proposals seek to introduce new simplified measures regarding invoicing, VAT registration, accounting and returns for SMEs acting both in wholly domestic markets and also cross-border across the EU.

Under the current rules an exemption can be applied to sales of small and medium enterprises (“SMEs”) under a certain threshold which varies across Member States. When the SME exceeds this threshold they cease to avail of the simplification measures. The current rules apply only to domestic sales made of the SME, this creates a distortion against SMEs operating cross-border.

Under the new rules, whilst Member States will still decide the threshold, a limit of 100,000 will apply. SMEs would be entitled to benefit from the exemption not only on domestic sales but also on cross-border sales to other Member States. Member States would be allowed to exempt all small business that qualify for a VAT exemption from obligations relating to identification, invoicing, accounting or returns.

In addition, a new category will be created for SMEs with annual turnover in excess of the 100,000 euro threshold but under 2 million euro under which SMEs would benefit from simplification measures regardless of whether or not they have already been exempted from VAT.

The European Commission Press Release

First ECOFIN of the Bulgarian Presidency to be held in Brussels on 23 January 2018 – Sets out Presidency work programme

The first ECOFIN meeting of the Bulgarian Presidency will take place on Tuesday 23 January 2018. The Agenda contains discussion of the Presidency work programme. On direct tax matters the priorities will be progressing efforts to agree on a proposal for enhanced administrative cooperation and the exchange of information amongst Member States. In addition, work will be progressed on the proposal for a common corporate tax base (CCTB) and the planned proposals on the taxation of the digital economy. From an indirect tax perspective, the priorities are  progressing the work on the establishment of a single VAT are beginning with the establishment of a definitive VAT system and a proposal on enhanced cooperation to prevent VAT fraud.

The first ECOFIN meeting of the Presidency will discuss the above mentioned VAT proposals relating to VAT rates and SMEs.

Amendments to be made to EU List of non-cooperative jurisdictions in tax matters

Top of the taxation agenda at the next ECOFIN meeting is the removal of certain countries from the EU Blacklist of non-cooperative jurisdictions in taxation matters.  These countries have undertaken to satisfy various commitments within a specific timeframe. The countries are Barbados, Grenada, the Republic of Korea, Macao SAR, Mongolia, Panama, Tunisia and the UAE. The Council have stated that they will carefully monitor the implementation of the undertakings.

The list now contains 9 jurisdictions consisting of, American Samoa, Bahrain, Guam, Marshall islands, Namibia, Palau, Saint Lucia, Samoa, and Trinidad and Tobago. In addition, letters will be sent to 8 Caribbean districts requesting that commitments be made to remedy EU concerns, these letters were delayed to allow time to recuperate after tropical storms damaged the Caribbean in September 2017.

 

 

Brussels, 15 January 2018

  1. GTACF responds to OECD consultation on mandatory disclosure rules for CRS avoidance

On behalf of the Global Tax Advisers’ Cooperation Forum (GTACF), the CFE has published an Opinion Statement in response to the OECD consultation draft regarding new tax rules requiring disclosure of Common Reporting Standard (“CRS”) avoidance arrangements and offshore structures.

The Opinion Statement argues that the OECD proposal puts a disproportionate obligation on tax advisers, whereas the broad definitions of the proposal combined with fines could result in penalising of what may be a legitimate arrangement. Furthermore, the part of the OECD proposal related to Offshore Structures seems to be very difficult to implement in practice. Finally, it was argued that better clarity of CRS legislation could supersede the need for mandatory disclosure rules.

The OECD model rules are intended to target promoters and service providers with a material involvement in the design, marketing or implementation of CRS avoidance arrangements or offshore structures. The proposed rules would require such intermediaries to disclose information on the scheme to their national tax authority. The rules contemplate that information on those schemes (including the identity of any user or beneficial owner) would then be made available to other tax authorities in accordance with the requirements of the applicable information exchange agreement.

The Global Tax Advisers’ Cooperation Forum (GTACF) was established in 2014 by CFE Tax Advisers Europe, the Asia-Oceania Tax Consultants Association (AOTCA) and the West African Union of Tax Institutes (WAUTI). The GTACF is a platform for tax advisers to provide a global response to international tax initiatives and to strengthen tax technical and policy cooperation.

  1. EU Commission to hold a public hearing on simplified withholding tax procedures

The European Commission has announced a public hearing on Tuesday 30 January 2018 to discuss the new Code of Conduct on withholding tax (WHT). The Code of Conduct on WHT is an initiative of the European Commission to improve the efficiency of withholding tax procedures, following input from EU Member States’ tax experts. The code is a non-binding document which calls for voluntary commitments by Member States and should be considered as a compilation of approaches to improve the efficiency of current withholding tax (WHT) procedures, in particular for refunds of WHT to which Member States can add or adapt elements to meet national needs or contexts. The EU Member states have not yet adopted the Code.

The public hearing titled ‘Simpler Withholding Tax Procedures for Europe’ will take place on 30 January 2018 at the Albert Borschette Congress Centre in Brussels, rue Froissart 36  (9.30 – 13.00), with introductory remarks by EU Commission vice-president Dombrovski and panel discussions on withholding tax procedures and implementation of the Code of conduct on withholding tax.

  1. OECD published a paper on tax liability, legal remittance responsibility and tax incidence

The OECD published a working paper on the tax incidence, the legal tax liability and remittance responsibility. It is argued that businesses play a key role in tax systems as both payers and remitters. The paper measures these categories across the 24 OECD member countries. This OECD paper highlights that the economic incidence, or burden, of a tax is not necessarily borne by the person on whom the tax is imposed under legal statute, but may be passed on to others in the economy, whether it be owners of capital, workers or consumers. While businesses benefit in certain ways through their involvement in the tax collection process (e.g., the cash flow benefit), their remittance responsibilities also entail compliance costs. The analysis of businesses’ overall role in remitting taxes to governments should include not just their legal tax liabilities, but also the compliance costs incurred on account of their legal remittance responsibilities.

In conclusion, the study finds that whilst the majority of empirical studies of economic incidence focus on the corporate income tax, a wide-ranging review of the literature finds that at least 30% of the corporate income tax is shifted onto labour.

  1. Countries seeking to persuade the EU to be removed from the tax ‘blacklist’

The countries that ended up on the EU tax ‘blacklist’ of non-cooperative jurisdiction are seeking to persuade the European Commission and the Council to be removed in a highly contentious battle. The Financial Times reported that Tunisia has already sought help from France to be removed from the list before President Macron’s visit of the country, claiming that the blacklisting was not in the spirit of the good neighbourly relations in the broader Euro-Mediterranean region. According to diplomats interviewed by the FT, Tunisia’s blacklisting was due to their poor management of deadlines.

South Korea has already reacted to the EU blacklisting, claiming that the European Union was not in a position to impose its tax standards on countries like the Republic of Korea. Among the accusations of a politicised blacklisting process, the Commission has insisted that the process is objective and rewards reform.

The Council of EU (ECOFIN) will discuss further measures for the blacklisted countries later this year.

  1. OECD published an update on the BEPS Inclusive Framework

The OECD published a January update on the participants of the BEPS inclusive framework, that now includes 111 countries. The Inclusive Framework on BEPS brings jurisdictions to collaborate on the implementation of the OECD/ G20 Base Erosion and Profit Shifting (BEPS) package.

Brussels, 08 January 2018

  1. CFE Launches Global Tax Top 5 in conjunction with AOTCA & WAUTI

As part of the ongoing collaboration designed to continue fostering policy cooperation between CFE, Asia-Oceania Tax Consultants Association and West African Union of Tax Institutes a new monthly publication has launched which will deliver updates to Members on international tax developments.

The first edition is available at this LINK

  1. CFE publishes its second EU Tax Policy Report of 2017

The Report contains detailed analysis of the primary policy developments at EU level over the past six months, focusing on taxation of the digital economy in the direct tax field and the new European Commission proposals towards a single VAT area in the indirect tax field.

It also looks at the new European Commission Blacklist, developments in the field of Anti-Money Laundering legislation and the Tax Intermediaries Directive. Finally it summarises the new European Commission decisions in the field of tax and state aid.

The publication is available at this LINK

  1. New Anti-Money Laundering rules came into force on 1 January

On 1 January 2018 new rules became law enabling national tax authorities to have direct access to information on the beneficial owners of companies, trusts and other entities, as well as customer due diligence records of companies. The new rules are contained in the Directive on Administrative              Co-operation (Directive 2011 / 16/ EU).

  1. Italian Parliament approves law imposing tax on digital transactions

The Italian Parliament has approved the Budget, containing a law applying a tax to certain types of digital transactions.  The tax will apply to the provision of services via digital transactions on electronic devices. The tax will be applied on the consideration paid for the transaction excluding VAT. A list of specific transactions falling within the new law will be published in April. The new law will be in force from 1 January 2019.