CFE’s Tax Top 5 – November 2016

28 November 2016

OECD multilateral convention to amend more than 2000 tax treaties 

The OECD announced that on 24 November 2016, the members of the ad hoc Group on the Multilateral Instrument implementing BEPS measures concluded the negotiations on the text of the Multilateral Convention.  More than 100 jurisdictions signed the multilateral instrument, including most European countries, the United States, Australia, Canada, Brazil, China, Russia, and India, to name but a few.

The Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS is intended to transpose results from the OECD/G20 BEPS Project into more than 2 000 treaties worldwide. It will implement minimum standards to counter treaty abuse and to improve dispute resolution mechanisms while providing flexibility to accommodate specific tax treaty elements.

The instrument will amend existing double taxation treaties, potentially over 2000, and it offers flexibility to signatories to opt out from provisions which do not reflect BEPS minimum standard. It is envisaged that the convention will enter into force after five countries have ratified it. The convention shall be effective for a specific double tax treaty after parties to that treaty have ratified the instrument, and after a certain period has passed to ensure legal certainty.

According to OECD’s timeline, the signing ceremony is expected to take place in June 2017 in Paris.

Read here the explanatory statement and the text of the multilateral convention.

UK Chancellor announces penalties for tax avoidance enablers in Autumn Statement

The UK Chancellor of Exchequer announced in the Autumn Statement that the UK Government is committed to go forward with the plan to introduce financial penalties for the tax advisers who act as promoters or enablers of aggressive tax avoidance schemes.  According to the UK government, strengthening tax avoidance sanctions would provide a strong deterrent to those enabling tax avoidance. The UK government plans a new penalty for any person who has enabled an entity to use a tax avoidance arrangement that is later defeated by HMRC.

This new regime follows an extensive consultation on ‘Strengthening tax avoidance sanctions and deterrents which ran from 17 August 2016 until 12 October 2016.  The UK professional associations have recently amended the Professional Codes of Conduct in relation to tax advice.

Read the Autumn Statement here,  and the concerns related to these developments expressed by the ICAEW Tax Faculty- statement 

European Commission opens infringement procedure for breach of Services Directive 

The European Commission opened infringement procedure against 9 member states for maintaining national rules that include excessive and unjustified obstacles to the freedom to provide cross-border services in the EU internal market.

The Commission found that certain service providers faced unjustified restrictions and requirements which were deemed to be contrary to the Services Directive (Directive 2006/123/EC). The November infringement package includes i.e. a reasoned opinion against Belgium for introducing restrictions on accountants. According to the provisions of the Services Directive, member states may not introduce obstacles that hinder the freedom of establishment and cross-border provision of services across the EU.

According to Elżbieta Bieńkowska, EU Internal Market Commissioner: “Services account for more than two thirds of economic activity and jobs in the EU Single Market. By making it easier for services providers to work across the EU, we generate new job opportunities, greater choice and lower prices for consumers. Together with the Member States, we need to remove the many unjustified barriers that still prevent professionals and companies from providing their services in different Member States. That is why I have made enforcement of already agreed EU laws a key priority of our Single Market Strategy.”

 

Please follow this link for the European Commission MEMO on the November infringement package.

Panama commissions international panel to improve financial transparency

Following the ‘Panama Papers’ revelations and the leak of 11.5 million documents from a prominent law-firm, Panama has embarked on an ambitious project to regain its international reputation. The government of Panama plans to commission international committee of experts that would recommend a modality of improving transparency in Panama’s financial industry.

According to the media reporting on these developments, the Government of Panama is hoping that the findings of the international committee will be shared with the international community, potentially resulting in common action to improve transparency among the legal and financial industry across the world.                                             

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

Aleksandar Ivanovski / Mary Dineen

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22 November 2016

  1. European Commission hosts joint conference with IMF to coincide with publication of new report on the performance of EU Member States’ tax systems 

The European Commission published a new report examining how tax systems of the Member States are performing against the taxation priorities of efficiency and fairness.  The report is predicated on the notion that the two highest priorities of European citizens are economic stability and social justice and the report seeks to address how taxation systems can achieve these two inter-connected objectives.

The report contains a summary of recent reforms in Member States which illustrate how decision makers are seeking to achieve the two objectives. It also presents the elements of the design and governance of member State tax systems which influence the key characteristics of efficiency and fairness. Finally, it sets out and explains the key policy priorities for the next European Semester cycle.

A copy of the report is available here – Link

In conjunction with the publication of the report, a 2-day conference was held in Brussels on 17 and 18 November.

A Link to the seminar contents is available here – Link

  1. EU Code of Conduct Group (Business Taxation) publishes report of work under Slovakian presidency

The Code of Conduct Group (Business Taxation) on harmful tax competition has published its report on the clarification of the third and fourth criteria carried out by the relevant sub-group of the Code of Conduct.

The third criterion is “whether advantages are available without any real economic substance being generated in the Member States concerned”.  The code of conduct sub-group was tasked with developing guidelines in line with the OECD BEPS Action 5 (Harmful tax practices). The report states that in relation to patent box regimes it will substantiate the principles of the modified nexus approach, as described in the OECD BEPS Action 5 report.

This comes subsequent to the Code of Conduct Group’s notification that France’s failure to revise its patent box regime in line with the modified nexus approach is in contravention of Ecofin Council conclusions of 9 December 2014 and 8 December 2015.

The report also identified the following regimes as being in need of review:

  • Holding company regimes
  • Banking and insurance regimes
  • Fund management regimes
  • Financing and leasing regimes
  • Headquarters regimes
  • Distribution and service centre regimes
  • Other regimes that may be identified by the group.

In relation to the fourth criterion pertaining to transfer pricing the report recommends that the Commission consider reviewing the EU Code of Conduct on transfer pricing documentation by the end of 2019. It states that this should be carried our through the joint Transfer Pricing Forum Expert Group.

The report is available here – Link

  1. Advocate General Kokott finds Belgium’s fairness tax incompatible with the EU Parent-Subsidiary Directive

A 2013 Belgian law imposes a “fairness tax” on domestic companies and foreign companies that have permanent establishments in Belgium in circumstances where the company distributes profits but pays little corporation tax in that same taxable period.

Proceedings were issued by a taxpayer before the Belgian constitutional court arguing that the law contravened the freedom of establishment and the EU parent-subsidiary directive. The Belgian court referred the questions to the European Court of Justice.

The impugned law makes no distinction as to whether gross dividends used to calculate the fairness tax include dividends received by the distributing company. Therefore, if the company distributes profits through a distribution of dividends which the company itself received, the law could subject a company to a tax burden in excess of that allowed in article 4 (3) of the Parent-Subsidiary directive. It therefore contravened the Directive.

However, AG Kokott held that the law is not in contravention of the freedom of establishment.

A copy of the Opinions is available at this link – Link

  1. EU Finance Ministers agree on improvements to EU VAT Rules at November ECOFIN Meeting

In response to the VAT Action Plan published earlier this year the Council adopted guiding conclusions for how best to improve VAT rules relating to cross-border transactions. More specifically, the conclusions relate to:

  • the VAT identification number as an additional condition for application of an exemption in respect of an intra-EU supply;
  • improving the quality and reliability of data used in the EU’s VAT information exchange system in order to better tackle VAT fraud;
  • determining the VAT treatment of the transaction chain, including ‘triangular transactions’ (where goods are shipped from a member state other than that of the supplier and the customer);
  • simplifying rules for call-off stock (where goods are sent to a customer’s storage facility in another member state);
  • work concerning the exemption from VAT of intra-EU supplies.

A copy of the conclusions is available at this link – Link

  1. CFE PAC Conference in Ljubljana – Follow up

Judging by the comments shared with the CFE team, our annual Professional Affairs conference in Ljubljana has been incredibly successful. The speakers discussed a very topical subject; the possible introduction of effective disincentives for tax advisers involved in aggressive tax planning, as well as the possibility of regulation of the tax profession in certain countries. Panel one discussants brought an international perspective of the issue, while panel two speakers advanced a regional position on the regulation of the tax profession. The CFE team would like to thank all the speakers on their contributions towards a successful conference. Many thanks to our Slovenian member organisation ZDSS for the warm welcome.

Link to the speakers’ presentations

Link to conference pictures

Link to our Twitter account for the related tweets: https://twitter.com/cfe_brussels

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

Aleksandar Ivanovski / Mary Dineen

Follow CFE on Linked in  and Twitter 

14 November 2016

  1. European Commission opens public consultation on introducing effective disincentives for tax advisors involved in tax evasion and tax avoidance 

European Commission published on 10 November 2016 a public consultation on the initiative to introduce effective disincentives for tax advisors and intermediaries for potentially aggressive tax planning schemes.

According to the European Commission, the consultation aims to gather views on whether there is a need for EU action aimed at introducing more effective disincentives for intermediaries or tax payers engaged in advice that facilitate tax evasion and tax avoidance and, in case there is, how should such rules be designed.

Reinhard Biebel from the European Commission, John Peterson from OECD and Ray McCann, Vice-President of the CIOT (formerly HM Revenue and Customs) will be speaking at the CFE PAC Conference to be held in Ljubljana next week, and the new developments will be subject of questions and discussion with the audience. You will find more information on our Professional Affairs Conference under item ‘5’ below.

Please follow this link for the European Commission public consultation : EN

  1. Council agrees on EU blacklist of non-cooperative jurisdictions

The Economic and Financial Affairs Council (ECOFIN) adopted on 8 November 2016, the criteria and established a process for introducing an EU list of non-cooperative jurisdictions in taxation. ECOFIN ministers agreed on Council conclusions, which will cover the criteria for listing third country non-cooperative jurisdictions, and also adopted guidance on the process for selecting and screening jurisdictions.

According to the Council of the EU, screening for non-cooperative jurisdictions in taxation matters is due to be completed by September 2017. Pursuant to present timeline, it is expected that the Council will adopt the blacklist of non-cooperative jurisdictions by end of 2017, regularly updating the list after.

To read Council conclusions on non-cooperative jurisdictions, please follow this link: EN

  1. Council agrees to grant access to beneficial ownership information to tax authorities

ECOFIN Council agreed to extend the access to beneficial ownership information requested pursuant to EU’s anti-money laundering legislation. The Directive is amending Directive 2011/16/EU as regards access to anti money-laundering information by tax authorities. It would allow member states’ tax authorities to access information on beneficial ownership of intermediary entities and other relevant client due diligence information, which will help them in the proper monitoring of the application of rules on automatic exchange of tax information.

The directive will apply from 1 January 2018, subject to adoption in Council and following consultation with the European Parliament. ECON Committee of the European Parliament approved the Directive unanimously on 10 November, and it is expected to be put to a plenary vote in November.

  1. CFE encourages members to participate in OECD tax certainty questionnaire

CFE is encouraging member organisations to participate in the OECD Survey on tax certainty. The survey is available online and should take 15-20 minutes to complete.

The Survey has been launched in response to the OECD receiving a mandate from the G20 leaders and Finance Ministers to work on solutions to support certainty in the tax system with the aim of promoting investment, trade and balanced growth. The survey builds on responses gathered by the European Tax Policy Forum (ETPF) and the Oxford University Centre for Business Taxation (OUCBT) in early 2016.

The survey will run from 18 October to 16 December 2016. It represents an opportunity to identify specific tax policy issues for the future G20 tax agenda and to contribute to creating practical and concrete solutions for a more certain and predictable tax system. The results of the survey will be published and presented to the G20 leaders in 2017.

The Business Survey is available at the following link:  link

  1. Last call for our PAC Conference in Ljubljana

This year’s Professional Affairs Conference co-organised with our Slovenian member organisation brings together a prominent line-up of speakers, including representatives from the Directorate General TAXUD of the European Commission, OECD, the European Parliament, national governments and associations. It coincides with European Commission’s open public consultation on mandatory disclosure rules.

To find your way to Ljubljana, please follow this link.

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

Aleksandar Ivanovski / Mary Dineen

7 November 2016

  1. Leading U.K. tax and accountancy bodies introduce updated national codes of conduct for tax advisers aimed at discouraging of avoidance schemes.

The seven leading UK accountancy and tax professional bodies have published updated guidance on the standards expected of tax advisers and agents. The updated Professional Conduct in Relation to Tax (PCRT) guidance has been endorsed by HMRC.  The revisions include five new standards which will prohibit the creation, promotion or facilitation of tax avoidance schemes.

The salient addition of the new guidelines is a set of standards for tax planning. It states that:

“Members must not create, encourage or promote tax planning arrangements or structures that i) set out to achieve results that are contrary to the clear intention of Parliament in enacting relevant legislation and/or ii) are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation”.

Disciplinary Sanctions will be imposed on members who do not comply with the new guidelines. The new guidelines will be in force from 1 March 2017.

Ray McCann, Vice-President of the CIOT will be speaking at the CFE PAC Conference to be held in Ljubljana later this month, and this new development is sure to be a subject of questions and discussion with participants.

For a copy of the updated PCRT please follow this link: LINK

  1. Council adopts conclusions in response to EU Commission’s Communication of 5 July 2016 on tax transparency

The Council adopted conclusions in response to a Commission communication of 5 July 2016 on tax transparency. The Commission communication resulted from the April 2016 Panama Papers revelations. It recommended a coordinated approach to preventing tax abuse at EU and international levels, and developing enhanced administrative cooperation between competent authorities in the Member States, if appropriate through consideration of OECD initiatives.

It endorsed the recent EU legislation for the automatic exchange of information on tax rulings and county by country reports as an important development. Going forward it highlighted the importance of the Commission’s work on revising the Directive on Administrative Cooperation and the Anti-Money Laundering Directive and indicated its intention to work towards a swift adoption of these initiatives.

To read the Council conclusions in full please follow this link: LINK

  1. Germany releases draft bill on further measures to combat tax avoidance

The new bill provides for the introduction of:

  • An EU beneficial ownership register of bank accounts and deposits which will allow the tax administration to request information from foreign banks.
  • An obligation to notify of any purchase or sale of shares in foreign entities, associations and funds where the value exceeds EUR 15,000 or 10% of the direct and indirect ownership of the entity.
  • A requirement to issue a notification if a German resident taxpayer obtains decisive influence on the business and financial activities on an entity established in a third country.

Failure to comply will result in financial penalties of up to EUR 25,00 being imposed on taxpayers or EUR 50,000 on financial institutions.

The new bill also amends existing laws to address decisions against Germany by the ECJ. This includes a law which allows for the deduction of expenses by a non-resident in connection with income received from another Member State (Grunewald (Case-C-599/13) and changes to the inheritance and gift tax laws relating to non-residents (Commission v Germany (Case C-211/13)) and (Hunnebeck (Case C 479/14)).

  1. OECD Global Forum on Transparency and Exchange of Information for Tax purposes

The OECD Global Forum on Transparency and Exchange of Information for Tax purposes held its annual meeting from 2 – 4 November in Georgia. The meeting saw the publication of 17 new reports assessing the level of compliance with international standards for exchange of information on request (EOIR), marking the conclusion of the first round of the Forum’s peer review process. For the countries that did not receive good ratings, a special fast-track review procedure has been introduced to enable the Global Forum to recognise progress made to address issues by mid – 2017.

97% of jurisdictions committed to exchanging information in 2017 are prepared for these exchanges.

Discussions were held about the importance of countries coming together around the Global Forum’s transparency standards in their respective transparency initiatives in the context of calls for the creation of so called “black lists” or lists of non-cooperative jurisdictions.

  1. Prominent line-up of speakers confirmed for this year’s CFE PAC conference

This year’s Professional Affairs Conference co-organised with our Slovenian member organisation ZDSS brings together a prominent line-up of speakers, including representatives from the Directorate General TAXUD of the European Commission, OECD, the European Parliament, national governments and associations.

Considering that the European Commission is suggesting EU-wide mandatory disclosure obligation, which goes further than the OECD proposed standards, lively discussion is anticipated. The Ljubljana conference is thus an opportunity to discuss the follow-up of OECD BEPS Action Point 12.

To find your way to Ljubljana, please follow this link.

 

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

Aleksandar Ivanovski / Mary Dineen