CFE’s Tax Top 5 – November 2018

BRUSSELS NOVEMBER 2018
CFE’s Global Tax Top 5 – November 2018

OECD Releases Tax Revenue Statistics for Asian and Pacific Economies

In November, the OECD published Revenue Statistics for Asian and Pacific Economies, in particular: Australia, the Cook Islands, Fiji, Papua New Guinea, New Zealand, Samoa, the Solomon Islands, Thailand and Tokelau.

The report demonstrates that the tax to GDP ratio fell in the majority of the jurisdictions between 2015 and 2016, highlighting a possible need for the jurisdictions to broaden their tax bases in light of the decrease in revenue. Decreases in the price of natural resources within the period was also identified as a cause for the decrease in revenue.

Revenue from corporate income tax ranged from 9.4% of total tax revenue to 41.1% across the countries, with the majority of Asian jurisdictions collecting more revenue from corporate income tax than personal income tax, with the opposite being true of the Pacific economies. VAT accounted for around 25% of revenues in Pacific economies, aside from in Australia and PNG, but was a less significant source of revenue in Asian jurisdictions.

Latin American Ministers Launch Tax Initiative

At a meeting of ministers, high-level officials and representatives from Latin America held in Uruguay on 19 November the so-called “Punta del Este Declaration” was signed to strengthen efforts within the region to combat tax fraud and corruption.

Under the agreement, Ministers and Deputy Ministers from Uruguay, Argentina, Panama and Paraguay have undertaken to establish a Latin American initiative to maximise the exchange of information to tackle tax evasion, explore further means of cooperation and establish national action plans to further the cooperation objectives.

Progress in relation to the undertakings will be presented by representatives from the jurisdictions attending the next OECD Global Forum.

Forum on Harmful Tax Practice Releases Preferential Tax Regime Update

The OECD has released a progress report as part of implementation of Action 5 of the OECD/G20 Base Erosion and Profit Shifting Project, concerning assessments undertaken by the Forum on Harmful Tax Practices (FHTP) of 53 preferential tax regimes.

From the regimes, 18 originate in jurisdictions which have made legislative changes to abolish or amend the regime, 4 regimes are specifically designed to meet the BEPS Action 5 standard, 10 regimes have prompted new commitments to implement legislative changes to abolish the regimes and 17 will now be brought into the FHTP review process.

The 4 remaining regimes were out of scope, not yet operational, already abolished or did not feature harmful features.

The Forum on Harmful Tax Practices next meets in January 2019 to continue assessing regimes where commitments were made by jurisdictions in 2017 to amend or abolish those regimes.

OECD Invites Input on Dispute Resolution Process

The OECD has now published a taxpayer questionnaire seeking input for the Stage One peer reviews for Brazil, Bulgaria, China, Hong Kong, Indonesia, Papua New Guinea, the Russian Federation and Saudi Arabia.

The peer reviews are being undertaken as part of the peer review process under Action 14 of the BEPS Action Plan concerning the Mutual Agreement Procedure (MAP). In particular, taxpayers are requested to provide input on issues concerning the access to MAP, the clarity of MAP guidance and implementation of MAP agreements concerning the jurisdictions.

Taxpayers and business and industry associations are requested to complete the questionnaire by 13 December 2018.

Global Forum on Transparency & Exchange of Information for Tax Purposes Release Report

The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes have released a report concerning the implementation of Automatic Exchange of Information. The report was released at its annual meeting which took place on 20-22 November in Uruguay.

Over 4,500 bilateral exchanges of information have taken place between 86 jurisdictions, in line with the Automatic Exchange of Information standards, with the exchange containing information concerning financial accounts taxpayers hold outside their jurisdictions.

The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes also adopted Terms of Reference for reviews that will take place to assess the effectiveness of the exchange standards in practice, as well as a work plan for the review process. The reviews will commence in 2020.

The selection of the remitted material has been prepared by
Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia

 

BRUSSELS 26 NOVEMBER 2018

EU27 Leaders Endorse Brexit Withdrawal Agreement

At the special EU summit meeting which took place on 25 November the leaders of the EU27 endorsed the Brexit Withdrawal Agreement and a political declaration on future EU-UK relations.

Key tax policy commitments contained in the withdrawal agreement include commitments for the UK to continue to apply the EU’s tax good governance standards, the Code of Conduct for business taxation, the provisions of domestic law that give effect to DAC (including DAC6 once transposed) & ATAD. Additionally, the withdrawal agreement includes commitments by the UK to be subject to the joint surveillance powers of DG COMP and the UK Competition Authority to ensure consistency on State aid matters throughout the “Single Customs Territory”. The political declaration sets out further intentions concerning the single customs territory, including intentions to ensure there are no tariffs which would create barriers to trade, to ensure freedom of movement of capital and investment, and to create a level playing field for open and fair competition.

Speaking after the summit meeting, Donald Tusk said “ahead of us is the difficult process of ratification as well as further negotiations. But regardless of how it will all end, one thing is certain: we remain friends until the end of days, and one day longer”. The UK parliament is expected to vote on the deal on 12 December.

OECD Releases Report on Automatic Exchange of Information

The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes have released a report concerning the implementation of Automatic Exchange of Information, The report was released at its annual meeting which took place on 20-22 November in Uruguay.

Over 4,500 bilateral exchanges of information have taken place between 86 jurisdictions, in line with the Automatic Exchange of Information standards, with the exchange containing information concerning financial accounts taxpayers hold outside their jurisdictions.

The OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes also adopted Terms of Reference for reviews that will take place to assess the effectiveness of the exchange standards in practice, as well as a work plan for the review process. The reviews will commence in 2020.

EU VAT Committee Publishes Updated Guidelines

The EU VAT Committee has now published updated guidelines in relation to interpretative matters considered at its 110th meeting, which took place in April 2018.

The updated guidelines set out the Committee’s view as to the correct interpretation of Article 2(1)(c) and Article 135(1)(c) of the VAT Directive concerning the VAT treatment of certain services provided in relation to syndicated loans.

Guidelines published by the EU VAT Committee are not legally binding on the Member States or European Commission, however can be adopted by the European Council into binding implementing measures which then become directly applicable without transposition into national law.

European Commission Publishes Autumn Semester Report

The European Commission has published its Autumn Report package, which includes the so-called Alert Mechanism Report, which proposes in-depth reviews for Member States which are identified as having macroeconomic imbalances.

The Member States which will be subject to the in-depth reviews in 2019 are Bulgaria, Croatia, Cyprus, France, Germany, Greece, Ireland, Italy, the Netherlands, Portugal, Romania, Spain and Sweden. The reviews will form part of the Country Reports to be published in early 2019.

The annual growth survey which forms part of the Autumn Report indicates that the European Union and all Euro economies have enjoyed 22 successive quarters of increased growth, and 2019 is predicted to be the first year since 2007 where all European countries will see increased investment. The Juncker Plan will trigger close to 360 billion Euro in investments.

OECD Issues Updated Residence/Citizenship by Investment Guidance

The OECD has published updated guidance concerning residence/citizenship by investment in relation to Residence by Investment programmes offered by Panama.

In accordance with Common Reporting Standards, Panama will need to ensure that documents are identified as having been issued to successful applicants under its Reforestations Investor Permit, Economic Solvency Permit and Friendly Nations Permit residence by investment programmes. The guidance has been updated to state that only this documentation should be perceived as high-risk for CRS due diligence procedures. Financial institutions are in those cases encouraged to use enhanced due diligence procedures to ensure the CRS is not being circumvented.

The selection of the remitted material has been prepared by
Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia

BRUSSELS 19 NOVEMBER 2018

European Parliament’s TAX3 Committee Releases Draft Report

On 14 November, the co-rapporteurs of the European Parliament’s Special Committee on Financial Crimes, Tax Evasion and Tax Avoidance (TAX3) published their draft report. The report presents the findings and recommendations of the rapporteurs following eight months of hearings by the Committee concerning anti-money laundering and aggressive tax planning.

Key recommendations in the report are that the Commission and Council adopt a comprehensive definition of aggressive tax planning, as well as a definition of permanent establishment, economic activity requirements and expenditure tests to avoid companies having an artificial taxable presence in a Member State. The rapporteurs further recommend that EU efforts to fight corporate aggressive tax planning are strengthened, that the BEPS action plan is supplemented, and that Member States’ tax systems are scrutinised. They also calls on the Council to adopt the proposals on CCTB and CCTB as well as the digital tax package proposals. The Committee calls for a broader scope for the exchange of tax rulings and for broader access by the Commission to those rulings, and guidance concerning what constitutes tax-related State aid and appropriate transfer pricing. The rapporteurs welcome the VAT action plan, but express regret that no safeguards were adopted concerning the Certified Taxable Person proposal.

Co-rapporteurs Luděk Niedermayer and Jeppe Kofod will present the report to their Committee members at a meeting scheduled to take place on 27 November. The Deadline for amendments is 17 December 2018, and the report will thereafter be voted by the Committee on 27 February 2019.

OECD Releases Progress Report on Preferential Tax Regimes

The OECD has released a progress report as part of implementation of Action 5 of the OECD/G20 Base Erosion and Profit Shifting Project, concerning assessments undertaken by the Forum on Harmful Tax Practices (FHTP) of 53 preferential tax regimes.

From the regimes, 18 originate in jurisdictions which have made legislative changes to abolish or amend the regime, 4 regimes are specifically designed to meet the BEPS Action 5 standard, 10 regimes have prompted new commitments to implement legislative changes to abolish the regimes and 17 will now be brought into the FHTP review process.

The 4 remaining regimes were out of scope, not yet operational, already abolished or did not feature harmful features.

The Forum on Harmful Tax Practices next meets in January 2019 to continue assessing regimes where commitments were made by jurisdictions in 2017 to amend or abolish those regimes.

UK Opens Consultation Concerning Digital Tax
The United Kingdom has launched a consultation concerning the proposal set out in its 2019 budget to implement a digital services tax from April 2020.

In its consultation document, the UK sets out the position that businesses ought to pay tax which reflects the value derived from users within the UK, and notes the proposed digital tax is intended to be a temporary tax that will be replaced by a comprehensive global solution.

The consultation requests input on the scope of business activities included under the tax, concepts of online content and platforms, revenue attribution to business activities, means of apportionment, concepts of user contribution, and the rate of the proposed tax and deduction of costs, amongst other issues.

The consultation will run until 28 February 2019.

OECD Invites Input on Dispute Resolution Process
The OECD has now published a taxpayer questionnaire seeking input for the Stage One peer reviews of Brazil, Bulgaria, China, Hong Kong, Indonesia, Papua New Guinea, the Russian Federation and Saudi Arabia.

The peer reviews are being undertaken as part of the peer review process under Action 14 of the BEPS Action Plan concerning the Mutual Agreement Procedure (MAP). In particular, taxpayers are requested to provide input on issues concerning the access to MAP, the clarity of MAP guidance and implementation of MAP agreements concerning the jurisdictions.

Taxpayers and business and industry associations are requested to complete the questionnaire by 13 December 2018.

Ireland Launches Consultation on ATAD Implementation

Ireland is seeking input concerning its proposed implementation of EU anti-tax avoidance directives ATAD1 and ATAD2, specifically concerning hybrid mismatches and interest deduction limitations.

The consultation requests that those responding give their input as to what entities should be within scope of the anti-hybrid regime, which foreign taxes should be considered equivalent to Irish taxes for the purpose of establishing whether a mismatch arises, how timing mismatches should be treated, views as to whether or not Ireland should implement defensive rules concerning hybrid mismatches and how to prevent mismatches.

The consultation will be open until 18 January 2019.

The selection of the remitted material has been prepared by
Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia

BRUSSELS I 12 NOVEMBER 2018

No Agreement Reached on Digital Tax at ECOFIN

At its meeting on 6 November, the Council of the European Union sitting as ECOFIN (Economic and Financial Affairs Council) were unable to reach agreement concerning the European Commission proposals for Digital Services Tax in the EU.

Progress has reportedly been made on some aspects of the proposals concerning administrative cooperation and collection of the tax, but issues remain as to the scope of the services which would be taxed within the proposed Directive. There is reportedly broad agreement that a sunset clause should be included, with German Finance Minister Olaf Scholz now proposing that the Directive apply only if no agreement is reached at OECD level in its final report on taxation of the digital economy, due in 2020. It is therefore possible an iteration of the directive could be agreed next month on the basis that implementation of the Directive is suspended until 2020.

Speaking at a media briefing following the meeting, Austrian Finance Minister stated the EU “need to adapt our rules to the digital transformation of the economy and digital companies have to pay their fair share of taxes. The Presidency wants to achieve concrete results by the end of this year. Time is short but I’m convinced that with the appropriate political will, we can get there.”

Irrespective of whether agreement can be reached by the end of 2018, the UK, Spain and Italy have set all out plans to introduce digital services tax for online business similar to those proposed by the Commission.

EU Council Updates “Blacklist” of Non-Cooperative Jurisdictions for Tax Purposes

Agreement was reached at last week’s ECOFIN meeting on 6 November to update the list of non-cooperative tax jurisdictions for tax purposes, i.e. the “Blacklist”.

Following high-level commitments made to remedy EU concerns and reform tax policies, Namibia will now be moved from the “blacklist” to the “grey list” of countries to be subject to close monitoring by the Council.

Five jurisdictions now remain on the list of non-cooperative jurisdictions: American Samoa, Guam, Samoa, Trinidad and Tobago and the US Virgin Islands.

European Commission Releases EU Law Infringement Package

The Commission has published a press release setting out the details of the November infringement proceedings against Member States for failing to comply with EU law.

The Commission issued letters of formal notice to the UK and Italy concerning their failures to levy the correct amount of VAT on the leasing of aircrafts and yachts, respectively. The Commission also issued two letters of notice to Belgium concerning its failure to implement correct tobacco excise duties and the evaluation of rental income from immovable property. Further, the Commission issued letters of notice to Romania to end its VAT split payment mechanism, to Italy to align its rules on the price of fuel in the Lombardy region with EU law and to Bulgaria to correctly transpose new transparency rules for the exchange of information.

In addition, the Commission stated they have now closed two infringement cases against Cyprus and Luxembourg brought for failure to implement into domestic legislation the DAC5 directive related to access to anti-money laundering registers, as the two Member states have now transposed the Directive into domestic law.

EU Council Adopts VAT e-publication Directive

The EU Council has now adopted the VAT proposal to align VAT rates for e-publications and physical publications. Presently electronically supplied services, including e-publications, are taxed at a rate of 15% VAT, whereas Member states have an option to apply a reduced VAT rate of 5% for physical publications.

The newly adopted proposal allows Member states to apply reduced VAT rates to e-publications in addition to physical publications. The adopted directive will apply on a temporary basis until the definitive VAT regime is agreed and implemented.

Final Reminder: CFE & AEDAF Mandatory Disclosure Rules Conference – 23 November 2018
CFE Tax Advisers Europe and the Asociación Española de Asesores Fiscales (AEDAF) will host the 11th European Conference on Tax Advisers’ Professional Affairs, in Madrid, Spain, on Friday 23 November 2018 from 9am to 3pm on the topic of “Transparency Trends in Taxation: How to Implement New EU & OECD Mandatory Disclosure Rules”.

The programme is finalised, and we now have the following confirmed institutional speakers:

• European Commission (Reinhard Biebel, Direct Tax Policy, DG TAXUD),
• OECD (John Peterson, Head of Aggressive Tax Planning, Centre for Tax Policy and Administration),
• Permanent Representation of Spain to the EU (Jorge Ferreras Gutiérrez, Counsellor, Fiscal Affairs)
• Parliament of the Kingdom of Spain (Francisco de la Torre, Member of Parliament, Tax Inspector on Leave)
• Tax Administration of the Kingdom of Spain (Jesús Gascón, Director General)

They will join the excellent line-up of other confirmed speakers from policy, practice and academia.

More information on the programme and registration details is available here. Register now to secure your place!

The selection of the remitted material has been prepared by
Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia

BRUSSELS 05 NOVEMBER 2018

Council of EU to Discuss Digital Taxation Proposals

The Council of the European Union sitting as ECOFIN (Economic and Financial Affairs Council) will discuss tomorrow the European Commission proposals for Digital Services Tax in the EU. EU’s finance ministers will exchange views on the digital services tax and discuss the progress to date in the negotiations among Member states.

Media reports of last week suggested that pressure to accept digital services tax mounts on Ireland, a country that will be adversely affected by the introduction of this temporary taxation measure. The Irish Times reported that the Government is under increasing pressure to agree to European Commission proposals ahead of tomorrow’s ECOFIN. Government sources said Ireland intends to resist the proposal in its current form, but there has been heavy lobbying by the French government and the Austrian presidency of the EU to have the directive approved by the end of the year.

Separately, both Spain and the UK have set out Budget plans to introduce digital services tax for online business similar to those proposed by the Commission. The UK plan, announced as part of the Budget, would place a 2% digital services tax on revenues from April 2020. Unlike the Commission proposal, the UK intends to introduce a “profitability threshold” as a safe harbour provision that exempts loss-makers and reduces the effective rate of tax on businesses with very low profit margins. Spain’s plans on the other hand mimic the European Commission proposal with 3% tax on revenue.

Various US officials, including the US Treasury Secretary Steven Mnuchin issued statements urging European partners to refrain from unilateral measures. Specifically, with regards to the UK proposals, the US indicated that such proposals will hurt prospects for a US-UK trade deal post Brexit.

It remains to be seen whether EU ministers will consider US proposals to abandon the digital services tax and focus instead on a multilateral solution under auspices of the OECD.

US President Considers Antitrust Issues of US Tech Companies

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Trump said that European Commission’s $5 billion fine against Google made him consider the antitrust issues, such as abuse of dominance. “You look at the European Union, they fined Google billions of dollars, and frankly I don’t like that they’re doing that because that’s an American company. But if anybody does that, it should be us doing it.”, Trump said speaking to HBO.

Ireland Moves a Step Closer to Ratifying OECD MLI

Ireland has moved a step closer to ratifying the OECD Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (“the MLI”). In September, the draft Multilateral Convention to Implement Tax Treaty Related Measures Order 2018 was discussed at the Parliament Committee on Finance, Public Expenditure and Reform and was subsequently debated and approved by the lower House of Parliament. The Government act will be included in Finance Bill 2018. Once it becomes primary law, it can then be deposited with the OECD, completing Ireland’s ratification of this key element of the OECD BEPS project.

Ecuador Signs the Multilateral Convention on Mutual Assistance in Taxation

The Ecuador signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (the Convention) in the presence of the OECD Deputy Secretary-General Ludger Schuknecht on 29 October in Paris. Ecuador is the 126th jurisdiction to join the Convention. The Convention is the key instrument for swift implementation of the Standard for Automatic Exchange of Financial Account Information in Tax Matters (CRS). The Standard – developed by the OECD and G20 countries – enables more than 100 jurisdictions to automatically exchange offshore financial account information since September. It is also a powerful tool in the fight against illicit financial flows.

Final Reminder: CFE & AEDAF Mandatory Disclosure Rules Conference – 23 November 2018

CFE Tax Advisers Europe and the Asociación Española de Asesores Fiscales (AEDAF) will host the 11th European Conference on Tax Advisers’ Professional Affairs, in Madrid, Spain, on Friday 23 November 2018 from 9am to 3pm on the topic of “Transparency Trends in Taxation: How to Implement New EU & OECD Mandatory Disclosure Rules”.

The programme is finalised, and we now have the following confirmed institutional speakers:

• European Commission (Reinhard Biebel, Direct Tax Policy, DG TAXUD),
• OECD (John Peterson, Head of Aggressive Tax Planning, Centre for Tax Policy and Administration),
• Permanent Representation of Spain to the EU (Jorge Ferreras Gutiérrez, Counsellor, Fiscal Affairs)
• Parliament of the Kingdom of Spain (Francisco de la Torre, Member of Parliament, Tax Inspector on Leave)
• Tax Administration of the Kingdom of Spain (Jesús Gascón, Director General)

They will join the excellent line-up of other confirmed speakers from policy, practice and academia.

More information on the programme and registration details is available here. Register now to secure your place!

The selection of the remitted material has been prepared by
Piergiorgio Valente/ Aleksandar Ivanovski/ Brodie McIntosh/ Filipa Correia