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Tax policy update

November 2024

Highlights

  • Commissioner nominees outlines key tax related commitments for 2024-2029 term
  • VAT in the Digital Age proposal adopted

Feature story

Key tax commitments from Commissioner nominee Wopke Hoekstra for 2024-2029 term

Between 4 and 12 November, Commissioner nominees with portfolios assigned by President Von der Leyen attended hearings of relevant European Parliament (EP) Committees. The Members of the EP (MEPs) quizzed the nominees about their intentions and plans for the 2024-2029 term. For taxation, key points emerged from Wopke Hoekstra (Netherlands), Commissioner nominee for taxation, climate, net zero and clean growth:

  • Hoekstra committed to working on tax initiatives to help Europe’s competitiveness, prosperity, and social fairness, with a focus on green taxation, closing the tax gap, simplification, and pursuing work that needs to be done internationally
  • he aims to close negotiations on the Energy Taxation Directive and explore further greening of the VAT system
  • he pledged to continue the fight against tax fraud, evasion, and avoidance, expanding the focus beyond the VAT gap
  • streamlining and decluttering tax legislation, in particular the Anti-Tax Avoidance Directive (ATAD) and the Administrative Cooperation Directive (DAC)
  • a holistic effort to declutter tax policies is planned towards 2026, adding that Pillar I and Pillar II, FASTER or BEFIT could be huge parts in this direction
  • on kerosene/aviation tax/levy: the European Commission (EC) could seek a “coalition of the willing” among Member States
  • regarding digital tax/Pillar 1: Hoekstra prefers a global agreement but will consider a pan-EU solution if necessary
  • he emphasised the need to eradicate fossil fuel subsidies by revising the Energy Taxation Directive and building consensus among Member States
  • additionally, he plans to work towards reducing taxes on renewables

European Commission

European Commission reports positive early impact of EU tax dispute settlement directive

The EC published on 29 October a report on the functioning of the EU’s Dispute Resolution Mechanism (DRM) Directive. The report details the DRM Directive’s three-step process for resolving tax disputes between Member States: complaint, mutual agreement procedure (MAP), and dispute resolution. It also provides an overview of the transposition checks conducted and statistical data collected under the DRM Directive, indicating that the directive has been effectively transposed, and that Member States are closing most cases within the required timeframes. While there is still limited experience with the directive’s application, preliminary feedback is positive, suggesting the DRM Directive is contributing to a fairer tax environment within the European Union.

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New web portal to guide SMEs ahead of 2025 VAT regime changes

The web portal was launched on 12 November to support the new VAT regime for SMEs, which becomes applicable from 1 January 2025 onward. The web portal contains valuable information for SMEs – and their advisors – on what the new rules will be, to whom they are applicable, frequently asked questions and much more.

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Commissioner hearings: tax points from non-tax nominees

In addition to Commissioner nominee Hoekstra (see feature article above), other nominees made tax related commitments in their EP hearings.

Maria Luís Albuquerque (Portugal), Commissioner nominee for Financial Services and the Savings and Investments Union, said the following:

  • more harmonised tax treatment for retail investment products should be explored

Piotr Serafin (Poland), Commissioner nominee for Budget, Anti-Fraud and Public Administration, explained the following:

  • new proposals for EU Own Resources are on the table, and it is essential to persuade Member States to support this direction. Strong preference for new EU own resources over increased Member State contributions to the EU budget
  • Own Resources currently on the table: CBAM, ETS, a Pillar 1 based one, and a statistical-based resource for the corporate sector

 

European Commission refers Germany to CJEU over discriminatory tax treatment of reinvested capital gains upon sale of real estate

The EC decided on 14 November to refer Germany to the Court of Justice of the European Union (CJEU) for having failed to remedy the infringement of the free movement of capital due to its discriminatory tax treatment of reinvested capital gains upon sale of real estate located in Germany.

Germany grants a deferral of taxation for reinvested capital gains made on the sale of real estate located in Germany provided that the real estate has been attributed to the fixed assets of a domestic permanent establishment for an uninterrupted period of at least 6 years. Corporations established in Germany, even without a business activity therein, are deemed to have such a permanent establishment at their place of management (i.e. in Germany). Comparable corporations established in other EU/EEA Member States are deemed not to have such permanent establishments in Germany. Hence, they are denied such tax deferral on reinvested capital gains from the alienation of German real estate.

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European Parliament

European Parliament adopts new opinion on FASTER

In a Plenary vote on 14 November, the EP adopted its opinion on the Council’s final agreement on withholding taxation (FASTER). The EP used the so-called fast-track procedure, meaning that no amendments were tabled. Now that EP’s opinion has been finalised, the Council’s FASTER agreement can be published in the EU’s Official Journal, thereby becoming EU law.

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MEP questions & replies

European Commission may consider changes to VAT rules for donated goods

  • Question by MEP Moritz Korner (RE/Germany)
  • Reply by Commissioner Gentiloni

Council

Agreement reached on VAT in the Digital Age (ViDA) proposal

The agreement on ViDA was reached during the ECOFIN meeting of finance ministers on 5 November, following months of deadlock primarily due to Estonia’s objections over the deemed supplier rules.

In summary, ViDA introduces the following key changes:

  • fully digital VAT reporting obligations for cross-border transactions by 2030
  • VAT payment requirements for online platforms on short-term accommodation and passenger transport services in most cases where individual service providers do not charge VAT
  • improved and expanded online VAT one-stop-shops, allowing businesses to avoid costly registrations for VAT in every Member State where they operate

On the deemed supplier rules specifically, a compromise was reached by granting Member States greater flexibility, notably by expanding the definition of short-term accommodation rental for tax purposes and giving Member States the possibility to exempt SMEs from the deemed supplier rules. The Council also agreed on a short transition period for applying these rules.

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This curated content was brought to you by Johan Barros, Accountancy Europe Senior Manager, Head of Advocacy & Policy, since 2015. You can send him tips by email, follow him on X and connect with him on LinkedIn.