Read now our factsheet detailing the main provisions of this legislative proposal
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November has been a busy month for Accountancy Europe’s tax team! In the past weeks, we have published 3 factsheets that aim to inform accountants and stakeholders about new European Commission (EC) tax proposals, namely:
Moreover, Accountancy Europe submitted on 17 November its formal response to the HOT proposal, with recommendations to make the provisions even better from SMEs’ perspective. Our response on the transfer pricing proposal is under preparation.
European Tax Adviser Federation (ETAF) organised an event on 29 November focusing on EU’s implementation of the OECD 2-Pillar solution. Reinhard Biebel, Head of Unit from EC’s DG TAXUD, confirmed at the event that the Commission does not intend to propose EU legislation to implement an eventual Pillar 1 agreement. He also warned against an “avalanche” of national and “regional” digital services taxes (DSTs) should the Pillar 1 process fail.
European Parliament (EP) adopted on 15 June its final Resolution with recommendations on Pandora Papers: Lessons learned. The file was led by MEP Niels Fuglsang (S&D/Denmark).
EC has now issued a reply to the Resolution, explaining topic-by-topic what action – or not – it intends to take on the various areas highlighted by EP.
The EC response is available from this link, under the “Documentation gateway” and “European Commission” section.
The draft report was prepared by MEP Kira Marie Peter-Hansen (S&D/Denmark), and proposes significant changes to EC’s original proposal. These include shortening the transposition deadline of the directive, and a suggestion to phase out the application of the arm’s length principle to introduce group-wide consolidation and formulary apportionment instead.
A vote in ECON Committee is currently scheduled for 22 February. EP only provides its non-binding opinion.
Draft report on HOT published
EP’s draft report on the Head office tax system for SMEs (HOT) proposal is now available and was prepared by MEP Lidia Pereira (EPP/Portugal). In it, Ms. Pereira notably proposes to reduce the eligibility criteria for SMEs to benefit from HOT, make the system applicable for an indefinite period and shorten the deadlines for applications from SMEs and tax administrations.
A vote in ECON Committee is currently scheduled for 22 February, and EP may only provide its non-binding opinion.
EP adopted on 22 November at its Plenary session its position on the VAT in the Digital Age proposals (ViDA). The report on VAT rules for the digital age was adopted with 570 votes in favour, 17 votes against and 52 abstentions. In addition, the report on the VAT administrative cooperation arrangements needed for the digital age passed with 615 votes in favour, 10 votes against and 15 abstentions. Both EP opinions were prepared by MEP Olivier Chastel (RE/Belgium).
EP only provides its non-binding opinion, but this opinion is nonetheless needed for ViDA to eventually become EU law. As reported in previous Tax Policy Updates, the Belgian Council Presidency appears to aim for an agreement on ViDA during its mandate, which will end in June 2024.
On the same day 22 November, the Plenary also adopted in a single vote its report on the proposal on VAT rules relating to taxable persons who facilitate distance sales of imported goods and the application of the special scheme for distance sales of goods imported from third territories or third countries and special arrangements for declaration and payment of import VAT. The report, prepared by MEP Olivier Chastel (RE/Belgium), passed with 603 votes in favour, 23 votes against and 10 abstentions.
The draft report, prepared by MEP Evelyn Regner (S&D/Austria), proposes significant changes to the original EC proposal. Notably, Ms. Regner proposes to lower the thresholds for companies that fall under the mandatory scope of BEFIT after the transitional period. Moreover, in a significant shift from the original proposal, she also proposes an allocation formula for the taxable profits.
The vote in ECON Committee is currently scheduled for 22 February – a date that is proving to be very tax heavy for the Committee’s agenda. As with all other tax proposals, EP only provides its non-binding opinion.
ECON Committee met on 28 November for a vote on the draft report on the proposal laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes (DEBRA). The draft report was prepared by MEP Ludek Niedermayer (EPP/Czech Republic).
The draft report passed the vote, as amended, with 35 votes in favour, 8 against, and 9 abstentions. A Plenary vote is currently scheduled for 15 January.
FISC Committee convened on 30 November for an exchange of views with Ms María José Garde, the new Chair of the Code of Conduct Group on Business Taxation (CCG). The exchange of views addressed the revision of the Code of Conduct of 8 November 2022, which broadened its scope to include not only preferential tax measures but also ‘tax features of general application’ and the effectiveness of the Code of Conduct for the EU’s work to fight tax evasion and avoidance. In addition, it sought to deepen the institutional cooperation between the Code of Conduct Group for Business Taxation and the FISC Subcommittee.
Ms. Garde explained to MEPs that she has set up a multiannual work programme for the CCG running until 2028. She also said that 480 preferential regimes of EU Member States and their dependent territories have been assessed, and over 130 of these were deemed harmful and have been rolled back.
OECD Secretary-General Mathias Cormann welcomed on 11 November the announcement that 48 countries and jurisdictions intend to implement the OECD’s global tax transparency framework for the reporting and exchange of information with respect to crypto-assets by 2027.
The “announcement of co‑ordinated international action on crypto-assets is a major step forward, marking another important milestone towards the widespread and co-ordinated approach to combat tax evasion through greater transparency and exchange of information”, Mr. Cormann said.
The Crypto-Asset Reporting Framework (CARF) is a key component of the International Standards for Automatic Exchange of Information in Tax Matters developed by the OECD under a G20 mandate. It provides for the automatic exchange of tax-relevant information on crypto-assets and comes against the backdrop of a rapid adoption of the use of crypto-assets for a wide range of investment and financial uses. Unlike traditional financial products, crypto-assets can be transferred and held without the intervention of traditional financial intermediaries, such as banks, and without any central administrator having full visibility on either the transactions carried out or on crypto-asset holdings.
Jurisdictions with high tax rates account for more than half of the low-taxed profits reported globally by multinational enterprises (MNEs), according to new OECD analysis.
The new data and estimates on taxation of large MNE profits show how tax incentives and other concessions in jurisdictions with high statutory and average tax rates enable some firms to pay low effective tax rates (ETRs). According to the OECD, these findings highlight how the introduction of a global minimum tax rate on the profits of large MNEs agreed by the OECD/G20 Inclusive Framework would create new opportunities for domestic resource mobilisation for high-tax and low-jurisdictions alike.
On 22 November, member countries at the UN voted to strengthen UN’s role in international tax matters. Developing nations, dissatisfied with the OECD’s coordination of global tax negotiations, strongly back this request.
The vote initiated a resolution on the creation of a convention on international tax cooperation characterised by greater UN’s intervention. This measure garnered support from 125 nations, most of which were low or middle-income countries including Nigeria, Ghana, China, India, Brazil and South Africa.
48 countries voted against the proposal, primarily developed countries, including EU member states, the US, UK, Japan and Korea. There were nine abstentions, including from OECD member states Norway, Iceland, Mexico and Turkey. Chile and Colombia, both OECD members, voted in support of the resolution.
European Parliament
EP publishes briefing paper on VAT in the Digital Age
European Council
November ECOFIN: Council and EC issue statements on the OECD’s 2-Pillar approach
OECD
OECD invites public input on proposed changes to the Commentary on Article 5 of the OECD Model Tax Convention and its application to extractible natural resources
European Commission
EC refers Belgium to the Court of Justice of the EU for failing to comply with rules on taxation of non-resident taxpayers
