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Tax policy update

January 2025

Highlights

  • Withholding tax directive (FASTER) officially becomes EU law
  • Council introduces electronic VAT exemption certificate
  • European Parliament fast-tracks work on ViDA and DAC 9 opinions
  • Trump announces US withdrawal from Pillar 2 framework

European Commission

EU report shows significant progress in VAT compliance across Member States

Most EU Member States made significant progress in VAT collection between 2018 and 2022, according to a new report released by the European Commission (EC) on 18 December.

The annual VAT Gap in the EU Report, which measures the difference between theoretically expected VAT revenues and the amount actually collected, shows that Member States lost around €89 billion in VAT in 2022, compared to €121 billion in 2018. This figure represents revenues lost primarily to VAT fraud, evasion, avoidance, non-fraudulent bankruptcies, miscalculations, and other factors.

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Faster directive becomes officially EU law

The new European withholding tax directive (FASTER) was published in the EU’s Official Journal on 10 January. This means that the legislation is now officially EU law, and its provisions will start applying from the dates set out in the directive.

Accountancy Europe published in September 2024 a factsheet with visuals that provides a summary of the key provisions and processes introduced by this new legislation.

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European Parliament

European Parliament’s FISC Subcommittee holds hearing on gender equality and taxation

European Parliament’s (EP) FISC Subcommittee held a public hearing on the impact of taxation on gender equality in the EU on 13 January, in the context of the EP’s Gender Equality Week 2024, which took place from 2 to 5 December.

The hearing looked at how tax measures in EU Member States affect gender equality, either in a positive or a negative way, what tax policies can currently be seen as obstacles to promoting gender equality, and how these obstacles can be addressed. The hearing also examined tax measures that can serve as a best practice or which could be considered to advance gender equality, and whether EU-level tax policies can contribute to achieving this aim.

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European Parliament adopts fast-track procedure for ViDA and DAC 9

The EP’s ECON Committee discussed the way forward on VAT in the Digital Age (ViDA) and the Directive on Administrative Cooperation, focusing on how to support companies with their filing obligations under the Pillar 2 Directive (DAC 9) during their meeting on 16 January. On both files, the EP must provide its non-binding opinion before the proposals become formally EU law.

For ViDA, the EP had previously produced a non-binding opinion on the EC proposal, after which the Council reached a political agreement on 5 November 2024. However, as the Council’s final agreement differed significantly from the EC’s original proposal, it was decided that the EP should provide a new opinion. For DAC 9, the Council is making progress, with a political agreement potentially expected already in March.

For both files, the ECON Committee decided at its meeting to adopt a fast-track procedure without amendments, to enable both files to be swiftly introduced into EU law. MEP Aurore Lalucq (S&D/France) is leading the EP’s work on DAC 9, whilst MEP Ľudovít Ódor (RE/Slovakia) is leading on ViDA. A final Plenary vote on both opinions is currently scheduled for 11 February.

MEP questions & replies

European Commission says share buy-backs do not involve transactions under the scope of PSD

  • Question by MEP Fabio de Masi (NI/Germany)
  • Reply by Commissioner Hoekstra

Council

Council introduces electronic VAT exemption certificate

The Council reached a political agreement on a new directive paving the way for the introduction of an electronic tax certificate for VAT exemptions on 10 December. The directive will provide for an electronic certificate to replace the existing paper certificate that is used when goods are to be exempt from VAT, for example because they are imported for embassies, international organisations or armed forces. The exact electronic format, including the necessary IT specifications, will be discussed in expert groups and determined in Commission implementing acts. In a transitional period, Member States will be able to use both electronic and paper versions.

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Poland assumes Council Presidency: key priorities in tax matters

In January 2025, Poland officially assumed the 6-month rotating Presidency of the Council, taking over from Hungary. The Polish government has published its Presidency programme to indicate its priority work areas. Notably, Poland is committed to supporting EU competitiveness by tackling harmful tax competition, including by updating the EU list of non-cooperative jurisdictions for tax purposes. This will involve an evaluation of the commitments made by cooperating jurisdictions to implement the principles of good governance in tax matters. The updated EU list is expected to be approved through Council conclusions in February 2025.

The Polish Presidency will also continue work on DAC 9, and efforts to close the VAT gap. In this regard, the priority will be further tightening VAT in the e-commerce sector, in particular to counter irregularities in the case of distance sales of imported goods via electronic interfaces. Lastly, the Presidency will also continue to work on the revision of the directive on the taxation of energy products and electricity (ETD).

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International

United States withdraws from international reform of corporate minimum tax and Europeans feel the impact

The US President Donald Trump announced his country’s withdrawal from the international reform of the corporate minimum tax on 20 January. In response, European policymakers are feeling the blow and insisting on the need to remain committed.

The European Commissioner for Economy, Valdis Dombrovskis, questioned at the ECOFIN Council press conference on 21 January, regretted the content of the US announcement. Mr. Dombrovskis said, “We remain committed to our international obligations undertaken over the last years and open to meaningful dialogue with our international partners”. He added, “We trust that it’s worth taking the time to discuss these matters with a new US tax administration in order to better understand their asks and explain also our position”.

Article originally appeared on Agence Europe (Read more)

Other news

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