Weekly Tax News – 19 November 2018

Draft of recommendations of TAX3 committee

On Wednesday 14 November in Strasbourg, MEPs Ludek Niedermayer (EPP, CZ) and Jeppe Kofod (S&D, DK) presented the draft report with initial recommendations in the framework of the TAX3 committee on financial crime, tax evasion and tax avoidance of the European Parliament.

The two co-rapporteurs call for an urgent reform of the outdated international and national tax rules. The report contains recommendations on fighting tax avoidance, tax evasion and aggressive tax planning, revamping corporate taxation, strengthening anti-money laundering actions, fighting VAT fraud and better protecting whistle-blowers and journalists. Amongst others, the report calls for a modernized legal framework for better taxation, such as the Common Consolidated Corporate Tax Base (CCCTB), the definitive VAT reform or the rules for taxing digital activities.

This is a first draft of the recommendations, that will be presented to the TAX 3 committee on 27 November. Members will then have until 17 December to table their amendments, before a vote in committee is scheduled for 27 February 2019 and in Plenary in March.

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Germany is still vague on the taxation of the digital economy

On Tuesday 13 November, in a speech on the future of the European Union, German Chancellor Angela Merkel confirmed that Germany is looking for an international solution before adopting the directive proposed by the European Commission on the taxation of the digital platforms. “An international solution will be best. If this is not achieved, Germany will be ready for a European solution”, she said before the plenary of the European Parliament, in Strasbourg. The German Finance Minister Olaf Scholz supported the approach of France (to formally adopt the directive on 4 December 2018 but with an implementation date for end of 2020) but delaying the application to January 2021 if an agreement at OECD level will not be reached before summer 2020.

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EU Court on Spanish tax regime

On Thursday 15 November, the EU Court confirmed two decisions of the European Commission from 2009 and 2011 stating that the Spanish Tax regime for the amortization of financial goodwill constitutes State aid incompatible with internal market. Pursuant to a tax measure inserted in the Spanish law on corporation tax in 2001, a company that hold shares (minimum 5% for at least one year) in a foreign company, can deduct the goodwill resulting from this acquisition from its taxes. The deduction takes the form of an amortisation, from the basis of assessment for the corporation tax payable by that undertaking. Companies that take shares in companies domiciled in Spain for tax purposes cannot obtain such deduction. Applying the three-step method, the General Court concludes that the measure at issue is selective, even though the advantage which it provides for is accessible to all undertakings liable for corporation tax in Spain.

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