Weekly Tax News – 25 February 2019

European Commission informs companies on tax procedures in case of no-deal Brexit

On Monday 18 February, the European Commission has published an outreach to EU businesses to prepare them for a possible exit without a deal of the United Kingdom from the European Union. The information campaign should help to inform companies (especially SMEs) that want to continue trading with the UK after 30 March on what they need to do to ensure a smooth transition from a tax and customs point of view. In particular, companies are invited to: (i) assess whether they have the necessary technical and human capacity to deal with customs procedures and rules; (ii) consider obtaining various customs authorisations and registrations in order to facilitate their trading activity if the UK is part of their supply chain; (iii) contact their national customs authority to see what other steps can be taken to prepare.

Poland authorised to introduce a split payment mechanism against VAT fraud

On Monday 18 February, the EU Council authorised Poland to introduce a mechanism for split payment of value added tax (VAT) from 1st March 2019 to 28 February 2022. Under this mechanism, VAT will have to be paid into a separate and blocked VAT bank account of the supplier opened in Poland, in respect to invoices issued for supplies of goods or services that present a risk of fraud and that generally fall under the generalised reverse charge mechanism for VAT. The special measure will apply to certain supplies of goods and services that are made between taxable persons as well as from business to business (B2B) and will only concern electronic bank transfers. For the country, this system offers better guarantees against VAT fraud.

Whistleblower Directive: European Parliament and Council still negotiating

On Wednesday 13 February, the European Parliament and the Council discussed the MEPs' proposal to incorporate Article 153 of the TFEU into the legal basis of the Whistleblower Directive, but also to soften the reporting mechanism by reducing it from 3 to 2 stages.

The question on prioritizing the alert is not closed, and there is room to manoeuvre. Some Member States, such as Belgium, Ireland, Bulgaria and Luxembourg, are in favour of an easing that would allow whistleblowers to initially turn either to their company's internal channel or to an external competent authority. France, on the other hand, is much less favourable.

The next trilogue negotiating session will take place on Tuesday evening, 26 February. An inter-institutional agreement on this issue is expected by early March at the latest.

TAX3 Public Hearing with Competition Commissioner Vestager and Spanish State Secretary of Finance Bardón

The exchange of views with Competition Commissioner Margrethe Vestager aimed to discuss the state of play of the implementation of the recommendations made by the Parliament in the last 5 years, especially the state of play on ongoing fiscal state aid investigations. She briefly commented the judgement of the General Court concerning tax exemptions granted by Belgium and regretted that the Commission’s decision has been annulled. She also pointed out how important it was that Member States correctly implement the European legislation to combat tax fraud and insisted that a follow-up is absolutely necessary and should be done by permanent structures.

Spanish State Secretary of Finance, Ms Inés María Bardón explained that the Spanish government is proposing to introduce the digital tax in their domestic legislation until an agreement at European/OECD/G20 level is reached. The Spanish legislative proposal is aligned with the one of the Commission and Ms Inés María Bardón declared that even if the Commission's proposal changed, Spain would be willing to adapt to it. Regarding the shifting away from unanimity principle in tax matters, Spain fully agreed that the EU must overcome these blocking situations and therefore was committed to support this initiative.

European Commission publishes a new blacklist of 23 countries for money laundering and terrorist financing

On 13 February, the EU Commission presented a new blacklist of 23 high-risk countries for money laundering and terrorist financing. The European Commission has included Saudi Arabia and Panama amongst others in an effort to regain citizens’ trust in the combat against financial crimes. The new list includes 23 countries, compared with 16 in the existing one. The Commission listed 12 countries already considered as risky jurisdictions and added 11 new ones. The Commissioner explained that her services used stricter criteria, in particular in regard to the transparency of the real owners of companies and trusts (beneficial ownership structures). The new methodology, and in particular the inclusion of Saudi Arabia, was contested by large member states like the UK, France, Germany, Italy or Spain. The European Parliament and the Council of Member States are given one month for approval of the blacklist, with a possible one-month extension.

Tax Commissioner Moscovici on qualified majority voting in tax matters

On 21 February Pierre Moscovici took part in a roundtable discussion on reforming the decision-making process for EU tax policy organized by Bruegel, a Brussels-based think tank. He explained that even though he has expected a lot of criticism and opposition from certain Member States, he still wanted to open up the debate to shift towards qualified majority voting in tax matters. Firstly, he argued that the unanimity rule in place right now was outdated and that the voting system needed to adapt to present challenges in order to regain effectiveness. Secondly, he dismissed the sovereignty argument of Member States since it only served the purpose of protecting national tax systems that were “on the edge of legality”. The unanimity principle was blocking progress on numerous reforms in tax policy like the CCTB, VAT and Digital Services Tax. Thirdly, Moscovici claimed that the current European tax system cost billions of Euros because it wasn’t fit to fight tax evasion and tax fraud properly. As a last argument for shifting toward qualified majority voting he pointed out that unanimity was weakening democracy and that it created a problem of representation, if just a few Member States were constantly blocking decisions in the Council.

ETAF Tax Conference “Future Trends of Taxation” on 20 March 2019

On 20 March 2019 in Brussels, representatives of the European Commission, Members of the European Parliament and academics will participate to the ETAF Tax Conference on “Future Trends of Taxation”. The panelists will discuss the last proposal of the European Commission to shift away from unanimity principle in tax, the tax objectives of the electoral programs and the impacts of Brexit on EU tax policy.