Weekly Tax News – 12 November 2019

ECOFIN decisions on VAT, excise duty and EU tax blacklist

On 8 November, the ECOFIN has reached an agreement on two VAT proposals on simplified rules for small businesses and on e-commerce. The proposal on small businesses seeks to apply exemptions that are currently only available to domestic businesses, to small enterprises established in other Member States. In particular, the text of the proposal foresees that small enterprises will be able to qualify for simplified VAT compliance rules in case their annual turnover remains below a threshold set by a Member State concerned, which cannot be higher than 85.000 EUR. The proposal regarding e-commerce should help Member States to collect, in a harmonised way, the records made electronically available by payment service providers, such as banks. The text of the agreement  includes two legislative texts: a) amendments to the VAT directive putting in place requirements on payment service providers to keep records of cross-border payments related to e-commerce; b) amendments to a regulation on administrative cooperation in the area of VAT.

The ECOFIN has also approved the delisting of Belize from the European list of non-cooperative jurisdictions for tax purposes. After this exclusion, the list now contains 8 jurisdictions, namely: American Samoa, Fiji, Guam, Oman, Samoa, Trinidad and Tobago, the US Virgin Islands and Vanuatu.

Finally, the Council has reached a provisional agreement on the modernisation of the excise duties regime applicable in Europe. The proposals contain measures that seek to simplify the processes covering export and import interaction and intra-EU movements of excise products.

Nine EU Member States ask new Commission to tax air transport

On 7 November, the Finance Ministers of the Netherlands, Germany, Belgium, Bulgaria, Denmark, France, Italy, Luxembourg, Sweden have signed a joint statement to urge the European Commission to design a form of aviation tax. The group of countries remarked that aviation has a significant impact on the environment causing 2,5% of global CO2-emissions. Furthermore, the statement highlights that aviation transport is exempted from excise duties, no VAT is levied on international flights and there is no coordinated ticket tax. The initiative was led by the Netherlands that in May had already declared its readiness to tax flight tickets from 2021 in order to reduce the gap with other less polluting transport modes, such as trains.

OECD looks for feedback on its GloBE Proposal under Pillar Two

On 8 November, the OECD has published its “Public consultation document Global Anti-Base Erosion Proposal (“GloBE”) - Pillar Two”. The GloBE proposal seeks to address remaining BEPS challenges by ensuring that the profits of internationally operating businesses are subject to a minimum tax rate. The proposal includes four components: a) an income inclusion rule that would tax the income of a foreign branch or a controlled entity if that income was subject to tax at an effective rate that is below a minimum rate; b) an undertaxed payments rule that would operate by way of a denial of a deduction or imposition of source-based taxation for a payment to a related party if that payment was not subject to tax at or above a minimum rate; c) a switch-over  rule  to  be  introduced  into  tax  treaties  that  would  permit  a  residence  jurisdiction  to  switch  from  an  exemption  to  a  credit  method  where  the  profits  attributable  to  a  permanent establishment (PE) or derived from immovable property (which is not part of a PE) are subject to an effective rate below the minimum rate; d) a subject to tax rule that would complement the undertaxed payment rule by subjecting a payment to withholding or other taxes at source and adjusting eligibility for treaty benefits on certain items of income where the payment is not subject to tax at a minimum rate. The OECD has actively encouraged stakeholders to take part to the public consultation by giving inputs on the proposal by 2 December 2019.

European Commission publishes 2020 Combined Nomenclature

On 31 October, the European Commission has published the Combined Nomenclature applicable from 1 January 2020. The Combined Nomenclature is a tool for classifying goods, set up to meet the requirements both of the Common Customs Tariff and of the EU's external trade statistics. It determines both the rates of custom duty and how the goods are treated for statistical purposes. The Combined Nomenclature is updated every year in the Official Journal of the European Union.

OECD released its guidance on CbCR

On 5 November, the OECD has released its “Guidance on the Implementation of Country-by-Country Reporting”. The main issues addressed by the guidance relates to the definition of items reported in the CbCR template (e.g. the treatment of dividends), the entities to be reported, the sharing mechanism and the case of Mergers/Acquisitions/Demergers. Furthermore, the OECD has also published a list of Common errors made by MNEs in preparing CbCR that will be updated as further common errors are identified.