Weekly Tax News – 18 May 2020

MEPs call for CCCTB, DST and FTT as new own resources

On Friday 15 May, the European Parliament has approved a resolution that calls for a €2 trillion recovery plan to take the European Union out of the COVID-19 economic crisis. The MEPs have adopted the resolution by a large majority (505 votes in favour, 119 against and 69 abstentions), calling for a Recovery and Transformation Fund to be financed “through the issuance of long-dated recovery bonds guaranteed by the EU budget”. The MEPs have required to the European Commission and to EU leaders to introduce a basket of new own resources to the Multiannual Financial Framework (MFF) 2021-2027. The list of potential candidates for new own resources drafted by the European Parliament includes a common consolidated corporate tax base (CCCTB), the digital services taxation, a financial transaction tax, income from the emissions trading scheme, a plastics contribution and a carbon border adjustment mechanism. The MEPs have also remarked the need for abolishing all rebates and corrections, simplifying the VAT-based own resource, and using fines and fees as extra revenue for the EU budget.

European Commission May infringement package: tax decisions

On 14 May, the Commission has released its May infringement package which includes the following tax-related measures taken by the European Commission towards EU Member States. The Commission has sent letters of formal notice to Luxembourg and Portugal asking to correctly transpose into their respective legislations the interest limitation rule of the Anti-Tax Avoidance Directive. Luxembourg received a second letter of formal notice highlighting the incompatibility with the EU freedom of establishment of its tax law on securisation enterprises with taxable operations in Luxembourg and statutory seat is in another EU Member State. A letter of formal notice was also sent to Denmark requiring the amendment of the legislation on the taxation of dividends paid to charitable organisations. It is worth reminding that the letters of formal notice require the addressed countries to act within the next 4 months, otherwise the Commission may decide to send reasoned opinions to those countries. The Commission has also sent reasoned opinions to Romania (for failing to develop an IT system for monitoring EU-wide circulation of excise goods) and to Finland (on its legislation providing for deductibility of group contributions between affiliated companies only if the company receiving the contribution is resident in Finland). The two Member States are required to act in the next 4 months or the Commission may decide to refer the cases to the Court of Justice. Finally, the Commission has referred the Netherlands to the Court of Justice of the European Union for taxing the transfers of pension capital by mobile workers, which according to the Commission is an obstacle to the free movement of workers, the freedom of providing services and the free movement of capital.

European Banking Authority reports on Cum-Ex/Cum-Cum tax scheme

On 12 May, the European Banking Authority (EBA) has released the results of its inquiry into dividend arbitrage trading schemes (“Cum-Ex/Cum-Cum”). The report shows that national authorities do not share the same understanding of dividend arbitrage trading schemes, due to differences in Member States’ domestic tax law. Furthermore, the inquiry concluded that facilitating, or handling proceeds from tax crimes undermines the integrity of the EU’s financial system and, therefore, sets out a number of expectations of credit institutions and national authorities under the current regulatory framework. The EBA has also published a 10-point action plan for 2020-2021 to enhance the future framework of prudential and anti-money laundering requirements covering such schemes.