Weekly Tax News – 29 June 2020

France, Italy, Spain and UK believe in a phased approach for the OECD digital tax

The discussions around the OECD negotiations on digital taxation have been relaunched this week by a letter sent by the Finance Ministers of Italy, France, Spain and the U.K. to the U.S. Secretary of Treasury Steven Mnuchin. The Ministers “believe that a phased approach, initially focused on automated digital services would considerably ease the task of achieving a consensus-based solution and make a political agreement within reach this year”. They highlight that such phased approach would “pave the way for possible transitional solutions to be discussed with the United States, notably with respect to existing or upcoming national digital service taxes”. On 24 June, Pascal Saint-Amans (Director of the OECD's Centre for Tax Policy and Administration) reassured that the discussions had not been interrupted and that once the U.S. presidential election is over, the negotiations might be easier.


DAC 6 and VAT e-commerce deadlines postponed

On 24 June, the EU Council formally adopted the amendment to the Directive on administrative cooperation in the field of taxation which postpones certain time limits for the filing and exchange of information due to the COVID-19 pandemic. Member States have the option to defer by up to 6 months:

  • automatic exchanges of information on financial accounts of which the beneficiaries are tax residents in another member state;
  • reportable cross-border tax planning arrangements.

On the same day, the Coreper (Member States' ambassadors to the EU) reached an agreement in principle on postponing by six months the implementation of the VAT regime applicable to online companies (1 July 2021 instead of 1 January 2021). The postponement should be adopted by the Council once the text has undergone a legal and linguistic review.


Commission opposes Italian request to apply VAT reverse charge on atypical supply of staff

On 22 June, the European Commission issued a Communication to the Council opposing to an Italian request for a derogation from Article 193 of the Council Directive 2006/112/EC (the “VAT Directive”). The purpose of the derogation requested by Italy is to place the liability for the payment of VAT to the tax authorities on the taxable person to whom the supplies are made (the so-called reverse charge mechanism) rather than on the person supplying the goods. The requested was limited to the case of contracts that involve atypical supply of staff, meaning the provision of services carried out by means of procurement contracts, sub-contracting, entrustment to consortia or other associated companies, characterized by a predominant use of labour at the customer’s business premises, with the use of capital goods owned by the customer, or in any case attributable to him. The aim of the requested derogation is the fight against VAT fraud. However, the Commission remarked that Italy has already been granted two special measures of a general nature to combat VAT fraud: the split payment mechanism for the supplies of goods and services to public authorities, to companies controlled by public authorities and to companies listed on the stock exchange that are included in the FTSE MIB index, and the mandatory generalised electronic invoicing. The Commission believes that another special measure like the one requested would imply an increased de-harmonization of the Italian VAT system from the common EU VAT system established by the VAT Directive.


State Aid Temporary Framework: Commission approves €7.6 billion Italian tax schemes

On 26 June, the European Commission has approved four Italian tax schemes worth €7.6 billion to support companies and self-employed workers affected by COVID-19 outbreak. The measures were approved under the State aid Temporary Framework adopted by the Commission to mitigate the economic impact of the COVID-19 outbreak. The four measures adopted in Italy includes:

  • A partial waiver of the regional tax on production activities (IRAP) for companies and self-employed workers with revenues not exceeding €250 million in 2019 active in all sectors with some exceptions (such as banks and financial institutions).
  • An exemption from the municipal tax (IMU) in relation to touristic properties used for commercial operations, including SPAs and sea resorts;
  • Tax credits to support the adaptation of production processes and work places to the new sanitary requirements;
  • Tax credits for certain companies and self-employed workers depending on level of revenues in relation to rents and leases for non-residential properties and business leases for the period between March and June 2020.

The European Commission concluded that the measures are necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a Member State, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework.


Coreper agrees to update EU excise duties on alcohol

On 24 June, Member States’ ambassadors to the EU (Coreper) have confirmed their agreement to update the Directive 92/83/EEC on excise duties on alcohol and alcoholic beverages within the EU. The updated rules on structures of excise duty are expected to improve the business environment and reduce costs for small alcohol producers. According to the compromise text, Member States will have until 31 December 2021 to transpose the directive into national law.


ETAF Tax Conference on 30 June