Weekly Tax News – 20 July 2020

The European Commission’s Action Plan on taxation

On 15 July, the European Commission presented a package of new tax measures to simplify tax compliance and better fight tax evasion. The Action Plan on “Fair and simple taxation supporting the recovery strategy” includes 25 tax initiatives that the Commission is planning to launch between 2020 and 2023. Amongst the many initiatives, the Commission is planning to present a complete package on “VAT in the digital age” to update VAT rules for the sharing economy, moving to a single EU registration, modernising VAT reporting obligations and facilitating e-invoicing. The Commission will also launch impact assessments on the introduction of a more consistent determination of tax residence within the Single Market and on the introduction of a common EU-wide system for withholding tax relief at source, accompanied by an exchange of information and cooperation mechanism between tax administrations. The tax Action Plan was accompanied by a “Communication on Tax Good Governance in the EU and beyond” aiming to strengthen how the EU promote transparency and fair taxation. It proposes a reform of the Code of Conduct for Business Taxation, to ensure that it can effectively tackle all forms of harmful tax competition in a more transparent manner. The Communication aims at reviewing the EU list of non-cooperative jurisdictions for tax purposes in order to ensure that it is still effective, fit and fair to deal with today’s challenges.

Commission proposes to extend automatic exchange of info to digital platforms

On 15 July, as part of the tax package, the European Commission has proposed a revision of the Directive on administrative cooperation in the field of taxation (DAC 7). The objective is to extend the EU tax transparency rules to digital platforms. On the basis of the proposal, Member States will automatically exchange information on income generated by sellers/service providers on digital platforms. In addition, DAC 7 should strengthen administrative cooperation through the clarification and improvement of existing rules, such as an explicit inclusion of joint tax audits and group requests.

EU General Court annuls Commission’s decision on Apple case

On 15 July, the General Court of the European Union dismissed the European Commission’s decision that Ireland had granted Apple an illegal State aid. In 2016, the Commission found that two Irish tax ruling granted in 1991 and 2007 were contrary to the EU State aid rules and ordered Ireland to recover €13 billion from Apple. However, according to the General Court, the Commission was wrong to declare that the Irish subsidiaries of Apple had been granted a selective economic advantage and, by extension, State aid. The Court explained that the Commission incorrectly concluded that the Irish tax authorities had granted to the Apple subsidiaries an advantage for not having allocated the group’s intellectual property licenses held by such subsidiaries and, consequently, all of the subsidiaries’ trading income to the Irish branches. The Court added that the Commission failed to demonstrate methodological errors in the contested tax rulings or that such tax rulings were the result of discretion exercised by the Irish tax authorities.

European Commission: no economic aid for companies linked with EU tax blacklist

On 14 July, the European Commission a recommendation on making State financial support to undertakings in the Union conditional on the absence of links to non-cooperative jurisdictions. The Commission recommended the Member States not to provide financial support to companies (i) resident  for  tax  purposes  in,  or  incorporated  under  the  laws  of,  jurisdictions  that feature on the EU blacklist of non-cooperative jurisdictions; (ii) controlled,  directly  or  indirectly,  by  shareholders  in  jurisdictions  that  feature on the EU blacklist; (iii) controlling,  directly  or  indirectly,  subsidiaries  or  owning  permanent  establishments  in jurisdictions that feature on the EU blacklist; and (iv) sharing ownership with undertakings in jurisdictions that feature on the EU blacklist. France, Denmark and Poland have already taken this type of measures as part of their national aid packages.

Millionaires call for wealth tax

On 13 July, 84 “Millionaires for Humanity” signed a letter calling on governments to raise taxes on wealthy individuals. The signers of the letter remark that the wealth taxes should be used to support the economic recovery and to sustain the health crisis. They also stress the importance of raising wealth taxes permanently.