Weekly Tax News – 9 November 2020

German Presidency is pushing to approve DAC 7

On 4 November, in the course of the ECOFIN meeting, the German Finance Minister Olaf Scholz has once again pushed its EU counterparts to adopt the sixth amendment to the Council Directive on Administrative Cooperation in the field of Taxation (so-called DAC 7). The proposal of the European Commission provides for an obligation for digital platforms to transmit to the tax authorities the revenues generated by service providers or supplier of goods using their platform. Mr Scholz highlighted that the negotiations are progressing well and that this proposal would be a major step forward to strengthen fair taxation within the EU.

Council supports Commission in its fight against Money Laundering

On 4 November, during the ECOFIN meeting, the Council discussed the draft of its general conclusions regarding the Action Plan of the Commission against Money Laundering. The Ministers have basically supported the Commission’s proposals and asked it to deliver concrete legislative proposals at the beginning of 2021. It is worth highlighting that the Council asked the Commission to transform certain parts of the AML-Directive into a directly applicable regulation in order to allow for a level playing field in the Single Market and for an even application of the provisions throughout the Union, reducing national divergences in transposition that undermine an effective implementation of the AML/CFT framework. Secondly, the Council does also support the idea of setting up an EU-level supervisor with direct supervisory powers, as well as the authority to take over supervision from a national supervisor in clearly defined and exceptional situations.

October Infringement Package: tax decisions

On 30 October, the European Commission has released its October infringement package where it pursues legal action against Member States for failing to comply with their obligations under EU law. In the field of taxation, the European Commission issued 6 letters of formal notice, 1 reasoned opinion and referred 4 countries to the Court of Justice of the European Union (CJEU). Two letters of formal notice were sent to Luxembourg which was required to change its rules on the taxation of interest received by individuals and to bring its rules on reduction of inheritance tax into line with EU law. Two letters of formal notice were also sent to Belgium which was asked to stop taxing dividends on shares held by life insurance companies abroad more heavily than dividends received by Belgian insurance companies and to bring its rules on exemption of income from savings deposits in line with EU law. The letter of formal notice sent to France required Paris to amend its legislation on the taxation of capital gains made by foreign investment funds while the letter sent to the UK regards its failure to comply with EU VAT rules for trade in financial instruments on certain terminal markets. The reasoned opinion sent to Spain urged Madrid to transpose the Directive on anti-tax avoidance practices concerning hybrid mismatches. The Commission referred Greece to the CJEU about the restriction to the freedom of establishment linked to its income tax rules for businesses with foreign branches. The referral of The Netherlands to the CJEU concerns its rules on the cross-border provision of pensions and the transfer of pension capital which, according to the Commission, restrict the free movement of citizens and workers, the freedom of establishment, the freedom to provide services and the free movement of capital. The European Commission decided to refer Belgium to the Court of Justice regarding its legislation on the deductibility of alimony payments from the taxable income of non-residents. Poland was referred to the CJEU for its failure to align with EU rules on the exemption of imported alcohol used in the production of medicines.

ETAF Tax Conference 1 December 2020