Weekly Tax News – 15 March 2021

ATAD3 could be the Commission’s answer to OpenLux

On 12 March, during the European Parliament plenary debate, Tax Commissioner Paolo Gentiloni remarked that the Commission is ready to tackle the issue raised by the OpenLux investigation, which revealed that over 50.000 shell companies located in Luxembourg manage over EUR 6 trillion worth of assets. He explained that an EU solution is needed and that DG TAXUD is already working on a possible amendment of the Anti-Tax Avoidance Directive (ATAD) to solve the issue. The MEPs who have participated to the exchange with the Commissioner welcomed this announcement, but they have also pointed out that, before implementing new rules, there is the clear need for EU Member States to properly apply existing ones and for the Commission to launch infringement procedures if such rules are not correctly applied.

European Parliament adopts its opinion on DAC7

On 10 March, the European Parliament adopted by a broad majority (568 votes in favour, 63 votes against, and 64 abstentions) its legislative resolution on a Council Directive on administrative cooperation in the field of taxation (DAC7). The Parliament’s report include recommendation to the Commission’s proposal aiming at effectively trace and tax the sales that people make by selling goods and providing services through online platforms. The rapporteur Sven Giegold (the Greens/EFA, Germany) commented on the adoption by saying that this Directive will close one loophole but other remains open since not all types of income and assets are included under DAC. He also complained that the Council has already decided its position without waiting for the European Parliament’s proposals and has postponed the implementation to January 2023.

European Commission consults on DAC8 and taxpayers’ rights

On 10 March, the European Commission has launched two tax-related public consultations. The first is related to a new revision of the Directive on Administrative Cooperation in the field of Taxation (DAC8), which would extend the exchange of information among EU tax authorities to crypto-assets and electronic money. Furthermore, DAC8 aims to tackle the lack of penalties and sanctions of the DAC, which results in a certain ineffectiveness of the current Directive. The second consultation looks at gathering opinions on how to improve taxpayers’ rights and simplify their obligations. The outcome of this second procedure should be a Recommendation to Member States along with a Communication to be issued in autumn 2021 which would identify best practices and case law to make taxpayers aware of their rights and obligations. The deadline to participate to the two public consultations is 2 June 2021.

Court of Justice on VAT group: principle establishment and branch must be regarded as separate taxable persons

On 11 March, the Court of Justice has delivered its judgement on the case C‑812/19 (Danske Bank A/S, Danmark, Sverige Filial vs Skatteverket), regarding the Swedish branch of a Danish Bank (Danske Bank). The principal establishment of Danske Bank is part of a Danish VAT group established under the Danish legislation based on Article 11 of the VAT Directive while its Swedish branch is not part of any Swedish VAT group. The Swedish Supreme Administrative Court issued a question to the Court of Justice to clarify if the Swedish branch constitute an independent taxable person, considering that the Danish establishment supplied services to the branch and imputed the costs thereof to the Swedish branch. The Court ruled that “the principal establishment of a company [the Danish principal establishment], situated in a Member State and forming part of a VAT group formed on the basis of Article 11, and the branch of that company [the Swedish branch], established in another Member State, must be regarded as separate taxable persons where that principal establishment provides that branch with services and imputes the costs thereof to the branch”.