Weekly Tax News - 4 April 2022

April 4, 2022

Implementing Directive for Pillar II: a new attempt at compromise on 5 April

The French Presidency of the EU Council will try again to reach an agreement among Member States on the Implementing Directive for Pillar II during a meeting of EU Finance Ministers on Tuesday 5 April. A new compromise text dated 28 March foresees that Member States where no more than twelve ultimate parent entities of groups in scope are located may elect not to apply the Income Inclusion Rule (IIR) and the Undertaxed Profit Rule (UTPR) for six consecutive fiscal years. It also maintains the delay in the application of the new rules from 1 January 2023 to 31 December 2023. On Wednesday 30 March, Poland and Estonia were reportedly still opposed to the text. The French Presidency believes that an agreement could nevertheless be reached on 5 April but sees as the main issue standing in the way of an agreement the request of Poland to add legal safeguards in the text linking the implementation of Pillar I (reallocation of taxing rights) to the implementation of Pillar II of the OECD tax deal.

Joe Biden proposes replacing the BEAT by the UTPR rule

The American administration released on Monday 28 March a package of tax proposals, as part of its fiscal 2023 budget plan. These include replacing the base erosion and anti-avoidance tax (BEAT) with the OECD Pillar II’s Undertaxed Profit Rule (UTPR) for tax years beginning in 2024. A US domestic minimum top-up tax (at a 15% rate) would be part of the rules to protect US revenues from the imposition of UTPR by other countries. The UTPR would not apply to income subject to the US’s global intangible low-taxed income (GILTI) regime. Joe Biden also proposed a new minimum tax on wealthy individuals, a so-called ‘billionaire’s tax’, that would impose a 20% minimum tax on total income for taxpayers with wealth of greater than $100m.

Experts say tax advisors in the Netherlands should be regulated

On Monday 28 March, MEPs from the subcommittee of the European Parliament on tax matters (FISC) discussed with experts the national tax reforms implemented in the Netherlands to combat aggressive tax schemes. Among their recommendations, they suggested regulating the Dutch tax profession. Jan van de Streek, professor of tax law at the University of Leiden, said that regulation could, for example, be done through an oath or ethical rules. Anna Gunn, partner at Gunn Tax Communication, also called for national regulation of the tax profession although she noted a new ethical dimension in the new generation of tax advisors. MEP Paul Tang, Chair of the FISC subcommittee, explained that there are striking differences across the EU, with for instance Germany and Austria having clear regulations for tax advisors and where the tax professionals manage to strike the right balance between private and public interests.

European Commission considering relaxing energy taxation rules

The European Commissioner for Taxation, Paolo Gentiloni, suggested on Monday 28 March that derogations to the EU rules on energy taxation could be made in view of the impact of the Russian invasion of Ukraine on the EU economy. EU countries already have invested 0.5 percent of their GDP on average in measures to reduce inflationary pressures on consumers and businesses. “We have to keep coordination. My services will come in the next few weeks with further guidance on what kind of derogations to the rules that we have on energy taxation could be allowed temporary in this difficult situation”, he reportedly said during a press conference in Bucharest.

European Commission urges Member States to withdraw golden passports granted to Putin’s allies

In a recommendation issued on Monday 28 March, the European Commission urged Member States to immediately withdraw or refuse the renewal of the citizenships or residence permits granted under an investor residence scheme (so-called Golden passports or visas) to Russian or Belarusian nationals who are subject to EU sanctions in connection to the war in Ukraine. More generally, the Commission also said that any Member State still operating investor citizenship schemes needs to terminate them immediately, recalling that such schemes are not compatible with the principle of sincere cooperation and with the concept of EU citizenship enshrined in the EU treaties. “Investor residence schemes raise inherent security, money laundering, tax evasion and corruption risks for Member States and for the EU as a whole. Russia's aggression against Ukraine has once again underlined these risks”, it stated.

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