Weekly Tax News - 7 June 2022

June 7, 2022

EU Member States agree on a sixth package of sanctions against Russia

EU leaders agreed in the night of Monday 30 May the sixth package of sanctions against Russia, including an embargo on Russian oil. The Commission initially proposed this sixth package of measures on 4 May but it created tensions between Member States. EU leaders finally agreed that the sanctions against Russia will cover crude oil, as well as petroleum products, delivered from Russia into Member States, with a temporary exception for crude oil delivered by pipeline. The delay has reportedly been given in order to satisfy Hungary, which is heavily dependent on Russian oil via the Druzhba pipeline. The sixth sanctions package also involves the exclusion of several banks from SWIFT and targeted sanctions. On Tuesday 31 May, in its conclusions, the European Council also recognized that the Russian war of aggression against Ukraine has shown the need for a stronger and more capable European Union in the field of security and defence. In this context, it said that it looks forward to the presentation of “a possible joint European Defence Investment Programme, including exploring a vehicle for Value Added Tax exemption and for European defence projects of high common interest”

Greenlight of Poland’s recovery plan raises hopes for an agreement on Pillar II

The European Commission formally approved on Wednesday 1st June the recovery plan of Poland after nearly a year of blockade due to the rule-of-law dispute regarding the independence of the country’s judiciary. In turn, EU institutions and stakeholders are now hopeful that Poland will lift its veto on the Implementing Directive for Pillar II (minimum taxation) of the OECD global tax deal. During the last Ecofin meeting, the French Finance minister, Bruno Le Maire, already said that he is optimistic an agreement could be reached at the next Ecofin meeting – and last one under the French Presidency– on 17 June. He explained that the EU Council is working on a politically binding link between Pillar I and Pillar II of the OECD agreement, rather than on a legally one, as Poland initially requested.

EU withholding tax procedures expected in first half of 2023

Speaking at a conference on Capital Markets Union on Wednesday 1st June, EU Tax Commissioner, Paolo Gentiloni, reportedly said that the European Commission will present a proposal on withholding tax procedures during the first half of 2023. The problems the Commission aims to tackle are the particularly burdensome withholding tax refund procedures for cross-border investors in the EU and, at the same time, the risks they present in terms of tax abuse. The Commission initially intended to present this proposal at the end of 2022. A public consultation is running until 26 June.

Final negotiations in the European Parliament before the vote on CBAM

The final vote in the European Parliament this week on the Carbon Border Adjustment Mechanism (CBAM) might be a bit different from the position adopted earlier this year by the Parliament’s Committee on the Environment, Public Health and Food Safety (ENVI). While the rapporteur Mohammed Chahim (S&D, Netherlands) had obtained a majority to abolish free allocation of allowances by the end of 2030 for sectors covered by the CBAM, he would reportedly have reversed his position. Together with the Renew Europe group, he tabled an amendment postponing the complete phase-out of free allowances: the reduction will have to start in 2026 (and not in 2025) and end in 2032. The S&D and Renew Europe groups also agreed on a second amendment to support European exporting companies, which could be negatively affected by CBAM. Those in the top 10% in terms of emissions will be eligible for free allowances for their exports of products covered by the CBAM regulation. The final vote is scheduled on Wednesday 8 June.

MEPs ready to start working on AMLA

The rapporteurs in the European Parliament, Luis Garicano (Renew Europe, Spain) and Emil Radev (EPP, Bulgaria) have published their draft report on the future Anti-Money Laundering Authority (AMLA) and they suggest quite a number of amendments to the original proposal from the Commission. First of all, they want to significantly increase the number of entities that would fall under the direct supervision of AMLA, by dropping the cross-border threshold and including crypto asset service providers on the list. The rapporteurs also want to give AMLA independent intelligence capacity and suggest that each national Financial Intelligence Units (FIUs) should delegate a member to the AMLA. While the Commission proposed that the budget of AMLA should be funded 75% via contributions from the sector and 25% via the EU’s budget, the two MEPs propose that the country hosting the agency would pay a contribution and that AMLA would be allowed to set its own fees. The deadline for amendments is on 17 June and a vote in the relevant committees of the European Parliament is reportedly planned for after the summer break.

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