VAT goes digital: the tax practitioners’ perspective
During a conference organized by the European Tax Adviser Federation (ETAF) on Wednesday 7 December 2022, tax advisers discussed with Patrice Pillet, Head of Unit VAT at the European Commission, how the package “VAT in the digital age” (ViDA) will affect our profession and what are its expected benefits, just one day before its official adoption on 8 December. “Electronic invoicing, associated with necessary regulatory changes, will undoubtedly modify the landscape of our profession. And we are quite ready for that!”, ETAF president Philippe Arraou said. ETAF very much welcomes and supports the staged approach on e-invoicing and digital reporting proposed in the new package. The proposed quasi real time access to invoicing information through an EU central database would save EU businesses over 4.1 billion euros per year on average in compliance costs over the next ten years, Patrice Pillet estimated. For Dr. Stefanie Becker, the ETAF representative in the Commission’s VAT expert group, the existing fragmentation of e-invoicing systems makes it really difficult for businesses to work cross-border and it is urgent to have a solution at EU level. Olivier Hody, Tax Adviser member of ITAA and Partner at the Deloitte Global Tax Center Europe, highlighted the concerns of the profession with the entrance of new e-invoicing players on the market and the potential “uberisation risk”. Speakers also discussed the two other pillars of the package: the updated VAT rules for passenger transport and short-term accommodation platforms as well as the introduction of a single VAT registration across the EU. Our event can be watched again online here.
Commission unveils its VAT in the digital age package
The European Commission published on Thursday 8 December its package “VAT in the digital age” (ViDA). It contains three pillars: - mandatory cross-border intra-EU e-invoicing and digital reporting requirements using the European standard EN 16931 ; - updated VAT rules for passenger transport and short-term accommodation platforms and ; - the introduction of a single VAT registration across the EU. All the changes proposed will be phased in between 2024 and 2028. The Commission estimates that the new measures will help Member States to collect up to 18 billion euros more in VAT revenues annually. On the same day, the Commission also published its 2022 VAT gap report, showing that Member States lost 93 billion euros in VAT revenues in 2020.
Eighth amendment to the Directive on Administrative Cooperation (DAC8)
The European Commission presented on Thursday 8 December a proposal of Directive amending for the eighth time the Directive on Administrative Cooperation in tax matters (DAC8). The main purpose of this proposal is to extend the automatic exchange of information between EU Member States foreseen by the Directive to income earned through crypto assets. The text requires reporting by EU and non-EU crypto-asset operators (when they have reportable users resident in the EU). Both domestic and cross-border transactions are covered. According to the Commission, this exchange of information could help Member States to recover 2.4 billion euros of tax revenues due. The proposal also extends the scope of the automatic exchange of advance cross-border rulings for high net-worth individuals, who hold a minimum of €1.000.000 in financial or investable wealth, or in assets under management. These exclude the individual’s main private residence. Member States will have to exchange information on the advance cross-border rulings issued, amended or renewed between 1 January 2020 and 31 December 2025, if they were still valid on 1 January 2026. Finally, the proposal establishes a common minimum level of penalties for the most serious non-compliant behaviour.
Ecofin cancels its discussion on Pillar Two at last minute
The discussion on the implementing Directive of Pillar Two of the OECD agreement (minimum taxation of multinationals) has been removed at last minute from the agenda of the meeting EU Finance Ministers on Tuesday 6 December. Hungary has refused to lift its veto on Pillar Two and to the EU financial aid to Ukraine for 2023 because it has not received assurances that the procedure under the ‘rule of law’ regulation that could lead to the suspension of EU cohesion funds for the country will be cancelled, nor has it received the green light from Member States on its recovery plan. The Council of the EU has until 19 December to adopt, amend or reject the Commission’s proposal to freeze the funds for Hungary. The Czech presidency of the Council of the EU will reportedly convene a meeting of Member States’ ambassadors to the EU on Monday 12 December in the afternoon to discuss a way forward on the four files. If an agreement is reached between the ambassadors, the package could be adopted early next week. If not, a new meeting of EU Finance Ministers could be organized before 19 December to break the deadlock.
Council agrees on AML regulation and AMLD6
The Council of the EU adopted on Wednesday 7 December its position on the anti-money laundering (AML) regulation and a new directive (AMLD6), proposed by the European Commission in July 2021. The EU AML rules will be extended to the crypto sector. The texts notably require crypto-assets service providers to apply customer due diligence measures when carrying out transactions of €1,000 or more and add measures to mitigate the risks associated with transactions with self-hosted wallets. EU Member States also agreed on an EU-wide maximum limit of €10.000 for cash payments, while allowing Member States to impose lower maximum limit. The texts also foresee that third countries that are listed by the Financial Action Task Force (FATF) will be listed by the EU. There will accordingly be two EU lists, a “blacklist” and a “grey list”, reflecting the FATF listings. The Commission will not be required to redo the identification process performed by the FATF. With regard to the beneficial ownership rules, the Council of the EU clarified that beneficial ownership is based on two components - ownership and control. The Council of the EU also detailed how to identify and verify the identity of beneficial owners for all types of entities, including non-EU ones. The provisions on data protection and document retention are also clarified in order to facilitate and speed up the work of the competent authorities. The European Parliament is expected to take a position on these texts in mid-March 2023, after what the interinstitutional negotiations will start.
ECJ clarifies rules for lawyers-intermediaries in aggressive tax planning
The Administrative Cooperation Directive (2011/16/EU) requires all intermediaries involved in potentially aggressive cross-border tax planning to report it to the tax authorities. However, each Member State may grant lawyers an exemption from this obligation where it would be contrary to professional secrecy. Intermediary lawyers are nonetheless required to notify any other intermediary, or the taxpayer concerned, of their reporting obligations to the competent authorities without delay. In a judgment (Case C-694/20) published on Thursday 8 December, the Court of Justice of the EU ruled that the EU Charter of Fundamental Rights protects the confidentiality of all correspondence between individuals and grants enhanced protection to exchanges between lawyers and their clients on the basis of professional secrecy. The above-mentioned obligation implies that other intermediaries are made aware of the identity of the intermediary lawyer and his or her analysis that the scheme should be reported. This interferes with the right to respect for communications between lawyers and their clients, the Court said. And the obligation of intermediaries to inform the tax authorities of the identity and consultation of the lawyer leads to a second interference. The reporting obligation on other intermediaries who are not subject to legal professional privilege and, if there are no such intermediaries, that obligation on the relevant taxpayer, ensure, in principle, that the tax authorities are informed, the ECJ concluded.
OECD consults on the design elements of Amount B under Pillar One
The OECD published on Thursday 8 December a public consultation document on the main design elements of Amount B under Pillar One (reallocation of taxing rights). Amount B provides for a simplified and streamlined approach to the application of the arm’s length principle to in-country baseline marketing and distribution activities, with a particular focus on the needs of low-capacity countries. The document outlines the scope, the pricing methodology and the current status of discussions concerning an appropriate implementation framework and seeks inputs from stakeholders in a number of specific questions. Interested parties have until 25 January 2023 to send their comments on the public consultation document to the OECD Secretariat.
This newsletter contains information about European tax policies and developments gathered from official documents, hearings, conferences and the press. It does not reflect the official position of ETAF nor should it be taken as a written statement on behalf of ETAF.