Weekly Tax News - Monday 12 February 2024

February 12, 2024

Jurisdictions continue to make progress in addressing harmful tax practices through the implementation of the international standard under BEPS Action 5, the OECD said on Tuesday 6 February. It had examined 322 preferential tax regimes and found that over 40% of them had been or were in the process of being abolished. In particular, the OECD found that the preferential tax rate for family offices in Hong Kong and the free-trade zones in the United Arab Emirates are not harmful anymore. The OECD also noted that the preferential tax regimes in Albania and Armenia have now been abolished. These four jurisdictions are currently on the EU's grey list of third countries with tax risks but which have committed themselves to take corrective measures. The next update of the EU black and grey lists is reportedly expected to be adopted on 20 February 2024.

European Commission grants Canada DAC7 equivalence

On Monday 5 February, the European Commission reportedly confirmed that information to be automatically exchanged between Canada and the 17 Member States signatories of the OECD Multilateral Competent Authority Agreement on Automatic Exchange of Information on Income Derived Through Digital Platforms is equivalent to the information required under the seventh amendment to the Directive on Administrative cooperation in tax matters (DAC7). With this decision, Canadian platforms that have reporting obligations under DAC7 will report the information to Canada, which will then exchange the information with the relevant EU countries, on the condition that the Canadian legislation enters into force and the exchange relationships between Canada and the EU Member States are activated. The 17 Member States that have signed the Multilateral agreement are Belgium, Bulgaria, Croatia, Cyprus, Estonia, Finland, Ireland, Latvia, Luxembourg, Malta, the Netherlands, Poland, Portugal, Slovakia, Slovenia, Spain, and Sweden. Canada’s DAC7 equivalence will apply as of 2024.

European Commission calls on Germany to comply with EU VAT rules regarding private tuition services

On Wednesday 7 February, the European Commission issued a reasoned opinion to Germany for failing to correctly apply the EU rules on VAT exemption for private tuition services, as set out in the VAT Directive and clarified by the European Court of Justice. This directive requires Member States to exempt private tuition covering school or university education from VAT. Member States may lay down additional conditions only to ensure the correct and straightforward application of this exemption and to prevent tax fraud, evasion and abuse. They must exercise this discretion in such a way as to ensure that the taxpayer entitled to the VAT exemption can actually benefit from it. In Germany, private teachers must present a certificate in order to qualify for VAT exemption. This certificate must be issued by the competent authority of the German "Land" and attest that the teaching services prepare for the exercise of a profession or for an examination before a legal entity governed by public law. According to the Commission, this provision does not comply with EU law as interpreted by the European Court of Justice. For this reason, Germany is considered to be in breach of its obligations under the VAT Directive. Germany now has two months to respond to the Commission and take the necessary measures. Should it fail to do so, the Commission may refer the matter to the European Court of Justice.

Greece asked to remove its excise duty exemption for tax-free shops at land borders with non-EU countries

The European Commission decided on Wednesday 7 February to open an infringement procedure by sending a letter of formal notice to Greece for failing to comply with the EU rules on general arrangements for excise duty. Greece exempts from excise duty goods supplied by tax-free shops located at its land borders with Albania, North Macedonia, and Türkiye. Until January 2017, the Directive allowed Member States which held tax-free shops located outside an airport or port on 1 July 2008 to use such exemption. Despite this no longer being permitted under EU legislation, Greece continues to use this exemption. The Commission is therefore sending a letter of formal notice to Greece, which now has two months to respond and address the shortcomings raised by the Commission. In the absence of a satisfactory response, the Commission may decide to issue a reasoned opinion.

FISC hearing on tax obstacles in the Single Market

The FISC subcommittee of the European Parliament will hold on Tuesday 13 February a public hearing on “Tackling Tax Obstacles in the Internal Market and the Role of Tax Policies in Promoting Economic Growth”. Experts will present their views and discuss with FISC Members on how to address remaining tax-related obstacles and distortions in the Single Market. Mr. Enrico Letta, President of the Jacques Delors Institute, mandated by the Council of the EU to prepare a high-level report on the future of the EU internal market and present it to the European Summit on March 20-21, 2024, will attend the hearing to comment on the tax aspects of his work on this report. Moreover, on the same day, the Department of Economic, Scientific and Quality of Life Policy will host a workshop with FISC members to present a study on "Good tax practices in the fight against tax evasion - The signalling role of FDI data". Pr. Arjan Lejour will present the report, which examines the role of foreign direct investment (FDI) in tax havens.

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