Weekly Tax News - Monday 13 November 2023

November 13, 2023

On Thursday 9 November 2023, EU Finance Ministers met in Brussels to discuss several economic and financial topics. On this occasion, they adopted, without discussion, a statement stressing the need to ensure consistency with OECD administrative guidelines when applying the Pillar Two Directive, in order to avoid applicability of diverging standards. In this respect, the Council welcomed the agreement reached by the Inclusive Framework on the clarifications concerning the application of the Pillar Two contained in the administrative guidelines approved in December 2022, February 2023 and July 2023. The statement also recalls that the recitals of the Pillar Two Directive refer to the use of the guidance developed by the Inclusive Framework as a source of illustration or interpretation and notes the intention of the EU Member States to follow this guidance when transposing the Pillar Two Directive into their national law. In an annexed statement, the European Commission affirms that the aforementioned administrative guidance is compatible with the Pillar Two Directive.

EP adopts its opinion on new EU own resources and urges Council to follow suit

The European Parliament adopted on Thursday 9 November its opinion on an amendment to the law governing the EU’s revenues, the so-called “Own Resources Decision” (ORD). This amendment, if adopted by the Council by a unanimous decision and ratified by all Member States, will introduce three new sources of income for the EU budget: - revenue from emissions trading (ETS); - the resources generated by the proposed EU carbon border adjustment mechanism (CBAM); and - a temporary statistical own resource based on corporate profits. At the end of 2021, the Commission proposed three new own resources, updated in June 2023, which, however, have not been yet adopted by EU Member States. MEPs urged Member States to adopt the new EU income streams before the EU elections in 2024.

MEPs want a more ambitious FASTER framework

On Tuesday 7 November, the ECON committee of the European Parliament met to discuss the draft report on the proposal for Faster and Safer Relief of Excess Withholding Taxes (FASTER), prepared by MEP Herbert Dorfmann (EPP, Italian). During the meeting, Mr Dorfmann said the Commission’s proposal is a good starting point but regretted that it is not ambitious enough. In his report, he proposed certain improvements, such as ensuring that the tax administrations have the necessary instruments and tools at their disposal. It is also important, according to him, to ensure more clarity in the registration of financial intermediaries from third countries. He recognized that, in the long term, digital certificates would be a good idea, however, the timeline set for implementation is very short in his view. He also added that a review of the directive should take place in three years. All in all, Mr Dorfmann was sceptical if much progress would be achieved during the Spanish presidency, but hoped more progress would be made during the Belgian one. The deadline for tabling amendments on the draft report is 15 November. A vote in the ECON committee is expected to take place on 23 January 2024.

EDPS opinions on BEFIT, HOT and TP Directive

The European Data Protection Supervisor (EDPS) published on Tuesday 7 November its opinions on three recent tax proposals: the proposal for a Directive on Business in Europe: Framework for Income Taxation (BEFIT), the proposal for a Council Directive establishing a Head Office Tax system for SMEs and the proposal for a Directive on transfer pricing. For these three files, the EDPS welcomed the inclusion of specific provisions on data protection in the proposals. Nevertheless, to enhance legal certainty and foreseeability, the EDPS recommended to further clarify the specific purposes of the processing of personal data in the context of the proposals. In addition, the EDPS recommended clarifying the starting date of the proposed data retention period and to ensure that the maximum retention period remains limited to what is strictly necessary.

Advocate General Pitruzzella recommends a new judgment on Ireland's tax rulings to Apple

On Thursday 9 November, the Advocate General of the Court of Justice of the EU (CJEU), Giovanni Pitruzzella, delivered his non-binding opinion on a case of tax state aid from Ireland to Apple dating back to 1991 and 2007 and deemed illegal by the European Commission. At that time, Ireland, by issuing two tax rulings, approved the method by which two companies in the Apple group (ASI and AOE) proposed to determine their taxable profits in Ireland from the activity of their Irish branches. In 2016, the European Commission had considered these tax rulings to be illegal state aid incompatible with the internal market, but this decision was overturned by the EU General Court, which found that the Commission had failed to demonstrate the existence of an advantage deriving from the adoption of the tax rulings. The Commission has appealed this decision to the CJEU, and the Advocate General Pitruzzella is now advising to set the judgment aside, arguing that the Court of First Instance failed to correctly assess the substance and consequences of certain methodological errors that could have vitiated the tax rulings. The CJEU, the EU's highest court, to which the European Commission has appealed, must now decide. The 13 billion € in back taxes that the EU is demanding from Apple and that must be repaid to Ireland are currently in escrow, pending legal proceedings.

As part of the ongoing work of the OECD/Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development (IGF) Partnership on BEPS in the mining programme, the OECD launched on Monday 6 November a public consultation on an additional toolkit designed to help developing countries address the transfer pricing challenges they face when pricing minerals. For many resource-rich developing countries, mineral resources represent a significant economic opportunity to increase government revenues. Tax base erosion and profit shifting (BEPS), combined with gaps in the capacity of developing country tax authorities, threaten this prospect, according to the OECD. The public consultation document provides a framework to identify the primary economic factors that can influence the pricing of minerals using transfer pricing principles. It shows how the framework can be applied to lithium. Further toolkits applying the framework to other commodities will be released as they are developed. Interested parties wishing to submit comments have until 2 February 2024 to send their comments by email to [email protected].

The Philippines has joined as a member of the Organisation for Economic Cooperation and Development (OECD)/G20 Inclusive Framework on Base-Erosion and Profit Shifting (BEPS), according to a press release published on Thursday 9 November. In a meeting on 8 November 2023 with OECD Centre for Tax Policy and Administration Director, Manal Corwin, Finance Secretary Benjamin Diokno presented the Department of Finance (DOF)’s letter of commitment stating the Philippines' support for the implementation of the BEPS Action Plan and its interest in joining the Outcome Statement on the Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalization of the Economy of 11 July 2023. Since 2016, the DOF and the Bureau of Internal Revenue (BIR) have been working on aligning the Philippines' domestic legal framework with the BEPS minimum standards, with support from the OECD, the Asian Development Bank (ADB), and other development partners, the release says.

On Friday 10 November, ETAF took part in the Belgian Institute for Tax Advisors and Accountants (ITAA) Congress. Throughout the day several mini-conferences were organized on different topics such as reporting and sustainability, e-invoicing, use of artificial intelligence and how to enhance the attractiveness of the profession. During a session dedicated to European and international tax policy news, ETAF Head of Office, Michael Schick, presented to Belgian tax professionals the recent SME relief measures proposed by the European Commission, including a Head Office Tax System for SMEs. He also informed the audience about the rationalisation plans of the European Commission for 2024 and its intention to reduce by 25% the administrative burden weighing on companies and originating from EU law. Moreover, Mr Schick gave some information about new EU AML rules, currently under negotiations between the Council of the EU and the European Parliament, and their impact on tax professionals. Finally, he gave a brief overview of the state of play on the future Securing the Activity Framework for Enablers (SAFE), which fate is linked to another proposal: the UNSHELL Directive laying down rules to fight the misuse of shell entities.

ETAF conference on 29 November

Register here: https://sweapevent.com/etafconferenceontheoecdtwopillarsolution

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