Weekly Tax News - 28 November 2022

November 28, 2022

UN gets mandate on international taxation

The UN General Assembly has adopted on Wednesday 23 November by unanimous consensus a resolution that gives mandate to the UN to start discussions on international taxation standards. The policy area has long been dominated by the Organisation for Economic Co-operation and Development (OECD). The resolution, presented by the African group of nations within the UN, will allow countries to begin intergovernmental discussions in New York over possible UN reforms to the global tax system, including the establishment of new UN bodies and mechanisms to monitor, evaluate and decide global tax rules. The UN Secretary-General Antonio Guterres has been tasked with delivering a report on the problems in the global tax system and potential solutions.


EU eyeing an exit tax for Russian oligarchs

The European Commission is reportedly reflecting on the idea of a “harmonized EU exit tax applicable to natural persons/individuals subject to sanctions who are tax resident in a third country that would apply when assets or capital gains of such persons are transferred (outbound payments) from any EU Member State to the third country of tax residence of the natural person covered by sanctions decisions". This is one of the options it reportedly proposed in a paper on the use of frozen assets to support Ukraine’s reconstruction. Other options would include transferring money from confiscated Russian frozen assets from EU countries to the EU, which would then assign these revenues to Ukraine; a system of voluntary contributions by EU countries, with possible incentives offered by the EU; and a mandatory transfer system from EU countries to the EU budget through a new EU levy.


Pillar Two Directive back on the Ecofin agenda

EU Finance Ministers will try again to reach a unanimous agreement on the Directive implementing Pillar Two (minimum taxation) during the Ecofin Council meeting on 6 December, according to a provisional agenda. The file was blocked by Hungary at the Ecofin meeting on 17 June. The country is reportedly tying its blockage on Pillar II to its Recovery and Resilience Fund disbursement, which has been under negotiation for months. Uncertainty on a possible agreement on Pillar Two remains as the European Commission reportedly recommended on Wednesday 23 November approving Hungary’s plan to spend its recovery funds but disbursing the money only when it will have implemented the 27 reforms recommended. The official decision of the Commission should formally be adopted next week and it will have to be supported by a qualified majority in the Council of the EU.


EU Member States concerned about Ukrainian refugees’ tax residency status

EU Member States have reportedly expressed concerns that Ukrainian refugees working remotely from the EU for companies in Ukraine may cause tax revenue losses for the country. EU Member States reportedly discussed Ukrainian residency status during a working party meeting on 16 November. Under the current rule, teleworking Ukrainian refugees would become tax resident in the EU countries hosting them if they remain there for 183 days. The issue should reportedly be addressed in the Czech Presidency’s report on tax issues to be endorsed during the Ecofin Council on 6 December and should state that Member States should minimize the tax implications for Ukraine because of the significant number of remote workers.


The AML Directive disclosure requirement of beneficial owners is invalid, ECJ says

Luxembourg’s requirement that beneficial ownership registry information be displayed online and remain accessible for all members of the public violates EU rules on data protection, the European Court of Justice ruled in a judgment delivered on Tuesday 22 November (cases C-37 & 601/20). The Court said that, in the light of the EU Charter of fundamental rights, the provision of the Directive (2015/849) on the prevention of the use of the financial system for the purpose of money laundering, whereby Member States must ensure that the information on the beneficial ownership of corporate and other legal entities incorporated within their territory is accessible in all cases to any member of the general public, is invalid. According to the Court, the general public’s access to information on beneficial ownership constitutes a serious interference with the fundamental rights to respect for private life and to the protection of personal data. The information disclosed enables a potentially unlimited number of persons to find out about the material and financial situation of a beneficial owner, it added. Following the judgment, Luxembourg, the Netherlands and Belgium have reportedly suspended operation of their ultimate beneficial ownership (UBO) registers. The European Parliament is also reportedly discussing the impact of this Court case on the sixth anti-money laundering, currently under negotiations.


Findings of the FISC mission to Switzerland

Members of the FISC Subcommittee of the European Parliament travelled to Bern from 3 to 4 November 2022. The delegation, led by the FISC Chair, MEP Paul Tang, met with representatives of the Federal Department of Finance, the Federal Tax Administration, Members of the Economic Affairs and Taxation Committees of the National Council as well as stakeholders from the private sector, experts and civil society. The discussions focussed on topical international tax issues, such as the implementation of the OECD's two-pillar tax reform, the reactions to the Pandora Papers, the fight against harmful tax practices, the automatic exchange of information or tax issues related to cross-border workers and the increase of teleworking post-COVID. In particular, the FISC delegation recalled that Switzerland has a reputation of being a tax haven for wealthy individuals and multinational companies and noted that it is still an important investment hub in the heart of Europe. They expressed worries that the Swiss framework to tackle aggressive tax practices and money laundering was not yet robust enough, despite some important progress over the past years.

Disclaimer

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.

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