Weekly Tax News - 14 November 2022

November 14, 2022

28 jurisdictions sign exchange information agreements on digital platforms’ income and offshore financial assets

On Wednesday 9 November, 22 countries and jurisdictions signed the multilateral competent authority agreement (MCAA) for the automatic exchange of information under the OECD Model Rules for Reporting by Digital Platforms. The agreement will allow jurisdictions to automatically exchange information collected by operators of digital platforms with respect to transactions and income realised by platform sellers in the sharing and gig economy and from the sale of goods through such platforms. The annual exchange of this information will assist tax administrations and taxpayers to ensure the correct and efficient taxation of such income, the OECD said. On the same day, 15 jurisdictions also signed a separate agreement, that will enable the annual automatic exchange of information collected from intermediaries that have identified arrangements to circumvent the Common Reporting Standard (CRS) and structures that disguise the beneficial owners of assets held offshore with the jurisdiction of tax residence of the concerned taxpayers.


DAC 8 and VAT in the digital age proposals delayed

The presentation of the eighth revision of the EU directive on administrative cooperation in the field of taxation (DAC 8) initially planned for 16 November has been delayed to December or January, the Director for direct taxation at the European Commission, Benjamin Angel said during a conference on Tuesday 8 November. The proposal will require crypto exchanges and companies to identify people who hold assets on their platforms. Commission officials reportedly need more time to ensure that the final draft matches perfectly with the EU market in crypto assets rulebook (MiCA), which legislators agreed during the summer. Benjamin Angel also confirmed that the DAC 8 proposal will include a dimension on tax rulings for natural persons. According to a tentative agenda of the Commission, the “VAT in the digital age” package will also be postponed to 7 December.


Agreement on a revised Code of Conduct on Business Taxation

The Council of the EU adopted on Tuesday 8 November a revised Code of Conduct on Business Taxation - the main tool used to tackle harmful tax competition within the EU - during the Ecofin Council meeting. The European Commission proposed in July 2020 a reform of the scope of the Code of Conduct to cover all measures that pose a risk to fair tax competition. But in December 2021, Hungary and Estonia opposed the reform. The revision broadens the scope of the tax measures under scrutiny when examining harmful tax practices within the EU. In particular, it introduces the concept of “tax features of general application”, whereas previously only preferential measures such as special regimes or exemptions from the general taxation system were examined. These tax features of general application will be regarded as harmful if they lead to double non-taxation or the multiple use of tax benefits. The revised Code should replace the old one from 1 January 2023.


No agreement on the tax component of the Eurovignette Directive

EU Finance Ministers failed to agree on Tuesday 8 November on the taxation of heavy goods vehicles for the use of road infrastructures in the Eurovignette Directive. Bulgaria, Portugal, Austria, Germany, Greece, France and Italy reportedly rejected the proposal by the Czech Presidency of the EU Council, which was to lower the minimum rates to zero upon the entry into force of the directive so that Member States are able to keep their existing heavy goods vehicle tax rates. The risk that competition becomes distorted and a race to the bottom were reportedly the main obstacles in reaching a unanimous agreement. Consequently, the work was referred back to the technical level in order to find a compromise acceptable to all Member States.


The Greens’ roadmap for a Green Tax Fix

In view of the European Commission’s symposium on 28 November on the tax mix for the future, the Greens/EFA group in the European Parliament presented on Tuesday 8 November during a conference its own roadmap for a green tax fix, based on the following Pillars: - better decision-making for fairer outcomes; - end tax havens & secrecy; - tax extreme wealth not labour; - multinationals should pay their fair share; - green taxes for a just transition. During the conference, Benjamin Angel, Director for direct taxation at the European Commission, presented the areas the Commission is exploring to rebalance the tax mix in the EU, including: - broadening the tax base by taxing crypto assets; - wealth taxation; - the fight against aggressive tax planning and tax avoidance; - progressivity in corporate income taxes; and - behavioural taxes.


EU Court annuls Commission’s decision on Fiat regarding Luxembourg tax ruling

The European Court of Justice (ECJ) invalidated on Tuesday 8 November the 2015 European Commission’s decision that had found that Luxembourg tax ruling concerning Fiat constituted a state aid incompatible with the internal market. In its judgment, the Court noted that the classification of State aid requires four conditions to be met: - the measure in question must consist of State intervention or make use of state resources; - this intervention must be likely to affect trade between Member States; - the intervention must provide a selective benefit to the beneficiary; and - it must distort or threaten to distort full competition. Furthermore, in order to assess whether there is an advantage and the selective nature of such a tax measure, the Court considered it necessary to identify the appropriate reference system for direct taxation. The ECJ concluded that in 2019 the General Court erred in law by accepting that the European Commission applied an autonomous arm’s length principle to companies integrated in Luxembourg, distinct from that defined by the relevant national tax law, in order to determine whether the tax ruling conferred a selective advantage to Fiat. Consequently, it annulled the judgment of the General Court.

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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