EU leaders gathered in Brussels for a two-day meeting which focused on enlargement and budget topics. On Thursday 14 December, they adopted conclusions on Ukraine, enlargement and reforms. They notably decided to open accession negotiations with Ukraine and Moldova, and to grant candidate status to Georgia. They will decide on the fate of Bosnia-Herzegovina after the European Commission has reported on the progress made in meeting the necessary membership criteria, by March 2024 at the latest. The leaders also held an in-depth discussion on the mid-term review of the EU’s long-term budget for 2021 – 2027 but they were unable to reach a consensus on a financial extension, including 50 billion € in aid to Ukraine. The issue will reportedly be discussed again at an extraordinary summit in January. On Friday 15 December, they also discussed security and defence, the Middle East, migration and the fight against antisemitism, racism and xenophobia. They also continued preparing the 2024-2029 strategic agenda.
Deal reached on the new EU AML Authority
On Wednesday 13 December, the EU Council and the European Parliament reached a provisional agreement on the creation of a new European authority for countering money laundering and terrorist financing (AMLA). The AMLA will be charged with directly supervising the 40 riskiest financial entities - those with operations in at least 6 Member States. The provisional agreement adds powers to the AMLA to directly supervise certain types of credit and financial institutions, including crypto-asset service providers, if they are considered high risk or operate cross-border. For non-selected obliged entities, supervision will remain mainly at national level. For the non-financial sector, the AMLA will only have a supporting role, carrying out reviews and investigating possible breaches in the application of the AML framework. The provisional agreement also expands the scope and content of AMLA’s supervisory database by asking the new authority to establish and keep up-to-date a central database of information relevant for the AML supervisory system. The only remaining issues are the decisions on the AMLA seat and its budget. Nine Member States have officially applied to host the AMLA. This decision is expected to be taken in 2024. The text of the provisional agreement will now be finalised and presented to the representatives of the Member States and the European Parliament for final approval. The other two texts of the AML package – the AML Regulation and the sixth AML Directive – are still being negotiated.
Commission proposes to remove Jordan and Cayman Islands from the AML blacklist
The European Commission proposed on Tuesday 12 December to remove Jordan and Cayman Islands from the EU list of high-risk third countries in terms of money laundering. At its plenary meeting in October 2023, the Financial Action Task Force (FATF) removed the Cayman Islands, Jordan, Albania and Panama from its own list. Taking into consideration the recommendation of the FATF, the European Commission has reviewed progress in addressing the strategic AML deficiencies of these jurisdictions. Following the measures implemented to address the action plans agreed with the FATF, the Cayman Islands and Jordan have remedied the strategic deficiencies in their respective AML regimes and no longer pose a significant AML threat to the EU, the Commission concluded. Albania was not on the EU AML backlist while for Panama, the Commission said that available information sources did not allow it to conclude, at this stage, whether it addressed its strategic deficiencies, notably with regard to transparency of beneficial ownership. The proposal is now with the European Parliament and the Council of the EU for their scrutiny.
Commission confirms five Member States opted to a delayed application of Pillar Two rules
Five EU Member States (Estonia, Latvia, Lithuania, Malta and Slovakia) have so far notified their intention to elect for a delayed application of the Income Inclusion Rule (IIR) and the Undertaxed Profits Rule (UTPR) in accordance with Article 50 of the Pillar Two Directive, according to a European Commission’s notice published in the Official Journal of the EU on Tuesday 12 December. Member States have until 31 December 2023 to transpose the Pillar Two Directive in their national orders. However, Article 50 of the Directive provides for the option to delay, for six consecutive fiscal years the application of the IIR and the UTPR for Member States in which no more than twelve ultimate parent entities of groups within the scope of this Directive are located. “The mere fact that certain Member States may use the election ought not distort the operation of the Pillar Two system within the EU and elsewhere”, the Commission said. It also recalled that a Member State making the election must nevertheless transpose on time all the other relevant Pillar Two Directive provisions so as to enable taxpayers and other Member States and jurisdictions to properly apply the system. Member States wishing to use article 50 of the Directive must notify the Commission by 31 December 2023.
EP adopts in full house the report on further reform of corporate taxation rules
On Tuesday 12 December, the European Parliament Plenary adopted the report on further reform of corporate taxation rules, drafted by MEP Isabel Benjumea Benjumea (EPP, Spain). The text makes recommendations on how to use corporate tax rules to ease the burden on businesses, especially SMEs. Among other recommendations, it calls on the Commission to present an overall evaluation of previous actions taken on corporate taxation since 2011 and to publish a thorough impact assessment on the best options towards easing the administrative burden on businesses, particularly SMEs. To reduce compliance costs and administrative burdens the resolution particularly calls on the Commission to conduct an impact assessment on the use of new technologies to improve the speed, efficiency, reliability, transparency and resilience of tax-related administrative procedures. It adds that this may lead the Commission to follow-up this exercise with a proposal to enhance cooperation between tax authorities, taking advantage of good practices identified, leading to a business-friendly environment. The final text can be found here.
On Tuesday 12 December, the European Parliament Plenary rejected (by 300 votes against, 282 in favour and 30 abstentions) a report drafted by MEP Kira-Marie Peter-Hansen (Greens/EFA, Denmark) on the role of taxation in times of crisis. End of October, the report was adopted by the ECON committee but didn’t pass the full house’s vote. The report made some recommendations on how to better use tax policy as a tool to facilitate redistribution, raise revenue and steer behaviours, notably towards favouring environment friendly behaviours. In particular, it suggested the creation of a permanent tax on excess profits in all sectors to offset the negative effects of the Covid-19 crisis. “Disappointing! It was close, but unfortunately, I did not get enough support for a fairer and greener tax system in the EU in times of crisis. Unbelievable that so many put the right of the mega-rich to fly tax-free in private planes above our well-being and the green transition”, Ms Peter-Hansen reacted on X after the vote. Most of the opposition reportedly came from MEPs from the EPP, ECR and ID groups while the Renew Europe group was very divided.
In a judgment issued on Thursday 14 December, the Court of Justice of the European Union (CJEU) confirmed the 2021 decision of the General Court of the European Union holding that the Commission had not established, in its 2017 decision, that the tax ruling granted to Amazon by Luxembourg constituted State aid incompatible with the internal market and that the subsidiary concerned of the Amazon group had benefited from an undue reduction in its tax burden. Indeed, in 2021, the General Court found that Luxembourg had not granted a selective advantage to this subsidiary and therefore annulled the Commission's decision. In its judgment of 14 December, the CJEU also dismissed the appeal lodged by the Commission against the judgment of the General Court and recognized that, despite the errors of law and the erroneous conclusion reached by that Court, the contested decision should be confirmed.
On Tuesday 12 December, the International Federation of Accountants (IFAC) organised a webinar aimed at understanding the evolution of whistleblower protection laws from the perspective of the accounting profession. To this end, it joined forces with Chartered Professional Accountants (CPA) Canada to examine how these frameworks can be improved. During the event, IFAC hosted a number of experts in the field, including representatives from the Whistleblowing International Network (WIN), the International Ethics Standards Board for Accountants (IESBA), the Network of European Whistleblowing and Integrity Authorities (NEIWA) and the OECD. The discussion touched upon the findings of the recent IFAC/CPA Canada report "Understanding Whistleblower Protection: Laws, Practices, Trends and Key Implementation Considerations". Since the EU passed the whistleblower protection directive in 2019 requiring all Member States to introduce laws with stronger minimum standards, 60 countries now have dedicated whistleblowing statutes around the world and are incorporating improved standards into new laws and reforms, according to the report. The report shows in particular the importance that future practices and laws are developed using local expertise and evidence and by adapting international best practice principles jurisdictionally.