Weekly Tax News - Monday 27 March 2023

March 27, 2023

Results of the European Council on 23 March

On Thursday 23 March, EU leaders gathered in Brussels to discuss the latest developments in relation to Russia’s war of aggression against Ukraine. On this occasion, the President of Ukraine, Volodymyr Zelenskyy, joined the EU leaders via video conference. In their conclusions published at the end of the meeting, EU leaders reiterated their firm condemnation of Russia's war of aggression against Ukraine and calls on Russia to stop its aggression and withdraw all of its military forces and proxies from the entire territory of Ukraine. Competitiveness, single market and the economy were also discussed during the meeting. In particular, to boost the EU’s long-term competitiveness, the European Council called for work to be taken forward on: - strengthening the EU’s resilience and productivity; - simplifying rules and procedures and reducing the administrative burden; - allowing for easier access to private capital and investment and ensuring targeted support in strategic sectors; - reducing the EU’s strategic dependencies; - encouraging innovation and increasing investment in research and development; - strengthening the digitalisation of the economy; - investing in the skills of the future; and - fostering the transition towards a more circular economy.

European Commission evaluates e-invoicing rules in public procurement

The DG GROW of the European Commission launched on Friday 17 March its evaluation of the current e-invoicing rules in public procurement (Directive 2014/55/EU). The directive requires all public administrations in Europe to receive and process electronic invoices issued under contracts to which the EU public procurement directives apply – if they are compliant with the EU e-invoicing standard. In particular, the Commission seeks e-invoicing users’ views on the current and future needs of e-invoicing in public procurement, including technical solutions, transmission level, the potential need for new standards and the scope of covered transactions. The evaluation also aims to investigate the consistency of the directive with the new ‘VAT in the digital age’ package, published in December 2022, it said. The results of the evaluation will feed a Commission’s report to the European Parliament and the Council, to be published during the fourth quarter 2023, and will support decision-making regarding the potential revision of the Directive. In addition to the general feedback open to all stakeholders, the Commission has elaborated a survey specifically for accountants. Interested stakeholders have until 14 April 2023 to provide a feedback to the European Commission.

Low support for DAC8 minimum financial penalties in the EU Council

EU Member States reportedly do not support the minimum financial penalties that the European Commission proposed to introduce in its eighth amendment to the Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC8). The proposal indeed contains a set of different minimum financial penalties depending on the infringement, the turnover of the non-compliant entity and on whether it is a company or an individual. Due to a lack of support, the proposed minimum penalties could reportedly be deleted from the text. To address the recent decision by the Court of Justice of the European Union invalidating reporting requirements from DAC6 that infringe professional privilege, the Swedish presidency also reportedly proposed adding to the text that each Member State may take the necessary measures to give intermediaries the right to a waiver from filing information on a reportable cross-border arrangement where the reporting obligation would breach the legal professional privilege under the national law of that Member State.

CEPS/UK mission conference on tackling offshore tax evasion and avoidance

Tax experts discussed on Tuesday 21 March the future of transparency measures in the fight against tax fraud and evasion at a conference in Brussels organised by the Centre for European Policy Studies (CEPS) and the UK mission to the EU. For Benjamin Angel, Director for direct taxation, tax coordination, economic analysis and evaluation at the European Commission, it is essential to make a better use of the data that tax authorities receive but also to make a bigger use of beneficial ownership registries. In this regard, he said that a discussion has started on how to activate the beneficial ownership criterion in the context of the establishment of the EU blacklist of non-cooperative tax jurisdictions. The Commission has proposed to request the zero tax jurisdictions to send to EU Member States annually and automatically the list of natural and legal persons that are on their registries, he explained. Achim Pross, Deputy Director of the OECD’s Centre for Tax Policy and Administration, recommended among other things to put in place a system of interconnected registers on beneficial ownership. Aikaterini Pantazatou, Professor of Tax Law, University of Luxembourg and Rahul Sahgal, deputy head of the tax department at the Swiss State Secretariat for International Finance, both warned about a possible compliance fatigue, with the multiplication of tax transparency initiatives, which may, in the end, be counterproductive if the measures cannot be correctly applied.

UNSHELL: Member States seek compromise on minimum substance indicators and exchange of information

EU Member States are reportedly trying to find a compromise on the minimum substance indicators foreseen in the UNSHELL Directive proposal. On Wednesday 22 March, Member States reportedly discussed a new compromise proposal from the Swedish Presidency, which introduces a fourth minimum substance criterion next to the three already existing (premise requirement, having an EU bank account in the EU, and tax residency of the employees).The fourth criterion added is reportedly that the majority of the meetings of the board of directors of the entity take place in the Member State of the entity.The views between the delegations would still differ on the number of criteria and which criteria should be met for an entity to have substance. Another issue reportedly discussed is the exchange of information. The Swedish Presidency had invited delegations to consider how the information exchanged can be useful to Member States and what information should be requested from the shell entities. No political agreement is expected in the near future on this file. A policy discussion at ministerial level should take place at the May ECOFIN meeting.

MEPs adopt recommendations to better fight tax abuse

On Tuesday 21 March, the ECON committee of the European Parliament adopted the own-initiative report, authored by MEP Niels Fuglsang (S&D, Denmark) on “lessons learnt from the Pandora Papers and other revelations”. The report makes a series of recommendations on protecting journalists and whistle-blowers, reducing conflicts of interest, better regulating intermediaries, improving reporting and information sharing, particularly on beneficial ownership, better addressing practices that can harm tax collection such as through the use of crypto-assets, golden passports or certain real estate transactions. It also calls on the Commission to assess the possibility of a minimum tax on capital gains at EU level. In their report, MEPs are once again targeting accountancy firms. In particular, they call on the Commission and Member States to further analyse and, where appropriate, address the potential conflicts of interest stemming from the provision of legal advice, tax advice and auditing services when advising both corporate clients and public authorities. They also reiterate their call to the Commission to consider introducing measures to clearly separate accountancy firms from financial or tax service providers as well as all advisory services.

EU contribution to the UN tax resolution

On Friday 17 March, the EU sent its contribution to the public consultation on the United Nations (UN) General Assembly’s resolution on the "Promotion of inclusive and effective international tax cooperation at the United Nations", which advocates for a greater role for the UN in tax policy. In their contribution, EU Member States recognize that the UN can play a key role in promoting global cooperation in the area of taxation. At the same time, they express support for the OECD framework and its achievements on tax matters, in particular on the Two-Pillar solution. They add that the work of the UN should support the ongoing negotiation process while “avoiding undue duplication of international efforts and a risk of likely inconsistent outcomes at the global level”. While the effectiveness of the OECD framework at addressing the concerns of developing countries has been several times criticized, the EU says that it supports “developing countries’ effective participation in decision-making at the level of the existing multilateral fora.”

Vietnam joins OECD multilateral convention to tackle tax evasion and avoidance

On Wednesday 22 March, Vietnam signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, bringing the total number of jurisdictions that participate in the Convention to 147. The Convention enables jurisdictions to engage in a wide range of mutual assistance in tax matters, such as exchange of information on request, spontaneous exchange, automatic exchange, tax examinations abroad, simultaneous tax examinations and assistance in tax collection. It guarantees extensive safeguards for the protection of taxpayers' rights. The Convention is the primary instrument for swift implementation of the Standard for Automatic Exchange of Financial Account Information in Tax Matters (Common Reporting Standard (CRS)), which enables more than 110 jurisdictions to automatically exchange offshore financial account information.

SAVE THE DATE: ETAF Conference on 28 June on SAFE


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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