Stakeholders discuss what BEFIT should look like
The public consultation of the European Commission on its future initiative Business in Europe: Framework for Income Taxation (BEFIT), expected for the third quarter 2023, closed on Thursday 26 January. In its feedback to the Commission, ETAF acknowledged the potential of this initiative to address the complexity and the high compliance costs that businesses with cross-border activities face as a result of having to comply with 27 different corporate tax systems. However, as this initiative will be based on some key features of Pillars One and Two of the OECD agreement, ETAF recommended to first learn the lessons from their implementation before deciding on any further step to implement a common corporate tax framework in the EU. ETAF also highlighted that tax advisers will need to learn this new corporate tax system and its application will require a new set of professional knowledge and skills. In parallel, the European Parliament is preparing its own initiative report on further reform of corporate taxation rules. Within this framework, it organized a public hearing on 25 January 2023 on what BEFIT should look like to gather some views from experts. During the hearing, several representatives of companies advocated for a gradual implementation of BEFIT and an optional system. Experts also wondered if this new proposal will endeavour a different outcome than the 2011 Common Consolidated Corporate Tax Base (CCCTB) and the two 2016 Common Corporate Tax Base (CCTB) and (CCCTB) proposals, which were rejected by Member States.
MEPs quiz Swedish Minister for Finance
On Tuesday 24 January, MEPs from the ECON committee of the European Parliament had an exchange of views with Elisabeth Svantesson, Minister for Finance of Sweden. The Minister focused on key priorities of the Presidency with regard to economic and financial affairs, namely continuous financial support to Ukraine, the review of economic governance, and progress on tax-related files. In the area of taxation, Ms Svantesson said her country intends to continue the work on the UNSHELL directive to fight the misuse of shell companies. On the VAT front, Sweden aims to take the new “VAT in the digital age” (ViDA) package forward. Another important file for the Swedish presidency is the eighth amendment of the Directive on Administrative Cooperation (DAC8), she said. Asked about the status of the review of the tobacco taxation directive, the minister replied that she does not expect a new proposal from the Commission on this subject in the first half of 2023.
Commission consults on criteria for information reported under DAC7
The European Commission opened on Friday 20 January a call for feedback on its draft implementing regulation laying down detailed rules for determining whether the information automatically exchanged under an agreement between the tax authorities of Member States and a non-EU country is equivalent to that specified in Council Directive (EU) 2021/514 ('DAC7'). DAC7 requires from 1 January 2023 platform operators, including those outside the EU that perform commercial activity in the bloc, to report the income earned by sellers through them and mandates that Member States automatically exchange this information. DAC7 covers the rental of immovable property, provision of personal services, sale of goods, and rental of any mode of transport. To avoid dual reporting requirements, the Directive included a mechanism that will suspend the reporting to the EU as long as a third country’s rules are deemed equivalent to those of the EU. The proposed implementing regulation says that where a non-EU jurisdiction does not include in its national law one or more of the relevant activities, a determination of equivalence shall only apply to information in relation to a relevant activity as defined in the national law of that non-EU jurisdiction. This means that platforms not covered by a third country’s rules will have to report directly to the EU. The deadline for providing feedback on the draft implementing regulation is 17 February 2023.
14 Member States have not yet transposed DAC7
The European Commission sent on Friday 27 January a letter of formal notice to 14 Member States asking them to transpose in their national law the seventh amendment to the Directive on Administrative Cooperation (Directive (EU) 2021/514 – DAC7), which is supposed to help tax authorities in the Member States of those particular taxpayers to prevent tax evasion or misreporting through the use of digital platforms. All Member States had to transpose the Directive into their national legislation and inform the Commission thereof by 31 December 2022. According to the Commission, the following Member States have not notified or only partially notified the national measures transposing DAC7: Belgium, Estonia, Greece, Spain, Croatia, Italy, Cyprus, Latvia, Lithuania, Luxembourg, Poland, Portugal, Romania, Slovenia.
Spain and Italy urged to correctly apply the AML Directive
The European Commission sent on Thursday 26 January letters of formal notice to Spain and Italy on grounds of their incorrect application of the Anti-Money Laundering Directive (4th AMLD as amended by 5th AMLD). Although these Member States had notified a complete transposition of the Directive, the Commission has identified several instances of incorrect application of the Directive, in particular concerning the setting up of the central beneficial ownership registers. According to the Directive, Member States have to ensure that information about the real owners of these legal entities is stored in a central register. Member States can, for that purpose, use a central database which collects beneficial ownership information, or the business register, or another central register. Without a satisfactory response from these Member States about the setting up of the central beneficial ownership registers within two months, the Commission may decide to continue the infringement procedure and send a reasoned opinion.
EPPO investigation into a massive cross-border VAT fraud
The European Public Prosecutor’s Office (EPPO) announced on 24 January an operation in 10 EU Member States (Austria, Bulgaria, Czechia, Estonia, Germany, Hungary, Lithuania, the Netherlands, Slovakia and Slovenia), within the framework of an investigation into cross-border VAT fraud by the EPPO in Munich. 61 searches of business premises and the homes of people directly linked to them were carried out, and five people were arrested in Czechia, Bulgaria and Slovakia. The criminal activity of the group behind the cross-border VAT fraud scheme led to estimated damages of €32 million, according to the EPPO. The investigation into the missing trader intra-community fraud scheme began in 2021, shortly after the start of the EPPO’s operations. The operation was supported by the German tax investigation units in Chemnitz, Würzburg, Nuremberg and Berlin.
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.
