ViDA package stalled
On Thursday 26 September, the High-Level Working Party on Tax Questions discussed the VAT in the Digital Age (ViDA) package, which is reportedly still facing a deadlock due to Estonia's opposition to a mandatory deemed supplier regime. This regime would make ride-hailing and short-term accommodation platforms responsible for collecting VAT. The Hungarian Presidency of the Council of the EU suggested discussing Estonia's idea for an opt-in to the regime, in contrast to the opt-out approach limited to SMEs proposed earlier this year by the Belgian Presidency. While some Member States reportedly expressed openness to Estonia's proposal, a larger group opposed it, favouring the Belgian compromise for an opt-out. Estonia, however, supports a broad opt-out rather than one limited to SMEs.
OECD releases model agreement for the implementation of the Amount B of Pillar One
On Thursday 26 September, the OECD/G20 Inclusive Framework on BEPS published a Model Competent Authority Agreement (MCAA) to facilitate the implementation of its political commitment on Amount B of Pillar One. At the beginning of this year, the Inclusive Framework released a report on Amount B of Pillar One. This report provides a simplified and streamlined pricing framework for baseline marketing and distribution activities that is expected to reduce transfer pricing disputes, compliance costs, and enhance tax certainty for tax administrations and taxpayers alike. Additional guidance on Amount B – including the definition of covered jurisdiction for the Inclusive Framework political commitment on Amount B – was published in June 2024, allowing jurisdictions to begin with implementation. Further work on the Pillar One package, including the Amount B framework, is ongoing as indicated in the Statement by the Co-Chairs of the Inclusive Framework on 30 May 2024.
20 EU Member States set out their Single Market priorities for the new Commission
In a joint non-paper prepared for the Competitiveness Council on Thursday 26 September, 20 EU Member States (Austria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, Germany, Ireland, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia and Sweden) set out their priorities for the new European Commission in the Single Market. The signatories say that the new Single Market Strategy to be published in June 2025 should set out concrete short-term and medium-term actions to facilitate cross-border trade. In general, they argue that priority should be given to the simplification and further harmonisation of EU rules as well as, where feasible, the application of the principle of mutual recognition. The new Commission should simplify the conditions for doing business and continue to cut red tape mainly through simplification and digitalisation of procedures, including the increased use of data, going beyond the announced 25% reduction of reporting requirements, they state. The 20 EU Member States expressly ask the Commission to focus on quality, consistency and implementation, rather than on the quantity of rules.
Attorney-client privilege must be protected in tax information request, CJEU rules
The Court of Justice of the European Union (CJEU) ruled on Thursday 26 September in case C‑432/23 (judgment only available in French at the moment) that a tax information request requiring a law firm to disclose information about its client relationship violates attorney-client privilege. The Court emphasised that legal advice, regardless of the field, is protected by Article 7 of the EU Charter of Fundamental Rights, which safeguards communications between lawyers and clients. The case involved a Luxembourg law firm, FSCS, which received a request from Luxembourg's tax authorities to provide documents about its services to a Spanish company, following a request from Spanish tax authorities under the EU Directive 2011/16 (DAC6). The Luxembourg authorities demanded all available documents, including contracts and communication related to corporate investment structures. The law firm refused, arguing that the advice concerned corporate, not tax matters. Luxembourg law allows lawyers to withhold information unless it relates to tax matters, but the Luxembourg tax authority fined the firm. After several legal appeals, the case was referred to the CJEU, which sided with the law firm. The Court ruled that domestic laws excluding tax advice from attorney-client privilege violate Article 7 of the EU Charter of Fundamental Rights, and that such orders infringe on the essential right to confidential lawyer-client communications. The Court further clarified that while DAC6 outlines obligations for information exchange between EU Member States, it does not override fundamental rights protections under the Charter. Member States must ensure that their information-gathering laws comply with these protections. Therefore, the Court concluded that the information request violated legal professional privilege and could not be justified.
