European Commission suggests tax benefits in response to US IRA
The European Commission presented on Wednesday 1 February a communication entitled “Green Deal Industrial Plan for the Net-Zero Age”, suggesting potential tax benefits for businesses in sectors in which delocalization risks have been identified, in response to the U.S. Inflation Reduction Act. This communication will be discussed at the extraordinary European Summit on 9 and 10 February. It is based on four pillars: - a predictable and simplified regulatory environment, - speeding up access to finance, - enhancing skills, and -open trade for resilient supply chains. The communication says that the Commission intends to allow further flexibility for the Member States to grant aid limited to carefully defined areas and on a temporary basis. To that end, the Commission will consult Member States on a proposal to adapt State aid rules on a temporary basis, until end 2025, to further speed up and simplify, with easier calculations, simpler procedures, and accelerated approvals. The adaptations would include: - simplification of aid for renewable energy deployments; - simplification of aid for decarbonising industrial processes; - enhanced investment support schemes for production of strategic net-zero technologies, including via tax benefits; - more targeted aid for major new production projects in strategic net-zero value chains. The Commission also encourages Member States to support clean tech industries/value chains and enhance competitiveness with tax breaks or other forms of support, such as tax credits, accelerated depreciation, or subsidies linked to the acquisition or improvement of green investment assets.
Summary report of the public consultation on SAFE published
The European Commission published on Wednesday 1 February a summary report of the answers received to its public consultation on a proposal to tackle the role of enablers that facilitate tax evasion and aggressive tax planning (Securing the Activity Framework for Enablers – SAFE), which closed on 12 October 2022. Overall, the Commission received 132 contributions taking different forms, mainly from associations, representing tax advisers, lawyers, or businesses. The report shows, in particular, that less than half of the Commission’s survey respondents (20/59) consider that enablers play an important role in facilitating tax evasion and aggressive tax planning while 16 out of 59 believe not. Several stakeholders requested a clear definition of aggressive tax planning to ensure legal certainty and some of them raised the issue of the term “enabler” could pose on the reputation of intermediaries. On the policy options proposed by the Commission, many respondents to the survey do not believe that due diligence procedures are an effective measure to tackle the problem. The idea of a mandatory registration in an EU register of enablers received mixed support. Out of the 59 respondents 17 respondents consider it very effective, 15 very ineffective, 8 effective and 4 ineffective. Some business associations (representing tax advisers) and businesses commented on the existing of such registers in some Member States and asked for the Commission to take into account this system in the design of the legislation. Many respondents (27/59) also suggested another path for the future. Out of those, 11 respondents consider that the European Commission should first evaluate the effectiveness of the existing legislation. The Commission will further analyse the replies to the public consultation in order to integrate them in the draft legislative proposal, tentatively scheduled for June 2023.
OECD releases further guidance on the implementation of Pillar Two
The OECD/G20 Inclusive Framework on BEPS released on Thursday 2 February administrative guidance to assist governments with implementation of the reform to the international tax system, which will ensure multinational enterprises (MNEs) will be subject to a 15% effective minimum tax rate (so-called Pillar Two). The document issued includes guidance on the recognition of the United States' minimum tax (known as the Global Intangible Low-Taxed Income or "GILTI") and on the design of Qualified Domestic Minimum Top-up Taxes. It also includes more general guidance on the scope, operation and transitional elements of the Pillar Two Rules to allow countries that are in the process of implementing the rules to reflect this guidance in their domestic legislation in a co-ordinated manner. Together with the December 2022 publication of the Safe Harbours and Penalty Relief document and public consultations on the GloBE Information Return and Tax Certainty, this document finalises the Implementation Framework. This new guidance document will be incorporated into a revised version of the Commentary that will be released later this year and replace the original version of the Commentary issued in March 2022. The Inclusive Framework will continue to release further guidance on an ongoing basis, it said.
ECJ expected to assign preliminary VAT rulings to General court in 2024
A proposal by the European Court of Justice (ECJ) to reassign preliminary VAT rulings to specialized judges on the General Court will reportedly be decided this year and implemented in late 2024. The ECJ sent a request to the European Parliament and the EU Council end of 2022 to make the General Court responsible for handling requests by Member States courts for preliminary rulings on VAT, excise duties, customs codes and tariff classification, passenger compensation, and greenhouse gas emissions allowance trading. This request is made against a background of sustained high levels of judicial activity marked by both the volume and complexity of cases brought before the Court of Justice, the ECJ explained. The cases it wants to transfer to the General Court involve areas which raise few issues of principle and for which there is a substantial body of case law of the Court of Justice that can guide the General Court in the exercise of its new jurisdiction and prevent the potential risk of inconsistencies or divergences in the case law, it reportedly explained.
María José Garde elected chair of the code of conduct group on business taxation
The Council of the EU’s preparatory body that oversees the implementation of the EU’s code of conduct on business taxation decided on Wednesday 1 February to elect María José Garde as new chair. She will take up the position on 5 February 2023 for a period of two years and will replace Lyudmila Petkova, who had chaired the group since 2019. Ms Garde is Director General of Taxation at the Ministry of Finance in Spain. She also served as chair of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes. The chair of the group, supported by the general secretariat of the Council and with the technical assistance of the Commission, is responsible for liaising with third-country jurisdictions on the EU listing process.
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.