Agreement on the 10th EU package of sanctions against Russia
Member States agreed on Saturday 25 February on the 10th package of sanctions against Russia and those that support it in its illegal aggression against Ukraine. The package, presented by the Commission on 15 February, contains new listings covering various categories of individuals and entities, who all contribute in their own way to the war, as well as trade and financial sanctions, including further export bans worth more than €11 billion, depriving the Russian economy of critical tech and industrial goods. It also steps up enforcement and anti-circumvention measures, including a new reporting obligation on Russian Central Bank assets. 24 February marked one year since Russia's full-scale invasion of Ukraine.
FATF suspends membership of Russia
The Financial Action Task Force (FATF) Plenary decided on Friday 24 February to suspend the membership of Russia. “The Russian Federation’s actions unacceptably run counter to the FATF core principles aiming to promote security, safety, and the integrity of the global financial system. They also represent a gross violation of the commitment to international cooperation and mutual respect upon which FATF Members have agreed to implement and support the FATF Standards”, it explained in a statement. Despite the suspension, Russia remains accountable for its obligation to implement the FATF Standards and must continue to meet its financial obligations. Russia will however remain a member of the Global Network as an active member of the Eurasian Group on Combating Money Laundering (EAG) and retain its rights as an EAG member. The FATF will monitor the situation and consider at each of its Plenary meetings whether the grounds exist for lifting or modifying these restrictions. The FATF also reiterated that all jurisdictions should be vigilant to current and emerging risks from the circumvention of measures taken against Russia in order to protect the international financial system.
OECD to start Pillar II peer reviews in 2023
The OECD will start a peer review process this year to assess countries’ domestic adoption of Pillar II rules and will ultimately publish the results on its website, Achim Pross, deputy director of the OECD’s Centre for Tax Policy and Administration, reportedly said on Monday 27 February during an OECD Tax Talks webinar. The review aims at evaluating countries as they draft domestic rules adopting the global anti-base-erosion (GLOBE) rules under Pillar II. As Pillar II takes the form of a common approach, Inclusive Framework members are not required to adopt the rules, but if they do, they must implement and administer domestic legislation in line with the model rules and other guidance from OECD. The peer review will help all countries to be sure that their domestic rules are in line with the model rules, Achim Pross said.
MEPs divided over the need of DEBRA
On Wednesday 1 March, the ECON committee of the European Parliament exchanged views on the 109 amendments tabled on the debt-equity bias reduction allowance (DEBRA) proposed by the European Commission. The discussion revolved around the potential impact of narrowing the scope of the proposal to SMEs only or broadening it by giving more generous tax advantages. The rapporteur for opinion on this file, MEP Luděk Niedermayer (EPP, Czech Republic), considered it very unfortunate that the Council did not recognise the importance of this proposal and decided to put it on hold for an undetermined period. However, several groups were of the view that the Council's decision to put this file on ice was not unjustified, given the current economic circumstances. MEP Claude Gruffat (Greens/EFA, France) said that this is not the right moment to implement measures that support company capitalisation at the expense of Member States’ treasuries. MEP José Gusmão (The Left, Portugal) also remarked that giving even more tax breaks to companies, on top of the general trend of reducing corporate taxation, seems unjustified. MEP Evelyn Regner (S&D, Austria) explained that the timing of the DEBRA proposal just before the release of a proposal to review the framework for income taxation in Europe (BEFIT) makes it difficult to proceed. The vote in the ECON committee on this file is tentatively scheduled for 28 March.
EPPO must step up its coordination with Member States on VAT fraud
The European Public Prosecutor’s Office (EPPO) must increase its coordination with Member States when it comes to increasingly complex VAT fraud cases, according to its 2022 annual report published on Wednesday 1 March. By the end of 2022, the EPPO had 1117 active investigations with overall estimated damages of €14.1 billion, nearly half of which (47%) resulted from VAT fraud. Serious VAT fraud involving two or more Member States are causing damages of at least €10 million accounted for about one-fifth of the financial crimes investigated by the EPPO by the end of 2022, according to the report. The EPPO says it needs to make legal and organizational adjustments to ensure that it adequately investigates and prosecutes all instances of VAT cross-border fraud. The report also identifies significant discrepancies to be addressed in order for the EPPO to be able to make a lasting change, particularly in the fight against cross-border VAT fraud.
Operator of a platform is presumed to be the supplier of the services provided for VAT purposes, ECJ says
The Council of the European Union did not exceed the limits of its implementing power in specifying that the operator of a platform, such as OnlyFans, is presumed to be the supplier of the services provided, the European Court of Justice (ECJ) ruled in a judgment delivered on Tuesday 28 February (Case C-695/20). UK-based Fenix International operates the OnlyFans social network, which allows fans around the world to buy content from creators. Fenix applies only 20% VAT to the 20% commission charged on any sum paid to a creator. Fenix challenged the UK tax authorities' position that it should pay VAT on the full amount received from a fan, arguing that the UK company is acting on its own behalf. At the time, the UK authorities based their argumentation on the EU Council Implementing Regulation (1042/2013) clarifying the VAT Directive. The VAT Directive establishes that a taxable person who, in the context of a supply of services, acts as an intermediary in his own name but on behalf of another person, is presumed to be the supplier of those services. In its Implementing Regulation, the EU Council states that a taxable person who engages in the electronic provision of services via an online platform is “presumed to be acting in his own name but on behalf of the supplier of those services”. The taxable person who engages in this supply is always presumed to be acting in his own name, but on behalf of the supplier of these services, and is therefore deemed to be the supplier of these services himself when he authorises the invoicing of the customer, the supply of these services or sets the general conditions of this supply. The Court therefore considered that Fenix is rightly to be regarded as the supplier of services under the VAT Directive and that the EU Council Regulation is valid.
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.