First initiatives to watch under new European Commission
The von der Leyen Commission II took office on 1 December. This followed the European Parliament’s earlier endorsement of the new College of Commissioners and its new mandate, which the President Ursula von der Leyen had proposed in September 2024. The new college has five Executive Vice-Presidents and 20 Commissioners, divided per portfolio, Member State and political priority, together with the High-Representative for Foreign Affairs of the European Union. The Commission is expected to present its 2025 Work Programme on 11 February 2025 in Strasbourg. According to an indicative agenda, it notably intends to adopt the following initiatives in the coming months: - a Competitiveness Compass based on three Pillars: closing the innovation gap, decarbonisation and economic security (15 January 2025); - an Omnibus simplification package looking at different sectors of the Single Market (26 February 2025) and proposals for a genuine Union of Skills (5 March 2025).
EU Finance Ministers meet in Brussels on 10 December
EU Finance Ministers will meet on Tuesday 10 December in Brussels for their last meeting under the Hungarian Presidency of the Council of the EU. Ministers will discuss economic governance issues and the economic and financial impact of Russia’s aggression against Ukraine. They will also be informed of the progress of work within the Council on proposals to reform the EU’s customs legislation. On the tax front, Ministers will hold a policy debate on the revision of the energy taxation directive. Despite earlier hopes of reaching an agreement during the December ECOFIN meeting, the Hungarian Presidency has finally decided to only ask Finance Ministers if they share the view that the current state of play of the negotiations shows that we are in the right direction for striking a balance between the climate ambition and the specificities of the Member States, as well as the competitiveness of the EU, according to a note prepared for the meeting. In the Presidency’s view, each topic of the file has been discussed thoroughly in the past three years, so there are no more major issues on which delegations’ preferences are unclear. The majority of the delegations agree that the current proposal would constitute a clear improvement compared to the currently applicable Directive, it says. At the same time, the Presidency recognises that legal scrutiny and some technical adjustments of the overall text still need to be undertaken. The ECOFIN Council should also adopt, without discussion, the proposal for an electronic VAT exemption certificate for certain transactions treated as exports under the VAT Directive, replacing the current paper form to be signed by hand. A number of amendments to the proposal were made, in particular to limit the scope of the mandatory use of the electronic VAT exemption certificate to situations where two Member States are involved and the exemption is not granted by way of a refund, and to include some key elements of the future electronic certificate, according to a note. Furthermore, the transition phase was delayed and shortened. The new rules would now enter into force by 30 June 2031 (instead of 2026) and Member States would be allowed to continue to use the paper version of the exemption certificate for a transitional period until 30 June 2032 (instead of 2030). The Council should also formally adopt the Directive on faster and safer relief of excess withholding taxes, following the re-issuance of the European Parliament’s opinion. Finally, the Council will approve the bi-annual ECOFIN report to the European Council on tax issues and conclusions on the progress achieved by the Code of Conduct Group.
Progress on tax issues under the Hungarian Presidency
During its six-month Presidency of the Council of the EU ending on 31 December 2024, Hungary pursued the work on several tax files, according to the traditional ECOFIN report on tax issues, due to be adopted on 10 December. More specifically, the Council reached an agreement on the VAT in the Digital Age (ViDA) package and an agreement on the proposal as regards the electronic VAT exemption certificate. It continued preparatory work on the proposal for a Council Directive on Transfer Pricing by advancing technical discussions on possible establishment of a Transfer Pricing Platform. Progress were also made on the proposal for a Council Directive laying down rules to prevent the misuse of shell entities for tax purposes (UNSHELL) on the basis of a new approach. “The practical implications of the new approach in general and the areas which would need further attention. Some delegations considered it important to clarify the relationship with the Directive on administrative cooperation (DAC). It was stressed that possible next steps on this file should be taken in such a way that it would not lead to excessive administrative burden for businesses and tax authorities”, the report says. Hungary held some further work on the Directive establishing a Head Office Tax System for micro, small and medium sized enterprises (HOT). However, the report outlines that whilst the Member States fully support the general objective to facilitate cross-border activities of SMEs, the support for the HOT legislative proposal is “very limited”. Finally, Hungary started the negotiations on the proposal for a Council Directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC9), published in October 2024, and the work with regard to the negotiations on tax cooperation in the United Nations based on discussions between Member States in the EU.
Introduction of a common template and electronic reporting formats for the CbC reports
The European Commission published on Monday 2 December its final implementing regulation introducing a common template and electronic reporting formats for the application of Directive 2013/34/EU as regards the information to be presented in country-by-country reports on income tax information (so-called CbCR Directive). The Directive requires undertakings to draw up, publish and make accessible a report on income tax information as regards the latter of the two consecutive financial years in each of which the consolidated revenue on their balance sheet date exceeded a total of 750 000 000 €. The implementing regulation aims at ensuring the CbC reports are comparable and machine-readable. In particular, it requests obliged entities to ensure that the visual presentation and content of the report on income tax information comply with the specifications provided for in Annex I. When drawing up the report on income tax information, the text states that obliged entities shall ensure the following: - the use of the XHTML format and the embedding of markups using the Inline XBRL specifications, in accordance with the applicable XBRL specifications set out in Annex II; - the mark-up of disclosures of information using the core taxonomy with the elements listed in Table 2 of Annex IV, in accordance with the marking up and filing requirements set out in Annex III. The implementing regulation will apply to reports on income tax information for the financial years starting on, or after 1 January 2025. The implementing regulation will take effect on 22 December 2024.
MEPs quiz Code of Conduct Group’s Chair
On Tuesday 3 December, the FISC Subcommittee of the European Parliament exchanged views with Ms María José Garde, Chair of the Council’s Code of Conduct Group (CoCG) on Business Taxation. Focusing on the accomplishments, Ms Garde said that the work of the Group had led to 480 tax regimes being examined within the EU and 130 of these being rolled back. Outside the EU, 95 jurisdictions were under screening, with three new jurisdictions added to the process this year (Brunei, Kuwait and New Zealand). The work of the Group had led to the abolishment of 130 tax regimes outside the EU. Ms Garde told MEPs that the most important ongoing work centred around the development of the transparency criterion on beneficial ownership, which, she said, would hopefully be ready in the next couple of months. During the debate, MEPs mostly pointed out the discrepancies between the lists of non-cooperative jurisdictions drawn up by the Group and those of NGOs, and argued that the criteria which the Group used to judge a jurisdiction as non-cooperative urgently needed reform. They also argued that numerous other reforms to the Group’s work were also needed. Ms Garde replied that the goal of the Group’s work was not to get to a point of sanctioning jurisdictions but rather to foster cooperation with them and establish an ongoing dialogue, with the aim of attracting these jurisdictions into a fair tax regime system. Surprise was also expressed by MEPs that the British Virgin Islands was recently removed from the list of non-cooperative tax jurisdictions and other questions were put about how to address the case of Gibraltar now that it was outside of the EU.
EPPO secures five convictions in VAT fraud investigation involving Covid-19 tests
Five individuals were convicted by the Munich Regional Court for organised VAT fraud following a multimillion VAT fraud investigation led by the European Public Prosecutor’s Office (EPPO) in Munich, the EPPO announced on Friday 29 November. These criminal activities, which involved trading Covid-19 tests, are estimated to have caused a VAT loss of around €14 million. The defendants organised a cross-border VAT carousel fraud – a complex criminal scheme that takes advantage of EU rules on cross-border transactions between its Member States, as these are exempt from value-added tax. The five defendants had been arrested at an earlier stage of the investigation last year after searches in Germany, Italy and Spain. The Italian Financial Police of Imperia had arrested one of them in Italy. The leader of the organisation was sentenced to six years of imprisonment, while the others received sentences of four years and three months, four years, and two were sentenced to two years and six months of imprisonment.
