(Updated 12/10/2015) The European Council, during a December 8 meeting, formally agreed to an amended directive requiring EU States to exchange information automatically on advance cross-border tax rulings and advance pricing agreements beginning January 1, 2017.
“Europe is now sending a strong signal for greater equity in taxation of businesses worldwide,” said Pierre Gramegna, minister for finance of Luxembourg and president of the Council, announcing the decision.
The agreement follows up on a promise to pursue automatic exchange of ruling information by European Commission President Jean Claude Juncker in November 2014, made one week after the “Lux Leaks” scandal broke.
“Adopting this important directive in a short period of time was a top priority for the Luxembourg presidency,” Gramegna said.
The directive follows a political agreement reached October 6, under which cross-border tax rulings are defined broadly, as “any agreement, communication, or any other instrument or action with similar effects, including one issued, amended or renewed in the context of a tax audit . . . .”
Under the agreement, tax rulings issued before 2012 are exempt from the exchange, even if the ruling is still in force when automatic exchange commences on January 1, 2017.
There is also no automatic exchange of information on tax rulings issued or amended between January 1, 2012, and December 31, 2013, if the ruling was no longer in effect as of January 1, 2014.
Further, rulings issued after April 1, 2016, can be excluded from the exchange if the group involved has an annual net turnover of less than €40 million. This exemption does not apply to companies conducting “mainly financial or investment activities,” though.
The EU Commission will develop a standard form to used for the exchange of information and will create a central directory open to all members to access the information. The Commission will not have access to most of the information.
The Council also reached a number of conclusions on the future of a code of conduct on business taxation and on implementation of OECD/G20 work on tax base erosion and profit shifting (BEPS).
The Council agreed that a common approach to implementing BEPS at an EU level would be valuable, and concluded that EU directives should be the preferred vehicle for implementing BEPS. Such efforts should be given a priority over other discussions, the Council said.
Gramegna said that the EU intends to implement the BEPS recommendations in a “swift and coordinated manner” and that the Council achieved a “quantum leap in the technical discussions” during the meeting.
The Council also approved tax information exchange (TIEA) agreements with Liechtenstein and Switzerland. Further, just following the meeting, the EU signed a TIEA with San Marino pursuant to a December 8 Council decision to authorizing the signature.
(Updated 12/10/2015 to include link to the Council’s decisions on the Code of Conduct for business.)
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