By Davide Anghileri, University of Lausanne
The Council of the European Union on 25 May approved new EU-wide rules regulating intermediaries that design or promote tax planning schemes; agreed on wording to be included in agreements with third countries on good governance in tax matters; and removed the Bahamas and Saint Kitts and Nevis from the EU’s list of non-cooperative tax jurisdictions.
Intermediaries
The Council changed amending Directive 2011/16/EU as regards to mandatory automatic exchange of information in the field of taxation in relation to reportable cross-border arrangements to reflect recommendations put forward by Action 12 of the OECD/G20 base erosion profit shifting (BEPS) action plan outcomes.
The aim is to establish new transparency rules for advisors and intermediaries that design or promote tax planning to prevent aggressive cross-border tax planning.
The new directive targets intermediaries such as tax advisors, accountants, and lawyers that design and/or promote tax planning schemes. The EU-agreement will require intermediaries to report schemes that are potentially aggressive. Penalties will be imposed on those that do not comply. Hence, EU member states will be required to automatically exchange the information they receive through a centralized database the directive states.
The types of schemes to be reported to the tax authorities are determined by the directive through indicators called “hallmarks.” The requirement to report a scheme does not imply that it is harmful, only that it may be of interest to tax authorities for further scrutiny.
EU member states will have until December 31, 2019, to transpose the directive into national laws and regulations.
The new reporting requirements will apply from July 1, 2020. Member states will be obligated to exchange information every three months, within one month from the end of the quarter in which the information was filed. The first exchanges should, therefore, be completed by October 31, 2020.
Vladislav Goranov, the minister of finance of Bulgaria, which holds the Council presidency, presented the new directive, calling it a key part of the EU’s strategy to combat corporate tax avoidance.
“With greater transparency, risks will be detected at an earlier stage and measures taken to close down loopholes before revenue is lost,” Goranov said.
Good governance tax principles for third states
The European Council also adopted conclusions on the EU standard provision on good governance in tax matters for agreements with third countries to prevent cross-border tax fraud and tax evasion as well as money laundering, corruption, and the financing of terrorism.
In the conclusions adopted, the Council suggested that the wording should be updated as follows:
“The Parties recognize and commit themselves to implement the principles of good governance in the tax area, including the global standards on transparency and exchange of information, fair taxation, and the minimum standards against Base Erosion and Profit Shifting (BEPS). The Parties will promote good governance in tax matters, improve international cooperation in the tax area, and facilitate the collection of tax revenues.”
The Council stressed the importance of implementing this provision in as broad a geographical basis as possible while taking into consideration the particular situation of each third country. Moreover, the Council pointed out that the new provision reflects developments in international tax standards since the previous standard provision was agreed in 2008. These include OECD standards aimed at preventing BEPS.
EU tax blacklist
The Council also updated the EU’s list of non-cooperative tax jurisdictions, removing the Bahamas and Saint Kitts and Nevis due to their commitments at a high political level to remedy the EU’s concerns.
Therefore, the two jurisdictions have been moved to the so-called grey list that includes jurisdictions that have committed to reforming their tax systems and are subject to close monitoring.
Thus, the EU blacklist is now comprised of the following jurisdictions: American Samoa, Guam, Namibia, Palau, Samoa, Trinidad and Tobago, and the US Virgin Islands. While the grey list comprises Anguilla, Antigua and Barbuda, the Bahamas, Bahrain, Barbados, the British Virgin Islands, Dominica, Grenada, Macao, the Marshall Islands, Panama, Saint Kitts and Nevis, Saint Lucia, South Korea, Tunisia, and the United Arab Emirates.
Davide Anghileri
Davide Anghileri is a PhD candidate at the University of Lausanne, where he is writing his thesis on the attribution of profits to PEs. He researches transfer pricing issues and lectures for the Master of Advanced Studies in International Taxation and Executive Program on Transfer Pricing.
Anghileri, a Contributing Editor at MNE Tax, previously worked as a policy advisor to the Swiss government on BEPS issues.
Davide can be reached at [email protected].
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