The European Commission has just presented its Anti-Tax Avoidance Package.
According to a press release issued by the European Commission the Anti Tax Avoidance Package calls on Member States to take a stronger and more coordinated stance against companies that seek to avoid paying their fair share of tax and to implement the international standards against base erosion and profit shifting.
Key features of the new proposals include:
· legally-binding measures to block the most common methods used by companies to avoid paying tax;
· a recommendation to Member States on how to prevent tax treaty abuse;
· a proposal for Member States to share tax-related information on multinationals operating in the EU;
· actions to promote tax good governance internationally;
· a new EU process for listing third countries that refuse to play fair.
According to the European Commsission collectively, these measures will hamper aggressive tax planning, boost transparency between Member States and ensure fairer competition for all businesses in the Single Market.
The European Commission states that the package is based around the following pillars:
· Ensuring effective taxation in the EU;
· Increasing Tax Transparency;
· Securing a level playing field.
The Anti Tax Avoidance Package consists out of the following documents:
· A proposal for an Anti-Tax Avoidance Directive
· A proposal for a revision of the Administrative Cooperation Directive (Council Directive 2011/16/EU)
· A recommendation on the implementation of measures against tax treaty abuse
Other documents published in the Anti Tax Avoidance Package include a.o.:
· A study on Aggressive Tax Planning
· Communication on an External Strategy for Effective Taxation
The proposal for an Anti Tax Avoidance Directive
The Anti Tax Avoidance Directive proposes six legally-binding anti-abuse measures, which all Member States should apply against common forms of aggressive tax planning. It aims to create a minimum level of protection against corporate tax avoidance throughout the EU, while ensuring a fairer and more stable environment for businesses.
The proposed six legally-binding anti-abuse measures, which all Member States should apply against common forms of aggressive tax planning are:
· Controlled foreign company (CFC) rule: to deter profit shifting to a low/no tax country.
· Switchover rule: to prevent double non-taxation of certain income.
· Exit taxation: to prevent companies from avoiding tax when re-locating assets.
· Interest limitation: to discourage artificial debt arrangements designed to minimise taxes.
· Hybrids: to prevent companies from exploiting national mismatches to avoid taxation.
· General anti-abuse rule: to counteract aggressive tax planning when other rules don’t apply.
The proposal for a revision of the Administrative Cooperation Directive
The revised Directive proposes country-by-country reporting between Member States' tax authorities on key tax-related information on multinationals operating in the EU.
These new transparency provisions will allow all Member States the information that they need to detect and prevent tax avoidance schemes.
The recommendation on Tax Treaties
The Recommendation advises Member States how to reinforce their tax treaties against abuse by aggressive tax planners, in an EU-law compliant way. It covers the introduction of general anti-abuse rules in tax treaties and the revision of the definition of permanent establishment.
Next to the Anti Tax Avoidance Package the European Commission also published “The Anti Tax Avoidance Package – Questions and Answers” (25 questions). Click here to be forwarded to “The Anti Tax Avoidance Package – Questions and Answers”.
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