On December 2, 2021 the European Commission published the key decisions of its December infringements package. With respect to taxes and customs this time the key decisions include one letter of formal notice (sent to Spain) and 5 reasoned opinions (sent to Spain, Belgium, Luxembourg, Sweden, Germany and Cyprus). This time the key decisions regard a variety of matters including: the taxation of non-resident taxpayers' capital gains, the transposition of CFC legislation of the EU ATAD Directive, the transposition of the non-deductibility of interest payments rule of the EU ATAD Directive, the taxation of dividends to non-resident public pension institutions, the automated exchange with other Member States of certain information related to the application of VAT legislation and the transposition of the new VAT e-commerce rules.
Spain – Taxation of non-resident taxpayers' capital gains
The Commission has decided to open infringement proceedings against Spain, requesting it to align its rules on the taxation of capital gains obtained within the country by non-resident taxpayers with the free movement of capital (Article 63 TFEU). In the case of capital gains, which result from a transfer of assets when the payment is deferred longer than a year or is paid in instalments in a period longer than a year, resident taxpayers have the option to pay the tax when the capital gains accrue or to defer it and pay it proportionally based on the cash flow. However, non-resident taxpayers are not offered this option of deferral and have to pay the tax when the capital gains accrue at the time of the transfer of the assets. Spain has two months to reply to the arguments raised by the Commission after which the Commission may decide to send a reasoned opinion.
Belgium – The transposition of CFC legislation of the EU ATAD Directive
The Commission has decided to send a reasoned opinion to Belgium on the grounds of incorrect transposition of the Anti-Tax Avoidance Directive (Council Directive (EU) 2016/1164). Contrary to Article 8(7) of the Directive, Belgian law does not allow a taxpayer to deduct from its tax liability the tax paid by a controlled foreign company in the state of tax residence. If Belgium does not act within the next two months, the Commission may decide to refer the case to the Court of Justice of the European Union.
Luxembourg – The transposition of the non-deductibility of interest payments rule of the EU ATAD Directive
The Commission has decided to send a reasoned opinion to Luxembourg on the grounds of incorrect transposition of the Anti-Tax Avoidance Directive (Council Directive (EU) 2016/1164). Article 4(7) of the Directive provides for a derogation of the measures limiting the deductibility in the corporate tax base of interest payments in favour of financial undertakings. The Directive includes an exhaustive list of entities considered as financial undertakings for this purpose in its Article 2(5). However, Luxembourg grants the derogation also to securitization entities, which are not financial undertakings within the meaning of the aforementioned provision. Luxembourg has two months to respond after which the Commission may decide to refer the case to the Court of Justice of the European Union.
Sweden – The taxation of dividends to non-resident public pension institutions
The Commission has decided to send a reasoned opinion to Sweden regarding its legislation on taxation of dividends paid to public pension institutions. Whereas Swedish public pension funds are, as state agencies, entirely exempt from tax liability, dividends paid to comparable non-resident public pension institutions are subject to a withholding tax, commonly at a rate of 15%, as resulting from the tax treaties concluded between Sweden and other EU/EEA countries. The Commission deems that such a fiscal scheme under which dividends paid to foreign public pension institutions are subject to less favourable treatment than similar distributions in purely domestic situations infringes the free movement of capital (Article 63(1) TFEU and Article 40 of the EEA Agreement). Sweden has two months to respond after which the Commission may decide to refer the case to the Court of Justice of the European Union.
Germany – Automated exchange with other Member States of certain information related to the application of VAT legislation
The Commission has decided to send a reasoned opinion to Germany for failing to fulfil its obligation to grant other Member States automated access to the information concerning call-off stock arrangements via the electronic system VIES (VAT Information Exchange System). The IT system requirements for call-off stock arrangements aim at allowing Member States to exchange more easily electronic data with each other with a view to fighting fraud. Call-off stock arrangements is one of the VAT simplifications referred to as “quick fixes” that entered into force on 1 January 2020. The call-off stock arrangements require, amongst others, that Member States adapt their IT systems in order to allow for the exchange of information between Member States as required by Council Regulation 904/2010. However, the lack of necessary adaptations on the side of Germany makes it more difficult for other Member States to carry out the controls necessary to prevent VAT fraud or tax evasion. If Germany does not act within the next two months, the Commission may decide to refer the case to the Court of Justice of the European Union.
Cyprus – The transposition of the new VAT e-commerce rules
The Commission has decided to send two reasoned opinions to Cyprus for failing to notify the measures for the transposition into national law of Directive (EU) 2017/2455 and Directive 2019/1995 (“VAT e-commerce” Directives). The new rules are intended to simplify VAT for companies and consumers involved in cross-border online sales within the EU and to create a fairer environment for EU sellers by removing the VAT exemption for low-value imports from outside the European Union. Member States should have adopted and published the necessary national provisions by 30 June 2021. If Cyprus does not act within the next two months, the Commission may decide to refer the case to the Court of Justice of the European Union.
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