During the meeting of December 8, 2023 of the ECOFIN Council, the Council approved a report to the European Council on tax issues. The report provides an overview of the progress achieved in the Council during the term of the Spanish Presidency (July to December 2023), as well as an overview of the state of play of the most important items under negotiation in the area of taxation.
With respect to the proposal for a so-called Unshell Directive the report contains a.o. the following update of the 'progress' made under the Spanish Presidency:
“The Spanish Presidency continued work on this file, which was discussed in the WPTQ on 4 July and 5 September and in the HLWP on 4 October and 23 November. In the July Working Party the following issues were discussed: tax consequences, links with domestic anti-abuse legislation, excluded entities, minimum substance, rebuttal of the presumption and reduction of administrative burden, tax residency certificate and exchange of information. Based on delegations' views expressed and building on the progress made during the previous Presidencies, in September the Presidency presented a compromise text covering the whole draft Directive. On this text, delegations expressed diverging views which prevented them from reaching an agreement and, as an alternative, suggested a two-stage approach. This approach consisted of a first stage in which the Directive would include an automatic exchange of information based on a number of agreed hallmarks, that would take place together with the application of domestic tax consequences, where considered appropriate. In a second stage, best practices about the use of that information to apply tax consequences among the Member States would be exchanged. In addition, it was suggested that after an evaluation of such practices a new proposal may be launched in the future, if appropriate.
In October, the Presidency asked in the HLWP whether delegations would like to continue working on the compromise text or could consider the two-stage approach. Although the principle of a two-stage approach was supported to some extent, several delegations considered that the main pending issues would not be solved by this approach and a number of delegations considered that it may require further analysis. During that meeting, the Commission suggested an alternative way forward that could be based on a minimum standard approach and a tool box of consequences. Taking into account that more technical work would have to be done regarding the two-stage approach, the Presidency submitted a proposal to the November HLWP based on the suggestions made by the Commission in order to check whether this could be an acceptable alternative way forward. However, there was no agreement on this new proposal within reach that would be acceptable for everybody, so further discussions will be needed in order to find compromise solutions on outstanding issues.”
The report furthermore gives updates on matters as: a Commission proposal for a Council Directive on Faster and Safer Relief of Excess Withholding Taxes (”FASTER”), the proposal for a Council Directive on BEFIT, the proposal for a Council Directive on Transfer Pricing, the proposal for a Council Directive on the Head Office Tax System (HOT), Directive on global minimum taxation (Pillar 2), the negotiations in the Inclusive Framework on BEPS on the Two-Pillar reform, VAT in the Digital Age, Revision of the Energy Taxation Directive (ETD) and the administrative cooperation in the field of taxation.
The full report as approved by the Council on December 8, 2023 can be found here.
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