Tax elements of the EU-UK trade agreement
The EU and the UK reached a trade agreement for post-Brexit relations on 24 December 2020. The agreement mainly covers trade in goods, but leaves services out of its scope.
On tax, the agreement commits the UK to following existing international OECD standards on exchange of information on financial accounts, cross-border tax rulings, CBC reports between tax administrations, and potential cross-border tax planning arrangements, as well as rules on interest limitation, controlled foreign companies and hybrid mismatches.
The agreement also obliges the UK to maintain the public CBCR requirement for credit institutions and investment firms that exists in EU law (capital requirements Directive, CRD IV). Read more
Commission adopts proposal to adapt decision-making process for interpreting certain VAT concepts
The Commission proposal, published on 18 December, puts in place a new decision-making process for certain VAT rules. by changing the rules of the EU’s VAT Committee.
The VAT Committee consists of representatives of EU Member States and of the Commission, and examines the application of EU VAT provisions raised by the Commission or a Member State.
VAT Committee can currently only agree non-binding guidelines on the application of the VAT Directive. But the new proposed process would mean that certain VAT committee decisions would be taken under the so-called ‘comitology procedure’, allowing for the adoption of binding interpretations of certain concepts in the EU’s VAT rules. The decisions would also be taken via qualified majority, rather than unanimity. Read more
Communication on Business Taxation for 21st Century delayed into February
The European Commission’s long-awaited Communication on Business taxation in the 21st Century was initially re-scheduled for publication on 3 February. However, in the more recent Commission agenda the Communication is no longer visible. Reportedly, it can be expected still for publication later in February or in March, but as always this may change.
Commission pledges support for Member States in digital tax disputes with the US
US Trade Representative (USTR) has concluded that the domestic digital taxes of several EU Member States (France already earlier, now also Italy, Spain, and Austria) are discriminatory towards US tech companies. This opens the doors for the US government to introduce retaliatory trade sanctions on the countries – although the US already decided to suspend its planned tariffs against France.
In response, DG TAXUD’s Benjamin Angel underlined that “the Commission will support all EU Member States targeted by the US procedure”.
USTR also updated the status of several other countries’ digital tax investigations that it is currently conducting. It remains to be seen whether the new Biden administration intends to change course on the US approach to digital taxation.
Commission updates timeline on DAC 8
European Commission will launch in February a public consultation for the Directive on administrative cooperation (DAC 8), to bring into its scope e-money and crypto-assets related transactions. The Commission also seeks to further harmonise DAC’s provisions for example around sanctions for non-compliance. The actual legislative proposal is expected for the second half of 2021.
Commission launches first round of feedback on its digital levy
On 18 January, the Commission launched a public consultation on its future ‘digital levy’, which is due to be published in June 2021.
The consultation, to which stakeholders can provide feedback until 12 April, seeks input notably on the design of the tax, for example whether it should be a:
- corporate tax top-up on all companies conducting certain digital activities in the EU
- tax on revenue created by certain digital activities in the EU
- tax on business-to-business digital transactions
The Commission is also consulting on other aspects of the levy, including:
- scope and definition of digital activities/transactions and of applicable companies
- compatibility with EU’s international obligations (e.g. DTAs)
- impact on SMEs and consumers
Stakeholders can additionally provide feedback until 11 February on a 4-page roadmap on the digital levy.
Unanimity for carbon border tax decision-making unlikely to happen
DG TAXUD’s Benjamin Angel provided further details on the upcoming (June) EU carbon border adjustment mechanism (CBAM), at a webinar organised by AFEP (French issuers’ association) to mark the launch of their new study on the topic.
Regarding the decision-making procedure for CBAM, Mr. Angel replied that this will depend on the chosen approach but that it is “very likely” that ordinary legislative procedure would apply. This means that EU Member States legislate via qualified majority rather than unanimity, and European Parliament has equal legislative powers.
On other aspects of CBAM, Mr. Angel ruled out using the yields to subsidise clean companies, and deems “feasible” the prospect of CBAM becoming applicable from 2023 – although this will depend on the speed of the legislators, he underlined.