UK and International Tax news
EU Directive On Automatic Exchange Of Tax Rulings
Tuesday 8th December 2015
The Council of the European Union has issued a directive amending Directive 2011/16/EU aimed at improving transparency on tax rulings given by member states to companies in specific cases about how taxation will be dealt with.
The directive is one of a number of initiatives aimed at preventing corporate tax avoidance. It will require member states to exchange information automatically on advance cross border tax rulings, as well as advance pricing arrangements. Member states receiving the information will be able to request further information where appropriate.
The CEU will develop a secure central directory where the information exchanged would be store and will be accessible to all member states and, to the extent that it is required for monitoring the correct implementation of the directive, to the Council.
A tax ruling is an assurance that a tax authority gives to a taxpayer on how certain aspects of taxation will be dealt with in that specific case. An advance pricing arrangement is a type of tax ruling, issued by a tax authority to determine the method and other relevant details of pricing to be applied to a transfer of goods or services between companies.
The directive will ensure that where one member state issues an advance tax ruling or transfer pricing arrangement, any other member state affected is in a position to monitor the situation and the possible impact on its tax revenue.
The directive is in line with developments within the OECD and its work on BEPS, the recent output of which was approved at a summit in Antalya on 15/16 November 2015.
The new rules will be applied from 1 January 2017. Until then, existing obligations for member states to exchange information will remain, in particular to
- For advance cross border rulings and advance pricing arrangements issued, amended or renewed between 1 January 2012 and 31 December 2013, provided they are still valid on 1 January 2014.
- For advance cross border rulings and advance pricing arrangements issued, amended or renewed between 1 January 2014 and 31 December 2016, regardless of whether they are still valid or not.
- Member states will have the possibility but not an obligation to exclude from information exchange advance tax rulings and pricing arrangements issued to companies with an annual net turnover of less than €40 million at a group level, if such advance cross-border rulings and advance pricing arrangements were issued, amended or renewed before 1 April 2016. However, this exemption will not apply to companies conducting mainly financial or investment activities.
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