UK and International Tax news
New EU Tax Evasion Rules
Wednesday 19th December 2012
The EC has recently announced that new EU rules to improve Member States’ ability to assess and collect the taxes that are due will enter into force on 1 January 2013. The Directive on Administrative Cooperation in the field of taxation lays the basis for stronger cooperation and greater information exchange between tax authorities in the EU. One of the key aspects of the Directive is that it brings an end to bank secrecy. In particular, a Member State cannot refuse to give information to another just because it is held by a financial institution.
On 6th December 2012, the EC adopted a Regulation laying down detailed rules for implementing Council Directive 2011/16/EU. It includes various provisions on the standard forms and means of communication that Member States will use when exchanging information.
The national laws, regulations and administrative provisions transposing the Directive will enter into force on 1.1.2013, with the exception of the provisions relating to automatic exchange of information which will enter into force on 1.1.2015.
The 2011 Directive is based on a proposal presented by the EC on 2 February 2009 to replace Council Directive 77/799/EEC concerning mutual assistance by the competent authorities of Member States in the field of direct taxation and taxation of insurance premiums.
The ECOFIN Council of 15th February 2011 formally adopted the new Directive which was published in the Official Journal on 11 March 2011. The main provisions of the Directive include the following:
EU standards for transparency and exchange of information on request are aligned to international standards. In particular, it provides that Member States can no longer refuse to supply information solely because this information is held by a bank or other type of financial institution.
Exchange of information that is of `foreseeable relevance` to the administration and the enforcement of Member States’ tax laws.
The scope of the Directive is extended to all taxes of any kind with the exception of VAT, customs duties, excise duties and compulsory social contributions already covered by other EU legislation on administrative cooperation.
Exchanges can relate to natural and legal persons, to associations of persons and any other legal arrangement.
Introduction of automatic exchange of information from 1 January 2015 on five categories of income and capital based on available information (income from employment, director’s fees, life insurance products not covered by other Directives, pensions, ownership of and income from immovable property).
Following a EC report to be submitted before 1 July 2017 and, on the basis of a new proposal by the EC, this list might be extended to dividends, capital gains and royalties. In addition, the Council may also decide to introduce unconditional automatic exchange of information in respect of at least three of the five aforementioned categories.
Improvements to the existing mechanisms for exchange of information including introductions of deadlines to accelerate procedures for the exchange of information on request (reply within six months following receipt of request) and for spontaneous exchange of information (transmission of information no later than one month after it becomes available).
Introduction of a mechanism to encourage feedback by the Member States that have received the information, which should be given, at the latest, three months after the outcome of the use of the information is known.
Other means of administrative cooperation including being present in the offices where the administrative authorities of the requested Member State carry out their duties, being present in administrative enquiries of the requested Member State, simultaneous controls, requests for notification and sharing of best practices.
Introduction of standard forms for exchange of information on request and spontaneous exchanges, computerised formats for the automatic exchange of information and channels for exchanging information.
A most favoured nation clause where, if a Member State provides wider cooperation to a third country than that provided for under the directive, it may not refuse such wider cooperation to another Member State that requests it on its own behalf.
Establishment of a regulatory committee which will be competent for implementing the technical aspects of the Directive.
If you would like further information on the above, please contact Keith Rushen on 0207 486 2378.Contact Us