UK and International Tax news

EC Proposes New Corporate Tax Anti Avoidance Measures

Thursday 4th February 2016

The European Commission has recently proposed a new Anti Tax Avoidance Package which will require member states to take a stronger and more coordinated stance against companies that seek to avoid paying their fair share of tax and to implement the international standards against base erosion and profit shifting.  

Key features of the new proposals include:

  • legally-binding measures to block the most common methods used by companies to avoid paying tax;
  • a recommendation to member states on how to prevent tax treaty abuse;
  • a proposal for member states to share tax-related information on multinationals operating in the EU;
  • actions to promote good tax governance internationally;
  • a new EU process for listing third countries that refuse to play fair.

The Package will seek to boost transparency on the taxes that companies are paying through a revision of the Administrative Cooperation Directive. Under the proposed rules, national authorities will exchange tax-related information on multinational companies’ activities, on a country-by-country basis. As such, all member states will have crucial information to identify risks of tax avoidance and to better target their tax audits. The EC is also looking at the separate issue of public country-by-country reporting, for which an impact assessment is currently underway in view of an initiative to be presented in early spring.

The Package contains a Communication on an External Strategy for Effective Taxation. Its aim is to strengthen cooperation with international partners in fighting tax avoidance, enhance EU measures to promote fair taxation globally based on international standards and create a common approach to external threats of tax avoidance. This will help to ensure a fair and level playing field for all businesses and countries.

The Package also contains a Chapeau Communication and Staff Working Document, which explain the political and economic rationale behind the individual measures and the EC’s broader agenda against tax avoidance. It is accompanied by a new Study on Aggressive Tax Planning, which looks at the main channels used by companies to avoid taxes.

The proposals include rules which are to apply to interest deductibility, exit taxation, switch-over clause, general anti-abuse rules, controlled foreign companies and hybrid mismatches. They also include CbC reporting and measures for the exchange of CbC reports, in the form of an amendment to the current EU Directive on Administrative Cooperation, which are to reflect the OECD recommendations in BEPS Action 13, and would apply to MNEs with a minimum consolidated group turnover of €750m. 

The two legislative proposals of the Package will be submitted to the European Parliament for consultation and to the Council for adoption. The Council and Parliament should also endorse the Tax Treaties Recommendation and member states should follow it when revising their tax treaties. Member states should also formally agree on the new External Strategy and decide on how to take it forward as quickly as possible once it has been endorsed by the European Parliament.  

The EC is to continue its campaign for corporate tax reform throughout 2016 including the relaunch of the CCCTB.

 

For more detail on the above contact Keith Rushen on 0207 486 2378.

 

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