EU: Directive on automatic exchange of tax rulings, APAs

EU: Directive on automatic exchange of tax rulings

The European Commission (EC) today announced that the European Council adopted a directive aimed at improving transparency on tax rulings—including advance pricing arrangements (APAs)—given by EU Member States to companies concerning how certain specific taxation issues will be addressed.

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As noted in the EC release, the directive requires EU Member States to exchange information automatically on advance cross-border tax rulings and APAs. 

  • Under the directive, EU Member States receiving the information will be able to request further information when appropriate. 
  • The EC will develop a “secure central directory” for storing the information exchanged, with that directory being accessible to all EU Member States and to the EC, to the extent that it is required for monitoring the correct implementation of the directive.
  • When one EU Member State issues an advance tax ruling or transfer pricing arrangement, any other affected EU Member State may monitor the situation and the possible impact on its tax revenue. 

The EC announcement states that the directive is in line with developments within the OECD and its work on tax base erosion and profit shifting (BEPS) project.  

Effective date, application rules

The new rules will apply from 1 January 2017. Concerning rulings issued before 2017, the following will apply: 

  • If advance cross-border rulings and APAs are issued, amended or renewed between 1 January 2012 and 31 December 2013, the communication (exchange of information) will take place, provided they are still valid on 1 January 2014.
  • If advance cross-border rulings and APAs are issued, amended or renewed between 1 January 2014 and 31 December 2016, the communication will take place whether or not they are still valid.
  • EU Member States may be able to exclude from the information exchange advance tax rulings and APAs issued to companies with annual net turnover of less than €40 million at the group level, if such advance cross-border rulings and APAs 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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