EU: New anti-tax avoidance package focused on corporations

EU: New anti-tax avoidance package

The European Commission today unveiled new measures to address corporation tax avoidance. The EC presented an anti-tax avoidance package that includes two legislative proposals addressing certain anti-base erosion and profit shifting (BEPS) issues and non-public country-by-country (CBC) reporting as well as a common approach to tax good governance towards third countries and recommendations to address treaty abuse.

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According to the EC release, among the features of the new proposals are:

  • Measures to block the most common methods used by companies to avoid paying tax
  • A recommendation to EU Member States on how to prevent tax treaty abuse
  • A proposal for EU Member States to share tax-related information on multinationals operating in the EU
  • Actions to promote tax good governance internationally
  • A new EU process for listing third countries that refuse to “play fair”

Collectively, these measures are intended to address aggressive tax planning, boost transparency between EU Member States, and allow fairer competition for all businesses in the single market.

Summary of the proposals

There are proposed rules in the areas of interest limitation, exit taxation, switch-over clause, general anti-abuse rules (GAAR), controlled foreign companies (CFC) and hybrid mismatches. These standards are intended to provide a minimum level of protection for EU Member States. 

The EC proposals also include  country-by-country (CBC) reporting and measures for the exchange of CBC reports, in the form of an amendment to the current EU Directive on Administrative Cooperation (DAC) under direct taxation (2011/16/EU). The CBC rules are intended to reflect the OECD recommendations in BEPS Action 13, but would only apply to multinational enterprises (MNEs) with a minimum consolidated group turnover of €750 million. 

Finally, the EC proposes updating the EU tax good governance criteria developed in the 2012 recommendations, including transparency, information exchange, and fair tax competition.

What’s next?

The two legislative proposals will now be submitted to the European Parliament for consultation and to the Council for adoption by all EU Member States. If approved, the proposal on CBC reporting would need to be transposed into domestic law by each EU Member State by the end of 2016, and be effective beginning 1 January 2017. 

The EC is expected to publish a revised proposal addressing the Common Consolidated Corporate Tax Base (CCCTB) initiative in the autumn of 2016, as well as a proposal on enhancing dispute resolution procedures in the summer of 2016. 

 

Read a January 2016 report [PDF 94 KB] prepared by KPMG’s EU Tax Centre

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