E-news from KPMG's EU Tax Centre

E-news from KPMG's EU Tax Centre

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KPMG’s EU Tax Centre helps you understand the complexities of EU tax law and how this can impact your business, enabling you to better predict how rules will develop and how to leverage opportunities and minimize risks arising from EU tax law.

E-News provides you with EU tax news that is current and relevant to your business. KPMG’s EU Tax Centre compiles a regular update of EU tax developments that can have both a domestic and a cross-border impact. CJEU cases can have implications for your country.

Latest CJEU, EFTA and ECHR

CJEU decision in the Radgen case (C-478/15)

On September 21, 2016 the CJEU delivered its decision in Peter Radgen, Lilian Radgen v. Finanzamt Ettlingen. The court ruled that, under the right of equal treatment of employees contained in the EU-Switzerland bilateral agreement for the free movement of persons (signed June 21, 1999), legislation which denies a taxpayer a tax exemption for teaching income received from a public body solely because that public body is established in Switzerland, whereas the exemption would have been available had the public body been established in Germany or elsewhere within the EU/EEA, is not permitted.

CJEU decision in the de Lange case (C-548/15)

On November 10, 2016 the CJEU rendered its judgment in J.J. de Lange and the Staatssecretaris van Financiën (State Secretary for Finance, Netherlands). The court ruled that a taxation scheme, such as that at issue in the main proceedings, under which the tax treatment of vocational training costs incurred by a person differs depending on age, falls within the material scope of Council Directive 2000/78/EC of November 27, 2000 establishing a general framework for equal treatment in employment and occupation. It is for the national court to determine whether that scheme, i.e. full deduction of vocational training costs from taxable income is also age-dependent, is objectively and reasonably justified by a legitimate objective relating to employment and labor market policy and the means of attaining that objective are appropriate and necessary.

CJEU decision in the Spanish case DTS Distribuidora de Televisión Digital SA (C-449/14 P)

The CJEU has dismissed an appeal by DTS Distribuidora de Televisión Digital SA (‘DTS’) to set aside a judgment by the General Court of the European Union, which upheld a Commission Decision on a proposed Spanish tax on commercial broadcasters that was to be used in relation to the funding of the Spanish public broadcasting organization; the Commission had concluded that this was not illegal state aid.

CJEU decision in the Portuguese case SECIL (C-464/14)

On November 24, 2016 the CJEU issued a ruling in the Companhia Geral de Cal e Cimento SA (‘SECIL’) case, in which it concluded that restricting the right to a full or partial elimination of economic double taxation of profit distributions to cases where the distributing company is resident within the EU/EEA is contrary to the Euro-Mediterranean Agreements Portugal concluded with Tunisia and Lebanon and the free movement of capital under Article 63 of the TFEU.

Advocate General's opinion in the Euro Park Service case (C-14/16)

On October 26, 2016 Advocate General Wathelet issued his Opinion in the Euro Park Service case. The case concerned the implementation into French law of the anti-abuse clause provided for in the Merger Directive. He concluded that the French provision is not compatible with the directive or the freedom of establishment (Art. 49 TFEU), since it imposes a condition that the use of the common system of taxation applicable to mergers and transactions is subject to a process of prior approval only for transfers made to foreign legal persons and requires the taxpayer, as a matter of course, to provide proof that an operation is genuine and proper. These conditions, in effect, constituted presumptions of tax avoidance or tax evasion which went beyond that which was permitted under EU law. Implicitly the Opinion also confirms that a Member State’s implementation of a directive can be assessed for its compatibility with primary EU law.

Advocate General's opinion in the Belgische Staat v. Comm. VA Wereldhave Belgium case (C-448/15)

On October 26, 2016 Advocate General (AG) Campos Sánchez-Bordona of the CJEU issued his Opinion in the Belgische Staat v. Comm. VA Wereldhave Belgium and Others case concerning the application of withholding tax on dividends paid by a Belgian subsidiary to its Dutch parent, which was a collective investment company. The Advocate General concluded that the EU Parent-Subsidiary Directive is not applicable on the grounds that such investment companies are taxed at a zero rate and are accordingly non-qualifying companies under the directive. To the second question, i.e. if the EU Parent-Subsidiary Directive is not applicable, is the Belgian legislation in question consistent with the freedom of establishment and the free movement of capital, the Advocate General suggested that the CJEU should declare this question inadmissible on the grounds that the legal and factual situation had not been adequately explained.

Advocate General's opinion in X. v. Ministerraad (C-68/15)

On November 17, 2016 Advocate General Kokott rendered her Opinion in case C-68/15, concluding that the Belgian fairness tax is partially contrary to European law. According to Advocate General Kokott, the fairness tax breaches Article 4 of the EU Parent-Subsidiary Directive. The fact that dividends received by a Belgian company from its subsidiary in another EU Member State are to be included in the taxable base of the fairness tax upon redistribution by the Belgian company violates Article 4 of the EU Parent-Subsidiary Directive.  

Infringement procedures & referrals to CJEU

Infringement procedures

Commission refers France to the CJEU for discrimination in the taxation of dividends

The Commission referred France to the CJEU for failure to comply with a judgment rendered by the Court on September 15, 2011. At issue is the refund of tax paid in France by companies with subsidiaries in other EU countries. The Council of State adopted a restrictive interpretation of the CJEU judgment by applying it to two individual cases in December 2012. The Commission takes the view that those judgments are incompatible with EU law.

For more information, please refer to the press release.

Referrals to CJEU

Denmark

On September 5, 2016 the Østre Landsret referred the Fidelity Funds v Skatteministeriet case (C-480/16) to the CJEU for a preliminary ruling on whether a tax regime under which non-Danish undertakings for collective investment covered by Council Directive 85/611/EEC 1 (the UCITS Directive) are taxed at source on dividends from Danish companies, whereas equivalent Danish undertakings for collective investment can obtain an exemption for tax at source, is contrary to the free movement of capital or Article 49 TEC (Article 56 TFEU) on the freedom to provide services.

France

On July 28, 2016 the Conseil d'État referred the Ministre des finances et des comptes publics v. Marc Lassus case (C-421/16) to the CJEU for a preliminary ruling on the French rules for deferring taxation of capital gains in the case of exchange of securities under the EU Merger Directive. The case concerns the question of the ending of the deferral, e.g. on subsequent transfer of the securities received under the exchange, in particular when this takes place at a time when the right to tax under a bilateral tax treaty has passed to another Member State.

The Netherlands

On July 18, 2016 the Supreme Court of the Netherlands (Hoge Raad der Nederlanden) referred the X NV v. Staatssecretaris van Financiën case (C-399/16) to the CJEU for a preliminary ruling on whether Articles 43 and 48 of the EC Treaty must be interpreted as precluding national legislation which excludes the possibility of taking into account a currency loss by a parent company established in a Member State, which it has transferred to a subsidiary established in another Member State, if that subsidiary is not included in a single tax entity with that parent company.

On the same date, the Dutch Supreme Court requested a preliminary ruling from the CJEU (case C-398/16) as to whether Dutch rules, which restrict the right for group companies to form a ‘Dutch fiscal unity’ only to Dutch resident companies which results in a different tax treatment for the deductibility of interest on loans associated with a capital contribution, constitute a restriction on the EU freedom of establishment principle.

State Aid

Irish Minister of Finance outlines key arguments for appealing against the EC's Apple State aid decision

On October 4, 2016 the Minister of Finance gave an Opening Statement before the Irish Upper House. The latter outlines the key arguments for Ireland to appeal the EU Apple State aid decision.

ECON committee hearing with Commissioner Margrethe Vestager

On October 10, 2016, during the hearing with the Economic and Monetary Affairs Committee (ECON) of the European Parliament, Commissioner Margrethe Vestager discussed several competition issues and was congratulated by several Members of Parliament regarding the Apple case. She told Irish Committee members that the 12.5% corporate tax rate in Ireland is not a problem.

For more information, see the press release.

Appeal in the Spanish case Athletic Club v Commission

The applicant contends that the General Court should annul Article 1 of Commission Decision of July 4, 2016 regarding State aid granted by Spain to certain football clubs, insofar as they order the recovery of the aid allegedly granted to the Athletic Club (case T-679/16). The applicant argues that the Commission failed to give sufficient reasons in the contested decision, since it did not assess essential elements of the definition of state aid, did not respond to reasoned arguments made by the parties and disregarded essential elements of the burden of proof.

Appeals in the Belgian excess profit exemption scheme

Several companies have lodged appeals with the General Court asking for annulment of the Commission’s decision of January 2016 regarding the “excess profit” tax rulings system (see ETF 271). The multiple grounds of the appeal include errors in assessing the advantage, selectivity, as well as arguments based on legal certainty and legitimate expectations.

The cases in question include Henkel Electronic Materials (Belgium) v Commission (T-681/16), Puratos and Others (Belgium) v Commission (T-265/16), Magnetrol International (Netherlands) v Commission (T-263/16), BP Aromatics v Commission, Atlas Copco Airpower and Atlas Copco (Belgium) v Commission (T-278/16) and Vasco Group and Astra Sweets (Belgium) v Commission (T-444/16).

European Commission finds Hungarian advertisement tax in breach of EU rules


On November 4, 2016 the European Commission announced that it found Hungary's amended Advertisement Tax Act to be in breach of EU State aid rules, because its progressive tax rates grant a selective advantage to certain companies.

For more information, see the press release.

EU Institutions

Council conclusions on the Communication on transparency and the fight against tax evasion and avoidance

On July 5, 2016 the European Commission adopted a Communication on further measures to enhance transparency and the fight against tax evasion and avoidance. It was issued together with several legislative proposals (see ETF 292).

The Council’s conclusions on this communication were adopted during the ECOFIN meeting on October 11, 2016.

Monaco taxation agreement approved by EU

On October 11, 2016 the Council approved the conclusion of an agreement with Monaco that will improve tax compliance by private savers. It will require EU Member States and Monaco to exchange information automatically as a means of combating tax evasion. It will give their tax administrations improved cross-border access to information about the financial accounts of one another's residents.

For more information, see the press release.

Tax package of October 2016

On October 25, 2016 the European Commission published several legislative proposals:
• to relaunch its Common Consolidated Corporate Tax Base initiative
• to combat hybrid mismatches, including those involving non-EU countries,
• to improve the existing procedures to resolve disputes involving double taxation within the EU.

They were accompanied by the Communication on building a fair, competitive and stable corporate tax system for the EU.

This package was discussed during the ECOFIN meeting on November 8.

On December 6, 2016 the Council adopted conclusions on the Commission Communication, welcoming the package.

For more information, see ETF 303 and the Commission's Q&A on the package.

Public hearings of the PANA committee

The European Parliament’s Panama Papers Committee has recently held several public hearings:

• on November 8, exchange of views with Commissioner Věra Jourová, about "Anti-Money Laundering: state of play of the implementation of EU legislation", see the press release.
• on November 14 on "Anti-money laundering and tax evasion: Who assures compliance with the rules and enforces them?", with representatives of various institutions involved in this area, see the press release.
• on November 16, exchange of views with Professor Joseph E. Stiglitz, Nobel Memorial Prize in Economics, see the press releases here and here.
• on December 7, exchange of views with Commissioner Pierre Moscovici, about the Commission’s role and actions to implement and enforce EU legislation against money-laundering and tax evasion, see the press release.
• on December 7, exchange of views with Ashish Kumar, Policy Analyst at the Financial Action Task Force (FATF) about how FATF sets international standards in the area of Anti-Money Laundering, and how FATF assesses their effective implementation and enforcement by its members.

A study has been released assessing the mandate of the Panama Inquiry Committee, which is intended to serve as a preparatory document for the Committee's investigation.

ECOFIN meeting on November 8

On November 8, 2016 the ECOFIN discussed several initiatives regarding tax transparency, aggressive tax planning and the corporate tax environment in the EU. The discussions focused on the relaunched proposal for a CCCTB/CCTB, the proposed directives on third country hybrids and on double taxation dispute resolution mechanisms, as well as tax authority access to beneficial ownership information.

For more information, see ETF 304.

Agreement on the DAC5 to give tax authorities access to AML information

During the ECOFIN, an agreement was reached on a proposal granting tax authorities access to anti-money laundering information, especially customer due diligence information and information on beneficial ownership.

Agreement on the criteria for the screening of third country jurisdictions

Agreement was also reached on the criteria for screening jurisdictions and the guidelines for the screening process. The screening process should be completed by September 2017, and the Council is expected to endorse the list of non-cooperative jurisdictions by the end of 2017.

For more information see ETF 304, the press release and the Council conclusions.

Public consultation on the role of advisors and intermediaries


As announced during the ECOFIN meeting, on November 10, 2016 the European Commission launched a consultation on “Disincentives for advisors and intermediaries for potentially aggressive tax planning schemes”, which addresses both illegal arrangements as well as legal tax planning schemes. The Commission is working to build more effective deterrents for tax advisers engaged in operations that facilitate tax evasion and tax avoidance, such as a mandatory disclosure scheme for tax advisers. The consultation will run until February 16, 2017.

For more information, see the press release and the survey.

Taxation trends in the European Union

On November 11, 2016 the European Commission published the 2016 edition of the study on taxation trends in the EU. The study analyses the tax systems of all 28 EU Member States, plus Iceland and Norway, and contains extensive and comparable data on the different tax structures and tax rates. It also provides an analysis on the medium- to long-term evolution of these trends.

Code of Conduct Group work on Patent boxes

After the adoption of the modified nexus approach, Member States committed to change their existing patent boxes to comply with the new rules. All relevant Member States, with the exception of France, submitted a report notifying the steps taken to comply. The Group agreed to report to the ECOFIN that France is in contravention and confirmed that the French patent box regime, like all the other Member States patent box regimes, will be examined against the Code of Conduct criteria, in order to assess their potential harmfulness.

The Group also decided that the Italian patent box, which was enacted after the agreement on the modified nexus approach in December 2014, should be treated the same as the pre-existing patent boxes.

With the exception of France and Italy, the other Member States are broadly in compliance with the rollback commitment of the modified nexus approach, but some technical issues still have to be resolved.

For more information, see the Group report ‘’Patent boxes: state of play and the way forward’’ and the report to the ECOFIN on its activity in the second half of 2016 (see below).

Report of the Subgroup to the Code of Conduct Group on its work during the Slovak Presidency

On November 17, 2016 the Subgroup on the clarification of the 3rd and 4th criteria of the Code (relating to economic substance and transfer pricing methodology respectively) issued a report on its work during the Slovak Presidency. An upcoming focus of the Subgroup includes reviewing certain national regimes in light of the 3rd criterion, i.e. holding, banking and insurance, fund management, financing and leasing, headquarters, distribution and service centers, as well as guidelines on the use of both OECD as well as non-OECD transfer pricing principles.

Report of Code of Conduct Group to the Council

On November 28, 2016 the Code of Conduct Group issued a report on its activity in the second half of 2016 under the Slovak Presidency. It deals with, for example, the work on patent boxes, guidelines on the issuance of tax rulings and outbound payments.

Regarding the establishment of the EU list of non-cooperative jurisdictions, the group had already agreed on the identification of third country jurisdictions to be prioritized for screening. The subgroup will continue work on clarifying two criteria (1.3 and 2.2.) of this list.

The report has been endorsed by the ECOFIN on December 6, 2016.

ECOFIN meeting on December 6

On December 6, 2016 the ECOFIN adopted the proposal to grant tax authorities access to anti-money laundering information. The Council further welcomed the corporate tax reform proposals presented by the Commission on October 25, 2016, including the CCCTB/CCTB, and discussed the progress on the 2013 proposal aimed at introducing a financial transaction tax.

The Council did not reach agreement on the proposal aimed at extending the recently agreed rules on hybrid mismatches to third countries.

For more information, see ETF 306.

Adoption of the DAC5 to give tax authorities access to AML information

During this ECOFIN meeting, the proposal granting tax authorities access to anti-money laundering information, especially customer due diligence information and information on beneficial ownership, was formally adopted. This takes the form of an amendment to the Directive on Administrative Cooperation in the field of direct taxation and is referred to as ‘DAC5’. The new rules will apply as from January 1, 2018.

In its report on the proposal, the European Parliament suggested that the information obtained by the tax authorities should be automatically exchanged between Member States. The automatic exchange was not, however, included in the final text of DAC5. According to Commissioner Pierre Moscovici, the Commission should come up with a separate proposal in this respect taking into account the related developments, particularly the ongoing pilot project for exchange of such information initiated by the G5 and the outcome of the proposed amendments to the Anti-Money Laundering Directive.

For more information, see ETF 292, ETF 304, ETF 306 and the press release.

Developments on AMLD5 regarding UBO information

On July 5, 2016 the Commission announced a proposal for a fifth AMLD. Regarding UBO information, the proposal aims in particular at:

• lowering the threshold for declaring beneficial ownership for passive corporate entities;
• giving the public access to a set of beneficial ownership information on companies and business-type trusts;
• giving the public access to the UBO information on ‘’family trusts’’, if there is a legitimate interest;
• implementing a direct and immediate interconnection of the national registries on company information to facilitate cooperation between Member States;
• requiring interim due diligence of customers rather than just new customers.

However, the last version of the compromise text, which was discussed during the ECOFIN meeting on December 6, no longer contains the two first provisions. Regarding UBO information for trusts, the AMLD5 compromise text provides for public access to all types of trusts, such access being based on a legitimate interest.

See ETF 292 and the last compromise text.

Financial Transaction Tax: state of play

At a meeting of the Working Party on Tax Questions held on October 25, 2016, the FTT10 indicated that further negotiations on FTT would continue on the basis of the agreed broad lines relating to a number of the key building blocks (e.g. scope of taxable transactions in shares and derivatives, territoriality, transaction chain, market maker exemption, etc.). This basic agreement would still have to be transformed into a legal text, where a number of issues would have to be refined further (for more information see the October 2016 Presidency note on the state of play on the FTT). The proposal will require the unanimous agreement of the FTT10, after consulting the European Parliament. All Member States can participate in discussions on the proposal, but only the FTT10 can vote.

On December 6, 2016 the ECOFIN meeting was informed that the FTT10 is working on a number of open questions and is trying to reach a compromise on the core elements.

For more information, see ETF 306.

Guidelines for a Model for a European Taxpayers’ Code

Following a public consultation on this, a group of Member States, together with the European Commission, prepared the European Taxpayers' Code. It is a non-binding instrument providing for a core of principles regarding the rights and obligations that govern the relationships between taxpayers and tax administrations.

For more information, see the press release and the guidelines.

Tax Policies in the EU survey

The "Tax Policies in the EU survey" examines how Member States' tax systems help to promote investment and employment, how they are working to reduce tax fraud, evasion and avoidance, and how tax systems help to address income inequalities and ensure social fairness.

It presents the most recent reforms in Member States and the reform options to help Member States looking to improve efficiency and fairness in their tax systems.

For more information, find the press release, an infographic and the report.  

OECD

Brochure - OECD work on taxation

The OECD issued a brochure highlighting its main working areas such as the BEPS project, the developments on tax transparency.

Panama and Saint Lucia join the Multilateral Convention on Mutual Administrative Assistance in Tax Matters

Panama and Saint Lucia became part of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters (“Convention”).
The Convention was developed jointly by the OECD and the Council of Europe in 1988 and provides for all forms of administrative assistance in tax matters, in particular with a view to combating tax avoidance and evasion. The Convention is also an important instrument for implementation of the automatic exchange of financial account information under the OECD’s common reporting standard (CRS), as well as the automatic exchange of country-by-country reports under Action 13 of the BEPS.

For more information, see the press release here and here.

Andorra, Macau (China), Mauritius, Ukraine and Panama join the Inclusive Framework on BEPS

In October and November, Andorra, Macau (China), Mauritius, Ukraine and Panama joined the Inclusive Framework on BEPS. It brings to 90 the total number of countries and jurisdictions participating on an equal footing in the Project.

For more information, see the press releases here, here and here.

OECD Secretary-General's tax report to G20 Finance Ministers

In October 2016, the OECD Secretary General issued a report for the G20 Finance Ministers and central bank governors. It is a targeted update on tax transparency, specifically the issue of beneficial ownership information.

OECD launches business survey on tax certainty

On October 18, 2016, the OECD announced the launch of a business survey on tax certainty. It will run from October 18 to December 16, 2016. Businesses and other stakeholders are invited to contribute to the development of practical and concrete policy options aimed at fostering certainty in the tax system. The results will be presented to the G20 in 2017.

For more information, please find the survey and the press release.

G20/OECD BEPS Project advances tax certainty agenda with the launch of global review of MAP programs

On October 20, the OECD released key documents that will form the basis of the Mutual Agreement Procedure (MAP) peer review and monitoring process under Action 14 of the BEPS Action Plan which calls for effective dispute resolution mechanisms to resolve tax treaty-related disputes.

For more information, see the press release.

Network of more than 1000 relationships now in place to automatically exchange information between tax authorities

On October 20, as a further step to implement the OECD Common Reporting Standard, the first series of bilateral automatic exchange relationships were established among the first batch of jurisdictions committed to exchanging information automatically as of 2017.

For more information, see the press release.

Five new jurisdictions sign tax co-operation agreement to enable automatic sharing of country-by-country information

On October 21, Brazil, Guernsey, Jersey, the Isle of Man and Latvia signed the Multilateral Competent Authority Agreement (MCAA) for the automatic exchange of Country-by-Country reports, bringing the total number of signatories to 49. As described above, MCAA is based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters developed by the OECD, which provides for all forms of administrative assistance in tax matters, in particular with a view to combating tax avoidance and evasion. MCAA should enable consistent and swift implementation of new transfer pricing reporting standards developed under Action 13 of the BEPS Action Plan. It will ensure that tax administrations obtain a complete understanding of the way MNEs structure their operations through the annual automatic exchange of country-by-country reports.

For more information, see the press release.


Global Forum makes advances on international tax

On November 4, the Global Forum on Transparency and Exchange of Information for Tax Purposes held its annual meeting in Tbilisi, Georgia on November 2-4. The meeting marked the completion of the first round of the Forum’s peer review process, with the release of 17 new reports assessing the level of compliance with the international standard for exchange of information on request. A second round of peer reviews now underway will include an assessment of the availability of and access by tax authorities to beneficial ownership information of all legal entities and arrangements.

For more information, see the press release.

Countries agree on OECD Multilateral Convention

On November 24, 2016 more than 100 jurisdictions concluded negotiations on a Multilateral Convention (or ‘multilateral instrument’) that is intended to implement certain tax treaty related aspects of the OECD/G20 Base Erosion and Profit Shifting (BEPS) initiative. The Convention is designed as a quick and effective mechanism to allow governments to bring their treaties into line with these aspects of the BEPS project, instead of renegotiating individual treaties. The OECD anticipates that up to 2000 treaties could be amended in this way.

For further information please see our ETF 305 and the press release.

Guidance on CbCr and country-specific information on implementation

On December 5, the Inclusive Framework on BEPS released two new documents to support the global implementation of Country-by-Country (CbC) reporting (BEPS Action 13):

• Key details of jurisdictions' domestic legal frameworks for CbC reporting; and
• Additional interpretive guidance on the CbC reporting standard.

For more information, see the press release.
 

Local Law and Regulations

Austria

Document on FAQs concerning automatic exchange of information published

The Ministry of Finance published a document on frequently asked questions (FAQs) concerning the account register and the automatic exchange of information.

Belgium

Draft bill containing various tax measures approved by government

In November, the Belgian government approved a draft law which includes an increase in the general withholding tax rate from 27% to 30% as from January 1, 2017 and an increase of the withholding tax rate from 17% to 20% in case of early distribution of liquidation reserves constituted as from assessment year 2018. The law also includes rules for the “internal” capital gains and introduces a regime for the recovery of the alleged state aid received by companies within the framework of the excess profit rulings.

For more information, see KPMG’s TaxNewsFlash.

Withholding tax exemption for dividends paid to Swiss companies

Dividends paid to a non-EU tax treaty country can be exempt from Belgian withholding tax if there is an exchange of information arrangement between Belgium and that country. Given that exchange of information will be in place between Belgium and Switzerland from 2017, dividends paid by a Belgian to a Swiss company will be exempt from withholding tax in Belgium as from January 1, 2017 (provided that certain conditions are met).

For more information, see KPMG’s TaxNewsFlash.

Draft law implementing GAAR and anti-hybrid rule and amending exit tax provision
On November 18, 2016, the Belgian parliament adopted the Bill transposing to Belgian law the general anti-abuse rule and anti-hybrid provisions included in the amended EU Parent-Subsidiary Directive. The Bill also introduces rules allowing the exit tax to be made either as a direct payment or over a period of years. The rules regarding the EU Parent-Subsidiary Directive generally apply retroactively from January 1, 2016, while the exit tax provisions apply from 2017.

For more information, see KPMG’s TaxNewsFlash.

Bulgaria

Country-by-country reporting and automatic exchange of information regarding advance tax rulings
In October 2016, a draft bill was submitted to the Bulgarian parliament transposing the EU Directives on country-by-country reporting and automatic exchange of advance tax rulings into Bulgarian law.

Croatia

Amendments to Corporate Tax Law

The Croatian parliament adopted amendments to the Corporate Income Tax Law. The main changes include reduction of the corporate income tax rate from 20% to 18%, introduction of a reduced 12% corporate income tax rate applicable to small businesses, new rules for tax deductibility of business entertainment expenses or possibility to request advance transfer pricing agreements. Once approved, the amendments will apply as of January 1, 2017.

Cyprus

Amendments to IP regime

Decree including amendments to the intellectual property (IP) regime was gazetted in November 2016. The changes are intended to align the existing IP regime in Cyprus with certain OECD recommendations under the Base Erosion and Profit Shifting (BEPS) Action 5. They will apply retroactively from July 1, 2016.

For more information, see KPMG’s TaxNewsFlash.

Finland

Treaty between Finland and Estonia – 0% WHT on royalties due to MFN clause

According to a press release issued by the Finnish tax administration, the most-favored nation (MFN) clause included in Article 12 of the Finland-Estonia tax treaty has been triggered. Accordingly, 0% withholding tax will now be applied on royalties between Finland and Estonia (the press release states that Finland will apply the 0% withholding tax with effect from January 1, 2016.

Law proposal on automatic exchange of advance tax rulings

The government presented legislation to parliament proposing the implementation of the automatic exchange of tax rulings as required by the EU Directive on mandatory automatic exchange of information in the field of taxation. The legislation is scheduled to become effective from January 1, 2017.

France

Country-by-country reporting – decree published

Rules for country-by-country reporting were introduced into French law in accordance with OECD guidelines and the EU Directive regarding mandatory automatic exchange of information in the field of taxation.

Finance Bill for 2017

The Finance Bill for 2017 proposes a number of changes regarding corporate taxation, such as a reduction of the standard corporate income tax rate from the current 33.33% progressively to 28%, extension of the scope of companies benefitting from the reduced corporate income tax rate of 15%, introduction of a definition of permanent establishment and modification of rules relating to the payment of corporate income tax installments by large companies.

Lastly, it is proposed to increase the rate of financial transaction tax from 0.2% to 0.3% and the scope of the tax will be extended to include intra-day transactions with effect from January 1, 2017.

For more information, see KPMG’s TaxNewsFlash.

Amending Finance Bill for 2016 – corporate taxation

On November 18, 2016, the Amending Finance Bill for 2016 was presented by the government and submitted to the National Assembly. The Bill extends the exemption from the 3% contribution on profit distributions following the decision of the Constitutional Court on September 30, 2016 (see section Local Courts for more information). The Bill also includes new rules in relation to the participation exemption.

For more information, see KPMG’s TaxNewsFlash.

Germany

Draft bill to combat tax avoidance

On October 28, 2016, the German Ministry of Finance issued a draft bill proposing new measures to combat tax avoidance, e.g. introduction of an EU beneficial ownership register with respect to bank accounts and deposits, notification obligation of taxpayers with respect to the purchase and sale of certain participations in foreign entities and funds or a 10-year statute of limitation period for tax evasion.

Greece

Draft Budget for 2017 tax amendments

The final 2017 Draft Budget was submitted to parliament. It proposed a number of changes in tax legislation including reform of the Income Tax Code.

Hungary

Parliament passes bill amending Corporate Income Tax Law

On November 23, 2016, parliament passed legislative proposals for tax law changes, scheduled to be enacted for 2017. The amendments to the Corporate Income Tax Law include a new tax benefit for early-stage businesses (start-ups).

For more information, see KPMG’s TaxNewsFlash.

Hungary to set EU lowest corporate tax rate

The Hungarian government announced a plan to reduce its corporate tax rate to a uniform 9% compared to the current 10% for profits up to HUF 500 million and 19% above that level. This would make the Hungarian corporate tax rate the lowest in the EU, below that of Ireland and Malta, which both have a rate of 12.5%. The plan still has to be submitted to parliament.

Iceland

Bill implementing BEPS Actions 4, 7 and 13 adopted

On October 13, 2016, parliament adopted the Bill implementing BEPS Action 4 (interest deduction limitations), Action 7 (Artificial Avoidance of Permanent Establishment) and Action 13 (Country-by-Country Reporting).

Ireland

Guidelines on bilateral APAs updated

The Irish Revenue updated the Guidelines for taxpayers on applying for a formal bilateral Advance Pricing Agreement (APA). The Guidelines stipulate that an APA can be agreed for a maximum period of five years.

Proposed tax changes

Several tax amendments were proposed as part of the Budget for 2017 including a comprehensive intervention program targeting taxpayers engaged in offshore tax evasion.

For more information, see KPMG’s TaxNewsFlash.

Central register of beneficial owners

With effect from November, Irish incorporated companies are required to create and maintain a register of beneficial owners. This is a first step towards create a central register of beneficial owners as required by the Fourth Anti-Money Laundering Directive.

For more information, see KPMG’s TaxNewsFlash.

Italy

New tax measures approved

On November 24, 2016, the Italian Senate approved the draft Budget Law for 2017. The main tax measures include, for example, a decrease in the corporate income tax rate to 24%, R&D tax credits and new voluntary disclosure procedure.

Updated list of uncooperative countries - Financial transactions tax

In October 2016, the list of uncooperative countries for financial transactions tax purposes was updated. In particular, Switzerland was removed from the list of uncooperative countries due to the entry into force of the amending protocol to the Italy – Switzerland double taxation treaty.

Malta

Special task force will combat black economy

The Minister for Finance announced formation of a Joint Enforcement Task Force which should support the government’s efforts directed towards combating the black economy. The government intends to gather resources and technical know-how from various departments, such as the Income Tax Department, the VAT Department and the Tax Compliance Unit, in order to prevent, detect, investigate and prosecute offenses related to unfair business competition and tax avoidance and evasion.

Budget for 2017 presented to parliament

The Budget for 2017 presented to the parliament in October 2016 includes several tax measures, such as tax incentives for investments on the Malta Stock Exchange or a tax credit in respect of research and development expenses. The measures are still to be implemented through legislative amendments and guidelines.

Netherlands

Tax changes in 2017

Several tax changes have been proposed within the 2017 Tax Plan. These concern, inter alia, dividend withholding tax refunds, interest deduction limitation rules and innovation boxes.
Bill on the Fiscal Unity Amendment Act approved

Nearly two years after the Amsterdam Court of Appeals ruled, on the basis of three preliminary rulings rendered by the Court of Justice of the European Union, that certain aspects of the Dutch corporate income tax fiscal unity regime were not in line with EU law, the last major step has been taken to rectify this: on November 29, 2016 the Upper House approved the Bill on the Fiscal Unity Amendment Act (the Bill was gazetted on December 8, 2016). More details can be found here.

Norway

Proposed amendment of CbC reporting – public hearing

The governmental proposal to amend the country-by-country (CbC) reporting rules to include companies engaging in extractive industries and/or logging of non-planted natural forests (i.e. primary forests) was sent for public hearing. The proposal is based on the EU Accounting Directive (2013/34/EU).

Proposed tax changes in 2017

On October 6, 2016 the Norwegian government published proposed tax changes for 2017 which include a general reduction in the corporate income tax rate to 24% (from the current 25%), and the introduction of a “financial activity tax” at a rate of 5% of the amount of gross salaries paid by financial sector businesses (that would likely not benefit from the corporate income tax reduction). The proposals in the 2017 budget plan are subject to parliamentary debate before a bill is presented to the Parliament. It is expected that a final vote on the budget would be before the end of 2016.

For more information, see KPMG’s TaxNewsFlash.

Poland

Changes in corporate tax law from 2017

Several amendments to corporate tax law will become effective as of January 1, 2017. These include the introduction of a reduced corporate tax rate of 15% (instead of 19%) for small taxpayers, as well as clarification of the “beneficial owner” status requirement for withholding tax exemption with respect to interest or royalties. For more information, see KPMG’s TaxNewsFlash.

Effective from January 1, 2017, new tax rules will apply to investment funds which will replace the general exemption with specific rules depending on the type of fund and the type of income. For more information, see KPMG’s TaxNewsFlash.

Commission requested Poland to implement rules on strengthened mutual assistance and exchange of information

The Commission announced that on September 29, 2016 it had formally requested Poland to fully transpose Council Directive 2014/107 that provides for the automatic exchange of information on financial accounts between Member States to better combat tax evasion and tax fraud. The rules should have been transposed by January 1, 2016. Poland has not yet informed the Commission of all the necessary measures to fully transpose the Directive into national law. In the absence of a satisfactory response within two months, the Commission may refer Poland to the Court of Justice of the European Union.

Portugal

Government decree on automatic tax information exchange

Several law decrees were gazetted relating to Portugal's obligations under the EU automatic exchange of information.

Romania

Romania joining BEPS project – draft law published

A draft law was published announcing accession of Romania as an associate to the OECD's Base Erosion and Profit Shifting (BEPS) Implementation Forum. Romania will participate in developing the BEPS Action plan as well as in reviewing and monitoring its implementation.

Slovakia

Tax law amendments

The Slovak parliament approved several changes to the corporate income tax law to become effective from January 1, 2017. These include an increased 35% withholding tax applicable to dividends paid to non-treaty companies (the income tax of 35% will likewise apply to Slovak companies receiving dividends from non-treaty companies) or a decrease of the corporate income tax rate from 22% to 21%.

For more information, see KPMG’s TaxNewsFlash.

Bill on automatic exchange of information

Council Directive 2015/2376 amending directive 2011/16/EU as regards the automatic exchange of tax information (also referred to as “DAC3”) was implemented into Slovak law. The amended law regulates the scope and conditions of automatic exchange of information on advance cross-border rulings, authority approvals of specific method of taxation of permanent establishment and decision on approval of a transfer pricing method. The amendments will be effective as from January 1, 2017.

Slovenia

Corporate and individual income tax rates amended

A tax reform was adopted by Slovenian parliament consisting of several amendments to the income tax law and tax procedure law. The amendments include an increase of the corporate income tax rate from 17% to 19%
The amendments will enter into force on January 1, 2017.

Guidance on R&D tax incentives

The Financial Administration published guidance on the application of research and development (R&D) tax incentives.

Beneficial ownership register introduced

Slovenia transposed the Fourth Anti-Money Laundering Directive (2015/849) into the national legislation and introduced a register of beneficial owners.

Sweden

Proposal amending merger and demerger rules

In September 2016, the Swedish government presented to parliament a legislative proposal amending tax rules on mergers and demergers (e.g. valuation of securities obtained in a merger or a demerger).

Proposed amendments regarding automatic exchange of rulings and implementing country-by-country reporting

On October 20, 2016, the Swedish government issued legislative proposals concerning, inter alia, the OECD country-by-country reporting and transfer pricing documentation and the automatic exchange of rulings between EU Member States. The amendments are scheduled to apply from April 1, 2017.

Proposal for financial activity tax

A report concerning the taxation of financial services issued on November 7, 2016 by a government committee, proposes that a new tax at a rate of 15% of total salary costs during a tax year be imposed on the financial services sector. The proposed effective date would be January 1, 2018.

For more information, see KPMG’s TaxNewsFlash.

Switzerland

Updated manual on taxation of legal entities

The Federal Tax Administration published an updated manual on the taxation of legal entities which provides guidance on various aspects such as the distinction between residents and non-residents, and taxation of holding and management companies.

United Kingdom

Autumn Statement 2016 – proposed changes to business taxation

The Autumn Statement 2016 presented to Parliament endorsed earlier proposals on business taxation including the reduction of the corporate tax rate to 19% from April 2017 and 17% from April 2020, reforms to the UK’s loss rules and implementation of certain OECD BEPS rules, in particular on hybrids and interest deductions. Amendments to the anti-hybrid rules were also announced.

For more information, see KPMG’s TaxNewsFlash.

Tackling tax evasion: outcome of consultation

On October 13, 2016 HMRC published a summary of responses to its consultation on tackling tax evasion (link to the document here) and a related draft government guidance (link to the document here).

R&D tax relief for SMEs – guidance updated

HMRC updated the Guidance on R&D tax relief for small and medium-sized enterprises (issued in December 2015) to include information whereby certain details will be published on the European Commission website if companies receive more than GBP 500,000 a year in State aid..

APA – Statement of Practice

In November 2016, HMRC provided guidance on the Advance Pricing Agreement (APA) legislation and its practical application. The guidance for instance explains that an APA may only include the determination of profits to be attributed to any permanent establishment (PE) once the existence of the PE is established.

Simplification of Corporation Tax computation

The Office of Tax Simplification published a consultation document whose aim is to engage companies and their advisors in a discussion on how the corporate tax system could be simplified and to identify the areas that would most benefit from reform. The consultation will run until December 31, 2016.

Guidance on general anti-abuse rule published
Guidance on the general anti-abuse rule (GAAR) and provisional counteraction notices was published by HMRC on its website including criteria for determining when a tax arrangement is abusive.

Local Courts

Austria

Court decision on tax treatment of losses incurred by foreign group companies

On June 29, 2016, the Austrian Supreme Administrative Court gave its decision in a case concerning the tax treatment of losses incurred by a foreign subsidiary.

In the given case an Austrian taxpayer used tax losses incurred by its German subsidiary. While the Austrian company followed the Austrian law when calculating the losses, as well as the depreciation base of assets of its German subsidiary, the tax authorities claimed that German rules should have been applied.

The Court decided in favor of the taxpayer and held that the losses and depreciation base of a foreign group company must be calculated on the basis of Austrian tax law.

France

Constitutional Court: Exemption from 3% tax unconstitutional

On September 30, 2016, the French Constitutional Court ruled that exemption from the 3% contribution that is available for distributions of dividends within a French tax group is unconstitutional because the exemption fails to afford equal tax treatment to taxpayers. The Court further decided that the unconstitutionality of the tax provision (resulting in a cancellation of the provision) is effective from January 1, 2017.
Following the decision, the exemption from the 3% contribution has been extended to distributions made to any resident or non-resident parent company directly or indirectly holding at least 95% of the capital of the French distributing company. Parent companies established in so-called “non-cooperative” countries or states could not benefit from the exemption unless they demonstrate that the location of the parent company is not mostly driven by tax reasons. This measure is proposed to apply to distributions made on or after January 1, 2017, but still has to be formally adopted.
A case is now pending at the CJEU regarding the compatibility of the French 3% contribution with the EU Parent-Subsidiary Directive (see E-news 61).

For more information, see KPMG’s TaxNewsFlash.

Public register of trusts ruled contrary to Constitution

On October 21, 2016, the French Constitutional Court ruled that the public register of trusts (which included, for example, information about the ultimate beneficial owners) provided for by the French General Tax Code infringes taxpayer's privacy and is thus in conflict with the French Constitution. Consequently, the data is no longer publicly available.
Ultimate beneficial owner registers must be implemented by all Member States by virtue of the Fourth Anti-Money Laundering Directive (to be transposed to national legislations by June 26, 2017). However, according to this directive, the access to the register should be restricted to persons with a legitimate interest.

75% withholding tax on dividends paid to residents of NCSTs in accordance with constitution

On November 25, 2016, the French Constitutional Court ruled that the 75% withholding tax rate applicable on dividends paid by a French resident to a resident of a non-cooperative state or territory (NCST) is in line with the constitution. The Court stated that the related provision is aimed at fighting against tax fraud, which is a constitutional objective. The taxpayer must, however, have the possibility to prove that distributions of dividends are not designed to shift profits to a NCST in an abusive manner.

Sweden

Application of group relief in case of liquidation of an indirectly held subsidiary

On November 14, 2016, the Swedish Tax Board issued a ruling concerning the entitlement of a Swedish taxpayer to claim relief for losses in the case of a liquidation of an indirectly held subsidiary. The Tax Board held that the Swedish parent company should be entitled to relief for those losses if they are final (reference was made to the decision of the Court of Justice of the European Union concerning Marks & Spencer (Case C-446/03)).

United Kingdom

Restitution of UK corporate tax charged on dividends from Dutch subsidiary

On October 5, 2016, the High Court issued a decision in a case where a UK taxpayer claimed restitution of UK corporate tax charged on dividends received from its wholly-owned Dutch subsidiary. The case concerned the quantification of credit due to the taxpayer following on from the decision of the CJEU in the FII group litigation.

The High Court allowed the taxpayer to recover taxes paid on the dividends related to the revaluation adjustments and those arising from the liquidation of a subsidiary. The Court, however, denied credit related to dividends arising from share premium in a second-tier Dutch subsidiary.

For more information, see KPMG’s TaxNewsFlash.

Robert van der Jagt
Chairman, KPMG’s EU Tax Centre and
Partner, Meijburg & Co

Barry Larking
Director EU Tax Services, KPMG’s EU Tax Centre and
Director, Meijburg & Co

 

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