On 6 October 2015, the Economic and Financial Affairs Council of the EU (ECOFIN) reached a political agreement on a directive to increase transparency and, ultimately, to combat corporate tax avoidance. This transparency initiative follows from the leaked tax rulings in 2014 in which it was revealed that a number of multinationals have benefited from favourable advance pricing arrangements (APAs) and tax rulings agreed to by some EU Members. Such rulings may give companies a degree of certainty as to their tax liability and may therefore attract them to set up operations in the Member State. The Commission is considering whether such rulings constitute unlawful State Aid which distorts the operation of the single market.
Currently, EU tax authorities have limited ability to obtain information on their residents’ activities in other Member States. Although the Directive on Administrative Co-operation in the field of Taxation (Council Directive 2011/16/EU of 15 February 2011) makes provision for mandatory EU-wide automatic exchange (Article 8), this pertains primarily to individuals. EU Member States will, from 1 January 2017, be required to exchange with each other relevant tax rulings (namely agreements concluded between multinational taxpayers and a Member State in relation to their tax liability in that State) and APAs issued or amended, within three months following the end of each calendar half year. The directive will be adopted at a forthcoming Council meeting (anticipated to be held in December 2015) after the European Parliament has given its opinion and the text has been finalised in all official languages.
Member States may opt to exclude rulings and APAs issued to companies with annual net turnover of less than EUR40m at a group level if they were issued, amended or renewed before 1 April 2016.
This article appears in the JHA November 2015 Tax Newsletter, which also features:
