Over the last few years, transfer pricing and related documentation has become the hot topic in Luxembourg taxation in an evolving environment that is relying increasingly less on tax rulings (including advance pricing agreements). In the past, taxpayers have viewed tax rulings as a way to provide legal certainty and to mitigate tax risks relating to investments and intra-group transactions. However, for a number of reasons this is no longer the case.
During the last ECOFIN meeting held on 6 November 2018, European Finance Ministers met to discuss the proposed directive for a digital sales tax (DST). The proposal would introduce a 3% tax levied on revenues resulting from the supply of certain digital services as determined by user value creation. While the representatives of different member States expressed concerns about some aspects of the proposal, only three member States clearly expressed their opposition to the directive proposal. Each of these dissenters had their own reasons to oppose the tax. Numerous technical points still need to be addressed, despite the assertions of the Commissioner Pierre MOSCOVICI to the contrary. However beyond the technical issues, our point of view is that the introduction of a digital tax would be a grave political mistake for two main reasons.
On 25 May 2018, the ECOFIN Council adopted the 6th Directive on Administrative Cooperation, commonly called DAC6, which requires so-called tax intermediaries to report certain “cross-border arrangements” that contain at least one of the hallmarks (characteristics or features of cross-border arrangements) defined in the Directive. DAC6 requires EU Member States to introduce, in their national law, mandatory disclosure rules for cross-border arrangements. The new Directive was inspired by the Final Report on Action 12 of the OECD Base Erosion and Profit Shifting, or BEPS Project, providing recommendations regarding the design of mandatory disclosure rules for aggressive and abusive transactions, arrangements or structures.
Automatic exchange of information was developed a decade ago as the new cure-all in the fight against tax fraud for developed countries’ tax administrations. In our new context of global transparency, the set-up of these instruments seems to be an unstoppable trend. However, while the purpose of AEoI is legitimate and reversing the situation is not an option, the AEoI raises, in its current form, genuine difficulties as regards fundamental principles in European law.
Over the last few years, transfer pricing and related documentation has become the hot topic in Luxembourg taxation in an evolving environment that is relying increasingly less on tax rulings. In the past, taxpayers have viewed tax rulings as a way to provide legal certainty and to mitigate tax risks relating to investments and intra-group transactions. However, for a number of reasons this is no longer the case.
We probably need to get used to politicians using Twitter as a communication channel, discussing highly complicated topics in a very simplified manner within a 140 character limit (recently increased to 280 characters). However, using Twitter entails the risk that messages are misunderstood or taken out of context.
Over the past few years, several EU Member States have implemented a variety of anti-abuse legislation – including anti-Directive/anti-Treaty shopping rules, controlled foreign company (CFC) rules, general anti-abuse rules (GAAR) and specific anti-avoidance rules (SAAR) – to protect their own tax base against erosion. Far from being uniform, the way anti-abuse legislation is designed varies from one state to another and may be rather restrictive or broad in its scope of application. However, in two major decisions in 2017, the Court of Justice of the European Union (CJEU) defined clear criteria that need to be adhered to when designing and interpreting anti-abuse legislation in an EU context. We’ve rewritten these criteria as 10 commandments that we hope Tax Authorities will follow.
As we saw in Part I of this series, we have to ask ourselves the right questions. Namely, “are EU institutions overstepping the legal bounds?” In this Part II, we explore the increasing tax powers of the EU institutions and possible implications of the CCTB Proposal on MS who actually don’t have much in common.
The CCTB Proposal raises fundamental questions on both the fiscal role of EU institutions and the impact of such a proposal on the fiscal sovereignty of MS. Even though the power to levy taxes remains exclusively in the hands of MS and the European Union has no fiscal capacity of its own, there is no doubt that EU law does, to some extent, interfere with this sphere of state responsibility. But what kind of fiscal Europe is being created via fiscal Directives? And how far can the EU institutions take tax measures?
Last week we revealed the results of our "Money Survey" where we asked 1000 Luxembourg residents to give us their perceptions of wealth, money and tax. Now, we've compared some of our findings to real figures with interesting results. Scroll through our infographic and learn just how much (or little) reality differs from perception.