PLATFORM FOR TAX GOOD GOVERNANCE

Transcription

1 EUROPEAN COMMISSION DIRECTORATE-GENERAL TAXATION AND CUSTOMS UNION Direct taxation, Tax Coorination, Economic Analysis an Evaluation Company Taxation Initiatives Brussels, May 2014 Taxu/D1/ DOC: Platform/7/2014/EN PLATFORM FOR TAX GOOD GOVERNANCE Discussion Paper on possible outputs of the Recommenation on aggressive tax planning 1 Meeting of 10 June 2014 Contact: Secretariat Platform, Telephone (32-2) taxu-platform@ec.europa.eu 1 Commission Recommenation of , C(2012) 8806 final, on aggressive tax planning.

2 The purpose of this paper is to follow-up the iscussion hel at the Platform meeting of 6 February 2014 on the Commission Recommenation on Aggressive Tax Planning of 6 December It prepares the iscussion for possible outputs. The agree work program provies that the Platform will iscuss how a common interpretation of the General Anti Abuse Rule (GAAR) recommene by the Commission can best be ensure. Where neee, the Platform will iscuss how the application of the GAAR relates to tax incentives introuce by iniviual Member States. "The Platform will iscuss possible ways to implement a tax treaty clause which ensures that treaty provisions aime at avoiing ouble taxation o not enable ouble non-taxation. It will also iscuss best-practices that coul assist Member States in the practical application of such clauses." 1) EMERGING OUTPUTS The iscussion at the previous meeting on 6 February 2014 reflects a consensus amongst members who expresse themselves, on a positive approach to the question of the efficiency of a single GAAR as propose in the EU Recommenation (question 8 of ocument Platform/006//2014/EN): members who expresse themselves, mainly non-ms organisations, state that a single GAAR at EU level woul be preferable, since part of the problem comes from legal uncertainty ue to the accumulation of rules. MS i not express themselves on this point. Platform members are invite to confirm this consensus of the Platform that the recommene single GAAR be aopte. 2) ISSUES REMAINING FOR DISCUSSION Several points on which the Commission requeste the opinion of the Platform members remain open an nee to be further iscusse uring this meeting in orer to clarify the opinions of Platform members. These questions are inicate below with the corresponing text of ocument Platform/006//2014/EN Limitation to the application of rules intene to avoi Double Taxation. On the basis of title A of ocument Platform/006//2014/EN, a iscussion took place at the meeting on 6 February At the time of the meeting, no MS ha alreay introuce such a clause in their ouble taxation conventions to ensure that a commitment not to tax a certain item only applies where this item is subject to tax in the other party to that convention. Recommenation C(2012) 8806 provies for an example of such a clause: 'Where this Convention provies that an item of income shall be taxable only in one of the contracting States or that it may be taxe in one of the contracting States, the other

3 contracting State shall be preclue from taxing such item only if this item is subject to tax in the first contracting State'. The Recommenation also states that: ' an item of income shoul be consiere to be subject to tax where it is treate as taxable by the jurisiction concerne an is not exempt from tax, nor benefits from a full tax creit or zero-rate taxation.' Review of progress. 2) Platform members are invite to report on the state of play an progress in incluing such a clause in ouble taxation conventions Agreement of the parties. The EC unerlines that the clause in the Recommenation reaing: " shall be preclue from taxing such item only if this item is subject to tax ", means that, with this clause, a MS is not force to tax if the Double Non Taxation is eeme legitimate, i.e. known an accepte by both MS. Without this clause, if a MS has given up its right to tax in a Double Taxation Convention, it cannot tax anymore, The purpose of the Recommenation is not to force MS to tax, but to better enable a MS to tax if it consiers the situation abusive. This Recommenation is aime at ensuring DTCs cannot prevent MS from taxing income in situations where Double Non Taxation (DNT) woul otherwise arise, not at forcing MS to tax in situations where the DNT is consiere legitimate. 3) Do the Platform members foresee practical or aministrative ifficulties in applying this approach in practice? If so, how can these ifficulties be aresse? EU or OECD approach Several members have mentione the OECD actions to insert anti-abuse rules in the DTC an state that they woul favour an OECD solution which woul have a broaer scope than an EU one. 4) Do Platform members believe that all MS shoul wait for an OECD solution? 5) If the answer to this question is yes, what shoul the EU be looking for in such a solution? How woul this solution iffer from the Commission Recommenation?

4 Remaining questions Several questions have not been aresse uring the last meeting. The Commission services woul like members to express their views on the following questions. 6) Do the Platform members see other ouble non-taxation issues that ought to be consiere in relation to Double Taxation Conventions? 7) Do Platform members have suggestions on best practices to aress non-taxation in Double Taxation Conventions? 2.2. General Anti-Abuse Rule (GAAR) State of play On the basis of paragraphs 6-10 of ocument Platform/006//2014/EN, the majority of those who spoke at the meeting on 6 February 2014 were in favour of a single GAAR within the EU, since various moels woul lea to various interpretations. However, the iscussion i not review the state of play an progress in incluing a GAAR in national legislations Common interpretation The GAAR in the Recommenation on Aggressive Tax Planning (ATP) takes account of iscussions in the proposal concerning the CCCTB, which shoul allow a common interpretation of the provision. Some members referre to the CCCTB proposal as part of the solution. 8) Woul Platform members have other suggestions to ensure a common interpretation of a General Anti-Abuse rule? The explicit reference to a GAAR is intene to counteract aggressive tax planning practices which fall outsie the scope of specific anti-avoiance rules, an to bringconsistency in the struggle against international aggressive tax planning at EU level. The overall level of protection insie the EU is equal to that of the lowest MS protection. Thus, once a payment flows into the market, after having entere from the weakest jurisiction, it may then move freely across the borers within the Union. Thus, the recommene GAAR is aapte to omestic an cross-borer situations confine to the Union as well as to situations involving thir countries to counteract aggressive tax planning practices which fall outsie the scope of Member States specific anti-avoiance rules.

5 9) Do the Platform members foresee practical or aministrative ifficulties in applying the General Anti-Abuse rule in practice? If so, how can these ifficulties be aresse? 10) Woul the GAAR approach nee to be supporte by other specific anti-abuse rules or initiatives (e.g. limitation of benefits clause)? 11) What are Platform members' views on other possible areas where a common approach coul be encourage?