EUROPEAN COMMISSION DIRECTORATE-GENERAL TAXATION AND CUSTOMS UNION Direct taxation, Tax Coordination, Economic Analysis and Evaluation Direct Tax Policy & Cooperation Brussels, 3 September 2014 TAXUD.D.2 (2014) 3179327 SUMMARY REPORT OF THE CONTRIBUTIONS RECEIVED ON THE PUBLIC CONSULTATION ON: USE OF AN EU TAX IDENTIFICATION NUMBER (TIN) Note: This document is being published for information only. It aims at summarising the contributions received from the interested stakeholders. This document does not necessarily reflect the views of the European Commission and should not be interpreted as a commitment by the Commission to any official initiative in this area. It does not purport either to represent or prejudge any formal proposal of the Commission. Commission européenne/europese Commissie, 1049 Bruxelles/Brussel, BELGIQUE/BELGIË - Tel. +32 229-91111 taxud-d2-eutin@ec.europa.eu
1. BACKGROUND On 25 February 2013 the European Commission, Directorate General Taxation and Customs Union launched a public consultation 1 on its website on the use of a European Tax Identification Number (EU TIN). The possible introduction of an EU TIN was proposed in the Action Plan 2 adopted by the Commission on 6 th December 2012, which read as follows: "TINs are considered as providing the best means of identifying taxpayers under automatic exchange of information. The national TINs are however built according to national rules which differ considerably and make it difficult for third parties (financial institutions, employers, other) to correctly identify and register foreign TINs and for the tax authorities to report back this information to the other tax jurisdictions. The creation of an EU TIN might constitute the best solution to overcome the current difficulties faced by Member States in properly identifying all their taxpayers (natural and non-natural persons) engaged in cross border operations. Whether this could be a unique EU number or the addition of an EU identifier to existing national TINs is an issue which should be further explored, as should be explored links with the other existing EU registration and identification systems. Although the concept of an EU TIN is simple, its implementation is a complex issue which calls for a step-by-step approach. A public consultation will be launched by March 2013. The presentation of a subsequent legislative proposal requires further in-depth studies and the strong support of the Member States. As a first step, a possibility would be to further develop the "TIN on EUROPA" portal, by making it possible to check the validity of national TINs by linking this application with Member States' databases." The public consultation aimed at collecting contributions from all interested stakeholders with a view to possibly translating the suggested action into a concrete legislative proposal. A consultation paper presented the topic in detail, while a separate electronic questionnaire identified the subjects and specific questions on which the Commission services invited contributions. The questions explored the possible scope of an EU TIN (both in terms of operations and taxpayers concerned), its practical aspects (including possible simplification and step-by-step approach), its design and functioning as well as various legal considerations (incl. data protection). 1 2 http://ec.europa.eu/taxation_customs/common/consultations/tax/2013_eutin_en.htm Communication (COM(2012)722 final) from the Commission to the European Parliament and the Council on an Action Plan to strengthen the fight against tax fraud and tax evasion 2
2. PROFILE OF THE CONTRIBUTIONS In total, 84 contributions were received to the on-line questionnaires. The Commission has published all submissions on its website, with the exception of 4, which their contributors requested not to be disclosed. It should be noted that, as all contributors did not reply to all questions, the number of contributions per question varies. Although not every comment is reflected in this summary report, all contributions were analysed. A small number of contributions, received in a free format (e.g. by email, by letter) either during the consultation period or after its deadline, are not considered in this report. Chart 1 presents the split of the 84 submissions by type of contributor: Citizen 37 No tax professional experience 13 Tax professional experience in the private sector 12 Tax professional experience in the public or not-for-profit sector 9 Tax professional experience in both the private sector and the public or not-for-profit sectors 3 Not-registered organisation 6 Business organisation 2 Private company 1 Academics 2 Non-governmental organisation 1 Registered organisation 39 Business organisation 7 Private company 1 Tax practitioner 28 Non-governmental organisation 2 Other 1 Public authority 2 Tax administration 2 Grand Total 84 Chart 1: Total number of contributions per type of contributor 26 of the 28 submissions received from registered tax practitioners came from the same firm represented in 26 EU Member States. As the views expressed varied on a country-by-country basis, all 26 submissions are legitimately considered as individual submissions in this report. The greatest number of contributions came from Germany (13), Poland (8), Belgium (7), Spain (6), France (6), Italy (6), Romania (5) and UK (5), as shown by Chart 2: Chart 2: Total number of contributions per country and type of contributor 3
The profile of contributors and their geographical spread show that, despite the limited number of contributions, the public consultation generated interest among all types of actors and in almost all EU Member States. Even if not representative from a statistical point of view, the submissions offer a good general understanding of the range of opinions on the possible use of an EU TIN. 3. ANALYSIS OF THE CONTRIBUTIONS 3.1. Design of an EU TIN 3.1.1. Immediate introduction of an EU TIN vs. step-by-step approach or alternatives For 42 contributors (52,50%), the preferred option, between those being considered, was for an immediate (i.e. non-phased) introduction of an EU TIN. The reasons given included easier identification of operators and taxpayers, reduction of costs over time for both tax administrations and operators, enhanced transparency in economic operations and public tenders and reduced tax fraud and evasion. 38 contributors (47,50%) expressed a preference for a step-by-step approach or alternatives. The main justifications for alternatives are: namely the initial setup costs and recurring costs for stakeholders involved, the complexity of an EU TIN, data protection issues, the differences in national tax legislations. For these reasons, several contributors argued for an impact assessment and recommended that alternatives are considered such as: improving the existing portal on national TIN, increasing direct cooperation between Member States, linking national databases, building on existing identification systems such as VAT or EORI 3 numbers or limiting the use of an EU TIN to certain taxes or operations. 3.1.2. Unique EU TIN vs. addition to existing national TIN 54 respondents (72,00%) expressed a preference for a unique EU TIN whereas 21 (28,00%) considered that an EU TIN could build on existing national TINs. 3.1.3. Simplification through unification or harmonisation with other existing global identifiers 39 contributors (46,40%) indicated that in their opinion a simplification could be achieved through unification of or harmonisation with other existing global identifiers. The VAT number was ranked as most appropriate (89,7%), followed by the EORI number: several contributors observed that replacing the current VAT number by the unique EU TIN would have limited impact as companies that are already registered for VAT would have minimal changes to make to 3 For more information on the EORI (Economic Operator Identification and Registration) number, please consult: http://ec.europa.eu/ecip/security_amendment/who_is_concerned/index_en.htm 4
their systems and a solution would only be required for companies that are not yet registered. The use of social security personal identification numbers or other national identification numbers (e.g. the unique identification person number in Romania or the enterprise number in Belgium) was also proposed. Some contributors stressed that a unique number (with country code) could be attractive for business provided it can be used for both domestic and intra-eu transactions: the introduction of an EU TIN on top of the national TINs would be rather an additional administrative burden without benefit. The creation of a trans-european system similar to VIES 4 was proposed: it would not record the data but rather redirect the queries to the Member States to avoid legal problems in relation to the ownership of the data which should remain under the control of the Member States. Other contributors suggested: Funding the necessary developments at EU level; Checking the IT compatibility of the different national tax systems and ensuring the mutual recognition of the EU TIN once implemented; Inserting in the EU TIN the country code of the residence of the taxpayer, which would change when the taxpayer moves to another Member State whereas the TIN itself would not change; Putting in place common rules, allocation procedures and standard controls; Registering all holders of bank accounts, property owners, shipowners, beneficiaries of public money, pensioners, companies of any legal form, freelancers and farmers; Registering the use of the TIN for specific taxes (e.g. for VAT, direct taxes, customs purposes, etc.). 3.1.4. Extension of an EU TIN system beyond the EU borders 32 contributors (38,10%) indicated that, in order to reap the benefits of an EU TIN at the lowest cost possible, its extension beyond the EU borders should be considered from the start, whereas 13 contributors (15,5%) would not support this. Contributors in favour of the extension pointed out that, in the current business environment, the development of business activities may involve operations outside the EU to a variable extent. In particular, it was proposed to extend the usage to major trading partners, neighbouring countries and, in particular, to the non-eu OECD countries. Cooperation with organisations such as the OECD Secretariat was encouraged. One suggestion was even made to introduce, in the long 4 Computerised VAT Information Exchange System (V.I.E.S.) to allow for the flow of the data held across the internal frontiers 5
3.2. Scope of an EU TIN term, a worldwide TIN to reinforce the fight against tax fraud and tax evasion and to support administrative cooperation on a worldwide basis. 3.2.1. Tax areas covered The contributions confirmed that most Member States use a TIN or a similar identifier in the administration of their national tax affairs. TINs are of primary relevance in the area of exchange of information, in particular for automatic exchange of information, as they facilitate easy and system-based matching of information received. At EU level, the use of an EU TIN should, as a minimum, be considered in relation to those categories of income and capital already covered by automatic exchange of information: savings income in the form of interest payments (Directive 2003/48/EC) and income from employment, director's fees, life insurance products, pensions and ownership of and income from immovable property (Directive 2011/16/EU). In addition, in order to improve the exchange of information and effective taxation, the use of an EU TIN was suggested in the following areas, relating to both harmonized and non-harmonized taxes:- Value added tax; Excise on alcohol; Excise on tobacco products; Energy and electricity taxation; Information on capital flows; Art and sportive business; Customs; Corporate taxation; Capital gain tax; Withholding tax; Claiming tax treaty benefits; Dividends; Tax deductible charity donations Mergers, divisions and partial divisions; Transfers of assets and exchanges of shares concerning companies of different Member States; Transfer of the registered offices of an SE or SCE between Member States; and Income from intellectual property. 3.2.2. Persons concerned 59 contributors (80,80%) replied that both individuals and nonnatural persons or entities engaged in cross-border transactions should be covered, whereas 8 (11,00%) suggested covering only nonnatural persons and 4 (5,50%) suggested covering only individuals. 6
Contributions were made with regard to the treatment of permanent establishments, vis-à-vis their head offices. On the one hand, given the need to separately determine and tax their income, permanent establishments might require a different EU TIN than their head office, in order to clearly separate tax obligations in different countries. However, it was suggested not to give a completely new number, but rather a similar number which would differ only by the last characters. On the other hand, some contributors suggested using the same EU TIN as the head office, where there is one single legal entity. As regards non-eu companies active within the EU, the majority (81,13%) favoured the allocation of either an EU TIN, as would be issued to EU companies or a specific foreign EU TIN. An alternative proposal was that non-eu companies keep the identification number of the country of origin and receive no EU TIN. Some contributors proposed that associations of persons that have the capacity to perform legal acts but lack the status of a legal person and other legal arrangements, of any form and nature, could be treated like corporations, companies or individuals and have their own EU TIN, with a possible prefix that indicates their nature. However, other contributors suggested not including them as the volume of transactions carried out by these entities does not suggest a high risk of non-compliance compared to other taxpayers. Also, if such an entity is not a taxpayer, either the TIN of each of its members should be used or one representative of the association should receive a specific EU TIN which would differ from his/her own individual TIN. Different views were also expressed on the treatment of transparent entities. Some contributors suggested treating them in the same way as individuals or companies and allocating them an EU TIN. Others felt they need not be covered if the owners' TINs were used to identify each owner s obligation. It was also pointed out that it is common for entities to be transparent in one country but not in another and special attention should be paid to these (hybrid) cases. Other special cases identified as requiring particular attention included partnerships, trusts and non-profit organizations and charities having economic activities. 3.3. Practical considerations 3.3.1. Allocation of an EU TIN 58 contributors (82.90%) replied that the EU TIN should be assigned by the country of residence as this country has the most appropriate means of carrying out the procedure of allocation. This would also ease the administrative burden on the taxpayer. 8 contributors (11,40%) did not share this opinion. Some proposed an allocation by the competent authority of the EU country where the cross-border 7
operations originated; others by a central authority, such as the European Commission. In the free text box, some contributors emphasized that allocation should be according to harmonized and unique rules within the EU. Also, the potential need for a European-wide residence definition, as well as a relevant tie breaker rule, which should apply for both natural and non-natural persons, was pointed out. A proposed solution was to follow the OECD Model Tax Convention and its commentary regarding double taxation. Various measures and controls were suggested in order to avoid the allocation of multiple EU TINs to one single person: Creation of one single lifelong TIN which could be indicated on the passport/id card; Central registration authority; Single database at EU level or alternatively a secured online EU portal which is connected to the national IT-systems; Mandatory cross-checks by the national authorities when registering a taxpayer; Penalties for taxpayers in case of double registration. 3.3.2. Lifetime of an EU TIN 66 contributors (93,00%) replied that the lifetime of an EU TIN should be permanent. 5 contributors (7,00%) considered that an EU TIN should be renewed periodically. Reasons invoked for renewing or revoking included the criminal use of an ID and termination of activities in the EU. 3.3.3. Portability of an EU TIN Whereas 10 contributors (13,70%) considered that a new EU TIN should be allocated in case of a change of tax residence to another Member State, 56 contributors (76,70%) replied that the same EU TIN should be kept, with the tax authorities concerned exchanging the EU TIN and related information. In such a case, the number would remain the same and only the country code if included would be changed. It was also highlighted that keeping the EU TIN would guarantee a correct identification of the stakeholders and would alert the authorities to a transfer of the seat of a taxpayer for the purpose of engaging in a scheme of tax fraud or evasion. 3.3.4. Accessibility of an EU TIN Contributors favoured being able to verify EU TINs. To give the best possible results, the verification should be connected to a single central database. 63 contributors (87,50%) considered that a central web-based application could provide online and real-time validation (similar to VIES). 34 contributors (75,60%) replied that a machineto-machine access should be foreseen (e.g. SOAP functionality), whereas 3 contributors (5,10%) were not in favour of this possibility. 8
3.4. Other aspects However, the information disclosed should only contain absolutely necessary data, for data protection reasons. The following information could be confirmed by the database: name, legal status (business), address, date and place of birth (individual), gender (individual), ID or passport number (individual), date of allocation of EU TIN and VAT number (business). 32 contributors (65,30%) stated that access to such an application should be public, whereas 12 contributors (24,50%) indicated the contrary. 30 contributors (42,90%) replied that an EU TIN should be mentioned on identification documents such as ID cards or passports, whereas an equal number (30 contributors) were against this. 42 contributors (61,80%) favoured establishing EU TIN certificates to certify the registration and tax residence of taxpayers, whereas 13 contributors (10,10%) did not share this opinion. The issuing of such a certificate should be the responsibility of the Member State where the taxpayer is resident or alternatively a central database management entity could issue the certificate. Certificates should be standardised and available in all EU languages. The following points or actions were among those proposed for further consideration:- Data protection and privacy legislation, in particular as regards the information put at the disposal of the economic operators when verifying the tax status of counterparts and clients and the necessary safeguards and controls; Feasibility study on the creation of an EU TIN, including a cost-benefitanalysis to understand the costs and time that would be needed to adapt the systems of economic operators and tax administrations, while avoiding unnecessary costs and burdens; Cost model for the operation of the EU TIN system; In-depth analysis of the EU TIN process, e.g. allocation process (timing ), creation of a magnetic EU TIN card with a chip; Harmonisation of tax laws and rates; IT systems, including the possible interconnection of the EU TIN with other systems such as those of local tax administrations, law enforcement bodies and customs offices; and New legislation and changes to existing legislation to define the obligations of the different stakeholders. 9
4. FOLLOW-UP The Commission services launched the public consultation in order to collect the opinions of all interested stakeholders on the creation of an EU Taxpayer Identification Number (TIN). The Commission services also recently launched a feasibility study aimed at providing an in-depth analysis of the various options for the introduction of an EU TIN or other alternatives. The views expressed by the contributors to this public consultation as well as the results of the feasibility study will be used by the Commission services to identify and develop the appropriate policy response. 10