EU proposal to exchange rulings previous message

EU proposal to exchange rulings

The European Commission has published a transparency package to combat tax avoidance by multinationals. A key component of the package is a proposal to introduce the automatic exchange of information between the tax authorities of EU member states on their tax rulings. A tax ruling is a confirmation or assurance that tax authorities give to tax-payers on how their tax will be calculated. In cross-border cases, tax rulings can influence the allocation of a group's taxable profits between its subsidiaries located in different countries.

The proposal includes the requirement of Member States to automatically exchange information on their tax rulings. This means that tax authorities would have to share a pre-defined set of information on all of their advance cross-border tax rulings with all other Member States. They would do this on a quarterly basis and following a standard format.

The proposal outlines the standard information that Member States would have to include in the quarterly reports on their tax rulings. This covers:

  • Name of taxpayer and group (where this applies);
  • A description of the issues addressed in the tax ruling;
  • A description of the criteria used to determine an advance pricing arrangement;
  • Identification of the Member State(s) most likely to be affected;
  • Identification of any other taxpayer likely to be affected (apart from natural persons)

Other features of the tax transparency package, which are specifically aimed at information exchange, include also the change to the code of conduct on business taxation. The code of conduct contains criteria to determine whether a domestic regime in an EU member state is “harmful,” in that it may result in tax benefits for certain companies.

This is the first step in the Commission’s ambitious agenda for 2015 to fight tax evasion and avoidance. The aim is to implement this proposal on January 1, 2016 in all Member States. This proposal will be followed before the summer by a detailed Action Plan on corporate taxation, which will set out the Commission's views on fair and efficient corporate taxation in the EU.

Way forward

Although tax avoidance is not illegal, there is an increasing public consent that it should be avoided. Due to the strong movement of greater transparency, we recommend companies to review their tax structures in place in order to avoid public scrutiny and take sufficient measure to avoid future adverse tax consequences and reputational damage.

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