ECOFIN - EU Ministers Negotiate The Draft On Tax Transparency Of Intermediaries

; posted on
March 13th, 2018

On the Economic and Financial Affairs Council (ECOFIN) regular meeting in Brussels on March 13, 2018, the Ministers are supposed to reach an agreement on a proposal for greater transparency in tax planning schemes. The proposal intends to deal with tax transparency for intermediaries by mandatory reporting, such as tax advisors, lawyers or accountants, aiming to fight tax avoidance and potentially harmful planning schemes.

Cross-border Techniques

Recent scandals (including the famous Paradise Papers) have indicated that 'intermediaries' play a significant part in helping multinationals and wealthy individuals escape their fair share of tax in the EU, benefiting from the secret culture provided by some countries and institutions. In this case, the Commission finds it important to compel the intermediaries to notify authorities about cross-border techniques they sell to clients for tax avoidance or tax affairs they arrange with techniques bearing one or more tax avoidance features. This information must be shared among all the tax authorities within the EU to identify the regulatory weaknesses. All eligible accountants, advisers, lawyers, banks etc. will be covered by the new rule.  

Listed Notification

Arrangements and techniques with one or more following features should be notified to the government:

  • When a fixed percentage of the tax avoided is charged as fee, or when a fee is charged explicitly for tax avoidance services;
  • Tax arrangements sold with a confidentiality clause attached;
  • Providing arrangements which use losses to reduce tax liability;
  • Providing tax avoidance advice that has been standardised and made available to more than one taxpayer;
  • The same asset is subject to depreciation in more than one jurisdiction;
  • Use of linked companies or entities with no substance and with circular transactions taking place between them;
  • Converting income into other types of revenue which are taxed at a lower level;
  • Deductible cross-border transactions based on the residency of the taxpayer;
  • When mismatches occur between EU or national law and the taxation applied in a non- EU country;
  • A payment mentioned in an arrangement is given a full or partial tax exemption in the jurisdiction where it should be taxed;
  • Where the transfers of payment across borders do not represent the true value of the assets bought;
  • Use of tax jurisdictions with no or low corporate tax rates, or which find themselves on the upcoming EU list of non-cooperative tax jurisdictions;
  • Arrangements that re-classify income in categories not subject to automatic exchange of information agreements;
  • Relief from double taxation on the same income in different jurisdictions by more than one taxpayer;
  • Use of jurisdictions with inadequate or weak anti-money laundering rules, including those which help to conceal beneficial ownership information;
  • Use of companies and entities not covered by EU rules or other agreements on automatic exchange of information;
  • Arrangements which include reference to cross-border tax rulings that are not already being reported or exchanged;
  • Arrangements that do not conform to the “arms’ length principle” or to OECD transfer pricing guidelines.

Sources: EU Council, EU Commission

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