Tax

Overview

Last updated: 29 March 2017

Bird & Bird's EU Legislation Tracker highlights Regulations and Directives scheduled to take effect or to be implemented by Member States in the period to the UK's departure from the EU. It does not provide an exhaustive survey. Instead, we have sought to summarise some of the key legislation, both draft and finalised, which we are tracking in the run up to Brexit and which are likely to be of interest to companies which do business in the UK and/or elsewhere in Europe. 

The Tracker includes a short commentary on the substance of each of the measures identified, and a timeline for their known or likely effective dates (for Regulations) or implementation deadlines (for Directives). These are colour coded by reference to the likely date of Brexit.

For the purposes of the Tracker, we have assumed that the UK will exit the EU two years from its service of Article 50 notice (i.e. 29th March 2019). Ultimately the UK's Great Repeal Bill will determine whether the UK will retain, implement, amend or repeal the legislation summarised in our Tracker and the date when this will happen.

Key
Implementation status 
  Implementation deadline/effective date likely to be pre-Brexit
  Implementation deadline/effective date likely to be post-Brexit
 
 Timeline    EU legislation
 

Several legislative proposals in respect of the Action Plan are planned for 2017. See below for the VAT DSM package as part of this wider Action Plan, presented in December 2016.

 

EU VAT Action Plan - adopted by the EU Commission in April 2016 and which presents measures and objectives to modernise the EU VAT system and create a single EU VAT area.

Overview:

  • The key objective is to set up a definitive VAT system for intra-EU Business-to-Business (B2B) cross-border trade involving a destination based single EU VAT area/system for goods and services. Several legislative proposals in respect of the Action Plan are planned for 2017.
  • In particular, for goods, the proposal is to require the supplier to collect VAT due on cross-border supplies at the customer's country VAT rate via an online portal in their home country/in the Member State of departure.
  • Proposals also include: removing VAT obstacles to cross-border B2C e-commerce and SMEs; measures to enhance administrative co-operation between tax administrations in EU and non-EU countries; and reform of VAT rates policy for Member States.

Brexit impact:

  • It is anticipated that any proposals implemented prior to Brexit would be retained by the UK. We would also expect the UK to look at any proposals that come into effect after leaving the EU with a high probability that similar proposals would be adopted under a new post Brexit VAT regime in the UK. Post Brexit, the UK's ability to operate in the VAT portal as currently and/or in the proposed single EU VAT area will require a separate agreement on VAT/separate VAT union.

Other information:

Action plan on VAT

 

Implementation deadline:

[Likely 31 December 2017?]

 

Draft: Dispute Resolution: Proposed Council Directive on Double Taxation Dispute Resolution Mechanisms in the European Union

Overview:

  • Draft double taxation legislation.
  • The draft Directive was published on 25 October 2016.
  • Includes measures to improve double taxation dispute resolution mechanisms where taxes are paid on the same profits in more than one member state.

Brexit impact:

  • Following Brexit, it is unlikely that UK persons will be able to use this facility and will instead have to rely upon tax treaty measures to avoid double taxation.

Other information:

Proposed Council Directive on Double Taxation Dispute Resolution Mechanisms in the European Union

 

Implementation deadline:

[Likely 31 December 2018?]

 

Draft: Common Corporate Tax Base ('CCTB'): Proposal for a Council Directive on a Common Corporate Tax Base 2016/0337

Overview:

  • The proposals were launched on 25 October 2016. 
  • Large multinational groups which have global revenues exceeding €750 million a year will become subject to a single rulebook to calculate their taxable profits throughout the EU. Additionally, loopholes associated with profit shifting will be closed, R&D will be encouraged via tax incentives, a mechanism will be introduced to better resolve double taxation disputes, and financing through equity rather than debt will be encouraged.

Brexit impact:

  •  As the CCTB will give rise to a significant loss of sovereignty over tax matters, and the UK was critical of the proposals, it is highly unlikely that these measures will be implemented in the UK.

Other information:

Proposal for a Council Directive on a Common Corporate Tax Base and Annex

EU commentary

Implementation deadline:

[2018/pre Brexit (likely):
- New VAT thresholds and simplified evidence requirements for SMEs
- Certain MOSS improvements on invoicing, record keeping and widening access for non-EU sellers
- VAT rate changes for e-books

However, please note that for all other elements of these proposals there is a post Brexit deadline of 2021 as IT systems need to be developed]

 

Draft: VAT proposals specific for the Digital Single Market and as part of the wider VAT Action Plan: Proposal for a Council Directive amending Directive 2006/112/EC and Directive 2009/132/EC as regards certain value added tax obligations for supplies of services and distance sales of goods, and proposal for a Council Directive amending Directive 2006/112/EC, as regards rates of value added tax applied to books, newspapers and periodicals

Overview:

  • Proposals were adopted by the Commission on 1 December 2016 to modernise VAT rules for cross border B2C e-commerce and are currently going through the consultation procedure.
  • The proposal would extend the EU's special Mini-One-Stop Shop ("MOSS") online VAT compliance concept to cover online distance sales of goods and other services and for certain imports.
  • The proposal would introduce two new VAT thresholds with simplified evidence requirements to support SMEs supplying cross border digital services B2C.
  • The proposal would remove (i) the existing EU distance-selling thresholds for intra-EU distance sales of goods (with a new annual €10,000 MOSS threshold applying), and (ii) a VAT exemption on imports for low value consignments.
  • The proposal would allow Member States to apply reduced VAT rates for e-books and online newspapers and magazines.
  • The proposal would introduce further, simplification measures and improvements for MOSS and for other imports.

Brexit impact:

  • As above, it is anticipated that any proposals implemented prior to Brexit would be retained by the UK. We would also expect the UK to look at any proposals that come into effect after leaving the EU with a high probability that similar proposals would be adopted under a new post Brexit VAT regime in the UK. Post Brexit, the UK's ability to operate in the VAT portal as currently and/or in the proposed single EU VAT area will require a separate agreement on VAT/separate VAT union.

Other information:

Proposal to amend Directive 2006/112/EC and Directive 2009/132/EC

Proposal to amend Directive 2006/112/EC, as regards VAT rates

Digital Single Market - Modernising VAT for cross border e-Commerce

 

Implementation deadline:

Member States should apply the Directive measures by 1 January 2019. This is the general deadline for implementation.

 

The Anti-Tax Avoidance Directive: Directive (EU) 2016/1164 laying down rules against tax avoidance practices that directly affect the functioning of the internal market

  • Anti-tax avoidance Directive.
  • Adopted by the Council on 12 July 2016.
  • The directive contains five main different anti-avoidance measures:
    • Hybrid mismatches – eliminating these between EU Member States, and between EU Member States and third countries.
    • Controlled foreign company (CFC) rule – to deter profit shifting to a low or no tax country by making those profits taxable in the EU.
    • Exit taxation – to prevent companies from avoiding tax when re-locating assets outside of the EU by imposing tax on the value of assets before they are moved out of the EU.
    • Interest limitation – to limit artificial debt arrangements designed to minimise taxes by capping interest deductibility.
    • General anti-abuse rule – to help prevent aggressive tax planning when other rules don't apply.

Brexit impact:

  • As we generally have equivalent rules for the measures covered by the Anti-Tax Avoidance Directive under UK law, it is unlikely that there will be any further implementation of these measures in the UK.

Other information:

Council Directive (EU) 2016/1164
EU commentary
Bird & Bird article
ATAD 2

Implementation deadline: 

[Likely December 2020 (becoming effective 1 January 2021)?]

 

 

 

Draft: Common Consolidated Corporate Tax Base ('CCCTB'): Proposal for a Council Directive on a Common Consolidated Corporate Tax Base 2016/0336

Overview:

  • The proposals were launched on 25 October 2016.
  • Following introduction of a CCTB it is proposed that a CCCTB will be introduced underwhich large groups will account for corporate tax on a consolidated basis across Europe will the tax revenue being divided by member states by means of a formula giving equal rating to:
    • Jurisdiction of sales
    • Jurisdiction of people (number of employees and quantum of salaries); and
    • Jurisdiction of assets

Brexit impact:

  • As the CCTB and CCCTB will give rise to a significant loss of sovereignty over tax matters, and the UK was critical of the proposals, it is highly unlikely that these measures will be implemented in the UK.

Other information:

Proposal for a Council Directive on a Common Consolidated Corporate Tax Base and Annex

EU commentary

 


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