The European Council on February 7th released the Maltese Presidency’s work plan regarding tax measures to prevent base erosion and profit shifting by multinationals. The Presidency will focus its efforts on achieving EU consensus in these areas over the coming months.
The road map has been divided in two parts: one related to the Council’s short-term work and the other regarding the medium-term work. It reveals that much of the work of the prior Presidency will be continued.
In the short term, the Maltese Presidency intends to work on unresolved issues in the anti-avoidance tax directive 2 (ATAD 2) regarding hybrid mismatches with third counties with a view to finding agreement as swiftly as possible. The Code of Conduct subgroup work on hybrid mismatches will remain temporarily on hold, however.
Attention will also be focused on the improvement of EU dispute resolution mechanisms. As the Presidency considers this subject a key measure to achieve a fair and efficient tax system in the EU, agreement will be sought on these issues by the end of June.
The Maltese Presidency intends to continue work of the Code of Conduct Group (Business Taxation) on the establishment of an EU list of third country non-cooperative jurisdictions, in line with the Council conclusions of May 2016 and November 2016, respecting the agreed timeline.
In this respect, the road map points out that work will be focused particularly on the characterization of offshore structures or arrangements which do not reflect real economic activity in the jurisdiction and the evaluation, in this context, of the absence of a corporate tax system or the application of a nominal corporate tax rate equal to zero or almost zero as a possible indicator.
Work will also focus on implementing a process to screen jurisdictions for placement on the list and on the exploration of defensive measures at the EU level.
The Maltese Presidency intends to examine the 2016 Commission proposal for a renewed common (consolidated) corporate tax base (CCTB/CCCTB), with a view to stabilise the text on the novel aspects of the CCTB by the end of June 2017.
Moreover, noting that no solutions have been found during the last three Presidencies regarding the Interest and Royalties Directive, the Maltese Presidency said it would follow up on previous proposals and explore other options with the aim of reaching agreement, taking account of discussions so far.
The Maltese Presidency seeks to reach agreement on a standard for a Good Governance in Tax Matters clause in EU agreements with third countries on the basis of the proposal presented by the Commission in Annex 2 of its External Strategy Communication of 28 January 2016.
Further, the new Presidency will consider an update to the mandate of negotiations for EU anti-fraud agreements with Andorra, Monaco, San Marino and Switzerland and to relaunch, if possible, negotiations on the EU anti-fraud agreement with Liechtenstein, following the repeal of the savings taxation directive, the adoption of the directive on the mandatory automatic exchange of information in the field of taxation, and the completion of all agreements on automatic exchange of information with the five European third countries.
The Maltese Presidency also intends to examine the OECD multilateral instrument to modify tax treaties, expected in June 2017.
In the medium term, the Maltese Presidency intends to support the Code of Conduct Group in its task of continued monitoring of the legislative process necessary to change existing patent box regimes following agreement on the modified nexus approach and Member States’ subsequent commitment to report on the progress made through the annual standstill and rollback reports.
The road map states that support will be given to the Code of Conduct Group and subgroups for the implementation of the Council Conclusions on the future of the Code of Conduct (Business Taxation).
The road map also states that further work will be done on the identification of potential problems which arise when payments are made from the EU to a third country.
Finally, the road map states that the EU Council would consider a Commission proposal on mandatory disclosure of aggressive tax planning.