On 18 March 2015, the European Commission published a proposal to amend the Directive on administrative cooperation between Member States (Directive 2011/16/EU) introducing a mandatory automatic exchange of information on advance cross-border rulings, as well as advance pricing arrangements. The proposal was previously announced by the European Commission President Juncker in reaction to LuxLeaks. It does not only include rulings and pricing arrangements which will be issued after the proposed amendment becomes effective, but also rulings and pricing arrangements issued less than ten years ago that are still in force. If approved, the proposed amendment will be effective from 1 January 2016. The proposal is part of a package meant to increase transparency between Member States in order to avoid aggressive tax planning and abusive tax practices.
The term advance cross-border ruling is defined as any agreement, communication or instrument with similar effects that:
- is issued by or on behalf of a tax authority of a Member State;
- concerns the interpretation or application of a legal or administrative provision of its national tax law;
- relates to a cross-border transaction or to the question whether or not activities performed in the State create a permanent establishment, and
- is made in advance of the transactions or of the filing of a tax return covering the period in which the transaction or activities took place.
Cross-border transactions include the making of investments, the provision of goods, services, finance and the use of intangible or tangible assets.
The term advance pricing arrangement is defined as any agreement or other instrument that is concluded by a taxing authority that determines in advance an appropriate set of criteria for the determination of the transfer pricing for transactions between associated enterprises. The definition includes arrangements relating to the determination of profits to a permanent establishment.
The proposal not only relates to advance cross-border rulings and advance pricing arrangements that are issued or amended after the date of entry into force of the proposed Directive, but also to all such arrangements that have been agreed upon within a period commencing ten years prior to the entry into force of the proposed Directive and are still valid at such date. These existing agreements have to be exchanged prior to 31 December 2016. New agreements have to be exchanged within one month after the end of the quarter during which the agreement was concluded.
The automatic exchange should in any case include a defined set of basic information which needs to be sent to all Member States as well as to the European Commission. This information should include the name of the company involved, a description of the activities performed by the company, the reasoning for the ruling, the countries and the entities that would be affected by the ruling, as well as a description of the set of criteria used for the determination of the transfer price. This information may be entered into a database which will be developed by the Commission. The database is to be accessible by all Member States and the European Commission, but not by the public.
After the exchange of information, a Member State may request additional information including the full text of the advance cross-border ruling or advance pricing arrangement if it believes the additional information is relevant for the application of its own tax rules.
If approved by the Council, the proposal will come into force on 1 January 2016.
Bron: Loyens & Loeff
Informatiesoort: Nieuws
Rubriek: Europees belastingrecht
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