The European Parliament plans to create a new committee on financial crimes, tax evasion and tax planning. This decision was taken by the Chairmen of the factions of the European Parliament on February 8 and it is awaiting approval in the plenary vote.
The main goal of the committee, which will last 12 months, will be the completion of work done by the members of the pre-existing TAXE 1, TAXE 2 and PANA committees, as well as focusing on the so-called “Paradise Papers” - recent information leaks.
Thus, the co-chairman of the Greens / European Free Alliance (Greens / EFA) fraction, Philippe Lamberts, noted: “Paradise Papers demonstrated the existence of clear objectives and serious volume of work that we must do if we want to ensure fiscal justice throughout the European Union. We want to be sure that the national treasuries are able to collect funds which are necessary to maintain the common prosperity of the EU”.
According to the official, the EU Parliament’s Panama Papers Committee has already developed a well-prepared plan of measures to reduce the cases of tax evasion. The new committee will ensure the maintenance of the progress achieved and the implementation of the necessary measures by the Commission and governments throughout the European Union.

The European Union announced its intention to expand the powers of Member States with respect to changing the rates of VAT and mitigating the rules of taxation for small businesses.
These changes are only part of a large-scale plan on revision of the European VAT system aimed at creating a single VAT zone.
We remind that the general rules of VAT in the European Union were agreed in 1992. According to the European Commission, they became obsolete and, in addition, too limited.
The EU Commissioner for Taxation, Pierre Moscovici, noted: “Today we are taking another step towards the creation of a single VAT zone in the European Union with simplified rules for our Member States and, in particular, companies. These proposals will give EU countries greater freedom with regard to application of preferential VAT rates to specific products or services. At the same time, they will enable to reduce the number of bureaucratic mechanisms for small enterprises engaged in cross-border activities, thereby contributing to their growth and job creation”.
The Commission proposed to give EU Member States the opportunity to introduce certain benefits, along with a standard VAT rate of at least 15%, namely:

  • two separate reduced rates ranging from minimum 5% to the level of a standard rate chosen by the particular Member State;
  • one option for exemption from VAT (or “zero rate”); and
  • one option of the reduced rate, which would be set between zero and reduced rates.

The current list of goods and services to which preferential rates can be applied is proposed to be canceled. Instead, it is planned to enter a list of products, to which a standard rate of 15% or higher will always apply.
In order to increase government revenues, Member States will be required to ensure the weighted average VAT rate to be at least 12%.
The second direction of proposals concerns small and medium-sized enterprises (SMEs). Currently, the EU Member States are allowed to release the sales of small businesses from VAT, provided that they do not exceed annual turnover. The turnover threshold varies depending on the particular EU country.
In addition to the existing thresholds, the EU proposed to introduce:

  • an income threshold of EUR 2.5m, according to which SMEs will be able to take advantage of such mitigation measures, regardless of whether they have been previously exempt from VAT or not;
  • the possibility for Member States to exempt all small businesses that are eligible to VAT exemptions for liabilities related to identification, invoicing, accounting or refund; and
  • a turnover threshold of EUR 100,000, which will allow companies to work in more than one Member State to receive a VAT exemption.

The Commission’s proposals will soon be submitted to the European Parliament and the European Social and Economic Committee, and then to the European Council for final adoption.

The European Union is discussing the possible exclusion of eight countries from the “black list” of offshore zones. It is reported by the IA Reuters, referring to the documents at its disposal. According to the agency, Panama, UAE, South Korea, Barbados, Grenada, Macau, Mongolia and Tunisia can be removed from the list. Such a proposal is justified by the fact that these countries have agreed to change their tax policy. In addition, an exclusion from the list of Bahrain was discussed, but in the end, it was decided to leave it on the list.
On Tuesday, January 16, the issue was discussed at the ambassadorial level. And next week the proposal will be considered by the EU finance ministers. In early December, the last ones published a “black list” of countries that did not want to cooperate with the EU in the field of tax reporting, as reported by the UNIAN. The list includes 17 countries, namely: American Samoa, Bahrain, Barbados, Grenada, Guam, Macau, Marshall Islands, Mongolia, Namibia, United Arab Emirates, Palau, Panama, Saint Lucia, Samoa, Trinidad and Tobago, Tunisia and South Korea. Offshore zones are on the territory of the most part of these states. We remind that the European Union decided to create a single “black list” after another leak of offshore documents called the Paradise Papers.

Over the past few years, the development of Bitcoin has been increased, which is actively discussed by the governments of different countries. In this regard, the European Union raised some concerns about funding of terrorism, money laundering and tax evasion, which might be related to cryptocurrencies. This is the reason why the European legislator has introduced the concept of cryptocurrency into the Fourth Anti-Money Laundering Directive, where Bitcoin is defined as a “monetary instrument”.
As the European Commissioner for Economic and Financial Affairs Pierre Moscovici notes, to date Bitcoin is not considered as an alternative currency along with dollar or euro due to volatility and much speculation.
It is noteworthy that the differences between the definitions of Bitcoins in the EU Directive and in the US legislation are not significant.
Details of the political discussions regarding the cryptocurrency in the European Parliament and the further legislative prospects for electronic money are still unknown.

European Union Flag

On December 6 meeting, the EU's Economic and Financial Affairs Council (ECOFIN) approved a number of measures for improvement international observance of the tax legislation.

Specifically, the ECOFIN provides access for tax authorities to information, held by authorities responsible for prevention of money laundering; reached a consensus on the Directive project that aimed at closing of “hybrid mismatches” with the taxation systems of three countries; also made the decision concerning the offer to recommence the common consolidated corporate tax base (CCCTB).

The Directive on exchange of information on beneficial owners of the companies it is intended to support tax authorities controlling the correct application of tax rules, thereby helping to prevent tax avoidance and tax fraud.

At the second stage after the intensive discussions, Council agreed to stabilize the document for the majority of provisions Directive's plan about hybrid mismatches, leaving only two questions to solve them on the next weeks: rules that would allow Member States to apply the limited benefits and date of realization.

“This directive will prevent corporate taxpayers for exploiting disparities between tax jurisdictions, in order of reducing their general tax liability”, said the Slovak Minister for Finance and President of the Council Peter Kazimir. “Such agreements are common and they lead to the erosion of tax bases of corporate taxpayers in the EU”.

Also, he said, that their work shows that they are serious about combating illegal tax practices in the EU, as well as international levels in coordination and cooperation with the G20 and the OECD.

Finally, the Council adopted a list recommendations concerning renewals of CCCTB project of the European Commission. This initiative will lead to the introduction of harmonized rules for calculating the tax base of companies in all EU member states. After that, the tax revenue will be collected and distributed between the Member States approach formulary distribution, in which the proceeds will be distributed on the basis of factors such as turnover, sales and employment levels of the population.

The Council stated that, for a start, the EU member states should “concentrate their efforts on the rules for calculating the tax base and, in particular, on new force majeure renewed legislative initiative”.

Author: Sergey Panov

managing partner Finance Business Service

Ireland street

Ireland remains the most efficient country in the EU, in which it is possible to pay taxes for businesses, according to the latest PwC / World Bank survey of tax.

The report dealt with 189 economies around the world and take into account that all taxes was paid by companies. He analyzed the bureaucratic and administrative burdens imposed on businesses, when it comes to time spent on compliance, payment and registration of taxes, as well as the amount of tax imposed. Ireland took the 6th place in the world.

PwC and the World Bank found that a typical Irish company spends about a quarter of the total volume of commercial profit in taxes. This figure was 12.4 percent of the income taxes, 12.1 percent of labor taxes and 1.4 percent in other taxes. In addition, the company spends a little more than two weeks, on their tax affairs and makes the payment almost every six weeks.

PwC stressed that the statutory corporate tax rate in Ireland 12.5 percent, very close to the rate of "income tax" 12.4 percent.

In the report explained that within the EU and the European free trade area, company will pay 40.6 percent of its commercial profit in taxes, including income taxes of 12.6 percent, taxes on labor force of 26.5 percent and 1.5 percent in others taxes. On a world scale, the typical company spends 40.8 percent of its commercial profit in taxes, spends more than seven weeks of their tax affairs, and make tax payments every two weeks.

Joe Tynan, head of the Irish PwC tax, said: "Research shows that the presence of a simple tax systems with competitive rates of business taxation and a reliable and transparent tax regime gives Ireland a real advantage on the market for attracting direct investment. The study confirms that the tax system of Ireland continues to be one of the most effective and transparent in the EU. Despite the fact that no one likes to pay taxes, the Irish tax system makes it relatively easy to comply with the rules and less bureaucracy in comparison with other EU countries."

He added: "The transparent Irish tax regime and low corporate tax rate, together with the relative ease of paying taxes, is vital for the continuation of support for Ireland's position as a choice location for foreign direct investment. This transparency and the relative ease to pay taxes along with 72 agreements and R&D tax credit system of world class are important elements in giving us the opportunity to help multinationals to establish operations in Ireland, as well as to expand their activities here."

Author: Olena Kutova

senior lawyer of the Finance Business Service company

Hungary

Mihaly Varga, Hungary's Minister of National Economy, announced about decision of government to reduce the corporate tax rate lower than 10 percent next year.

On November 18, behind the scenes of the Regional Digital Conference in Budapest, he made the announcement during which he unveiled the plan of the government to impose a single rate for nine percent of the corporate tax.

Now, the headline shows, that the rate of Hungary of the corporate tax constitutes 19 percent, and there is lower level of the income tax of 10 percent on the first 500 million Hungarian forints (1.7 million US dollars) of the income.

Dramatic movement would give Hungary one of the lowest corporate tax rates in the world and one of the lowest in the European Union "onshore" jurisdictions.

Varga said that this measure will save companies about 145 billion HUF (500 million US dollars) a year tax. The Government expects to compensate the shortfall through controlled growth to increase tax revenues.

The government plans to introduce a new tax rate of 1 January 2017.

Author: Olena Kutova

senior lawyer of the Finance Business Service company

European Union building

The tax commissioner Pierre Moscovitchi says that the European commission something reached in fight "revolution of tax transparency" against prevention and avoidance of taxes.

This week Moscovici gave a keynote speech at a conference in 2016 on the future of Europe at Harvard University. He said that the event, which the Commission approved the events surrounding Luxleaks, Panama Papers, and the Bahamas Leaks, is now forcing EU members "to perform their duties."

He told with hope: "The bank secrecy will disappear in Europe soon, and the companies won't have any more an opportunity to play with borders it isn't enough to pay a tax or in general not to pay it. Besides, the Commission plans to publish "black list" of the tax havens as 'naming and shaming' is a powerful tool which we shall be ready to use.

Moscovici said that the EU "should unite the problem of a stronger tax administration into negotiations with uncooperative territories."

Author: Olena Kutova

senior lawyer of the Finance Business Service company

European Council

The European Council confirmed the offer to provide to the tax authorities access to information, the contents of the authorities responsible for the prevention of money laundering.

If the owner of the financial account is an intermediary of structure, then Directives of the EU 2014/107/EU requires that financial institutions reported about the beneficial property right of the enterprise. The application of this provision relies on the information, the contents of the authorities responsible for the prevention of money laundering, in accordance with Directive 2015/849 / EU.

The Council said: "Access to this information will ensure that the tax authorities are better prepared to fulfill its monitoring obligations, so it helps to prevent tax evasion and tax fraud."

The proposal is one of many measures set out by the European Commission in July 2016, in connection with the leak Panamanian newspaper, and it will be apply 1 January 2018.

According to the Commission, the measure "guarantees, that tax authorities have provided access to the data provided by rules of anti-money laundering EU, especially consumer information on financial inspection and information in their national registries of beneficial ownership to fulfill their task not only in the context of anti-money laundering, and terrorist financing. "

"Indeed, the fact that members of the state currently has a choice whether or not to grant access to this information to the tax authorities, which limits the efficiency of tax audits. With access to this information, the tax authorities will be able to identify the person behind the opaque company, structure or enterprise and respond quickly to situations evasion and tax avoidance. "

As soon as the European Parliament has given its opinion, Council will formally adopt the Directive.

Author: Olena Kutova

senior lawyer of the Finance Business Service company

Canada

President of the European Council Donald Tusk warned that comprehensive economic and trade agreement (CETA) with Canada may be the last with the EU if the government "is not able to convince people that the trade agreements on their behalf."

Pinned hopes that CETA will be formally signed on Thursday 27 October. However, despite approval by 27 of the 28 EU Member States, the Belgian region of Wallonia refused to give their support. The Federal Government of Belgium gave their support to end on 24 October. Andre Antoine, Walloon parliament speaker, said that it is impossible to adhere to this "ultimatum."

It was to be a meeting last week after the European Council, where Tusk said "all member states, except one, approved the deal."

Commenting on the event, Tusk said: "Firstly, our citizens are increasingly concerned at the expense of trade agreements, leading the negotiations to their advantage, and I'm afraid that we can not continue negotiations for free trade agreements (FTA), if we do not will prove in practice that we are very serious about the protection of European consumers, workers and businesses."

"We have made some progress in this direction. Leaders have committed to urgently reach agreement on the modernization of EU trade defense instruments. We instructed our trade ministers to break the deadlock."

Speaking before the meeting, Tusk said: "If we can not convince people that trade agreements on their behalf if we can not convince them that our representatives are negotiating to protect the interests of the people, we have not is likely to build public support for free trade. it means, I'm afraid that CETA could be our last agreement on free trade."

Author: Sergey Panov

managing partner Finance Business Service