Closer cooperation between EU Tax Authorities in the drive for greater transparency

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Tax authorities in the EU have agreed to cooperate more closely to enable Member States to ensure that all their taxpayers pay their fair share of the tax burden.

So the global drive for transparency and accountability is gathering pace, bringing more commitments for affected entities that need to comply with reporting programmes such as the EU’s Directive on Administrative Cooperation (DAC).

The agreed instruments for cooperation between EU Member States lay down the same rules, obligations and rights for all and the essential piece of legislation in this respect is Council Directive 2011/16/EU, the Directive on Administrative Cooperation in the field of taxation, as amended in 2014 & 2015 (commonly known as DAC3)

The 2011 Directive established all the necessary procedures for exchanges of information on request, spontaneous exchanges, automatic exchanges, participation in administrative enquiries, simultaneous controls and notifications to each other of tax decisions.

Automatic exchange consists of the automatic provision of information by one country to another on income of residents of the second country and, in the case of cross-border tax rulings and advance pricing arrangements, the automatic provision of information to all Member States and the Commission.

The Directive provides for the exchange of information that is of `foreseeable relevance` to the administration and the enforcement of Member States’ tax laws and this has included, from 1 January 2015, mandatory automatic exchange of information in respect of income from employment, director’s fees, life insurance products, pensions and ownership of and income from immovable property.

The 2014 amendment brought a list of financial information within the scope automatic exchange with effect from 1 January 2017. This consists of interest, dividends and similar type of income, gross proceeds from the sale of financial assets and other income, and account balances. DAC envisages that banks, insurance companies, investment funds and similar financial institutions will report to their local tax authorities who will in turn pass this information on to the tax authorities in the countries of residence of their account holders, investors, shareholders etc.

The 2015 amendment provided for the automatic exchange of information regarding cross-border tax rulings and advance pricing arrangements (which includes ATCAs), also with effect from 1 January 2017.

Although the 2015 amendment does not apply until 2017, it requires Member States to exchange details of tax rulings given to businesses since 1 January 2012. This includes all Statutory Clearances, Non-Statutory Clearances and Low Risk Opinions.

In fact, all cross-border rulings in relation to direct taxation are potentially in scope. Basically it applies to any situation where a person may rely on an opinion expressed by a tax authority with regard to future tax consequences.

In addition to DAC3, BEPS Action Point 5 recommends that certain tax rulings are spontaneously exchanged with other countries that would have an interest in that ruling. For countries that have the necessary legal basis, exchanges under this framework began on 1 April 2016. This covers all rulings that could give rise to BEPS concerns, such as APAs and permanent establishment rulings

More details from EU website here



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