European Commission Proposal: automatic exchange of cross-border advance tax rulings

On March 18, 2015, the European Commission (the “Commission”) published a package of tax transparency measures. The tax transparency package is the result of the Commission’s ambitious agenda to confront harmful tax competition and perceived corporate tax avoidance in the European Union. The Commission has prepared a proposal for a new Council Directive amending Directive 2011/16/EU regarding mandatory automatic exchange of information in the field of taxation (the “Proposal”). The Proposal inter alia provides for quarterly automatic exchange of cross-border advance tax rulings (“CBR”), including advance pricing agreements (“APA”) between Member States.

Scope

The Proposal applies to CBR and APA.

A cross-border ruling is basically any written confirmation granted in advance by the tax authorities of a Member State, concerning the interpretation or application of a domestic tax law provision and relating to a CBR.

An APA should be seen as any written confirmation granted in advance by the tax authorities of one or more Member States establishing inter alia an appropriate set of criteria to determine the transfer price of cross-border transactions between associated companies.

CBR and APA regarding domestic tax matters as well as relating to individuals are explicitly excluded from the scope of the Proposal.

Content

The Proposal provides for an obligation for Member States to automatically exchange information regarding CBR and APA.

Information on future CBR and APA (i.e. CBR and APA that are issued or amended after the date of entry into force of the Proposal) will have to be automatically communicated every three months to the competent authorities of all other Member States, as well as to the European Commission.

Information on existing CBR and APA (i.e. CBR and APA that were issued within a period beginning ten years before the entry into force, but still valid on the date of entry into force of the Proposal) will have to be communicated to all other Member States and the European Commission before December 31, 2016.

The information that is required to be automatically exchanged is explicitly mentioned in the Proposal. The information will at least include: the identification of the taxpayer, the content of the CBR or APA, a description of the activities and envisaged transactions, the identification of other Member States and companies of these Member States likely to be concerned. Additionally, in the case of an APA, the set of criteria to determine the transfer price or the transfer price itself will also be included.

Further information may be requested by the tax authorities of the Member States. Upon request, more details (or the full text of a CBR or an APA) may be provided by the Member State which issued it.

Entry into force

The Proposal would only enter into force pursuant to a vote at unanimity of all the Member States at the level of the Council. Assuming that unanimity would be reached, the Proposal should be applicable as from January 1, 2016.