EU Ministers Agree Initial EU BEPS Response
The European Union’s Economic and Financial Affairs Council agreed a work plan in response to the OECD’s base erosion and profit shifting recommendations at its meeting on December 8.
Following the meeting, ECOFIN – comprised of finance and economy ministers from all member states – released a list of agreed conclusions.
First, the Council agreed to proposals to strengthen the work of the Code of Conduct Group on business taxation, with additional measures foreseen in 2016. It highlighted the usefulness of the work carried out by the Group in assessing whether individual tax measures in member states are “harmful” and endorsed a new work package for the Group, which will include preparing guidance on tackling BEPS.
In particular, the Group has been asked to prepare guidance on the implementation of BEPS Actions 8-10 (aligning transfer pricing outcomes with value creation) and Action 13 (transfer pricing documentation), with the support of the Commission and the EU Joint Transfer Pricing Forum. It has also been asked to draft guidance on the EU’s response to Action 12, on the disclosure of aggressive tax planning arrangements.
ECOFIN stressed the need to find common, yet flexible, solutions to BEPS at the EU level consistent with OECD BEPS conclusions, paying specific attention to compliance with EU Treaty freedoms and competences. It said it supports an effective, swift, and coordinated implementation by member states of the anti-BEPS measures to be adopted at EU level.
It noted that several legislative proposals linked to the BEPS agenda are currently under discussion in the Council, notably the proposal for a Common Consolidated Corporate Tax Base (CCCTB) and the recast of the Interest and Royalties Directive (IRD). It noted in particular that a common anti-abuse clause is envisaged in the context of the recast of the Interest and Royalties Directive, following the insertion of a similar clause in the Parent-Subsidiary Directive, on the basis of the conclusions of Action 6. ECOFIN agreed that anti-BEPS measures should ideally be introduced through EU legislation, and in particular directives.
The Commission is expected to put forward an anti-BEPS package of legislative and non-legislative measures early in 2016. The Council said the OECD BEPS conclusions on Actions 2 (hybrid mismatches), 3 (Controlled Foreign Company rules), 4 (interest limitation rules), 6 (general anti-abuse rule), 7 (permanent establishment status), and 13 (country-by-country reporting) might be implemented, following further technical analysis, through legislative proposals focusing on international anti-BEPS aspects, without precluding the application by member states of domestic or agreement-based provisions aimed at preventing BEPS.
ECOFIN said it “acknowledges” the need for further discussion on the concept of minimum effective taxation, in particular within the recast of the Interest and Royalties Directive.
It noted that OECD BEPS conclusions on OECD Action 2 (neutralizing the effects of hybrid mismatch arrangements) are being taken into account for ongoing works of the subgroup on hybrid mismatches of the Code of Conduct Group and invited the Code of Conduct Group and the Subgroup to discuss the forms of hybrid mismatches that are not addressed through EU legislation.
Concluding, the Council stressed the need for “a swift and efficient implementation of OECD BEPS conclusions also at global level. It said it looks forward to the multilateral instrument to modify tax treaties envisaged under OECD BEPS conclusions on Action 15 expected by the end of 2016 and underlined the importance of involving a maximum number of countries, including developing countries, in order to ensure a level playing field in the area of BEPS.