TAX TALK: BEPS & ATAD RESHAPING INT’L TAX LANDSCAPE
Speakers corner: Delano asked Raymond Krawczykowski, partner and tax leader at Deloitte Luxembourg, “In your view, what have been the key changes in EU & Luxembourg tax rules in 2017, and what major shifts could be in store for 2018-19?” His response was clear: Beps and Atad.
The Base Erosion and Profit Shifting standards (Beps) are reshaping the international tax rules applicable to cross-border transactions. Even though many countries have already agreed between themselves on these rules, their implementation and application to taxpayers has not been immediate.
While many of the aspects agreed upon over the last years are already in force, others will only enter into force as from next year. Policymakers of both EU member states and many other countries all over the world continue to adapt their respective fiscal frameworks to the new (tax) environment, taking into account the undisputable intertwining of trade and tax.
One of the main aspects of the Beps project is tax transparency, implemented through various exchanges of information and particularly, the automatic exchange of information. This solution imposes on the persons having the information, including the taxpayers, an obligation to report data, under certain conditions, to national tax authorities, as in the case of country-by-country reporting. The information collected in this way is then shared on a regular basis among the national tax authorities. The automatic reporting increases the documentation requirements for companies, resulting in the need for implementation of expensive system changes and technological solutions.
Anti-Tax Avoidance Directive (Atad)
Some other new tax standards will become applicable as from next year, especially in connection with the coherence of corporate income taxation at international level. The main legal act in this respect would be the transposition of the EU’s Anti-Tax Avoidance Directive into the national laws of all member states. We are currently waiting for the Luxembourg draft law transposing this directive, which will amend our tax rules, especially by requiring the taxpayers to provide more explanations regarding the rationale of the transactions they conduct.
Since Luxembourg has already demonstrated a proactive approach in ensuring that investors and businesses can trust the country’s stability, as well as its dedication to adapting quickly to an ever-changing landscape, it is legitimate to expect that the coming Luxembourg tax rules would stabilise, or even reinforce, the investment landscape of the country in the long run.
What is Beps?
“Base erosion and profit shifting (Beps) refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. Under the inclusive framework, over 100 countries and jurisdictions are collaborating to implement the BEPS measures and tackle BEPS.” Source: OECD
What is Atad?
“The Anti-Tax Avoidance Directive (Atad) contains five legally-binding anti-abuse measures, which all member states should apply against common forms of aggressive tax planning. Member states should apply these measures as from 1 January 2019. It creates a minimum level of protection against corporate tax avoidance throughout the EU, while ensuring a fairer and more stable environment for businesses.” Source: European Commission