On 15 July the European Commission (EC) adopted a new tax package (Tax Package) to ensure that the EU tax policy supports Europe’s economic recovery and its long-term growth. The aim of the Tax Package is to reduce unfair tax competition and increase tax transparency through simplifying tax rules and procedures. The adopted Tax Package seeks to promote fair taxation by offering support to the Member States in a crisis situation.
The Tax Package consists of three separate but related elements:
- Action Plan for fair and simple taxation supporting recovery strategy and presenting a number of upcoming initiatives in the field of direct and indirect taxation,
- Revision of the Council Directive on administrative cooperation in the field of taxation (DAC7) and
- Communication on Tax Good Governance in the EU and beyond.
The Tax Package does not cover taxation of digital services or minimum effective taxation. These proposals are about to be presented this autumn. They will summarise discussion held within the Organization for Economic Cooperation and Development (OECD).
The Action Plan consists of a set of 25 separate initiatives in the field of direct and indirect taxation to be implemented by 2024, i.a.:
- amending the VAT Directive on implementing single EU VAT registration to allow a supply of services and/or sale of goods anywhere in the EU;
- adapting EU VAT rules to digitalization for easier compliance and more efficient tackling tax fraud by modernizing VAT reporting obligations and facilitating e-invoicing;
- clarifying determination of tax residence for EU taxpayers who carry out the cross-border activity, ensuring that the Member States use the same criteria to determine tax residence status, and lowering the risk of double taxation (or double non-taxation);
- enhancing the antifraud experts’ network of the Member States (Eurofisc), improving the use of technology and sharing information between the Member States;
- amending outdated VAT provisions on financial services which are to take into account new digital economy and increase in outsourcing of input services by financial and insurance operators;
- amending the VAT Directive to provide a special scheme for travel agents and ensure level playing field for entities established outside the EU;
- reinforcing tax dispute prevention and solution mechanisms, and extending it to VAT.
As a part of the revision of the Directive on administrative cooperation (DAC7), EC proposes to introduce the automatic exchange of information between Member States’ tax administrations on income/revenues generated by sellers on digital platforms. The information exchange is intended to verify that these entities pay the appropriate share of taxes.
The revision is also aimed at boost administrative cooperation by clarifying rules in other areas where the Member States cooperate in the fight against tax abuse, for example through joint tax audits.
Tax good governance
The actions planned under the last pillar of the Tax Package are focused on promoting fair taxation and combating unfair tax competition in the EU and internationally. As part of the third initiative, the EC proposes:
- reform of the Code of Conduct for Business Taxation which aims to counteract tax competition and harmful tax practices in the EU;
- improvements to the EU list of non-cooperative jurisdictions concerning non-EU countries;
- reinforcement of the EU’s tax good governance rules regarding EU funds and defensive measures;
- additional support for developing country partners to improve their cooperation in the field of taxation, in line with the 2030 Sustainable Development agenda.
The proposed Tax Package is the first part of a more comprehensive EU tax agenda for the coming years.
If you have any questions, our experts are at your disposal:
Head of Tax, Board Member
CEE VAT Compliance Director
Tax Manager - Tax Adviser