Following a directive proposal put forward by the European Commission as part of a package of measures in March, the European Council reached political agreement on a directive amending the text of 2011/16/EU directive on administrative cooperation in the field of taxation.
EU member states will be required to automatically exchange information on advance cross-border tax rulings as well as advance pricing arrangements. The directive is in place to ensure that any member state who is affected by the issuance of another member state's advance tax ruling or transfer pricing arrangement is able to monitor the situation and the possible impact on its tax revenue.
Where necessary, member states receiving information will be able to request additional information. The Commission will also develop a central secure directory where the exchanged information will be stored. This will be made accessible to all member states and to the Commission to the extent required for monitoring purposes.
Once the European Parliament has expressed its opinion and the directive has been finalised in all languages, this will be adopted during a Council meeting. The new rules will come into effect as of 1 January 2017 and until then, the present rules will remain in place.
Pierre Gramegna, finance minister of Luxembourg and president of the Council stated that "This is a decisive step towards greater transparency in tax matters. ... Europe is sending a strong signal for greater equity in taxation of businesses worldwide."
Meanwhile, it is important to note that the following rules will apply for rulings issued prior to 1 January 2017:
- If advance cross-border rulings and advance pricing arrangements are issued, amended or renewed between 1 January 2012 and 31 December 2013, such communication shall take place under the condition that they are still valid on 1 January 2014.
- If advance cross-border rulings and advance pricing arrangements are issued, amended or renewed between 1 January 2014 and 31 December 2016, such communication shall take place irrespectively of whether they are still valid or not.
- Member states will have the possibility (not an obligation) to exclude from information exchange advance tax rulings and pricing arrangements issued to companies with an annual net turnover of less than €40 million at a group level, if such advance cross-border rulings and advance pricing arrangements were issued, amended or renewed before 1 April 2016. This exemption will not apply to companies conducting mainly financial or investment activities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
