This week, the European Council has reached and agreement on the proposal related to increasing transparency in order to take control over aggressive cross-border tax planning structures and generally to take preventive measures in sphere of corporate tax avoidance. The proposal generally reflects action 12 of the OECD's 2013 action plan to prevent tax base erosion and profit shifting.
Agreement was reached during the meeting of the Economic and Financial Affairs Council. The Council will adopt the directive without further discussion once the text has been finalized in all official languages.
Timeframe set for the member states to incorporate these new requirements into the national laws and regulations is up until 31 December 2019.
The draft of the directive sets requirements for professional advisors, involved in structure-planning (advisors, lawyers, accountants) to send information on schemes that they regard as potentially aggressive.
This new initiative is aimed at forcing preventive measures, which could help counter fight wrongful arrangements; it would provide for automatic exchange within the member states through centralized database system.
Parties involved in aggressive cross-border tax planning structuring that would not be in compliance with the new regulations, would be facing sanctions. The latter will be imposed by the member states.
Currently, the member states are facing more and more difficulties fighting with tax bases erosion, as the art of tax planning is developing constantly.
For the intermediaries involved the new proposal shall entail additional job and bureaucracy.
The draft of the fresh EU directive clarifies which types of structures should be considered as of potential interest for the tax authorities, as the main goal of the new procedure is to track down schemes that do not have legitimate purpose.
The directive and the corresponding requirements will apply from July 01, 2020. There would be an obligation for the member states to perform the exchange of information every three months. The first automatic exchange of information will be completed by October 31, 2020.