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On May 21, 2018 the South African Revenue Service (SARS) released a Draft Guide on Mutual Agreement Procedures for comments. Interested parties have until June 15, 2018 submit coments on the draft guide.

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On August 30, 2016 the European Commission announced that it had concluded that Ireland granted undue tax benefits of up to €13 billion to Apple. According to the EU this was illegal under EU state aid rules, because it allowed Apple to pay substantially less tax than other businesses. Consequently Ireland had to recover the illegal aid.

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On May 17 the OECD released its decisions on 11 preferential regimes of BEPS Inclusive Framework Members.

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On May 15, 2018 the Irish Revenue issued Revenue eBrief No. 88/18 to announce that it created a new Tax and Duty Manual (PART 02-01-03) to clarify how the normal tax rules apply to transactions involving cryptocurrencies. According to the Irish Revenue the purpose of the manual is to give guidance on the tax treatment of various transactions involving cryptocurrencies.

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On May 17, 2018 the Court of Justice of the European Union (CJEU) judged in Case C-566/16, Dávid Vámos versus Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (ECLI:EU:C:2018:321).

This request for a preliminary ruling concerns the interpretation of EU law and, in particular, of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1, ‘the VAT Directive’).

 

The request has been made in proceedings between Mr Dávid Vámos and the Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (Appeals Directorate of the National Tax and Customs Administration, Hungary, ‘the Appeals Directorate’), concerning that directorate’s decision finding a value added tax (VAT) debt owed by Mr Vámos and imposing on him a financial penalty and interest for late payment.

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On May 16, 2018 the OECD announced that the United Arab Emirates joined the Inclusive Framework on BEPS. Therewith the total number of jurisdictions that have joined the Inclusive Framework on BEPS comes to 116.

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The next Economic and Financial Affairs (ECOFIN) Council is taking place on May 24 and May 25, 2018. On May 24, 2018 there is a budget meeting. On May 25, 2018 an ordinary ECOFIN Council will take place. On May 11, 2018 the Dutch Minister of Finance sent an annotated agenda for these meetings to the Dutch House of Representatives. According to this annotated agenda several tax topics will be discussed during the ECOFIN Council of May 25, 2018.

According to this annotated agenda as sent by the Dutch Minister of Finance a.o. the following tax subjects are going to be discussed during the upcoming ECOFIN Council:

·   Administrative cooperation in the area of VAT;

·   A general reverse charge mechanism for VAT purposes; and

·   VAT and e-publications.

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During its meeting of May 9, 2018, the Swiss Federal Council adopted a dispatch on approving the agreements on the Automatic Exchange of Financial Account Information (AEOI) with Singapore and Hong Kong. In the same dispatch the Swiss Federal Council is proposing the introduction of the AEOI with other financial centres to Parliament.

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On May 11, 2018 a new Decree on transfer pricing was published in the Dutch Staatscourant (the Decree from April 22, 2018, nr. 2018-6865). The Decree regards transfer prices, the application of the arm’s length principle and the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (The OECD Guidelines). The Decree published on May 11, 2018 replaces the Decree from November 14, 2013, nr. IFZ 2013/184M.

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On May 9, 2018 the Dutch Ministry of Finance sent a summary of discussions of the EUROGROUP meeting of April 27, 2018 and of the informal ECOFIN Council to the Dutch House of Representatives. Once again these summary of discussions give an interesting insight in the discussions that were held. In this article we will focus on the summary of discussions of the tax subjects that were discussed during the informal ECOFIN Council of April 28, 2018.

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On May 11, 2018 the OECD announced that Bahrain joined the Inclusive Framework on BEPS. Therewith the total number of jurisdictions that have joined the Inclusive Framework on BEPS comes to 115.

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On May 7, 2018 the Federative Republic of Brazil and the Republic of Singapore signed an Agreement for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (Hereafter: the DTA).

Although the DTA has been signed, it has not entered into force yet. For the DTA to enter into force, the respective ratification procedures have to have been finalized in both countries.

 

Below we will discuss a selection of provisions included in the DTA of which we think they might interest our readers.

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On May 9, 2018 the OECD announced that it is considering starting two new projects to revise the guidance in Chapter IV (administrative approaches) and Chapter VII (intra-group services) of the Transfer Pricing Guidelines.

In this respect the OECD invites interested parties to comment on:

·   the future revision of Chapter IV, “Administrative Approaches to Avoiding and Resolving Transfer Pricing Disputes” of the Transfer Pricing Guidelines; and

·   the future revision of Chapter VII, “Special Considerations for Intra-Group Services”, of the Transfer Pricing Guidelines.

 

The consultation periods run until June 20, 2018. Comments are to be send to This email address is being protected from spambots. You need JavaScript enabled to view it. in Word format . Comments in excess of ten pages should attach an executive summary limited to two pages.

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On May 9, 2018 the OECD announced that Saint Lucia joined the Inclusive Framework on BEPS. Therewith the total number of jurisdictions that have joined the Inclusive Framework on BEPS comes to 114.

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On May 4, 2018 the Irish Revenue issued Revenue eBrief No. 82/18 to announce that it created a new Tax and Duty Manual on Country-by-Country Reporting (PART 38-03-21). According to the Irish Revenue the manual has been created to address some frequently asked questions on the interpretation of legislation and regulations which implement Country-by-Country Reporting in Ireland.

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On May 4, 2018 the Swiss Federal Department for Finance issued a press release announcing that on May 3, 2018 the Swiss Confederation and the Federative Republic of Brazil concluded an Agreement for the Elimination of Double Taxation with respect to Taxes on Income and the Prevention of Tax Evasion and Avoidance (Hereafter: the DTA).

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On May 3, 2018 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Kokott in the Case C-249/17, Ryanair Ltd versus The Revenue Commissioners (ECLI:EU:C:2018:301) was published.

The focus in the present case is once again the interpretation of the concept of ‘taxable person’ and the definition of ‘economic activity’ within the meaning of Article 9(1) of the VAT Directive. The proceedings will give the Court an opportunity to clarify the scope of its case-law on deduction of input tax by holding companies.

In 2006 the airline Ryanair made a bid to take over the Irish airline Aer Lingus. Although the takeover failed for reasons of competition law, Ryanair had already incurred considerable costs for consultancy and other services in connection with the planned takeover. Ryanair therefore claimed deduction of the input tax paid, which was refused by the Irish tax authorities.

It is recognised in the Court’s case-law that deduction of input tax can also be claimed for abortive investments. However, the dispute arises in this instance because, according to case-law, the mere acquisition and holding of shares does not constitute economic activity within the meaning of the VAT Directive. Consequently, according to the Court’s case-law, a holding company whose sole purpose is to acquire shares is not entitled to deduct input tax.

In contrast with the situation of a conventional holding company, however, in this case an operating undertaking (and thus a taxable person) sought to make a strategic takeover of a competitor. The question therefore arises whether the limitation of input tax deduction based on the case-law on holding companies actually applies here, as the economic dimension of the case is addressed only if regard is had, in a functional analysis, to the importance of the acquisition of shares for the existing economic activity.

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On May 3, 2018 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Szpunar in the Case C-153/17, Commissioners for Her Majesty’s Revenue and Customs versus Volkswagen Financial Services (UK) Ltd (ECLI:EU:C:2018:305) was published.

The parties to the main proceedings are in disagreement as to the defendant’s right to deduct input value added tax (‘VAT’) paid on goods and services used for the purposes of its hire purchase transactions.

In the context of this dispute, both parties seem to have very good arguments in support of their views. However, it seems to me that this discussion is taking place without seeing what is referred to by the well-known English expression as ‘the elephant in the room’. That ‘elephant’ is the United Kingdom’s classification for tax purposes of hire purchase contracts, which is, in my view, incorrect.

Under the legislation of that Member State, such contracts are to be treated as two distinct transactions, one being the taxable supply of a vehicle, and the other, an exempt supply of credit. Given that the price of the vehicle charged to the customer must be limited to the exact purchase price of that vehicle, paid by the lessor to the dealer, the amount of output VAT collected is also exactly equal to the input VAT on that vehicle and fully deductible in respect of that supply. The remainder of the lessor’s costs, as well as his profit margin, are, on the other hand, covered by the revenue from the exempt supply of credit. The referring court is therefore uncertain as to the correct approach for the deduction of input VAT on the lessor’s overhead costs, used to an extent for the purposes of the taxable supply of the vehicle, but which are in fact covered by the revenue from the supply of credit, which, as an exempt transaction, is not subject to output VAT.

It therefore seems impossible to give a correct response to this question without addressing the issue of the splitting of hire purchase contracts into two distinct transactions, which I very much doubt is consistent with EU legislation on VAT.

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