On May 15, 2017 the Dutch Minister of Finance sent an annotated agenda for the following Eurogroup and Economic and Financial Affairs (ECOFIN) Council to the Dutch House of Representatives. These meetings will take place on May 22, 2017 (Eurogroup) and on May 23, 2017 (ECOFIN Council). According to the annotated agenda several tax topics will be discussed during the ECOFIN Council of May 23, 2017.
Proposal for a Council Directive on Double Taxation Dispute Resolution Mechanisms in the European Union
According to the Dutch Minister of Finance the ECOFIN Council will be invited to come to an agreement on a Council Directive on Double Taxation Dispute Resolution Mechanisms in the European Union.
In cross border situations the possibility exists that two countries are op the opinion that they are entitled to levy taxes over a source of income. As a result a taxpayer is confronted with double taxation. Furthermore the possibility exists that taxpayers are confronted with a taxation that is not in accordance with the regulations of a bilateral tax treaty. To offer a solution for such situations regulations regarding mutual agreement procedures are included in bilateral tax treaties and the Convention on the elimination of double taxation in connection with the adjustment of profits of associated Enterprises (90/436/EEC) with the goal to eliminate double or unjustifiable taxation. However no obligation exists for the countries involved to come to a successful conclusion of these mutual agreement procedures, which means that the taxpayer can still end up with a double taxation or an incorrect taxation if the countries involved do not successfully conclude their mutual agreement procedure.
The proposal for a Council Directive on Double Taxation Dispute Resolution Mechanisms in the European Union offers the taxpayer the certainty that in case the Member States do not successfully conclude their mutual agreement procedure within a timeframe of 2.5 years the matter will be put in front of an Arbitration Committee consisting out of independent experts that will judge on the matter. This would provide the taxpayers that the matter will be settled within a certain period.
In his letter to the House of Representatives the Dutch Minister notes that not all Member States are positive about the proposal. According to the Minister a small group of Member States fears that the proposal will lead to too many arbitration cases. The Minister states that these Member States try to exclude disputes regarding small amounts from the possibility of arbitration. According to the Dutch Minister of Finance negotiations are still ongoing in this respect.
A proposal for a the introduction of a CCTB
According to the Dutch Minister of Finance the Maltese Presidency wants to have an initial exchange of views/policy debate regarding the proposal for a Council Directive on a Common Corporate Tax Base. Since the proposal for a Directive was published in October 2016 the proposal has been discussed in several working parties. In this respect especially 3 parts of the proposal were reviewed:
· A deduction for R&D activities
· A deduction or addition that is depending on the decrease or increase of the equity; and
· A limited possibility for a cross-border settlement of profits and losses.
In his letter to the Dutch House of Representatives the Dutch Minister a.o. notes that many Member States worry with respect to the question what impact the aforementioned subjects might have on the (tax) revenues of the Member States.
The Dutch Minister also notes that there are also other reasons because of which many Member States have a critical attitude towards the proposal for the introduction of a CCTB. According to the Dutch Minister certain Member States are of the opinion that the measures included in the proposal might lead to abuse. Member States have also pointed out the importance for good anti-abuse measures. Certain Member States have also pleaded for more flexibility within the proposal. This a.o. for being able to react to new constructions which lead to the avoidance of taxation. Member States have also pointed out that although a common corporate tax base would eliminate the existing differences between the tax systems within the EU. However since unanimity is needed to adjust such a common corporate tax base it might be difficult to react to future developments what can have negative effects for the global position of EU Member States.
Click here to download the letter the Dutch Minister sent to the Dutch House of Representatives from the website of the Dutch Ministry of Finance (a downloadable Pdf document).
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