On July 14, 2023 the European Commission published the key decisions of the July 2023 infringements package. The key decisions published include 3 letters of formal notice and 2 reasoned opinions that were sent to Member States. Furthermore the European Commission decided to refer Luxembourg to the Court of Justice of the European Union for failing to correctly transpose EU anti-tax avoidance rules (See our separate article).
Letters of formal notice
The European Commission asks Sweden to amend its rules on preliminary income taxation of foreign contractors
The European Commission decided to open an infringement procedure by sending a letter of formal notice to Sweden drawing its attention to the potential incompatibility of its legislation on preliminary income taxation with EU law. Swedish clients paying for work carried out by contractors established in other EU Member States or EEA countries are obliged to withhold a preliminary income tax at a rate of 30 per cent on the relevant remunerations unless the foreign contractors have been approved by the Swedish tax authority for preliminary income tax purposes (commonly termed as ‘F-tax approval'). The Commission deems that such an obligation to withhold preliminary income tax in situations where foreign contractors have no Swedish permanent establishment – and hence no income tax liability in Sweden – could infringe the freedom to provide services (Article 56 of the TFEU and Article 36 of the EEA Agreement). Sweden has now two months to reply to the arguments raised by the Commission after which the Commission may decide to send a reasoned opinion.
The Commission calls on Hungary to align its corporate income tax rules with EU anti-tax avoidance rules
The European Commission decided to open an infringement procedure by sending a letter of formal notice to Hungary requesting it to align, on a number of points, its corporate income tax rules with the Anti-Tax Avoidance Directive (ATAD Council Directive (EU) 2016/1164). The Commission identified divergent rules on the taxation of Controlled Foreign Companies (CFCs) as well as a problematic definition of “associated enterprise” which, for the purposes of applying the Directive's rules, should include also subsidiaries under common control. The Hungarian legislation does not guarantee that. Hungary now has two months to reply to the arguments raised by the Commission after which the Commission may decide to send a reasoned opinion.
The European Commission takes further action against Belgium for breaching the free movement of workers
The European Commission decided to open an infringement procedure under Article 260 TFEU by sending a letter of formal notice to Belgium for not properly complying with the ruling of the Court of Justice of the European Union of March 10, 2022 (Case C-60/21). The Court found that Belgium infringed the Treaty by refusing non-resident taxpayers who earn less than 75% of their worldwide income in Belgium from deducting their alimony payments from their taxable income. Deduction is refused in Belgium even when the taxpayer has no significant taxable income in the State of residence, making it impossible to deduct the above payments from taxable income in the State of residence. This refusal penalises non-resident taxpayers, who have exercised the right of freedom of movement of workers, because the alimony payments are deducted neither from their taxable income in their State of residence nor in Belgium as the State of employment. Belgium has two months to reply to the letter of formal notice. Otherwise, the Commission may refer the case back with proposed financial sanctions to the Court of Justice of the European Union.
Reasoned opinions
The European Commission calls on Belgium to eliminate discriminatory conditions for tax exemption of remuneration received from savings deposits
On July 14, 2023 the European Commission decided to send a reasoned opinion to Belgium for maintaining discriminatory conditions for tax exemption of remuneration received from savings deposits. The Commission considers that the Belgian tax exemption system applicable to income from savings deposits imposes discriminatory conditions for access to the Belgian banking market on service providers established in other Member States of the European Union or the European Economic Area and, therefore, is contrary to the freedom to provide services (Article 56 TFEU and Article 36 of the Agreement on the European Economic Area). Belgium has now two months to reply to the arguments put forward by the Commission. Otherwise, the Commission may decide to refer the case to the Court of Justice of the European Union.
The Commission urges Belgium, Greece, Spain, Cyprus, Poland and Portugal to complete the transposition of tax transparency rules into national law and closes the infringement against Slovenia for lacking transposition of the same Directive
On July 14, 2023 the European Commission decided to send a reasoned opinion to Belgium, Greece, Spain, Cyprus, Poland and Portugal for failure to communicate the national measures implementing Council Directive (EU) 2021/514 of March 22, 2021 (DAC7) amending Directive 2011/16/EU on administrative cooperation in the field of taxation. Under DAC7, digital platforms such as websites and mobile apps, which allow taxpayers to sell goods, offer online and offline personal services, or rent out immovable property or means of transport, have to report those taxpayers and their economic activities. This information will help tax authorities prevent tax evasion or misreporting by using digital platforms. The deadline for the communication of the national transposing measures was December 31, 2022. Belgium, Greece, Spain, Cyprus, Poland and Portugal have two months to reply and take the necessary measures. In the absence of a full communication of all national implementing measures, the Commission may decide to refer the case to the Court of Justice of the European Union.
Copyright – internationaltaxplaza.info
Follow International Tax Plaza on Twitter (@IntTaxPlaza)
