On May 23, 2024 the European Commission published the key decisions of the May 2023 infringements package. The package contains a few very interesting decisions in the area of tax.

The Commission sent letters of formal notice to Germany, Hungary, Poland and Romania in which they call on these jurisdictions to fulfil their obligation to cooperate with other Member States on tax transparency of income realized through digital platforms.

• Furthermore, the Commission sent a reasoned opinion to Spain in which it urges Spain to change its rules on taxation of non-resident taxpayers' capital gains where they are paid in instalments.
• Also reasoned opinions were sent to Spain, Cyprus, Latvia, Lithuania, Poland and Portugal for failure to notify measures for the transposition into national law of the Pillar 2 Directive.
• In a further reasoned opinion the Commissions requests Sweden to amend its rules on preliminary income taxation of foreign contractors.
• The Commission also sent a reasoned opinion to Greece in which it urges Greece to change its legislation on car taxation and registration.

And last but not least the Commission Referred Spain to the Court of Justice of the European Union (CJEU) for having introduced additional conditions in Spanish law restricting EU harmonised rules on divisions of companies (Council Directive 2009/133/EC, “the Merger Directive”).

Letters of formal notice

The Commission calls on Germany, Hungary, Poland and Romania to fulfil their obligation to cooperate with other Member States on tax transparency of income realised through digital platforms

The European Commission decided to open an infringement procedure by sending a letter of formal notice to Germany (INFR(2024)2043), Hungary (INFR(2024)2045), Poland (INFR(2024)2047) and Romania (INFR(2024)2048) for failing to exchange timely information on income earned by individuals and companies through the use of online platforms. Directive (EU) 2021/514 of 22 March 2021 amending Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC7) introduced, as of 1 January 2023, new tax transparency rules for transactions on digital platforms. The objective is to better identify situations where tax should be paid. The reporting should happen at two stages. First, online platforms were obliged to collect the information about the income earned by individuals and companies throughout 2023 and report it to the Member State of the platform. Then, that Member State had to exchange that information by 29 February 2024. The timely reporting and exchange is essential for ensuring a level playing field in the Union and the smooth functioning of DAC7 across all Member States. Germany, Hungary, Poland and Romania have failed to fulfil their obligation in exchanging the necessary information with tax authorities of other Member States which hinders them to enforce local tax laws. The Commission is therefore sending a letter of formal notice to Germany, Hungary, Poland and Romania, who now have two months to respond and address the shortcomings raised by the Commission. In the absence of a satisfactory response by the Member States, the Commission may decide to issue a reasoned opinion.

Reasoned opinions

The Commission urges Greece to change its legislation on car taxation and registration

Today, the European Commission decided to send a reasoned opinion to Greece (INFR(2020)4001) for failing to amend its rules on car registration and taxation. According to the case-law of the Court of Justice, Article 110 of the Treaty is infringed where the taxes on imported cars are calculated differently than for similar domestic cars, leading to higher taxes being imposed on the imported product. Under the provisions currently in force in Greece, the registration tax, imposed on all vehicles, is higher for certain categories of imported second-hand vehicles than for similar domestic second-hand vehicles. Moreover, the Greek environmental tax, imposed on certain categories of vehicles, discriminates between domestic second-hand vehicles and second-hand vehicles purchased in another Member State and subsequently registered in Greece. The Commission considers that the Greek legislation is not compatible with Article 110 of the Treaty since vehicles imported from another Member State are taxed more heavily compared to domestic vehicles. At the same time, Greece prohibits the registration of certain second-hand vehicles imported to Greece, while no similar prohibition is imposed to the corresponding categories of domestic vehicles. This prohibition is a clear restriction to the free movement of goods and contrary to Article 34 and Article 36 TFEU. Therefore, the Commission has decided to issue a reasoned opinion to Greece, which now has two months to respond and take the necessary measures. Otherwise, the Commission may decide to refer the case to the Court of Justice of the European Union.

The Commission urges Spain to change its rules on taxation of non-resident taxpayers' capital gains where they are paid in instalments

Today, the European Commission decided to send a reasoned opinion to Spain (INFR(2021)4035) for failing to align its rules on the taxation of capital gains obtained in Spain by non-resident taxpayers with the free movement of capital (Article 63 TFEU). For capital gains coming from a transfer of assets when the payment is deferred longer than a year or is paid in instalments in a period longer than a year, resident taxpayers have the option to pay the tax when the capital gain accrues or defer it and pay it proportionally based on the cash flow. However, non-resident taxpayers are not offered this option of deferral and have to pay the tax when the capital gains accrue at the time of the transfer of the assets. The Commission opened an infringement procedure by sending a letter of formal notice to Spain on 2 December 2021. Since Spain did not adapt its legislation to EU law requirements, the Commission has decided to issue a reasoned opinion to Spain, which now has two months to respond and take the necessary measures. Otherwise, the Commission may decide to refer the case to the Court of Justice of the European Union.

The Commission sends reasoned opinions to Spain, Cyprus, Latvia, Lithuania, Poland and Portugal for failure to notify measures for the transposition into national law of the Pillar 2 Directive

Today, the European Commission decided to send a reasoned opinion to Spain (INFR(2024)0049), Cyprus (INFR(2024)0020), Latvia (INFR(2024)0094), Lithuania (INFR(2024)0080), Poland (INFR(2024)0113), and Portugal (INFR(2024)0119) for failing to notify measures for the transposition into national law of Council Directive (EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union (Pillar 2 Directive). The Commission considers the two-pillar solution which requires that all major multinational corporations must pay a minimum effective tax rate of 15%, as top priority. All EU Member States were required to bring into force the laws necessary to comply with the Pillar 2 Directive by 31 December 2023. To date, most of the EU Member States have met these obligations. However, Spain, Cyprus, Latvia, Lithuania, Poland and Portugal have still not notified their national implementing measures Therefore, the Commission has decided to issue a reasoned opinion to these Member States who now have two months to respond and take the necessary measures. Otherwise, the Commission may decide to refer the case to the Court of Justice of the European Union.

The Commission requests Sweden to amend its rules on preliminary income taxation of foreign contractors

Today, the European Commission decided to send a reasoned opinion to Sweden (INFR(2023)4007) requesting it to bring its legislation on preliminary income taxation into line with EU law requirements. 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 (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 establishments and hence, no income tax liability in Sweden, infringes the freedom to provide services (Article 56 of the TFEU and Article 36 of the EEA Agreement). Therefore, the Commission has decided to issue a reasoned opinion to Sweden, which now has two months to respond and take the necessary measures. Otherwise, the Commission may decide to refer the case to the Court of Justice of the European Union.

Referral to the Court of Justice

The Commission requests Spain to abolish restrictive additional conditions for tax deferrals under the Merger Directive in case of divisions of companies

Today, the European Commission decided to refer Spain (INFR(2018)4084) to the Court of Justice of the European Union for having introduced additional conditions in Spanish law restricting EU harmonised rules on divisions of companies (Council Directive 2009/133/EC, “the Merger Directive”). The Merger Directive ensures that business reorganisations, such as mergers and divisions, are not hampered by taxation at the time of restructuring. In principle, taxation of capital gains resulting from such reorganisation should be deferred to a later sale or disposal of the assets and shares. However, Spanish law sets restrictive conditions for total divisions of companies. The tax deferral is not granted if the shareholders of the divided company do not receive the same proportion of shares in all and each of the companies resulting from the division, unless the acquired assets are branches of activity. The Commission sent a reasoned opinion in November 2019 to Spain. Since then, the Spanish implementation of the Merger Directive is still not fully compliant with EU law and creates an unlevel playing field for companies operating across the internal market. As the Spanish authorities did not take any appropriate action to comply with the Commission's reasoned opinion, the Commission considers that efforts by the authorities, to date, have been insufficient and is therefore referring Spain to the Court of Justice of the European Union. More information is in the press release.

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