The European Commission intends to cast its net wide, in its legislative proposal to shed light on the work of tax intermediaries to be presented on 21 June. According to a draft proposal of which EUROPE has had sight, the scope of application will include all types of intermediary and taxpayer.
This is the last raft of measures in the pipeline since the Panama Papers scandal broke just over a year ago, revealing to the world the scale of offshore companies created by the Panamanian law firm Mossack Fonseca.
“Recent leaks, including Panama Papers, have highlighted how certain intermediaries appear to have effectively helped their clients to make use of aggressive tax planning arrangements in order to reduce the tax burden and conceal money offshore”, the Commission writes in the draft proposal.
The European institution is therefore proposing to amend the directive on administrative cooperation (2011/16) to require intermediaries, in other words any person bearing responsibility towards a taxpayer for devising, promoting, organising or managing the implementation of a cross-border arrangement, specifically a tax planning scheme that could be seen as aggressive within the meaning referred to by the Commission, to submit these schemes to the tax authorities. Taxpayers are defined as any person using arrangements of this kind potentially to optimise their fiscal position.
The arrangements concerned are those that contain at least one of the characteristics listed by the Commission in an appendix to the directive. These cover a broad range of situations, with generic characteristics, others related to the benefits a taxpayer may derive from an arrangement, others specifically covering cross-border transactions, those aiming to circumnavigate the automatic exchange of information or those related to transfer prices.
By way of example, situations related to the transfer of losses from a company to a jurisdiction will be included, or the conversion of income to capital, gifts or other lower-taxed categories of revenue. It will also cover arrangements concerning tax-deductible cross-border payments when at least one of the following conditions is met: - the recipient of the payment is not a tax resident in one of the jurisdictions concerned; - the jurisdiction in which this person pays tax levies no corporate taxation or applies a zero rate or half of the normal average EU rate; - the jurisdiction in question is on the EU list of tax havens.
Exchange details. The tax adviser, or the taxpayer if the tax adviser is resident outside the EU, will be required to send tax planning schemes to the tax authorities within five days of their being drafted and before they enter into force. The member states will then exchange these schemes between themselves on a quarterly basis. The Commission wishes to have limited access to the information, along the lines of its access to the exchange of information on tax rulings. Its interest is largely to ensure that the exchange takes place.
The Commission wants the member states to provide for sanctions should the taxpayer or tax advisor fail to observe the obligation to send plans to the authorities. The member states will have the discretion to define these sanctions, but they must be effective, proportionate and have a deterrent effect. The Commission wants the directive to be implemented from 2019. (Original version in French by Élodie Lamer)