Ecofin meeting: country by country reporting adopted / no agreement on ATAD

On 25 May 2016, the EU Ecofin Council discussed the European Commission’s Anti-Tax Avoidance Package of 28 January 2016, formally adopting the proposal including in the EU Administrative Cooperation Directive the filing of country by country reports by large multinationals to tax authorities and the automatic exchange of the reports among these. EU-based companies will already have to report from the 2016 fiscal year. Parent companies from non-EU countries have to file reports through their EU subsidiaries from the 2017 fiscal year.

This measure which implements the OECD/G20 BEPS Action 13 Recommendation into EU law had already been politically agreed at the Council meeting on 8 March; the European Parliament has expressed its support on 12 May.

On the proposal for an Anti-Tax Avoidance Directive (ATAD), the Dutch Council presidency had presented a new compromise proposal but no agreement could be reached. According to press reports, the switchover clause may be dropped in the course of negotiations; ministers also agreed, upon request of the UK, to request the Commission to put forward a more comprehensive proposal on hybrid mismatches by October. The next date for reaching political agreement on the proposal will be 17 June 2016.

The Council adopted conclusions on two other parts of the Package: the two Communications on an external strategy for effective taxation, announcing a common EU methodology for blacklisting tax havens and developing measures against these, and the recommendation on tax treaty abuse and permanent establishments (PE).

Ministers agreed to draw up a common list of tax havens in 2017; criteria should be defined by September 2016, taking into account the work of the OECD Global Forum on cooperativeness of jurisdictions.

As regards treaty abuse and PE, the Council welcomed the proposed provisions with regard to a principal purpose test and permanent establishments to be included in bilateral tax treaties agreed by a member state, stressing that it also considers limitation on benefits clauses helpful.