woensdag 17 juni 2015

Tax ruling practice

The European Commission has enlarged its state aid investigation into private tax ruling practices to cover all 28 European Union States. On 8 June 2015, the European Commission announced its next steps in its EU-wide State aid review of Member States’ tax ruling practices.

Definition (OECD’s Consolidated Application Note, 2004)

“Any advice, information or undertaking provided by a tax authority to a specific taxpayer or group of taxpayers concerning their tax situation and on which they are entitled to rely”

Typical conditions:

-          facts accurately presented;

-          taxpayer abides by the terms of the ruling.

Policy rationale

-          higher certainty of applicable tax law;

-          higher compliance by taxpayers;

-          lower litigation.

State aid

Tax rulings are generally not as such a problem under EU state aid rules. However, if a tax ruling results in a Member State providing selective advantages to specific companies or groups of companies, this distorts competition in the Single Market in breach of EU state aid rules.

Under the State aid rules contained in the EU treaties, State aid is an advantage given by a Member State to specific companies (or specific sectors of the economy), which affects competition within the EU. This advantage is not restricted to beneficial tax treatment: it can either be measures granting positive benefits (such as direct subsidies) or measures which enable a business to mitigate costs it would otherwise have incurred.
The Commission opened the state aid investigation February 3, noting that deductions granted through Belgium’s ruling system usually amount to more than 50 percent and sometimes up to 90 percent of the company’s profits.
The rulings allow multinational entities in Belgium to reduce their corporate tax liability by “excess profits” that allegedly result from the advantage of being part of a multinational group. The Belgian tax authorities argue that each company of a multinational group should be taxed as if it was independent, and that any excess profits should not be taxed in Belgium and are thus exempt from corporate taxation.
The European Commission has announced that its current view is that Belgium’s excess profits tax ruling system provides for a selective advantage tantamount to State aid, and has requested stakeholder comments on this determination by July 5.

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