BRUSSELS | MAY 2020
1.OECD Update on International Work Programme
The OECD held a Tax Talks Webcast in May concerning the recent and upcoming developments in the OECD’s international tax work, not only in relation to the tax challenges presented by the COVID-19 crisis, but also as regards continuity on its programme of work.
In relation to progress on the work on taxation of the digital economy, a virtual meeting will be held by the Inclusive Framework in July to discuss progress made by the working groups. Pascal Saint-Amans stated that although one or two countries have requested the work of the OECD on the digital economy be delayed, the majority of other countries see an increased need to progress the work and reach a consensus in accordance with the original timeline, given further unilateral digital taxes being introduced.
It is expected that details of the key policy features will be agreed and made public in October, with the report on the final solution to be produced for the G20 by the end of the year. Good technical progress is reportedly being made in relation to both pillars, with the so-called “building blocks” being examined by the working groups presented during the discussion. However, notwithstanding the progress being made, Pascal Saint-Amans stated he does not exclude some staged process, with some aspects of the package being progressed further in 2021, given the shift in the timeline for agreement to be presented in October.
Speaking recently concerning the trade implications of any agreement at international level, Pascal Saint-Amans reportedly stated “Interestingly, I would see the impact of COVID on trade as probably pulling some of the teeth out of the mouth of 301, the threat by the U.S. to take sanctions against countries moving unilaterally,” Saint-Amans said. “We can see Indonesia, India, Nigeria, Egypt joining France, the U.K., Spain, Italy, Austria, Turkey, and I could name many others that are going to move if we don’t have the solution very quickly.”
2. EU Updates List of High-Risk Third Countries
As part of the European Commission’s Action Plan for a comprehensive Union policy on preventing money laundering and terrorist financing, the Commission published a Revised Methodology for identifying high risk third-countries with deficiencies in their money- laundering and counter terrorist financing regimes. It aims to improve transparency in the process by “ (i) the interaction between the EU and FATF listing process; (ii) an enhanced engagement with third countries; and (iii) reinforced consultation of Member States experts.”
In addition, the Commission has published an updated List of High-Risk Third Countries, by way of Delegated Regulation, in line with its revised methodology. The list has been submitted to the European Parliament and Council for approval, which ordinarily should occur within one month.
The Regulation proposes to add the Bahamas, Barbados, Botswana, Cambodia, Ghana, Jamaica, Mauritius, Mongolia, Myanmar/Burma, Nicaragua, Panama and Zimbabwe to the List, and removes from the list Bosnia-Herzegovina, Ethiopia, Guyana, Lao People’s Democratic Republic, Sri Lanka and Tunisia. Afghanistan, Iraq, Pakistan, Syria, Trinidad and Tobago, Uganda and Yemen remain on the list.
3. OECD Hosts BEPS Action 13 Consultation Webinar
A digital public consultation was held on 12 – 13 May by the OECD concerning the 2020 review of BEPS Action 13 Country-by-Country reporting, focusing on improvements to the minimum standard for high level transfer pricing risk assessment, BEPS-related risks, and analysis of various aspects concerning the reporting standards.
The public consultation was recorded and can be replayed via the OECD’s website.
4. EU to Postpone Reportable Cross-Border Arrangement Deadlines
The European Commission has published proposals for Council decisions to postpone deadlines imposed by the EU Directive on Administrative Cooperation by 3 months, as well as the entry into force of the VAT E-commerce package by 6 months.
This follows on from public requests made by financial and professional association organisations, seeking leniency in the enforcement of penalties and deadlines contained within the Directive due to the extraordinary consequences of the COVID-19 outbreak which have resulted in severe disruption across the European economy.
As concerns the Directive on Administrative Cooperation, the proposal would:
Defer the time limit for exchanges of information on Reportable Financial Accounts by 3 months, i.e. until 31 December 2020;
- Change the date for the first exchange of information on reportable cross-border arrangements that feature in Annex IV to Council Directive 2011/16/EU from 31 October 2020 to 31 January 2021;
- Change the date for the beginning of the period of 30 days for reporting cross- border arrangements which are included in Hallmarks listed in Annex IV to Council Directive 2018/822/EU from 1 July 2020 to 1 October 2020;
- Change the date for the reporting of the ‘historical’ cross-border arrangements (i.e. arrangements that became reportable from 25 June 2018 to 30 June 2020) from 31 August 2020 to 30 November
The Commission has also included in the proposal concerning the Directive on Administrative Cooperation the possibility of extending the reporting deadlines for a further 3 months, depending on the continued evolution of the coronavirus impact on the EU.
As concerns the VAT e-commerce package, the proposals would “only concern the date of application of the already adopted legal framework of the VAT e-commerce package set out in the VAT Directive. The date of application shall be postponed by six months. This means that the rules shall be applied as of 1 July 2021 instead of 1 January 2021. Consequently, Member States shall adopt and publish their transposition measures by 30 June 2021 instead of 31 December 2020.”
The proposals will be considered by the Council as a matter of priority.
5.Countries Agree on COVID-19 Taxation of Cross-Border Workers
In recent weeks, various countries have agreed on the taxation of cross-border workers during the COVID-19 outbreak period. This follows after OECD guidance was published analysing tax treaty implications concerning certain tax issues raised by the circumstances surrounding the COVID-19 outbreak, such as potential creation of a permanent establishment or change in the place of effective management on the basis of a cross- border employee carrying out duties remotely, as well as other issues concerning cross- border workers and changes in the residence status of workers.
Agreements have been concluded between Belgium and the Netherlands, the Netherlands and Germany and Germany and Belgium, with countries generally agreeing that days worked at home due to COVID-measures would count as days worked in the contracting state. Some agreements deal with more specific cases versus a general agreement. Further agreements are expected to be concluded in the coming weeks.
6.Commission Expands Temporary State Aid Framework
The European Commission has expanded the Temporary State Aid Framework adopted in March to assist Member States in dealing with the economic impact of the COVID-19 outbreak. To minimise the economic impact of the COVID-19 outbreak, the Framework allows Member States to provide aid by: providing grants, selective tax advantages, and advance payments of up to 800,000 Euro; providing State guarantees for loans taken by businesses; subsidising public loans to companies, putting in place safeguards for banks providing State aid to the economy; and providing short-term export credit insurance.
The Commission has now expanded the Framework to include criteria for Member States to apply when providing recapitalisation and subordinated debt to companies, to protect the EU level playing field.