Explanatory Memorandum to COM(2020)197 - Amendment Directive 2011/16 to address urgent need for deferring certain time limits for the filing and exchange of information in the field of taxation due to COVID-19 - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2020)197 - Amendment Directive 2011/16 to address urgent need for deferring certain time limits for the filing and exchange of ... |
|---|---|
| source | COM(2020)197  |
| date | 08-05-2020 |
1. CONTEXT OF THE PROPOSAL
• Reasons for and objectives of the proposal
The COVID-19 outbreak is a severe public health crisis which has affected all Member States. It poses a major challenge for public health care systems and is likely to have severe implications for the Union’s economies for an extended period of time. This situation creates an overwhelming disruption in the life of citizens and businesses, who struggle to carry out their activities due notably to the constraints linked to the lockdowns in many Member States.
In light of these unprecedented circumstances, a number of Member States and persons liable to report information under Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation 1 have requested the deferral of certain deadlines for the filing and exchanging of information under this Directive. More specifically, the requests for deferral pertain to automatic exchanges of information on financial accounts of which the beneficiaries are tax resident in another Member State 2 and reportable cross-border arrangements 3 that feature in Annex IV to Council Directive 2011/16/EU. The severe disruption caused by the COVID-19 pandemic hampers the timely compliance of financial institutions and of the persons liable to report cross-border arrangements and affect negatively the capacity of Member States’ tax administrations to collect and process the data.
This situation requires an urgent and coordinated response within the Union and where relevant at global level. In this regard, it would be useful to take into account the initiative of the Steering Group of the Global Forum with respect to the common reporting standard (CRS) for Reporting Financial Institutions, the latter being transposed in Union law via Council Directive (EU) 2014/107.
It is therefore necessary to defer the deadline for the exchange of information on financial accounts of which the beneficiaries are tax resident in another Member State. This would accordingly allow Member States to adjust their national deadlines for the filing of such information by the Reporting Financial Institutions. In the same vein, the deadlines for filing and exchanging information on cross-border arrangements under Annex IV of Council Directive 2011/16/EU should also be extended.
Meanwhile, it should also be recalled that the exchange of information on financial accounts of which the beneficiaries are tax resident in another Member State and on reportable cross-border arrangements under Annex IV to Council Directive 2011/16/EU is crucial in the fight against tax avoidance and tax evasion in the Union. Member States will need tax revenues to finance their considerable efforts to contain the negative economic impact of the measures against the COVID-19 pandemic. Ensuring tax fairness by preventing tax avoidance and tax evasion becomes more important than ever. While the current crisis calls for adjusting the calendar for filing and transmitting some tax data, it should not lead to relinquishing the efforts of national administrations for ensuring fair taxation.
The length of the deferral should not disrupt the established structure and functioning of Council Directive 2011/16/EU. Rather, it should be of limited duration, in proportion to the practical difficulties caused by a temporary lockdown aiming at containing the pandemic.
Considering the current uncertainty about the evolution of the COVID-19 pandemic, it is useful to provide for the possibility of one further extension of the deferral period for filing and exchanging information. This would be necessary if during part or all of the period of deferral, the exceptional circumstances of severe risks for public health caused by the COVID-19 pandemic persist and Member States have to either implement new or continue existing lockdown measures. Such extension should not disrupt the established structure and functioning of Council Directive 2011/16/EU. Rather, it should be of a limited and pre-determined duration in proportion to the practical difficulties caused by the temporary lockdown. The extension should not affect the essential elements of the obligation to report and exchange information under this Directive. It may merely extend the deferral of the deadline for complying with such obligations while ensure that no information remains without eventually being exchanged.
• Consistency with existing policy provisions in the policy area
Since the beginning of the COVID-19 outbreak, the Commission has received a considerable number of questions and requests and has embarked on a number of initiatives in order to mitigate the impact of the crisis. In this context, DG TAXUD has already taken several decisions, mainly in the area of Customs and VAT, in order to urgently resolve problems or at least provide reassurance. These are summarized on the TAXUD website ( COVID-19 TAXUD response 4 ).
The proposed initiative is consistent with the measures adopted by the Commission to take into account the exceptional present difficulties faced by businesses and national tax administrations. It responds to the requests made by a number of persons liable to file information under Council Directive 2011/16/EU and by Member States for deferring the time limits for filing and exchanging information under Council Directive 2011/16/EU.
The proposed initiative is also aligned with that of the Steering Group of the Global Forum concerning the CRS for Reporting Financial Institutions to extend the deadline for the exchange of information from the end of September 2020 to the end of December 2020.
The Council also organised an informal meeting with Member States on 29 April 2020 where all Member States agreed on the need to defer the filing and exchange of information requirements under Council Directive 2011/16/EU.
2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY
• Legal basis
Articles 113 and 115 of the Treaty on the Functioning of the European Union (TFEU) constitute the legal base of this legislative initiative. Most initiatives linked to harmonising or coordinating the legal framework in the field of direct taxation rely on Article 115 TFEU, whilst indirect tax is dealt with under Article 113 TFEU. The proposed rules aim at amending the specific time limits for filing and exchanging certain information (information on financial accounts and reportable cross-border arrangements), to take into account the current difficulties in complying with the obligations under Council Directive 2011/16/EU due to the COVID-19 crisis. Considering that reportable cross-border arrangements may relate to both direct and indirect tax schemes, both legal bases are relevant to the proposed rules.
• Subsidiarity (for non-exclusive competence)
The proposal fully observes the principle of subsidiarity as set out in Article 5 TFEU. It addresses administrative cooperation in the field of taxation. Legal certainty and clarity for the application of the deferral of certain deadlines under the Directive can only be ensured if there is a coordinated approach to the identified problem across Member States.
• Proportionality
The proposal consists of adjusting existing provisions of the Directive regarding the deadlines applicable for the filing and exchange of certain information, in order to address challenges that persons liable to report information and tax administrations are facing due to the current COVID-19 outbreak. The adjustments do not go beyond what is necessary to achieve the objective of administrative cooperation between Member States. They provide for a deferral, which takes into account the length of confinement/ lockdown measures, and ensure that no information which becomes reportable during the period of deferral will be left unreported or without being exchanged.
• Choice of the instrument
The legal base for this proposal (Article 115 TFEU) lays down explicitly that legislation in this field may only be enacted in the legal form of a Directive.
The proposed Directive also constitutes the sixth amendment to Council Directive 2011/16/EU and follows Council Directives (EU) 2014/107/EU, 2015/2376, 2016/881, 2016/2258 and 2018/822.
3. RESULTS OF EX-POST EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS
• Fundamental rights
This Directive respects the fundamental rights and observes the principles recognised in particular by the Charter of Fundamental Rights of the European Union.
4. DETAILED EXPLANATION OF THE SPECIFIC PROVISIONS OF THE PROPOSAL
The Directive proposes changes to certain time limits for filing and exchanging information under Council Directive 2011/16/EU, more specifically concerning information on financial accounts as provided by Council Directive 2014/107/EU and reportable cross-border arrangements as provided by Council Directive 2018/822/EU.
·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 2020.
Considering the current uncertainty regarding the evolution of the COVID-19 pandemic, the proposed initiative provides for the possibility of extending once the deferral period for the filing and exchange of information. The Commission will be empowered to give such extension by way of delegated acts.