The European Commission has repeatedly expressed its ambition to implement the Two-Pillar agreement in a coherent and consistent way across Member States. On December 22, 2021, a mere two days after the Inclusive Framework released its Pillar Two package, the EC proposed a Directive to implement Pillar Two for large multinational groups operating in the European Union. The Directive would implement the GloBe Model rules only, leaving Pillar One for another time.

The proposal sets out how the effective tax rate will be calculated per jurisdiction, and includes binding rules that will ensure large groups in the EU pay a 15% minimum rate in every jurisdiction in which they operate. The design elements of the Directive consist of the OECD Model rules and the -still to be released-Commentary and detailed implementation guidance. The Commission proposes that the Directive be finalized by the middle of 2022 and transposed into national law in Member States and effective on January 1 ,2023. The timetable envisaged by the Commission is ambitious and raises an issue with regard to the OECD process. Indeed the explanatory Commentary is not scheduled to be released by the OECD before January or February and the implementation guidance will not be available until then end of 2022 or even early 2023.

It remains to be seen whether the EU is overly ambitious particularly in light of the fact that the US legislation that would implement Pillar Two is delayed and uncertain.


Continue Reading EU Sets Pillar Two In Motion

The European Union passed a sixth version of its Directive on Administrative Cooperation in the Field of Taxation, known as “DAC 6” (Directive (EU) 2018/82 2), on 25 May 2018. DAC 6 introduces reporting requirements for professional intermediaries (and under certain circumstances tax payers) relating to their involvement in a wide range of cross-border arrangements and transactions featuring “hallmarks” of tax planning concerning one or more EU Member States or the UK. These are referred to in DAC 6 as “reportable cross-border arrangements“. Specific hallmarks relate to transfer pricing (category E) and they do apply without main benefit test.

Failure to comply with DAC 6 could imply significant penalties under domestic legislations of the EU member states (and the UK) as well as reputational risks for not only intermediaries ( law firms, accounting firms , banks …) but also for businesses and individuals.


Continue Reading Always More Transparency in the EU: DAC6 and Transfer Pricing

This week is a busy week for the digital industry. The EU Court of Justice is closing two cases involving digital-economy giants. At the same time, the EU Commission released its new Tax Package covering three separate but related initiatives: a Tax Action Plan (25 distinct actions) to make taxation “simpler, fairer and better attuned to the modern economy over the coming years,” a proposal on administrative cooperation (“DAC 7”) extending EU tax transparency rules to digital platforms, and a Communication on tax good governance proposing a reform of the Code of Conduct, which addresses tax competition and tackles harmful tax practices within the EU. DAC 7 and the new transparency rules will directly impact the digital industry.

Continue Reading The Digital Industry in the EU Spotlight