NEW TAX TRANSPARENCY RULES FOR CROSS-BORDER TAX RULINGS AND ADVANCE PRICE ARRANGEMENTS

New transparency rules entered into force on 1 January 2017. EU Member States are obliged to automatically exchange information through a central depository on all new cross-border tax rulings and advance price arrangements that they issue, accessible to all other Member States. The aim is to prevent corporate tax avoidance and to block tax abuse and profit shifting. A tax ruling serves an assurance given by the tax authority to the taxpayer on how certain aspects of taxation will be dealt with in that specific case. An advance pricing arrangement is a type of tax ruling issued by the tax authority to determine the method and other relevant details of pricing to be applied to a transfer of goods or services between companies.

Now in every six months, national tax authorities will send a report to the depository, listing all the cross-border tax rulings and advance pricing arrangements that they have issued. Other Member States will then be able to check those lists and to ask the issuing Member State for more detailed information on a particular ruling. This procedure shall ensure that where one Member State issues a tax ruling or advance pricing arrangement, any other Member State affected is in a position to monitor the situation and the possible impact on its tax revenue. The first exchange should take place by 31 September 2017 at the latest. By 1 January 2018, Member States will also have to provide the same information for all cross-border rulings issued since the beginning of 2012. Member States cannot refuse to supply information solely because this information is held by a bank or other type of financial institution.

This administrative cooperation will be further enhanced so that multinational enterprise groups (MNE Groups) located in the EU or with operations in the EU, with a total consolidated revenue equal or higher than € 750 million will be obliged to file a country-by-country report in 2018. The country-by-country report will include information for every tax jurisdiction in which the MNE Group does business on the amount of revenue, the profit before income tax, the income tax paid and accrued, the number of employees, the stated capital, the retained earnings and the tangible assets. The competent authority of the Member State that received the country-by-country report shall, by automatic exchange, communicate the report to other Member States. Member States shall adopt legislation necessary to comply with these rules, including the effective, proportionate and dissuasive penalties applicable to infringements of the national provisions.