| OECD BEPS | EU ACTION | |
| Action 1: Digital Economy | Direct Tax: The digital economy is the whole economy, so ring fenced solutions are not appropriate. OECD BEPS actions in general should address risks posed by digital economy. VAT: VAT should be paid in country of consumer and States should provide simplified systems for businesses to pay it. | Direct Tax: EU agrees with OECD assessment that no special action needed. Situation will be monitored to see if general anti-avoidance measures are sufficient to address digital risks. VAT: VAT is paid in country of consumer for e-commerce sales. Simplified payment system in place for certain digital services since 2015, which the Commission will propose to extend to tangible goods in 2016 (MOSS). |
| Action 2: Hybrid Mismatch Arrangements | Specific recommendations to link the tax treatment of an instrument or entity in one country with the tax treatment in another, to prevent mismatches. | ATA Directive includes a provision to address hybrid mismatches. |
| Action 3: Controlled Foreign Companies (CFCs) | Best practice recommendations for implementing CFC rules. | ATA Directive includes provisions on CFC rules, for within the EU and externally.
|
| Action 4: Interest Limitation | Best practice recommendations on limiting a company's or group's net interest deductions. | ATA Directive includes provisions to limit interest deductions, for situations within the EU and externally. |
| Action 5: Harmful Tax Practices Action 5: Harmful Tax Practices | Tax rulings: Mandatory spontaneous exchange of relevant information. Patent Boxes: Agreement on "Nexus Approach" to link tax benefits from preferential regimes for IP to the underlying economic activity. | Tax rulings: Mandatory automatic exchange of information on all cross-border rulings and APAs from 2017. Patent Boxes: Member States agreed to ensure that their Patent Boxes are in line with the nexus approach (Code of Conduct Group, 2014). |
| Action 6: Treaty Abuse | Anti-abuse provisions, including a minimum standard against treaty shopping, to be included in tax treaties. Choice of either Limitation of Benefits (LOB) or Principle Purpose Test (PPT) or a combination of both. | ATA Recommendation on Tax Treaties encourages Member States to use an EU-compatible PPT approach. LOB clauses are less easily adapted to the needs of the Single Market. |
| Action 7: Permanent Establishment | Definition of Permanent Establishment (PE) is adapted in Model Tax Convention, to prevent companies from artificially avoiding having a taxable presence. | ATA Recommendation encourages MSs to use the amended OECD approach. |
| Actions 8 -10: Transfer Pricing Intangibles Risk and Capital High Risk Transaction | Arm's Length Principle and Comparability Analysis confirmed as pillars of Transfer Pricing. More robust framework for implementing this standard. | Joint Transfer Pricing Forum (JTPF) working on EU approach to implementing BEPS conclusions. Work includes looking at more economic analysis in TP, better use of companies' internal systems, and improving TP administration. |
| Action 11: Measuring and monitoring BEPS | The OECD aims to publish new statistics on corporate taxation and the scope and revenue impact of BEPS. | EU study underway on the impact of some types of aggressive tax planning on Member States' effective tax rates. The tax rates are based on a representative firm and calculated by using a neoclassical investment model. |
| Action 12: Disclosure of Aggressive Tax Planning | Recommendation to introduce rules requiring mandatory disclosure of aggressive or abusive transactions, structures or arrangements. | To be discussed in the Code of Conduct. The Commission will keep the issue under review, as part of its tax transparency agenda. |
| Action 13: Transfer Pricing documentation and Country-by-Country Reporting | MNEs required to file an annual Country-by-Country report (CbCR) to tax administrations on key financial data, as well as a master file and local file. Information for tax authorities only – not public CbCR. | ATA Package proposes legally binding requirement for Member States to implement the OECD CbCR provisions. EU-TPD, broadly in line with the master file and the local file, but to be reviewed to take into account the conclusions of the BEPS project. Work ongoing on feasibility of public CbCR in the EU. |
| Action 14: Dispute Resolution | G20/OECD countries agreed to measures to reduce uncertainty and unintended double taxation for businesses, along with a timely and effective resolution of disputes in this area. A number of countries have committed to a mandatory binding arbitration process. | In 2016, the Commission will propose measures to improve dispute resolution within the EU, as foreseen in the June 2015 Action Plan. |
| Action 15: Multilateral Instrument to modify tax treaties | Interested countries have agreed to use a multilateral instrument to amend their tax treaties, in order to integrate BEPS related measures where necessary | ATA Recommendation sets out the Commission's views on Treaty related issues and their compatibility with EU law, which MSs should consider in their negotiations on the Multilateral Instrument. |
http://ec.europa.eu/priorities/internal-market/index_en.htm
http://www.oecd.org/ctp/beps.htm
See European Parliament (2015a) and European Parliament (2015b)
European Parliament (2015a)
For more details, see European Commission (2015b)
For a review of existing indicators and the associated challenges, see OECD (2015i).
IMF (2014)
Dover et al. (2015)
The study develops further a method initially introduced in a study by the IMF (2014).
Excluding Spain, Hungary and Finland
Lee et al. (2015)
Egger, P., W. Eggert and H. Winner (2010)
Finke, K. (2013)
Sullivan, M. (2004)
Clausing, K. A. (2011)
Heckemeyer, J. H. and M. Overesch (2013)
According to Eurobarometer (2012) 88% of Europeans (EU-27) supported tighter rules on tax avoidance and tax havens: http://ec.europa.eu/public_opinion/archives/eb/eb78/eb78_cri_en.pdf
European Commission (2015b)
For example, the average standard VAT rate has increased by 2 percentage points over the period 2007-2014 in the EU. For a detailed description of tax reforms in Member States, see the Taxation Trends in the European Union 2015 and the Report Tax Reforms in EU Member States 2015.
Evidence from behavioural economics shows that fairness (e.g. that the tax administration or the government treats taxpayers in a consistent and transparent way) is an important determinant of tax morale. If anecdotal evidence in the public opinion suggests that some taxpayers receive a different treatment or can easily avoid taxes, this might deteriorate the willingness to contribute to public revenues via taxes in general. Alm and Torgler (2006) analyse in an empirical study a number of tax morale determinants.
European Commission (2012a)
European Commission (2015b)
Commission Expert Group on Taxation of the Digital Economy – Report, 2014,
OECD (2015a)
European Commission (2015d)
European Council Conclusions, 18 December 2014, EUCO 237/14, http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/146411.pdf.
Resolution of the Council 98/C 2/01
European Commission (2012a)
European Commission (2012c)
European Commission (2012b)
However, information will need to be communicated on all advance cross-border rulings and advance pricing arrangements issued, amended or renewed since January 2014. Information on advance cross-border rulings and advance pricing arrangements issued, amended or renewed in 2012 and 2013 will need to be exchanged if those rulings are still valid.
See also VVA Consulting and ZEW (2015)
European Parliament (2015a)
European Parliament (2015a)
European Parliament (2015a)
Vella, J. (2015)
Evers, L. K. (2015)
European Parliament (2015a)
European Parliament (2015b)
European Parliament (2015a)
European Parliament (2015a)
European Parliament (2015a)
OECD (2013a)
OECD (2013b)
All EU Member States that are OECD countries, plus Croatia, Latvia and Lithuania.
OECD/G20 BEPS, Explanatory Statement, 2015 Final Reports
For more details, refer to OECD (2015b)
Cross-border payments that are deductible under the laws of one jurisdiction and are not included in the ordinary income under the laws of the other jurisdiction where the payment is received.
Payments that produce two deductions in respect of the same payment, through for example deductible hybrid payments or deductible payments made by a dual resident
Outcome where payments are deductible under the rules of the payer jurisdiction and are set-off by the payee against a deduction under a hybrid mismatch arrangements.
i) For D/NI outcomes: the primary response consists in denying deduction of the income at the level of the payer, while the defensive rule would be to include hybrid payments in the ordinary income of the payee.
ii) For DD outcomes: the primary response is to deny either the parent or the resident company deduction of the income. The proposed defensive rule denies the payer deduction of the income in the case of deductible payment made by a hybrid.
iii) For indirect D/NI, the primary response consists in denying the payer deduction of the income (no defensive rule is deemed necessary in that case).
For more details, refer to OECD (2015c)
Under the entity approach, either all or none of the income will be included depending on whether the majority of that income falls within the definition of CFC income.
Under the transactional approach, some income can still be included even if the majority does not fall within the definition of CFC income, therefore being in general more accurate in the attribution of income.
For more details, refer to OECD (2015d)
The fixed ratio rule limits an entity’s net interest deductions to a fixed percentage of its gross operating profits measured using earnings before interest, taxes, depreciation and amortisation (EBITDA). This rule, which is relatively straightforward to apply, ensures that an entity’s interest deductions are directly linked to its economic activity. The possible ratio would be in a range of 10%-30%.
For more details, refer to OECD (2015f)
For more details, refer to OECD (2015g)
For more details, refer to OECD (2015k)
EU Joint Transfer Pricing Forum, JTPF Program of Work 2015 -2019 (section 3.2.2), http://ec.europa.eu/taxation_customs/resources/documents/taxation/company_tax/transfer_pricing/forum/jtpf0052015programmeofwork.pdf
For more details, refer to OECD (2015a)
For more details, refer to OECD (2015e)
For example, the type of rulings exchanged is broader and the exchange is foreseen with all Member States.
For more details, refer to OECD (2015h)
For more details, refer to OECD (2015i)
For more details, refer to OECD (2015n)
For more details, refer to OECD (2015j)
For more details, refer to OECD (2015l)
For more details, refer to OECD (2015m)
Ramboll Management Consulting and Corit Advisory (2016)
Tax rules and practices of Member States were examined as of June 2015.
Aggressive Tax Planning is defined as “taking advantage of the technicalities of a tax system or of mismatches between two or more tax systems for the purpose of reducing tax liability. It may result in double deductions (e.g. the same cost is deducted both in the state of source and residence) and double non-taxation (e.g. income which is not taxed in the source state is exempt in the state of residence)".
For a complete overview of all indicators identified by the ATP Study, refer to Annex A1.
Based on the description provided in pp. 25-50 of the ATP Study
OECD (2013a)
OECD (2014)
OECD (2013a)
OECD (2013a)
In other words, the ATP study identified that 26 Member States do not score on indicator 32 (No general or specific anti-avoidance rules to counter the model ATP structures).
Furthermore, if a MS has a withholding tax on interest but exempts or refunds it under certain circumstances, the Member State would be more exposed to being used in an ATP structure if the exemption or refund is granted without any beneficial owner test.
In general, it is important to recall that the main cause for hybrid mismatches is that the tax classification largely depends on different criteria and case law in each Member State. This makes it therefore difficult to say precisely which Member States should score on an indicator. Both sides are equally important and this certainly calls for a coordinated approach. A choice had however to be made in the study on how to define the indicators in order to allow for a review per Member State.
Annex 5 of the ATP Study
European Commission (2015a)
European Commission (2012c)
For simplicity reasons, the Directive foresees that all the income of the subsidiary (i.e. the CFC) will be taken into account when the conditions are met. This differs from the OECD/G20 BEPS outcome which allows countries to distinguish between types of incomes.
LOB rules are designed to curb treaty shopping essentially by denying access to the benefits (e.g. reduced withholding tax rates for dividends, interest and/or royalties) of a tax treaty (between country A and country B), in situations where the beneficial owners (e.g. shareholders) of the recipient of the income (e.g. corporate entity) are not residents in the same country as the recipient of the income (i.e. A or B). They are therefore by definition not easy to reconcile with the objectives of a Single Market.
Council Directive 2011/16/EU of 15 February 2011 on administrative cooperation in the field of taxation and repealing Directive 77/799/EEC (OJ L 64, 11.3.2011, p. 1).
https://ec.europa.eu/europeaid/sites/devco/files/com_collectmore-spendbetter_20150713_en.pdf
https://sustainabledevelopment.un.org/post2015/transformingourworld
Particularly in the frame of the EU "Collect more - Spend better" strategy (https://ec.europa.eu/europeaid/sites/devco/files/com_collectmore-spendbetter_20150713_en.pdf) and the Addis tax initiative (http://www.addistaxinitiative.net/).
In annex A4, the "scoreboard of indicators" approach is explained in greater details.
Ramboll Management Consulting and Corit Advisory (2016)
Ramboll Management Consulting and Corit Advisory (2016).
The indicators relative to countries that are necessarily outside of the EU are not presented per structure.
Ramboll Management Consulting and Corit Advisory (2016)
For instance, the ATP study identifies how offshore jurisdictions's tax rules could be used in various structures of aggressive tax planning (see above section 2.2.1).
Zoromé, 2007
Dharmapala and Hines (2009); Konrad and Stolper (2015).
Some of the World Governance Indicators could be used, which include voice and accountability, political stability, government effectiveness, regulatory quality, rule of law and control of corruption.
Kar D. and J. Spanjers (2014)
The recently released financial secrecy index (FSI) identified 15 qualitative indicators that indicate non-transparency and can be considered as pre-conditions for facilitating tax evasion (but also possibly other activities such as money laundering). See Tax Justice Network, 2015, http://www.financialsecrecyindex.com/index.php/introduction
In the framework of the OECD/G20 BEPS Action 11 (OECD (2015i)), many different indicators (based both on micro- and macro-data) were reviewed to identify the scale and economic impact of BEPS, to track changes in BEPS over time and to monitor the effectiveness of measures implemented to reduce BEPS. Existing data sources were also examined. In this context, it is noted that, while firm-level data are needed for a better analysis of BEPS, current sources suffer among others of a sampling bias (e.g. too Eurocentric, weak coverage of low-income countries).
It should be recalled that economic indicators tend to be released with a time-lag and this is even more the case for "softer" indicators gathered through surveys or by combining several strands of data. In addition it should be emphasized that the indicators would inevitably reflect reforms undertaken by countries to address ATP with a delay because of inertia both in economic structures and in perception.
More refined indicators like implicit percentiles could also be used, as they would also allow reflecting the distance between countries. A simple ranking would indeed not show if countries ranked for instance first and second have nearly the same values, or if they differ by a full order of magnitude (while estimated percentiles would give such an indication). However, given that the main purpose of the scoreboard is preselection, this additional information was not deemed essential at this stage.
http://www.financialsecrecyindex.com/introduction/fsi-2015-results
Tax justice network, 2015, Financial secrecy index 2015 Methodology, 101p, version dated 16.10.2015. Up to 204 criteria covering information on the legal, administrative, regulatory, and tax structures of the chosen jurisdictions have been surveyed. About 46 of the 204 criteria employed are then used to construct 15 different key secrecy indicators (KFSIs). The 15 indicators cover 4 areas: (a) knowledge of beneficial ownership, (b) corporate transparency, (c) efficiency of tax and financial regulations, and (d) international standards and cooperation. Missing information is considered an indication of secrecy. The 15 key qualitative indicators are themselves aggregated into a single one and then finally weighted through the use of the country's absolute share in the world total trade of financial services; this gives a single ranking, which is subject to the choices made regarding indicator selection, aggregation and weighing.
