30 Amendments of Fabio DE MASI related to 2016/0011(CNS)
Amendment 61 #
Proposal for a directive
Recital 5
Recital 5
(5) It is necessary to lay down rules against the erosion of tax bases in the internal market and the shifting of profits out of the internal market. Rules in the following areas are necessary in order to contribute to achieving that objective: limitations to the deductibility of interest and royalty income, basic defence measures against base erosion and profit shifting through secrecy or low tax jurisdictions, a clear definition of permanent establishment, exit taxation, a switch-over clause, a general anti-abuse rule, controlled foreign company rules and a framework to tackle hybrid mismatches. Where the application of those rules gives rise to double taxation, taxpayers should receive relief through a deduction for the tax paid in another Member State or third country, as the case may be. Thus, the rules should not only aim to counter tax avoidance practices but also avoid creating other obstacles to the market, such as double taxation.
Amendment 69 #
Proposal for a directive
Recital 6
Recital 6
(6) In an effort to reduce their global tax liability, cross-border groups of companies have increasingly engaged in shifting profits, often through inflated interest or royalty payments, out of high tax jurisdictions into countries with lower tax regimes. The interest and royalty limitation rule iss are necessary to discourage such practices by limiting the deductibility of taxpayers’' net financial costs (i.e. the amount by which financial expenses exceed financial revenues). I and royalty income. With respect to interest costs, it is therefore necessary to fix a ratio for deductibility which refers to a taxpayer’'s earnings before interest, tax, depreciation and amortisation (EBITDA). Tax exempt financial revenues should not be set off against financial expenses. This is because only taxable income should be taken into account in determining up to how much of interest may be deducted. To facilitate taxpayers which run reduced risks related to base erosion and profit shifting, net interest should always be deductible up to a fixed maximum amount, which is triggered where it leads to a higher deduction than the EBITDA-based ratio. Where the taxpayer is part of a group which files statutory consolidated accounts, the indebtedness of the overall group should be considered for the purpose of granting taxpayers entitlement to deduct higher amounts of net financial costs. The interest limitation rule should apply in relation to a taxpayer's net financial costs without distinction of whether the costs originate in debt taken out nationally, cross-border within the Union or with a third country. Although it is generally accepted that financial undertakings, i.e. financial institutions and insurance undertakings, should also be subject to limitations to the deductibility of interest, it is equally acknowledged that these two sectors present special features which call for a more customised approach. As the discussions in this field are not yet sufficiently conclusive in the international and Union context, it is not yet possible to provide specific rules in the financial and insurance sectors.
Amendment 70 #
Proposal for a directive
Recital 6 a (new)
Recital 6 a (new)
(6a) Profit shifting into secrecy or low tax jurisdictions poses a particular risk to Member States' tax proceeds as well as fair and equal treatment between tax avoiding and tax compliant firms, large and small. In addition to the generally applicable measures proposed in this directive for all jurisdictions, it is paramount to deter secrecy and low tax jurisdictions from basing their corporate tax and legal environment on sheltering profits from tax avoidance while at the same time not adequately implementing global standards as regards tax good governance, such as the automatic exchange of tax information, or engaging in constructive non-compliance by not properly enforcing tax laws and international agreements despite political commitments to implementation. Specific measures are therefore proposed to use this directive as a tool to ensure compliance by current secrecy and low tax jurisdictions with the international push for tax transparency and fairness.
Amendment 79 #
Proposal for a directive
Recital 8
Recital 8
(8) Given the inherent difficulties in giving credit relief for taxes paid abroad, States tend to increasingly exempt from taxation foreign income in the State of residence. The unintended negative effect of this approach is however that it encourages situations whereby untaxed or low-taxed income enters the internal market and then, circulates – in many cases, untaxed - within the Union, making use of available instruments within the Union law. Switch- over clauses are commonly used against such practices. It is therefore necessary to provide for a switch-over clause which is targeted against some types of foreign income, for example, profit distributions, proceeds from the disposal of shares and permanent establishment profits which are tax exempt in the Union and originate in third countries. This income should be taxable in the Union, if it has been taxed below a certain level in the third country. Considering that the switch-over clause does not require control over the low- taxed entity and therefore access to statutory accounts of the entity may be unavailable, the computation of the effective tax rate can be a very complicated exercise. Member States should therefore use the statutory tax rate when applying the switch-over clause of origin. Member States that apply the switch-over clause should give a credit for the tax paid abroad, in order to prevent double taxation.
Amendment 94 #
Proposal for a directive
Recital 11
Recital 11
(11) Hybrid mismatches are the consequence of differences in the legal characterisation of payments (financial instruments) or entities and those differences surface in the interaction between the legal systems of two jurisdictions. The effect of such mismatches is often a double deduction (i.e. deduction in both states) or a deduction of the income in one state without inclusion in the tax base of the other. To prevent such an outcome, it is necessary to lay down rules whereby one of the two jurisdictions in a mismatch should give a legal characterisation to the hybrid instrument or entity and the other jurisdiction should accept it. Although Member States have agreed guidance, in the framework of the Group of the Code of Conduct on Business Taxation, on the tax treatment of hybrid entities4 and hybrid permanent establishments5 within the Union as well as on the tax treatment of hybrid entities in relations with third countries, it is still necessary to enact binding rules. Finally, it is necessary to limit the scope of these rules to hybrid mismatches between Member States. Hybrid mismatches between Member States and third countries still need to be further examined. __________________ 4 Code of Conduct (Business Taxation) – Report to Council, 16553/14, FISC 225, 11.12.2014. 5 Code of Conduct (Business Taxation) – Report to Council, 9620/15, FISC 60, 11.6.2015.
Amendment 109 #
Proposal for a directive
Article 2 – paragraph 1 – point 4 a (new)
Article 2 – paragraph 1 – point 4 a (new)
(4a) 'royalty cost' means costs arising from payments of any kind made as a consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films and software, any patent, trade mark, design or model, plan, secret formula or process, or for information concerning industrial, commercial or scientific experience, or any other intangible asset; payments for the use of, or the right to use, industrial, commercial or scientific equipment shall be regarded as royalty costs;
Amendment 110 #
Proposal for a directive
Article 2 – paragraph 1 – point 4 b (new)
Article 2 – paragraph 1 – point 4 b (new)
Amendment 113 #
Proposal for a directive
Article 2 – paragraph 1 – point 7 a (new)
Article 2 – paragraph 1 – point 7 a (new)
(7a) 'a person or enterprise associated with a taxpayer' means a situation where the first person holds a participation of more than 25 percent in the second, or there is a third person that holds a participation of more than 25 percent in both.
Amendment 121 #
Proposal for a directive
Article 4 – paragraph 2
Article 4 – paragraph 2
2. Exceeding borrowing costs shall be deductible in the tax year in which they are incurred only up to 310 percent of the taxpayer's earnings before interest, tax, depreciation and amortisation (EBITDA) or up to an amount of EUR 1 000 000, whichever is higher. The EBITDA shall be calculated by adding back to taxable income the tax-adjusted amounts for net interest expenses and other costs equivalent to interest as well as the tax-adjusted amounts for depreciation and amortisation.
Amendment 130 #
Proposal for a directive
Article 4 – paragraph 3 – subparagraph 2 – point d a (new)
Article 4 – paragraph 3 – subparagraph 2 – point d a (new)
(da) the taxpayer's equity and total assets are reduced by any contribution stemming from intra-group shares or ownership structures, for the purpose of avoiding an abusive application of the derogation set out in this paragraph through nested corporate structures potentially giving way to artificial changes to an entity's equity to total assets ratio;
Amendment 132 #
Proposal for a directive
Article 4 – paragraph 3 – subparagraph 2 – point e a (new)
Article 4 – paragraph 3 – subparagraph 2 – point e a (new)
(ea) the corresponding income arising from the borrowing costs paid and deducted by the taxpayer over and above the threshold determined in paragraph 2 is, at its final destination, subject to an effective tax rate of at least 90 % of the tax rate that would have applied on the taxpayer's profits in case of non- deductibility.
Amendment 134 #
Proposal for a directive
Article 4 – paragraph 4
Article 4 – paragraph 4
4. The EBITDA of a tax year which is not fully absorbed by the borrowing costs incurred by the taxpayer in that or previous tax years may be carried forward for futurethe following two tax years.
Amendment 140 #
Proposal for a directive
Article 4 – paragraph 5
Article 4 – paragraph 5
5. Borrowing costs which cannot be deducted in the current tax year under paragraph 2 shall be deductible up to the 310 percent of the EBITDA in subsequentthe two following tax years in the same way as the borrowing costs for those years.
Amendment 146 #
Proposal for a directive
Article 4 – paragraph 6
Article 4 – paragraph 6
6. Paragraphs 2 to 5 shall not apply to financial undertakings for a duration of two years starting on the date of entry into force of this directive.
Amendment 148 #
Proposal for a directive
Article 4 a (new)
Article 4 a (new)
Article 4a Royalties limitation rule 1. Royalty costs shall be fully deductible in the tax year in which they are incurred if the corresponding income with the recipient of the royalty or licence fee payments by the taxpayer is subject to an effective tax rate at least as high as the effective tax rate that would have applied for the taxpayer in case of non- deductibility. 2. Royalty costs for which the corresponding income with the recipient of the royalty and licence fee payments is, at its final destination, subject to an effective tax rate lower than the effective tax rate that would apply for the taxpayer in case of non-deductibility shall only be deductible proportionally to the difference in effective tax rates. For the purpose of this paragraph, "proportional" means that for a difference of a given percentage between the effective tax rates applicable for the taxpayer and the final recipient of the royalty income, a share of that percentage of the royalty costs are deductible for the taxpayer.
Amendment 150 #
Proposal for a directive
Article 4 b (new)
Article 4 b (new)
Article 4b Secrecy or low tax jurisdictions 1. Payments from an entity in a Member State to an entity in a secrecy or low tax jurisdiction, as defined in this Directive, shall be subject to a withholding tax of at least 10 percent. 2. Payments which are not directly directed to an entity in a secrecy or low tax jurisdiction, but which can be reasonably assumed to be directed to an entity in a secrecy or low tax jurisdiction indirectly, e.g. by means of mere intermediaries in other jurisdictions, shall be equally covered by the provisions of paragraph 1. 3. Member States shall update any Double Tax Agreements which currently preclude such a level of withholding tax with a view to removing any legal barriers to this collective defence measure.
Amendment 152 #
Proposal for a directive
Article 4 c (new)
Article 4 c (new)
Article 4c Permanent establishment 1. A fixed place of business that is used or maintained by a taxpayer shall be deemed to give rise to a permanent establishment if the same taxpayer or a closely related person carries out business activities at the same place or at another place in the same Member State and: a) that place or other place constitutes a permanent establishment for the taxpayer or the closely related person under the provisions of this article, or b) the overall activity resulting from the combination of the activities carried out by the taxpayer and the closely related person at the same place, or by the same taxpayer or closely related persons at the two places, is not of a preparatory or auxiliary character, provided that the business activities carried on by the taxpayer and the closely related person at the same place, or by the same taxpayer or closely related persons at the two places, constitute complementary functions that are part of a cohesive business operation. 2. Where a person is acting in a Member State on behalf of a taxpayer and, in doing so, habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the taxpayer, and these contracts are: a) in the name of the taxpayer, or b) for the transfer of the ownership of, or for the granting of the right to use, property owned by that taxpayer or that the taxpayer has the right to use, or c) for the provision of services by that taxpayer, that taxpayer shall be deemed to have a permanent establishment in that State in respect of any activities which that person undertakes for the taxpayer, unless the activities of such person are of auxiliary or preparatory character so that, if exercised through a fixed place of business, would not make this fixed place of business a permanent establishment under the provisions of this paragraph. 3. The Member States shall adapt any bilateral Double Tax Treaties to this definition.
Amendment 161 #
Proposal for a directive
Article 5 – paragraph 1 – subparagraph 2 a (new)
Article 5 – paragraph 1 – subparagraph 2 a (new)
In cases where the market value of a transferred asset increases by at least 50% within two years of the transfer having taken place, the taxpayer is liable to a retrospective surcharge on the tax due as a result of the provisions in the first subparagraph equal to the difference between the market value of the asset at the time of transfer and the increased market value thereafter.
Amendment 179 #
Proposal for a directive
Article 6 – paragraph 1
Article 6 – paragraph 1
1. Member States shall not exempt a taxpayer from tax on foreign income which the taxpayer received as a profit distribution from an entity in a third country or as proceeds from the disposal of shares held in an entity in a third country or as income from a permanent establishment situated in a third country where the entity or the permanent establishmentwhere this foreign income is subject, in the entity’'s country of residence or the country in which the permanent establishment is situated, to an effective tax on profits at a statutory corporate tax rate lower than 4025 percent of the statutory tax rate that would have been charged under the applicable corporate tax system in the Member State of the taxpayer. In those circumstances, the taxpayer shall be subject to tax on the foreign income with a deduction of the tax paid in the third country from its tax liability in its state of residence for tax purposes. The deduction shall not exceed the amount of tax, as computed before the deduction, which is attributable to the income that may be taxed.
Amendment 186 #
Proposal for a directive
Article 6 – paragraph 2 – introductory part
Article 6 – paragraph 2 – introductory part
2. Paragraph 1 shall not apply to the following types offoreign losses:.
Amendment 187 #
Proposal for a directive
Article 6 – paragraph 2 – point a
Article 6 – paragraph 2 – point a
Amendment 188 #
Proposal for a directive
Article 6 – paragraph 2 – point b
Article 6 – paragraph 2 – point b
Amendment 202 #
Proposal for a directive
Article 8 – paragraph 1 – introductory part
Article 8 – paragraph 1 – introductory part
1. The tax base of a taxpayer shall include the non-distributed income of an entity where the following conditions are met:
Amendment 203 #
Proposal for a directive
Article 8 – paragraph 1 – point a
Article 8 – paragraph 1 – point a
(a) the taxpayer by itself, or together with its associated enterprises, as defined under the applicable corporate tax system, holds a direct or indirect participation of more than 50 percent of the voting rights, or owns more than 50 percent of capital, or is entitled to receive more than 50 percent of the profits of that entity or can be considered the ultimate place of effective management of the entity meaning the place where key management and commercial decisions of the entity that are necessary for the conduct of the entity's business are in substance made;
Amendment 205 #
Proposal for a directive
Article 8 – paragraph 1 – point b
Article 8 – paragraph 1 – point b
(b) under the general regime in the countryprofits of the entity, profits are subject to an effective corporate tax rate lower than 4025 percent of the effective tax rate that would have been charged under the applicable corporate tax system in the Member State of the taxpayer;
Amendment 210 #
Proposal for a directive
Article 8 – paragraph 1 – point c – introductory part
Article 8 – paragraph 1 – point c – introductory part
(c) more than 250 percent of the income accruing to the entity falls within any of the following categories:
Amendment 211 #
Proposal for a directive
Article 8 – paragraph 1 – point c – point vii
Article 8 – paragraph 1 – point c – point vii
(vii) income from services rendered to or goods traded with the taxpayer or its associated enterprises;
Amendment 219 #
Proposal for a directive
Article 10 – paragraph 1
Article 10 – paragraph 1
Where two Member States or a Member State and a third country give a different legal characterisation to the same taxpayer (hybrid entity), including its permanent establishments in one or more Member States or third countries, and this leads to either a situation where a deduction of the same payment, expenses or losses occurs both in the Member State in which the payment has its source, the expenses are incurred or the losses are suffered and in another Member State or a situation where there is a deduction of a payment in the Member State in which the payment has its source without a corresponding inclusion of the same payment in the other Member State, the legal characterisation given to the hybrid entity by the Member State in which the payment has its source, the expenses are incurred or the losses are suffered shall be followed by the other Memb the legal characterisation of the other State.
Amendment 220 #
Proposal for a directive
Article 10 – paragraph 2
Article 10 – paragraph 2
Where two Member States give a different legal characterisation to the same payment (hybrid instrument) and this leads to a situation where there is a deduction in the Member State in which the payment has its source without a corresponding inclusion of the same payment in the other Member State, the legal characterisation given to the hybrid instrument by the Member State in which the payment has its source shall be followed by the legal characterisation of the other Member State.
Amendment 222 #
Proposal for a directive
Article 10 – paragraph 2 a (new)
Article 10 – paragraph 2 a (new)
Member States shall update their Double Tax Agreements with third countries or negotiate collectively equivalent agreements in order to make the provisions of this article applicable in cross-border relations between Member States and third countries.