30 Amendments of Eva JOLY related to 2016/0011(CNS)
Amendment 60 #
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, 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. Nevertheless, it is also urgent and necessary to lay down a single set of rules for calculating taxable profits of cross-border companies in the Union by treating corporate groups as a single entity for tax purposes, in order to strengthen the internal market and eliminate many of the weaknesses in the current corporate tax framework enabling aggressive tax planning.
Amendment 67 #
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 payments, out of high tax jurisdictions into countries with lower tax regimes. The interest limitation rule is 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). 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 iIt 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 sectorsperhaps with a more customised approach.
Amendment 74 #
Proposal for a directive
Recital 7 a (new)
Recital 7 a (new)
(7a) Too often, multinational companies make arrangements to transfer their profits to tax havens without paying any or very low rates of tax. The concept of permanent establishment will provide a precise, binding definition of the criteria which must be met if a multinational company is to prove that it is situated in a given country. This will force multinational companies to pay their taxes fairly.
Amendment 77 #
Proposal for a directive
Recital 7 b (new)
Recital 7 b (new)
(7b) The term transfer pricing refers to the conditions and arrangements surrounding transactions effected within a multinational company, including subsidiaries and shell companies whose profits are divested to a parent multinational. It denotes the prices charged between associated undertakings established in different countries for their intra-group transactions, such as the transfer of goods and services. As the prices are set by non-independent associates within the same multinational undertaking, they may not reflect the objective market price. The Union must satisfy itself that the taxable profits generated by multinational undertakings are not being transferred outside the jurisdiction of the Member State concerned and that the tax base declared by multinational undertakings in their country reflects the economic activity undertaken there. In the interests of taxpayers, it is essential to limit the risk of double non-taxation which may result from a difference of opinion between two countries regarding the determination of the arm's length charge for their international transactions with associated undertakings. This system does not rule out the use of a range of artificial arrangements, in particular involving products for which there is no market price (for example a franchise or services provided to undertakings).
Amendment 78 #
Proposal for a directive
Recital 7 c (new)
Recital 7 c (new)
(7c) The OECD has developed the 'modified nexus approach' in an effort to regulate the patent box system. This method guarantees that, under the patent box system, a favourable rate of tax is charged only on revenue directly linked to spending on research and development. However, we already see the difficulty for member States in applying the concepts of 'nexus' and 'economic substance' to their innovation boxes. If, by June 2016, the Member States have still not fully implemented the modified nexus approach in a uniform manner in order to eliminate current harmful patent box regimes, the Commission should submit a new, binding legislative proposal under Article 116 of the Treaty on the Functioning of the European Union.
Amendment 80 #
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 statutoryMember States should use the effective tax rate when applying the switch-over clause. Member States that apply the switch-over clause should give a credit for the tax paid abroad, in order to prevent double taxation.
Amendment 86 #
Proposal for a directive
Recital 9
Recital 9
(9) General anti-abuse rules (GAARs) feature in tax systems to tackle abusive tax practices that have not yet been dealt with through specifically targeted provisions. GAARs have therefore a function aimed to fill in gaps, which should not affect the applicability of specific anti-abuse rules. Within the Union, the application of GAARs should be limitapplied to arrangements that are ‘wholly artificial’ (non-genuine); otherwise, the taxpayer should have the right to choose the most tax efficient structure for its commercial affairsconsidered harmful. It is furthermore important to ensure that the GAARs apply in domestic situations, within the Union and vis-à-vis third countries in a uniform manner, so that their scope and results of application in domestic and cross-border situations do not differ.
Amendment 89 #
Proposal for a directive
Recital 10
Recital 10
(10) Controlled Foreign Company (CFC) rules have the effect of re-attributing the income of a low-taxed controlled subsidiary to its parent company. Then, the parent company becomes taxable to this attributed income in the State where it is resident for tax purposes. Depending on the policy priorities of that State, CFC rules may target an entire low-taxed subsidiary or be limited to income which has artificially been diverted to the subsidiary. It is desirable to address situations both in third-countries and in the Union. To comply with the fundamental freedoms, the impact of the rules within the Union should be limited tocover all arrangements which result inone of the principal purposes is the artificial shifting of profits out of the Member State of the parent company towards the CFC. In this case, the amounts of income attributed to the parent company should be adjusted by reference to the arm’s length principle, so that the State of the parent company only taxes amounts of CFC income to the extent that they do not comply with this principle. CFC rules should exclude financial undertakings from their scope where those are tax resident in the Union, including permanent establishments of such undertakings situated in the Union. This is because the scope for a legitimate application of CFC rules within the Union should be limited to artificial situations without economic substance, which would imply that the heavily regulated financial and insurance sectors would be unlikely to be captured by those rules.
Amendment 95 #
Proposal for a directive
Recital 11 a (new)
Recital 11 a (new)
(11a) An exhaustive 'black list' with accompanying sanctions should be prepared by the Commission to list tax havens including those in the Union, which distort competition by granting low or no taxation to non-residents without real economic substance.
Amendment 98 #
Proposal for a directive
Recital 12 a (new)
Recital 12 a (new)
(12a) One of the main problems encountered by the tax authorities is the impossibility of gaining access in due time to comprehensive and relevant information about MNEs' tax planning strategies. Such information should be made publicly available, in order for tax authorities to react quickly to tax risks, by assessing those risks more effectively, targeting checks and alerting about changes required to the legislation in force.
Amendment 105 #
Proposal for a directive
Recital 15
Recital 15
(15) The Commission should put in place a specific monitoring mechanism to ensure the proper implementation of this Directive and the homogeneous interpretation of its measures by Member States. It should evaluate the implementation of this Directive three years after its entry into force and report to the European Parliament and the Council thereon. Member States should communicate to the European Parliament and the Commission all information necessary for this evaluation,.
Amendment 108 #
Proposal for a directive
Article 2 – paragraph 1 – point 1 a (new)
Article 2 – paragraph 1 – point 1 a (new)
(1a) 'taxpayer' means a corporate entity covered under the scope of this Directive;
Amendment 112 #
Proposal for a directive
Article 2 – paragraph 1 – point 7 a (new)
Article 2 – paragraph 1 – point 7 a (new)
(7a) 'permanent establishment' means a fixed place of business situated in a Member State through which the business of a company of another Member State is wholly or partly carried on; this definition should also address situations in which companies which engage in fully dematerialised digital activities are considered to have a permanent establishment in a Member State if they maintain a significant digital presence in the economy of that country;
Amendment 115 #
Proposal for a directive
Article 2 – paragraph 1 – point 7 b (new)
Article 2 – paragraph 1 – point 7 b (new)
(7b) 'tax haven' means a jurisdiction characterised by one or several of the following criteria: no or only nominal taxation for non-residents; laws or administrative practices preventing the effective exchange of tax information with other governments; legal or administrative provisions preventing tax transparency or the absence of requirement of a substantial economic activity to be carried out.
Amendment 116 #
Proposal for a directive
Article 2 – paragraph 1 – point 7 c (new)
Article 2 – paragraph 1 – point 7 c (new)
(7c) 'competition haven' means a jurisdiction whose tax system has preferential tax regimes constituting harmful tax competition
Amendment 119 #
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 30 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 amortisationeach corporate group's consolidated interest costs payable to third parties or up to an amount of EUR 1 000 000, whichever is higher.
Amendment 135 #
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 future tax years for a maximum period of two years.
Amendment 144 #
Proposal for a directive
Article 4 – paragraph 6
Article 4 – paragraph 6
Amendment 172 #
Proposal for a directive
Article 5 a (new)
Article 5 a (new)
Amendment 174 #
Proposal for a directive
Article 5 b (new)
Article 5 b (new)
Article 5 b Harmful tax regimes 1. Patent or innovation boxes are not the right incentive to promote Research and Development and should be phased out in Member States where they exist by 2020. In the meantime, stricter rules than the 'modified nexus approach' on economic substance and transparency shall apply to the existing regimes, especially regarding how much revenue is granted in the form of tax exemption to taxpayers benefiting from such boxes regimes. Counter- measures shall be applicable by Member States which see their tax base eroded by such regimes. 2. Tax rulings with a cross-border effect shall be made public. The competent authority of a Member State shall publicly disclose advance rulings and advance pricing arrangements in an accessible centralised register, twelve months at the most after the ruling is signed. 3. Within the Union, the consolidated tax base shall make it possible to eliminate the issue of profit shifting through tax planning as regards intellectual property. 4. That system shall take account of the location of profit attribution. 5. The common consolidated corporate tax base (CCCTB) shall include: - a common corporate tax base under which a single set of rules shall apply with regard to calculating the taxable result for the purposes of corporation tax, in all the Member States; - consolidated results for members of the group.
Amendment 177 #
Proposal for a directive
Article 5 c (new)
Article 5 c (new)
Article 5c 'Letterbox' companies 1. The use of letterbox companies shall be prohibited by taxpayers operating in the European Union. Taxpayers shall communicate to tax authorities element of proof demonstrating an economic substance for each of the entities in their group, as part of their annual country-by- country reporting obligation.
Amendment 191 #
Proposal for a directive
Article 7 – paragraph 1
Article 7 – paragraph 1
1. Non-genuine arrangements or a series thereof carried out for the essentialmain purpose or one of the main purposes of obtaining a tax advantage that defeats the object or purpose of the otherwise applicable tax provisions shall be ignored for the purposes of calculating the corporate tax liability. An arrangement may comprise more than one step or part.
Amendment 196 #
Proposal for a directive
Article 7 – paragraph 3 a (new)
Article 7 – paragraph 3 a (new)
3a. For the purposes of paragraph 1, an arrangement or a series thereof shall be regarded as non-genuine to the extent that they lead to different taxation of certain types of income, such as those generated by patents.
Amendment 199 #
Proposal for a directive
Article 7 – paragraph 3 b (new)
Article 7 – paragraph 3 b (new)
3b. The European Parliament may call for the Commission to open an investigation if it considers that a discretionary bilateral tax agreement has been agreed between a Member State and a MNE.
Amendment 200 #
Proposal for a directive
Article 7 – paragraph 3 c (new)
Article 7 – paragraph 3 c (new)
3c. In order to prevent the creation of special purpose entities such as 'letterbox companies' or shell companies with a lower tax treatment, enterprises must correspond to the definitions of permanent establishment and minimum economic substance laid down in Article 2.
Amendment 218 #
Proposal for a directive
Article 10 – title
Article 10 – title
Hybrid mismatches between Member States
Amendment 224 #
Proposal for a directive
Article 10 a (new)
Article 10 a (new)
Article 10a Hybrid mismatches involving third countries Where a Member State and a third country give a different legal characterisation to the same taxpayer (hybrid entity), including permanent establishments in the third country, 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 the third country 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 third country, the legal characterisation given to the hybrid entity by the third country, the expenses are incurred or the losses are suffered shall be followed by the Member State. Where a Member State and a third country 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 third country, the legal characterisation given to the hybrid instrument by the third country shall be followed by the Member State.
Amendment 226 #
Proposal for a directive
Article 10 b (new)
Article 10 b (new)
Article 10b Measures against tax treaty abuses 1. It is recommended that Member States amend their bilateral tax treaties to include the following provisions: (a) a clause ensuring that both parties to the treaties commit that tax will be paid where economic activities are taking place and value is created, (b) an addendum to clarify that the objective of bilateral conventions, beyond avoiding double taxation is to fight tax evasion and tax avoidance, (c) a clause for a principal purpose test based general anti-avoidance rule, as defined in the Commission recommendation C (2016) 271 final, (d) a definition of permanent establishment, as defined in Article 5 of the OECD Model Tax Convention; 2. The Commission shall make a proposal before 31 December 2017 for a "European approach to tax treaties" in order to set up a European model of tax treaty which could ultimately replace the thousands bilateral treaties concluded by each Member States; 3. Member States shall denounce or refrain for signing bilateral treaties with jurisdictions not respecting minimum standards of Union agreed principles of good governance in tax matters.
Amendment 230 #
Proposal for a directive
Article 11 – title
Article 11 – title
Review and Monitoring
Amendment 235 #
Proposal for a directive
Article 11 – paragraph 2 a (new)
Article 11 – paragraph 2 a (new)
2a. The Commission shall put into place a specific monitoring mechanism to ensure the full and adequate transposition of this Directive and the correct interpretation of all definitions provided and actions required by Member States, in order to have a coordinated European approach on the fight against base erosion and profit shifting.