Proposal for a Council Directive amending Directive 2011/16/EU as regards mandatory automatic exchange of information in the field of taxation

Businesses have traditionally viewed tax planning as legitimate on the grounds that they use legal arrangements to reduce their tax liabilities. However, tax planning has become more elaborate in recent years, developing across jurisdictions and shifting taxable profits towards states with beneficial tax regimes. This "aggressive" form of tax planning can take a multitude of forms, such as taking advantage of the technicalities of a tax system or of mismatches between two or more tax systems for the purpose of reducing or avoiding tax liabilities. Its consequences include double deductions (e.g. the same expense is deducted in both the state of source and the state of residence) and double non-taxation (e.g. income is not taxed in either its state of source or in the recipient’s state of residence).

Such practices are in many cases assisted by the rulings issued by national administrations, which confirm to a company how a specific transaction will be taxed under existing legislation and therefore provide legal certainty for the structure put in place. Even though Member States are obliged to ensure that they issue tax rulings in compliance with existing EU and national law, a lack of transparency regarding such rulings may impact on other countries which have links with the beneficiaries of the rulings.

Tax avoidance, as well as tax fraud and tax evasion, have an important cross-border dimension. Globalisation and the increasing mobility of taxpayers can make it difficult for Member States to assess tax bases properly. This phenomenon can affect the functioning of taxation systems and entail tax avoidance and tax evasion and thus jeopardise the functioning of the Internal Market. Therefore Member States can only address this problem effectively if they agree to take common action. For this reason, improving administrative cooperation between Member States' tax administrations is a key objective of the Commission's strategy.

Council Directive 2011/16/EU was adopted to replace an earlier Directive dealing with assistance between Member States (Council Directive 77/799/EEC), as a response to Member States’ need for enhanced administrative cooperation in the field of taxation.

The purpose of the present proposal is to ensure that Directive 2011/16/EU provides for comprehensive and effective administrative co-operation between tax administrations by providing for the mandatory automatic exchange of information regarding advance cross-border rulings and advance pricing arrangements, a particular type of advance cross border ruling used in the area of transfer pricing. Tax driven structures which lead to a low level of taxation of income in the Member State issuing the ruling may leave only low amounts of income to be taxed in other Member States involved thus eroding their tax bases.

The proposal requires Member States to automatically exchange basic information about advance cross-border rulings and advance pricing arrangements with all other Member States. This is based on the principle that it is other Member States which are best placed to assess the potential impact and relevance of such rulings, rather than the Member State giving the ruling. In appropriate cases the Member States receiving the information can request further more detailed information.

The proposal has been specifically designed to allow the automatic information exchange on rulings to build on the existing rules in Directive 2011/16/EU relating to the practical arrangements for exchanging information including the use of standard forms. It is also in line with international developments at the level of the OECD and its work on BEPS.

• Primary Source

EUR-Lex: COM(2015)135: Follow the progress of this proposal through the decision-making procedure http://eur-lex.europa.eu/legal-content/EN/HIS/?uri=COM:2015:135:FIN

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