Transcript Prova PPT

Taxation in enlarged Europe
Summer school ISEO 2004
July, 2
Raffaele Rizzardi
We pay taxes for public services
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army and police
foreign policy
justice
interest on bonds
We pay taxes for welfare
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Healthcare
School
Housing
Cheap transport
Unfunded pensions
Aids to industry
Unemployment subsidies
Level of public services
= level of taxation
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Stability pact: deficit <= 3% of GDP4
Tax competition
Fair - Unfair or harmful (EU – OCDE): taxation
to incoming foreign corporations lower than for
national ones
The Irish case
The Primarolo report (code of conduct)
Corporate tax burden
= tax base * tax rate
 Harmonization of tax base
- 1988 – first proposal of directive
- 1992 – Ruding report
- 2002 – revamping of Ruding report
- 2004 – corporate tax conference in Rome
Harmonization of tax base
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SE - Societas Europea - EC Regulation
2157/2001 since October 2004
HST – Home State Taxation – tax base of each
subsidiary according to taxation rules of the
Head office’s State - Small Medium Sized
Enterprises
CCTB – Common Consolidated Tax Base –
Assessment of a global tax base – Splitting
according to multiple keys: turnover, cost of
staff, value of plants, etc.
Common rules in tax base
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Thin capitalization
- Debt (granted or
guaranteed by stockholders) to Equity ratio
Participation exemption
Limited taxation on dividends – No more tax
credit
Consolidated group tax base (national or
worldwide)
Tax credit on dividends
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TAX CREDIT
Corporate tax base
1.000
Corporate tax (360)
Dividend
640
Tax credit
360
Shareholder’s tax base
1.000
Prepaid tax
360
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PRESENT SYSTEM
Corporate tax base
1.000
Corporate tax
(360)
Dividend
640
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Additional tax base for
shareholder 5% or 40%
of dividend (0% in fiscal
consolidation)
Localization of business profits
National tax law for foreign activities:
1)
2)
Exemption rule
Imputation rule with foreign tax credit
Branch or subsidiary?
1)
2)
3)
Branch – imputation of revenue or loss taxed
at head office rate – foreign tax credit –
matching credit
Subsidiary – imputation of incoming revenue
(dividend) – Parent/subsidiary directives
CFC legislation – subsidiaries in tax heavens
treated as branch (carry over of losses
abroad)
Transfer price
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Risk of profit transfer by excess payment of
costs to a foreign corporation in the group or
reduced selling price
OCDE guidelines – 1979 – Revised 1995
Arm’s length rule – comparable transactions
between independent corporations
Information on inter-group
transactions
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Special auditing (Ireland)
New restrictive German law
Documentation on services rendered, on
comparable costs for foreign purchase, on
effective use for subsidiary
No shareholder’s costs
Transfer price audit
Double taxation
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Corresponding adjustments
OCDE model – article 25 – mutual agreement
EU arbitration convention
Burdensome procedure
APA – Advance Price Agreements
Model tax conventions
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First agreements in 1930
Production and sales mainly local
Few international exchanges (custom duties
between each country – risk of currency
fluctuation)
25 States in EU = 25 x 12 = 300 different
treaties >> one multilateral treaty?
Model tax conventions
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(2)
“may be taxed” – in both States – foreign tax credit
(e.g. dividends – interest – directors’ fees)
“shall be taxable only” – in one State (e.g. royalties,
excepted limited withholding tax; capital gains on
stocks)
Deviations from general rules in each agreement
Place of effective management
Permanent establishment (PE)
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International tools for taxation are obsolete and
do not fit a globalized economy
E-commerce: is a computer server a PE?
Subsidiary: is it a PE of parent company?
Hidden PE (the Philip Morris case in Italy)
European Court of Justice
Impact on direct taxation
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No specific power by EU treaty
Judgments mainly based on:
article 43 – freedom of establishment – case C-9/02 de
Lasteyrie du Saillant – exit tax on unrealized capital
gains – case C-324/00 – Lankhorst-Hohorst – thin
capitalization
article 56 – freedom in movement of capital – case
334/02 – Comm. vs. France – exclusion of fixed levy
for foreigners
Taxation of savings
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Present rule: a resident of one State is not taxed if the
paying agent is in another State – Interest income
should be declared in resident State
Directive 2003/48/EC – withholding tax for Belgium,
Luxembourg, Austria – negotiations with non EC
countries – rate 15% - 20% - 35%- “transitional period”
Exchange of information for other countries and for all
after “transitional period”
Directive 2003/49/EC – associated companies interest and royalties (+ code of conduct = “Monti
package”)
Definition of interest payment
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Current accounts, bonds including premiums
and prizes attaching to securities
Zero coupon bonds
NO: penalty charges for late payment – capitalgains on bonds (taxed in Italy)
Value Added Tax
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National laws complying with directives
No majority voting – Missing agreement:
options
Consumption tax – (should be) neutral in
business activities
Deduction of input VAT from VAT due for
supply of goods or services
LIST of Standard VAT rates applied in the Member States
Below is a table brought up to date until Febrary 02, 2004, illustrating the standard VAT rate applied in the Member States of the European
Union.
Member state
Ordinary rate
Austria
20 %
Austria ( Communes of Jungholz and Mittelberg)
16 %
Belgium
21 %
Cyprus
VAT RATES
15%
Czech Republic
19%
Denmark
25%
Estonia
18%
Finland
22 %
France
19,6 %
Germany
16 %
Greece
18 %
Hungary
25%
Ireland (Eire)
21 %
Italy
20 %
Latvia
18%
Lithuania
18%
Luxembourg
15 %
Malta
18%
Netherland
19 %
Poland
22%
Portugal
19 %
Slovak Republic
19%
Slovenia
20%
Spain
16 %
Sweden
25 %
United-Kingdom
17,5%
Financial and insurance services
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VAT exemption
Input VAT non deductible
Higher costs for outsourcing
Impact on structure: branches rather than
subsidiaries – Group taxation in some
countries
Proposed “cash flow method”
“Transitional period” – supply of
goods and related services
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VAT due at customer’s country (“reverse
charge”)
Listings to check compliance
Identification number of customer – Full
disclosure now starting on internet
Audit to check that goods have left the country
of origin
Place of supply of services
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Present rules (article 9 – directive
77/388/EEC)
Physical identification – place of immovable
property – physically carrying out of some
services – distances covered
Place of customer (plus effective use and
enjoyment)
Place of supplier
Refund of foreign VAT
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8th and 13th directive – EC and non-EC
countries (reciprocity)
Application for refund to each of the central
national authorities
Refund if tax is locally deductible
The case of car lease (Netherlands and
Luxembourg)
New proposal
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General rule: reverse charge if customer is a
taxable person
Including car lease over 30 days
No need for refund
Listing for services
Local VAT for tangible services, supplied for
immediate consumption (restaurants)
E-commerce - goods
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Private customers pay VAT in the country of purchase
if they take care of transport
Suppliers shall identify and pay destination VAT over a
yearly threshold (€ 35.000 or € 100.000)
New project: One-stop shop – ID only in head office’s
country – VAT paid to local tax authority with rates and
details of destination
From outside EC: custom rules
E-commerce – services
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Directive 2002/38/EC
De-materialized goods (files) = services
Reverse charge if customer is a VAT taxpayer
VAT due by supplier for private customers
From outside EC (private customers): ID in a single
country – VAT paid to local tax authority with rates and
details of destination
Audit of compliance and enforcement ??? Where is
customer really located ???