Among the variety of issues facing European Union (EU) policy makers, taxation may be the hottest topic of geopolitical jostling. The EU Member States are working with the Organisation for Economic Co-operation and Development (OECD) to coordinate ways to shore up international tax rules and shut down base erosion and profit shifting (BEPS). And within the EU, the European Commission (EC) and the EU Member States have had a longstanding practice of setting a wide range of rules to curb unfair tax competition among its Member states. All this is happening as the EU considers changing its voting practices to make it easier to enact coordinated tax policies in all its Members states’ interests.
Whatever the future might hold for taxation in the EU, one thing is certain: International companies doing business with and within EU Member states will need to deal with an unsettled and dynamic tax environment for years to come.
This article highlights some of the most important tax trends and developments affecting international companies in Europe today. It concludes with some key advice to help tax directors manage the new tax reality in the region.
Takeaways for tax leaders
Tax matters are at the top of the EU’s agenda and, with an unprecedented array of new and proposed measures coming onstream at the member state, EU and OECD levels, taxation is expected to remain a priority for years to come.
Within this dynamic tax environment, tax leaders can help steer their companies through unsettled conditions and chart their best course forward by:
- engaging directly in the policy development work of the OECD and the EC to ensuring issues specific to their company’s business models and industry are addressed
- engaging with member states’ governments, peer companies and industry associations to understand the effects of the tax proposals and contribute to the development of consensus positions
- engaging with their company’s senior management and strategy and business development teams to model and predict the effects of various scenarios on effective tax rates, cash flows and business models
- preparing for the first set of mandatory reports on their cross-border tax arrangements due by 1 July 2020
- reviewing country-by-country tax reports and determining their course of action if the reports are made public
- reviewing structures in view of the CJEU’s recent beneficial ownership decision to determine whether the recipient actually enjoys the benefits of the income received
- keeping up with frequently changing EU blacklist designations and ensuring any entities in blacklisted jurisdictions have appropriate business substance
- monitoring EC state aid proceedings and determining their impact on existing tax arrangements (e.g. IP structuring, interest-free loans)
- helping their companies set up internal mechanisms and procedures for whistleblowers, and considering how to respond to any internal tax-related whistleblowing reports their company may receive.
Vinod Kalloe and Robert Van der Jagt discuss the most important tax trends and developments affecting international companies in Europe today.
Transcript (PDF 167 KB)