EU – Baltic States, Financial Services, Legislation, Markets and Companies, Taxation

The new rules should lead to greater cooperation between the EU member states on tax matters and act as a deterrent from using tax rulings as an instrument for tax abuse. All Union states will be equipped with the information they need to protect their tax bases and effectively target companies that try to escape paying their fair share of taxes.

The agreement was reached just seven months after the presentation of the Commission's ambitious proposal on the subject.

Commission’s opinion

Following the announcement of the agreement, Jean-Claude Juncker, President of the European Commission said: "I warmly welcome the agreement as a major step forward. The automatic exchange of information on tax rulings will provide national authorities with insight on aggressive tax planning. It marks a leap forward in our efforts to advance on tax coordination and tax harmonisation. The current system of corporate tax rules is unjust and unfit for purpose. There is a plethora of national rules that allows some companies to win, while others lose out. This unfair competition is anathema to the principles of fair competition within our Internal Market."

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: "All EU states have agreed to share more information on tax rulings given to companies which operate cross-border. This is a major step in combating aggressive tax planning, creating greater transparency in corporate taxation and in providing fairer competition for both businesses and consumers. The agreement is an important signal that the member states are ready to deliver on our common goal of fair and effective taxation. The EU will continue to work to implement these transparency rules worldwide."

Key elements of the new rules

Presently, the EU member states share very little information with one another about their tax rulings. It is at the discretion of the member state to decide whether a tax ruling might be relevant to another EU country. As a result, the EU states are often unaware of cross-border tax rulings issued elsewhere in the EU which may have an impact on their own tax bases. The lack of transparency on tax rulings can be exploited by certain companies in order to artificially reduce their tax contribution.

To redress this situation, the new rules will require the EU member states to automatically exchange information on their tax rulings. The directive will remove member states discretion to decide on what information is shared, when and with whom.

These rulings will have to be exchanged every six months; they will include all similar instruments irrespective of the actual tax advantage involved. The agreement will also cover existing rulings of the past five years. Besides, the member states will then be able to ask corresponding states for more detailed information on a particular tax ruling.

The automatic exchange of information on tax rulings will enable the EU states to detect certain abusive tax practices by companies and take the necessary action in response.

It is expected that this initiative will deter tax authorities from offering selective tax treatment to companies once this is open to scrutiny by their peers. This will result in much healthier tax competition in Europe.

In addition, the Commission will regularly receive the information it needs in order to monitor the implementation of this directive and ensure that the member states are complying with their responsibilities.

However, the member states will have to transpose the new rules into national law before the end of 2016, meaning that the Directive will come into effect on 1 January 2017.

See more information in:

= Tax Transparency Package of 18 March 2015 (IP/2015/4610).

Reference: Commission’s press review “Tax transparency: Commission welcomes agreement reached by Member States on the automatic exchange of information on tax rulings”, Brussels, 6 October 2015, in:

http://europa.eu/rapid/press-release_IP-15-5780_en.htm?locale=en