Tax & Legal

The EU Council Directive for mandatory automatic exchange of tax information in cross-border arrangements provides that all intermediaries and, in their absence, the taxpayer involved in potentially aggressive cross-border tax arrangements (that may lead to tax avoidance and evasion) must report them to the competent tax authorities. In a Belgian case the European Court of Justice took the chance to comment on various general aspects of the Directive.

On 12 September 2023, the European Commission adopted a key package of initiatives to reduce tax compliance costs for large, cross-border businesses in the EU, called “Business in Europe: Framework for Income Taxation” (BEFIT), to make life easier for both businesses and tax authorities by introducing a new, single set of rules to determine the tax base of groups of companies.

The European Court of Justice (ECJ) decided that the German penalty surcharge for failure to present proper documentation in cross border business relations is in line with the EU principle of freedom of establishment. Although there is a restriction because the documentation requirements and the associated penalty only apply to taxpayers engaged in business relationships with related parties abroad, the measures are proportionate, don’t go beyond what is necessary to attain the objective pursued and are necessary to ensure a balanced taxation powers between Member States.

In its referral to the European Court of Justice (ECJ) for a preliminary ruling, the Regional Tax Court of Bremen raises doubts as to whether the penalty surcharge under Section 162 (4) Fiscal Code due on failure to present proper documentation in cross border business relations is in line with the freedom of establishment in Art. 49 TFEU and the freedom to provide services (Art. 56 TFEU).