MEPs adopted recommendations to prevent withholding tax regimes from facilitating tax avoidance, while also reducing barriers for companies and investors who operate cross-border.
The resolution, drafted by Pedro Marques (S&D, PT), and adopted 52 in favour, 5 against and 1 abstention on Tuesday in the Economic and Monetary Affairs committee, points out that the system of withholding taxes between Member States has remained largely fragmented in terms of rates and relief procedure, creating loopholes and legal uncertainty. It also notes that the current system is abused to shift profits, enables aggressive tax planning and creates the undesired effect of double taxation in addition to barriers to cross-border investments in the single market.
This state of affairs, the general fiscal context and the various tax scandals, notably the cum-ex and cum-cum frauds, require legislation to be put in place, MEPs argue.
The resolution among other things:
- Reiterates a demand made previously to the Commission by MEPs to present a legislative proposal for an EU-wide withholding tax in order to ensure that payments generated within the Union are taxed at least once before leaving it. Adding to this already stated demand, the newly adopted resolution says that such a proposal could contain a possible minimum effective tax rate.
- Calls on the Commission and the Member States to establish a common and standardised withholding tax framework that reduces the complexity for investors, reduces the practice of treaty-shopping and ensures that all dividend, interest, capital gains, royalties payments, professional services payments and relevant contract payments generated in the EU are taxed at an effective tax rate.
- Calls on the Commission to propose measures to enhance cooperation and mutual assistance between tax authorities, financial market supervisory authorities and law enforcement authorities regarding the detection and prosecution of withholding tax reclaim schemes.
- More needs to be done to address the role of intermediaries and therefore calls on the Commission and Member States to develop appropriate measures to prevent intermediaries from facilitating tax abuse and tax avoidance.
- Calls on the Commission to extend the scope of the mandatory exchange of information to dividend arbitrage schemes and all information on capital gains, including the granting of dividend and capital gains tax refunds.
- Urges the Commission to come forward with a common and standardised EU procedure for refunds of withholding tax for all Member States, which would be particularly helpful for retail investors.
Further information