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European Tax Law – Prof. Dr. Roman Seer

European Tax Law – Prof. Dr. Roman Seer. Mutual Administrative Assistance in Tax Matters. Outline. A. Principles of Mutual Assistance in Tax Matters I. Territoriality Principle and Legal Interests II. Plurality and Complexity of the Legal Sources III. Mutual Assistance Instruments

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European Tax Law – Prof. Dr. Roman Seer

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  1. European Tax Law – Prof. Dr. Roman Seer Mutual Administrative Assistance in Tax Matters

  2. Outline A. Principles of Mutual Assistance in Tax Matters I. Territoriality Principle and Legal Interests II. Plurality and Complexity of the Legal Sources III. Mutual Assistance Instruments IV. Reciprocity, Equivalence, Subsidiarity V. Legal Protection of Secrets B. Bilateral Information Clauses I. Types of Information Clauses II. The Development of Art. 26 OECD-DTT-Model III. The Content of TIEA OECD-Model IV. Adaption of National Laws on TIEA Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  3. Outline C. Council Directive on Administrative Cooperation (2011/16/EU) I. General information II. Scope of application III. Types of information exchanges IV. Boundaries of information exchange V. Extended obligation to cooperate D. Intergovernmental Administrative Assistance in Tax Collection I. Development up to the Directive 2010/24/EU II. Art. 27 OECD-DTT-MC 2003 III. Types of Administrative Assistance IV. Procedure and Legal Protection of the Taxpayer E. Council Regulation on Administrative Cooperation in the Fieldof VAT No. 904/2010 of 7.10.2010 Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  4. The lack of the Territoriality principle Principle of universal taxation Territoriality principle substantive tax law international law Tax authorities‘ power is still limited by the territorial border Taxation of worldwide sources Gap Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  5. Risk for legal Interests Legal interests Tax equality Tax legality Fairness of tax competition National fiscal budgets Equality among states Equality among individual taxpayers

  6. Plurality of legal sources EU directives and implementaried national acts - Bilateral double tax treaty information clauses - Bilateral tax information exchange agreements • Multilateral conventions: • Council of Europe/OECD Convention (1988) • EU Convention on mutual assistance in crime matters (1959) • Nordic Convention on mutual assistance in tax matters

  7. Legal bases EU-Law Bi- and multilateral treaties National Law VAT-Regulation of 7.10.2010 General Tax Code Clause DTT/Art. 26, 27 OECD-MC Directive 2011/16/EU Tax Code Provisions TIEA/OECD-TIEA-MC 2002 Tax Code Provisions Directive 2010/24/EU Directive 2003/48/EC Tax Code Provisions Convention of Council of Europe/OECD of 25.1.1988/27.5.2010 Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  8. Supremacy of EU-legal sources EU-legal sources DTT/TIEA National Law Supremacy of EU-law (and derived national law) Lex posterior rule

  9. Complexity of legal sources • Relationship between the different sources has to be clarified • Need for a unified standardized legal basis • Council Directive 2010/24/EU concerning the mutual assistance for the recovery of claims and Council Directive 2011/16/EU on administrative cooperation in the field of taxation can lift the minimum standard on a higher level

  10. Mutual Assistance Instruments Instruments Request for mutual assistance Spontaneous transmittance of information Automatic transmittance of information after examination of a single case for the benefit of the foreign state after examination of a single case for the benefit of the requesting state in a systematic predefined field of cases for the benefit of the foreign state Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  11. Mutual assistance instruments • no hierarchy between the three instruments • the interaction of the different instruments leads to an effective transnational risk management • request for information and spontaneous information exchange -> reduction of an individual and concrete risk for a tax deficit • automatic exchange of information -> reduction of a general and abstract risk for a tax deficit • on the one hand measures are focused on a single case and on the other hand they are less specific

  12. Mutual assistance instruments Specific instruments Participation of tax officers in foreign tax examinations Simultaneous examinations only in rare cases: transfer pricing, tax havens, VAT carousel issues sole presence Exercise of powers conferred by officials of the requested tax authority

  13. Instruments of mutual assistance • numbers of requests and information exchanges vary from State to State • correlation between a reluctance of request and enlarged domestic duties of the taxpayer on cross-border activities (question of the burden of proof) • simultaneous examinations are still rare exceptions in practice

  14. Mutual assistance principles Principles Reciprocity Equivalence Subsidiarity Standardization of instruments, procedere and secret protection Scope of examination instruments does not differ from domestic cases Tax authority shall use firstly its own instruments to verify the abroad facts

  15. Legal protection: kind of secrets Secrets Bank secrets Commercial secrets less a protection of involved taxpayers than more a tool for states to keep up an location advantage Protection of the involved taxpayer with his/her enterprises and inventions Precaution of a fair economic competition Harm of a fair economic competition 15

  16. Legal protection: kind of secrets Secrets Bank secrets Commercial secrets Protected: Requested State has the right to refuse to submit information Are not protected: Requested State has no right to decline to supply information This distinction is generally excepted and now common standard: Art. 26 OECD Double Tax Convention, Art. 5 (4) (a) OECD Model Convention TIEA, Art. 21 (4) Council of Europe/OECD Convention, Art. 5 (3) Council Directive 2010/24/EU, Art. 17 (4) u. Art. 18 (2) Council Directive 2011/16/EU 16

  17. Legal protection: difference against making a request incoming request or spontaneous information Risk of violation the secrecy rights of taxpayer is less urgent Risk of violation the secrecy of taxation data by the requesting or receiving state Taxpayer can protect his rights still after answering the request by the foreign state Taxpayer‘s right of secrecy is jeopardized 17

  18. Hierarchie of legal protection Notification right Consultation right Intervention right

  19. Legal protection: effectivness after notification: file an objection or an action Prospective effect: ex ante Intermediate suspension: preventive injunction of the transmittance of information Alternative: claim for damages as a less effective retrospective („ex post“) legal protection

  20. Effectivness: legal protection/mutual assistance Effectivness Legal protection Mutual assistance Balancing of interests Taxpayer has to bring the evidence of serious risk for his/her secret rights Time limits for injunction action and evidences Optimizing

  21. Efficiency of mutual assistance Improvement of effeciency Soft factors Law provisions • - Training tax officers on lanquage skills • Standardization of electronic forms • Clear competence and shortened way • Fast response • Exchange of tax officers and use of simultaneous inspections Directive 2011/16/EU of 15th February 2011 Overcoming an „anti-mutual assistance mood“!

  22. Character of administrative assistance Request for information or administrative assistance: Passive instrument (from the view of the applicant state) Applicant State has no influence on the method of examination by the requested State Taxpayer has no right to request the state for information and assistance Subsidiarity: in Germany the taxpayer who undertakes cross-border activities is fundamentally obliged in an extended manor to cooperate and supply the tax authority with the required evidences (Sec. 90 II AO)

  23. Types of Information Clauses in DTT Types of Information Clauses Small Clause Mayor Clause Information exchange is limited on the conduction of the DTT Information exchange and mutual assistance have to be given for the tax assessment purposes in general of the state parties DTT-Reality: Hybrids and Enlargements

  24. Development of Art. 26 DTT-Model not only in conducting the DTT, but limited on residents of the state parties and such tax types are mentioned in the DTT Art. 26 OECD-MC 1963 = limited mayor clause Art. 26 OECD-MC 1977 = limited mayor clause Omission of the requirement of state party residency Art. 26 OECD-MC 2000 = unlimited mayor clause Enlargement on all types of taxes of the state parties Art. 26 OECD-MC 2005 = unlimited major clause without a restriction by bank secrects Examination of the requested state does not depend neither on its own public tax interests nor on a national bank secret

  25. Comparison: Council Directive 77/799/EWG Comparable with Art. 26 OECD-MC 1977/2000 = limited major clause Limited on the types of taxes mentioned in Art. 1 Dir. (taxes on income and capital) According to Art. 8 I Dir. limited by the national laws including a national bank secret

  26. Comparison: Council Directive 2011/16/EU Comparable with Art. 26 OECD-MC 2005 = unlimited major clause Unlimited on all types of taxes except VAT und custom duties applicable (Art. 2 [1] Dir.) According to Art. 18 II Dir. a national bank secret is not a hindrance to provide the other Member State with tax-relevant information

  27. OECD Agreement on Exchange of Information on Tax Matters – TIEA 2002 Exchange upon request according to Art. 5 Model Agreement: comparable to Art. 26 OECD Model Convention = major information clause But the requested State is not allowed to decline a request because the required information is held by a bank or because the conduct being investigated would constitute a crime Though relating to certain taxes that are covered by the agreement Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  28. TIEA - Statistics • significant increase in the number of TIEAs signed in the last two years Source: OECD, The Global Forum on Transparency and Exchange of Information for Tax Purposes – A Background Information Brief, 3rd Nov. 2010, p.16 Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  29. TIEA – a Tool to involve Tax Haven States • Model Agreement on exchange of information in tax matters developed by the OECD Global Forum Working group on effective exchange of information released in 2002 is: • an instrument to establish effective exchange of information and fight tax havens • not a binding instrument but contains models for bi- and multilateral agreements • TIEAs concluded adhere largely to this Model Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  30. TIEA - Content • OECD Model Agreement regulates: • Exchange of information upon request (Art. 5) respecting the principle of subsidiary • qualified requirements for the request • obligation to investigate for the requested State • no bank secrecy • exchange of information without regard to whether the conduct being investigated would constitute a crime • Protection of commercial secrets Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  31. TIEA - Content • OECD Model Agreement regulates: • Protection of the international fiscal secret/Confidentiality of the information exchanged • Right to participate in tax examinations abroad • Possibility to agree upon one language between the Contracting Parties • Possibility to agree upon costs by the Contracting Parties Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  32. Example: Liechtenstein SteueramtshilfeG (SteAHG) v. 30.6.10, LGBl. 10, 353 • Adaption of national laws on TIEA in: • Art. 7 SteAHG = Information upon request (Art. 5 III TIEA) • Art. 8 SteAHG = reasons of declining (Art. 7 TIEA) • No reason to decline are secrects of banks, other financial institutions, fiduciaries including nominees and trustees (Art. 12 III SteAHG, Art. 5 IV TIEA); • Other commercial secrets of trade, business, industry or profession have to be protected (even: attorney-client-privilege) • National tax authority will prove: substantial information request or „fishing expedition“ • Art. 10 SteAHG: National tax authority will request for information internally and inform the involved parties • Compulsive enforcement of the internal request (Artt. 14-16 SteAHG) under a judge clause • International tax secret has to be observed (Artt. 22, 23 SteAHG)

  33. Legal Protectionagainst a request upon informationSteueramtshilfeG(SteAHG) - Liechtenstein Final decree (Art. 21 SteAHG) about the legitimacy of the request and the transmittance of the information Within 14 days after notification Appeal to VGH Liechtenstein: Right of action = involved party and information holder with residence, seat in Liechtenstein or liecht. Authorized recipient (Art. 25, 26 SteAHG) within 14 days after notification Appeal to the StGH Liechtenstein: the chief judge can determine a suspensive effekt of the appeal within 14 days

  34. Limitation of national Examinations by the formal territoriality principle ► Difficulties to clarify and verify facts in cross-border cases Jeopardizing of national budgets and the internal market -> Losses of revenue -> Distortion of competition in the internal and capital market Council Directive 2011/16/EU of 15.2.2011 Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  35. -> EC Councel determines on the basis of the proposal of the EU Commission the Directive 77/799/EWG of 19.12.1977 OJ No. L 336, 15 -> EC Councel determines on the basis of the proposal of the EU Commission the Directive 2011/16/EU of 15.2.2011 OJ No. L 64, 1 -> Member States have to transform the Directive 2011/16/EU into its national laws until 1.1.2013. The former directive 77/799/EWG will be repealed with effect from 1.1.2013. Directive 2011/16/EU – Development Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  36. Goal of the new directive: Improvement of the mutual administrative cooperation between the Member States on common principles and rules Directive sets the (minimum) standard of intergovernmentalcooperation and have to be transformed until 1.1.2013 in national law of the Member States Germany: still in force is the code of 19.12.1985 („Gesetz zur Durchführung der EG-Richtlinie über die gegenseitige Amtshilfe im Bereich der direkten Steuern und der Mehrwertsteuer [EG-AHG]“) with Amendments Österreich: still in force is the EG-AmtshilfeG No 657/1994 since the accession of Austria to the EU from 1.1.1995 with Amendments Directive 2011/16/EU – national Laws Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  37. Directive 77/799/EWG: only direct taxes on income and capital Directive 2011/16/EU: taxes of any kind levied by Member States (including local authorities), even: inheritance tax, local taxes Exception: Council Regulation No. 904/2010 of 7.10.2010, VAT-Cooperation Exception: Council Regulation No. 515/97 of 13.3.1997, amended by No. 766/2008, mutual assistance in custom duties Directive 2011/16/EU – scope of taxes Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  38. Directive 2011/16/EU – Types of Information Exchanges on request without request in single cases in a group of cases in single cases Art. 5-7 Dir. Spontaneous information exchange Art. 9, 10 Dir. Automatic information exchange Art. 8 Dir. Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  39. Requested tax authoritiy checks the conclusiveness of the request from an ex ante perspective (but no proof of the foreign tax claim) -> Presumption: the requesting tax authority has already exhausted its usual sources of information and its possible means of examination (subsidiarity principle, Art. 17 (1) Dir.). -> Presumption of the relevance of the requested information for the taxation in the territory of the applicant tax authority -> Spontaneous information exchange:tax relevance of the information for the single case has to be proofed before the information will be delivered. Directive 2011/16/EU – Art. 1 (1)TaxRelevanceoftherequested Information Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  40. Core area of the mutual assistance in tax matters Obligationto provide the tax relevant information (Art. 5 Dir.) Relevant for the tax administration and enforcement in a single case Directive 2011/16/EU – Art. 5-7Exchange of Information on Request Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  41. subject = facts or legal relationships Requested tax authority fulfills the information request on the same way it wo do in a sole national tax case. Requested tax authority determines the typ and scope of the necessary evidences Directive 2011/16/EU – Art. 5-7Exchange of Information on Request Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  42. Directive 2011/16/EU – Art. 4Organisation Request at the German Tax Authority: LMF Land BZSt Bonn Central Liaison Office EU-MS OFD time limits (Art. 7 Dir.): max. 6 months; confirmation within 7 days BMF Berlin FA Discretionary Enquiries Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  43. Central Liaison Offices for Information Exchanges between Austria and Germany Direct contracts via OFD to Austrian Tax Offices possible!(Art. 4 of Austria-German TIEA of 4.10.1954) Austria-GermanyOrganisation for Mutual Assistance in Tax Matters Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  44. Austria-GermanyOrganisation for Mutual Assistance in TaxMatters direct bilateral information exchange: Austria-Germany Steuer- u. Zoll-koordination Salzburg OFDen FÄ FÄ Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  45. Obligation of Tax Authorities of the Member States without a requestof a foreign Tax Authority of another Member State in single cases Not routinely Instrument to combat tax fraud Importance of reciprocity Directive 2011/16/EU – Art. 9Spontaneous Exchange of Information Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  46. Art. 9 I Dir.: 5 casesforspontaneousinformation Groundsforsupposingthattheremaybe a lossoftaxin theother Member State, A personliabletotaxobtains a reductionin, or an exemptionfrom, taxin one Member State whichwouldgiveriseto an increase in taxortoliabilitytotaxin theother Member State, Business dealingsareconductedthroughoneormore countries in such a waythat a saving in taxmayresult in oneortheother Member State or in both, Groundsforsupposingthat a savingoftaxmayresultfromartificaltransfersofprofitswithingroupsofenterprises, Receivedinformationhasenabledthecompetentauthoritytoobtaininformationwhichmebe relevant in assessingliabilitytotax in theother Member State thathassubmittedtheinformationfirstly. Directive 2011/16/EU – Art. 9Spontaneous Exchange of Information Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  47. Mandatory automatic information exchange without a request similar types of cases (group of cases) Importance of reciprocity Directive 2011/16/EU – Art. 8Automatic Exchange of Information Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  48. Taxable periods from 1.1.2014 on: 5 groups of cases = 1. Income from Employment 2. Director‘s fees 3. Life insurance products not covered by other Union legal instruments on exchange of information and other similar measures 4. Pensions 5. Ownership of and income from immovable property. Directive 2011/16/EU – Art. 8Automatic Exchange of Information Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  49. European Parliament resolution of 10.2.2010: Enlargement of 3 further groups 1. Dividends 2. Capital gains 3. Royalties However, it was impossible to include these groups by the Council unanimously. Directive 2011/16/EU – Art. 8Automatic Exchange of Information Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

  50. Limitation by national Laws – Art. 17 (2) -> No obligation to carry out inquiries or to communicate information, if it would be contrary to legislation of the requested Member State to conduct such inquiries or to collect the information requested for its own purposes. Directive 2011/16/EU – Art. 17 (1)-(5)Boundariesof Information exchange Mutual Administrative Assistance in Tax Matters Prof. Dr. Roman Seer

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