EUROPEAN COMMISSION
DIRECTORATE-GENERAL
TAXATION AND CUSTOMS UNION
Direct taxation, Tax Coordination, Economic Analysis and Evaluation
Direct Tax Policy & Cooperation
Brussels, 13 November 2013
[deleted]
TAXUD.D.2 (2013) Ares 3722968
WORKING DOCUMENT
FOR OFFICIAL USE ONLY
COMMITTEE ON ADMINISTRATIVE
COOPERATION FOR TAXATION
MODEL INSTRUCTION FOR THE SPONTANEOUS EXCHANGE OF CROSS-BORDER RULINGS
AND UNILATERAL ADVANCE TRANSFER PRICING AGREEMENTS
MEETING N° 7 OF 28-29 NOVEMBER 2013
Table of contents
1.
INTRODUCTION ....................................................................................................... 3
2.
LEGAL BASIS COUNCIL DIRECTIVE 2011/16/EU .............................................. 4
2.1. Article 9 Scope and conditions of spontaneous exchange of
information ........................................................................................................ 4
2.2. Article 10(1) Time limits ................................................................................... 4
3.
BACKGROUND ......................................................................................................... 5
3.1. The Code of Conduct for Business Taxation and the Code of Conduct
Group ................................................................................................................. 5
3.2. Definition of a cross-border ruling and examples of cross-border
rulings to be sent spontaneously ........................................................................ 5
3.3. Definition of unilateral advance transfer pricing agreements to be sent
spontaneously .................................................................................................... 6
4.
NATIONAL ORGANIZATION AND ENSURING EFFECTIVE
EXCHANGE REGARDING CROSS-BORDER RULINGS AND
UNILATERAL APAS ................................................................................................ 6
5.
CONTENT OF INFORMATION TO BE SENT SPONTANEOUSLY ..................... 8
5.1. Cross-border rulings .......................................................................................... 8
5.2. Unilateral APAs ................................................................................................. 9
6.
FEEDBACK ................................................................................................................ 9
7.
MONITORING ......................................................................................................... 10
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1.
INTRODUCTION
The purpose of this Model Instruction is to provide practical guidance with a view
to improving the effectiveness of the arrangements for spontaneous exchanges of
information. It is particularly focused on motivating tax officials to initiate
spontaneous exchanges of information on cross-border rulings and unilateral
advance transfer pricing agreements (APAs).
Information provided spontaneously is potentially very effective as the information
selected by the (local) tax officials draws on their own practical experience
regarding what will be relevant to the levying of taxes. Spontaneous exchange of
information relies heavily on the active participation and co-operation of tax
officials. Therefore it is important for all Member States to develop strategies that
aim to encourage and promote the use of spontaneous exchange of information by
their tax officials in accordance with Council Directive 2011/16/EU. This Model
Instruction supports the implementation of such strategies in the Member States’
internal guidelines, procedures and awareness programs for spontaneous exchange
of information. It highlights the importance and suggests practical steps to facilitate
the exchanges. This Model Instruction also emphasizes the importance of sending
feedback on the effectiveness of the information provided.1
Although this Model Instruction specifically targets the spontaneous exchange of
cross-border rulings and unilateral APAs, it should be stressed that this does not
intend to convey that the spontaneous exchange of any other information that may
be relevant to another Member State is less important. The general principles set
out in this note (legal basis for spontaneous exchange, the use of the standard forms
and the common communication network (CCN), time limits and other
practicalities) also apply to spontaneous exchange on other issues, e.g. information
detected during a tax audit or investigation.
When communicating with countries outside the EU, the bilaterally agreed
procedures must be followed by the competent authority.
1 To localize this Model Instruction, the Member States can, if needed, add an additional paragraph to
describe their own national procedures (how to contact the competent authority, notification procedure
etc.).
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2.
LEGAL BASIS COUNCIL DIRECTIVE 2011/16/EU
2.1. Article 9 Scope and conditions of spontaneous exchange of information
(1)
The competent authority of each Member State shall communicate the
information referred to in Article 1(1)2 to the competent authority of
any other Member State concerned, in any of the following
circumstances:
– the competent authority of one Member State has grounds for
supposing that there may be a loss of tax in the other Member
State;
– a person liable to tax obtains a reduction in, or an exemption
from, tax in one Member State which would give rise to a tax
liability in the other Member State;
– business dealings between a person liable to tax in one Member
State and a person liable to tax in the other Member State are
conducted through one or more countries in such a way that a
saving in tax may result in one or the other Member State or in
both;
– the competent authority of a Member State has grounds for
supposing that a saving of tax may result from artificial transfers
of profits within groups of enterprises;
– information forwarded to one Member State by the competent
authority of the other Member State has enabled information to be
obtained which may be relevant in assessing liability to tax in the
latter Member State.
(2)
The competent authorities of each Member State may communicate,
by spontaneous exchange, to the competent authorities of the other
Member States any information of which they are aware and which
may be useful to the competent authorities of the other Member States.
2.2. Article 10(1) Time limits
(1)
The competent authority to which information referred to in Article
9(1) becomes available shall forward that information to the competent
authority of any other Member State concerned as quickly as possible,
and no later than one month after it becomes available.
2 Article 1(1): "This Directive lays down the rules and procedures under which the Member States shall
cooperate with each other with a view to exchanging information that is foreseeably relevant to the
administration and enforcement of the domestic laws of the Member States concerning the taxes
referred to in Article 2".
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3.
BACKGROUND
3.1. The Code of Conduct for Business Taxation and the Code of Conduct
Group
The Code of Conduct for Business Taxation addresses harmful tax
competition inside the EU. This is an important factor in reducing distortions
in the single market and in preventing significant losses of tax revenue. It is a
non-binding instrument of a political character containing political
commitments. It was agreed by a "Resolution of the Member States meeting
within the Council" in December 1997.
The Code of Conduct contains two central features:
(1)
The commitment from Member States to amend their laws and
practices as necessary with a view to eliminating any harmful
measures as soon as possible (rollback), and
(2)
The commitment from Member States to refrain from introducing any
new tax measures which are harmful within the meaning of the Code
(standstill).
In March 1998 the Code of Conduct Group was established to assess harmful
business tax measures that may fall within the scope of the Code of Conduct
for Business Taxation and to monitor their abolishment. It is a special high-
level Council Working Group.
3.2. Definition of a cross-border ruling and examples of cross-border rulings
to be sent spontaneously
The Code of Conduct spells out, inter alia, five criteria for assessing whether a
tax measure is harmful. One of these criteria is lack of transparency. This
element has been given particular emphasis by the Code of Conduct Group in
its considerations with respect to the advance interpretation or application of
tax provisions by a tax administration to a specific fact pattern of a specific
taxpayer (tax rulings). While recognising the potentially positive aspects of
such administrative practices, the Code of Conduct Group also agreed on the
need to improve the exchange of relevant information specifically for cross-
border rulings that may affect tax bases of other Member States. Therefore, in
June 2010 the Code of Conduct Group established the following general
guidance:
If a Member State provides advance interpretation or application of a legal
provision for a cross-border situation or transaction of an individual taxpayer
(hereafter: cross-border ruling), which is likely to be relevant for the tax
authorities of another Member State, the tax authorities of the first Member
State will spontaneously exchange the relevant information regarding this
cross-border ruling in accordance with Community law provisions with the
latter Member State in order to assure coherent overall taxation.
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By means of a non-exhaustive list, this would specifically concern the
following types of cross-border rulings:
(1)
MS 1 gives clearance on the absence of a PE in MS 1 to a company
resident in MS 2. Such a ruling could be relevant for the tax authorities
of MS 2 (same applies in the reverse situation);
(2)
MS 1 gives clearance on specific items related to the tax base of a PE
in MS 1 to a company resident in MS 2. Such a ruling could be
relevant for the tax authorities of MS 2 (same applies in the reverse
situation);
(3)
MS 1 gives clearance on the tax status of a hybrid entity resident in
MS 1 which is controlled by residents of MS 2. Such a ruling could be
relevant for the tax authorities of MS 2 (same applies in the reverse
situation);
(4)
MS 1 gives clearance to a company resident in MS 1 regarding the tax
value for depreciation for an asset that is acquired from a group
company in MS 2. Such a ruling could be relevant for the tax
authorities of MS 2 (same applies in the reverse situation).
3.3. Definition of unilateral advance transfer pricing agreements to be sent
spontaneously
Advance transfer pricing agreements are a specific type of cross border ruling
relating to transfer pricing.
For the purposes of this document a unilateral advance pricing agreement is
any agreement between a single Member State (or its political sub-divisions
or local authorities) and a taxpayer that determines, in advance of controlled
transactions, an appropriate set of criteria (e.g. method, comparables and
appropriate adjustments thereto, critical assumptions as to future events) for
the determination of the transfer pricing or the transfer price itself for those
controlled transactions over a fixed period of time. This includes an
agreement between a MS and a taxpayer on how profits of a permanent
establishment should be determined over a fixed period of time.
4.
NATIONAL ORGANIZATION AND ENSURING EFFECTIVE EXCHANGE REGARDING
CROSS-BORDER RULINGS AND UNILATERAL APAS
This Model Instruction covers cross-border rulings involving companies and
unilateral APAs. Examples of the cross-border rulings to be exchanged
spontaneously can be found in paragraph 3.2 of this Model Instruction. The cross-
border rulings and unilateral APAs as well as feedback (please see paragraph 6)
shall be sent by using standard electronic forms. National procedures will indicate
who is responsible for filling in those forms in the Member States (for example the
decision maker preparing the cross-border ruling or the competent authority).
[deleted]
Information exchanged shall, as far as possible, be provided by electronic means
using the common communication network (CCN) between the competent
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authorities. Timing of the exchanges has to be in line with Article 10 of the Council
Directive 2011/16/EU.
Member States shall ensure that cross-border rulings and unilateral APAs that fulfil
the criteria detailed in Article 9 (1) of the Council Directive 2011/16/EU are
exchanged with other Member States. The process for exchanging should follow
Article 4 of Council Directive 2011/16/EU. It will be the responsibility of the
receiving authority to ensure information reaches the correct person. In order to
ensure that each Member State has sufficient national procedures in place, the
following criteria are to be followed:
(1)
Each Member State ensures that their resource availability, procedures and
network for spontaneous exchange of information allows fulfilment of the
requirements of the Council Directive 2011/16/EU, in particular that:
– The national network for spontaneous exchange of information in
general provides the possibilities for effective exchange regarding
cross-border rulings and unilateral APAs;
– There is a clear communication channel from the decision maker
to the competent authority that sends the information to another
Member State.
(2)
Each Member State ensures that good quality training is organized and
national guidance is prepared for the decision makers who prepare cross-
border rulings and/or unilateral APAs.
– The decision makers must have knowledge about the requirements
set by Article 9 (1) of Council Directive 2011/16/EU and thus be
able to identify relevant cross-border rulings and unilateral APAs
that are to be exchanged. They will also be informed and have
knowledge of any additional clarifications and practical
arrangements to spontaneous exchange of information regarding
cross-border rulings and unilateral APAs such as this instruction;
– The decision makers must have sufficient knowledge on the
national information exchange procedure to be able to transfer a
relevant cross-border ruling and unilateral APA to another
Member State through the designated national competent
authorities.
(3)
Each Member State will take all reasonable measures to overcome any
additional obstacles that might hinder the effective exchange of information
on cross-border rulings and unilateral APAs, in particular that:
– This instruction gives a definition of cross border rulings and
examples of cross-border rulings to be sent spontaneously in
paragraph 3.2 and a definition of unilateral APAs in paragraph
3.3, but those definitions should not be interpreted too narrowly. If
there is some doubt as to whether or not the definitions are met the
default position of the decision maker should be to exchange if the
conditions of spontaneous exchange conditions (under Article 9(1)
Council Directive 2011/16/EU) are otherwise met.
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5.
CONTENT OF INFORMATION TO BE SENT SPONTANEOUSLY
5.1. Cross-border rulings
When sending spontaneous information on cross-border rulings, the sending
Member State should take into consideration some obstacles, which may
result in limited use of such information such as language barrier and
complexity of the cross-border ruling. Therefore information, which will
finally be sent, should be as clear and comprehensive as possible.
Firstly it should be remembered that the purpose of this information is to give
the receiving Member State sufficient facts to take a decision as to whether or
not the case is potentially significant. Therefore, it is strongly recommended
that when sending information about cross-border rulings the sending
Member State adheres to the set of principles and guidance contained in this
Model Instruction.
At this stage it is up to the sending Member State to determine which
information, for example the full text of the cross-border ruling in the original
language or any other material, would be considered useful. However at a
minimum it is important that a short summary, preferably in English or any
other language bilaterally agreed, should be provided and should contain the
following information(in the free text box in the SIF Part C Section C3):
(1)
Reference number of the cross-border ruling where available;
(2)
Details of the issue for which the taxpayer requires an answer;
(3)
Administration’s response and reasoning. In the case when an administration
publishes rulings on its website, inserting a direct link to such ruling would
facilitate the work of the receiving Member State;
(4)
Information on whether or not the ruling is binding;
(5)
In the case that it is a binding ruling, information should be supplied
regarding who is bound by this ruling (administration and/or taxpayer), and
whether this ruling is final (accepted by both parties) or if the ruling can be
still appealed against by the taxpayer. As an appeal period may vary from
Member State to Member State, the sending Member State should decide
whether information about the ruling should be exchanged immediately
when the ruling is issued or when the ruling is considered to be final. In
making this decision it should be borne in mind that time limit restrictions
may be an issue for the recipient Member State of the information;
Finally, the sending Member State should consider limitations arising from
Article 17(4)3 of the Directive.
3 Article 17(4): "The provision of information may be refused where it would lead to the disclosure of a
commercial, industrial or professional secret or of a commercial process, or of information whose
disclosure would be contrary to public policy."
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5.2. Unilateral APAs
The exchange of information is intended to work as a two-step process. The
first stage would be a spontaneous exchange of important information about
the unilateral APA which should enable the receiving Member State to decide
whether a request for additional information under stage 2 was appropriate.
To this end the initial spontaneous exchange should include the following
information;
(1)
The name, address and tax registration number of the taxpayer to which the
unilateral APA is granted;
(2)
The name, address and if available the tax registration number of the other
participant to the controlled transaction for which the unilateral APA is
granted including why it is considered as being a related party;
(3)
The period covered by the unilateral APA;
(4)
Information on all entities directly involved in the controlled transaction for
which the unilateral APA is granted;
(5)
A short description of the transaction/business activity covered by the
unilateral APA;
(6)
The transfer pricing method used and the price/margin agreed, as well as any
other relevant terms of the unilateral APA, and;
(7)
The estimated value of the transactions covered by the unilateral APA.
Finally, the sending Member State should consider limitations arising from
Article 17(4)4 of the Directive.
6.
FEEDBACK
If the sending Member State has requested feedback, the decision maker/auditor in
the receiving Member State shall provide feedback to its competent authority. The
competent authority shall send feedback as soon as possible and no later than three
4 Article 17(4): "The provision of information may be refused where it would lead to the disclosure of a
commercial, industrial or professional secret or of a commercial process, or of information whose
disclosure would be contrary to public policy."
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months after the outcome of the use of the requested information is known (article
14(1))5.
Even if the sending Member State has not requested feedback, it is good practise to
always send feedback to the sending Member State. Feedback on information sent
will encourage administrative cooperation between Member States.
7.
MONITORING
The Member States are responsible for providing statistics in line with the existing
guidelines for statistics on spontaneous exchange of information which provide for
an efficient and transparent analysis of the number of cross-border rulings and
unilateral APAs sent and received per Member State.
The Commission, based on statistical data provided by the Member States, will
prepare summary tables on cross-border rulings and unilateral APAs. Tables will be
made available to the Member States for the purpose of discussion in the Code of
Conduct group.
5 Article 14(1): "Where a competent authority provides information pursuant to Articles 5 or 9, it may
request the competent authority which receives the information to send feedback thereon. If feedback
is requested, the competent authority which received the information shall, without prejudice to the
rules on tax secrecy and data protection applicable in its Member State, send feedback to the
competent authority which provided the information as soon as possible and no later than three months
after the outcome of the use of the requested information is known. The Commission shall determine
the practical arrangements in accordance with the procedure referred to in Article 26(2)."
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