Advance tax rulings revisited - European .Introduction into Advance Tax Rulings, Advance Pricing

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Transcript of Advance tax rulings revisited - European .Introduction into Advance Tax Rulings, Advance Pricing

  • Introduction into Advance Tax Rulings,

    Advance Pricing Agreements and other Arrangements

    Prof. dr. Elly Van de Velde European Parliament June 2, 2015

  • 1

  • I. Towards a renewed relationship

    Fundamental debate on complex, extensive, variable, uncertain and vague income tax law

    Change of mentality within the tax administration (Tax-on-web, help line, )

    From a conflict model to a dialogue model concerning a more mutual and co-operative approach with mutual trust and transparency (enhanced relationship?)

    Two keywords: tax compliance and legal certainty

    Legally organized ADR or informal arrangements


  • II. Advance tax rulings

    Definition? (BE)

    1. Binding legal decision

    2. Given by the federal Advance Tax Ruling Service

    3. In accordance with the current law (national, European, international)

    4. With respect to the application of tax law

    5. On specific (no hypothetic) situations

    6. Before any tax consequences

    7. No exemption or reduction


    Prefiling meeting, formal application, other meetings, written procedure


  • II. Advance tax rulings

    1. Binding legal decision

    For the taks authorities (including tax auditor, inspector)

    Unilateral (the taxpayer is not required to carry out the transaction)

    Legal qualification? (Unilateral) Agreement? Opinions? Decision? Legal uncertainty

    Prescribed by a legal provision or in accordance with principles of estoppel, legitimate expectations,


  • II. Advance tax rulings

    2. Competent authority

    Tax authorities (local, central)

    Autonomous service within the tax administration (independent? impartial?) that issues rulings or gives binding advice

    Experts Commission (always or for important tax rulings)

    Not one person!

    Consistency and uniformity!


  • II. Advance tax rulings

    3. In accordance with the law

    ATRs contra legem are not binding the tax administration Changements in tax law

    No taxation without representation

    ATRs can be obtained as long as very strict interpretation of essential elements discussion on the margin of appreciation of taks authorities when taks law is unclear

    International, European, national (case) law



  • II. Advance tax rulings

    4. Application of tax law

    Decision about how tax law will be applied in the taxpayers particular situation

    Personal income tax, corporate income tax, VAT,

    Specific tax matters


  • II. Advance tax rulings

    5. Specific situation or transaction

    Individual situation

    No hypothetic question

    No precedential value, but general policy

    Apply for a ruling for another taxpayer?


  • II. Advance tax rulings

    5. Specific situation or transaction

    Constitutional principle of equality

    No privileges at all, no exemption or reduction of taxes can be levied except by statute

    similar cases must be treated equally, different cases unequally (exceptions conditions)

    problem: how to prove comparability?

    solution: anonymous summarized publication of ATRs (unilateral APAs included) and published annual reports OR publication of (binding) policy guidelines

    Legal certainty? Apply for an ATR yourself


  • II. Advance tax rulings

    6. Before any tax consequences

    ATR before filing the tax declaration?

    Even after the transaction and after the income taks year?


  • II. Advance tax rulings

    7. No exemption nor reduction

    Some excluded tax matters

    Tax rates and calculation of taxes

    Amounts and percentages of taxes

    Tax declaration, examination and control, evidence, tax assessment, terms, professional secrecy, ...

    Administrative sanctions, tax increase

    Principle of legality

    Principle of equality


  • II. Advance tax rulings


    Informal prefiling meeting

    Formal filing meeting

    Written procedure?

    Mutual relationship: taxpayers have to hand over all the necessary information spontanously or on request of the taks administration


    2005 2006 2007 2008 2009 2010 2011 2012 2013

    Prefiling 250 575 642 698 742 866 866 951 1103

    Filing 375 570 553 465 500 576 576 592 647


  • II. Advance tax rulings

    No strict term depends on the complexity of the ruling application

    ATR is binding for max. 5 years (exceptions)

    Internal exchange of tax rulings

    Publication of the individual ATR/unilateral APAs on the website of the Ministry of Finance? Annual reports? Guidelines? Databases?



  • III. Advance pricing agreements

    Starbucks, Apple, Fiat, Amazon, Excess profit rulings: allocation of profits

    On transfer pricing methodologies if the transaction price between 2 related parties within a group is at arms lenght compared by the transaction price with an unrelated party in accordance with the law, OECD guidelines,

    EU APA Guidelines on the procedure of APAs

    Unilateral: between the tax administration and the taxpayer, without the participation of any other state involved exchange of information?

    Bi- or multilateral: between tax administrations (art. 25 DTC - MAP)


  • IV. Informal tax agreements

    Informal tax agreements or tax arrangements:

    flourishing and daily practice to accomplish legal certainty BUT

    they create legal uncertainty itselves

    Doctoral thesis (2009):

    1. Legal limits/possibility?

    2. Legal qualification?

    3. Legal consequences?


  • IV. Informal tax agreements

    Whether and to what extent provide tax arrangements (informal tax agreements) legal certainty?

    Does the Constitution allow agreements with the tax administration?

    Are there any international, European, constitutional or administrative limits to take into account?

    Is tax law (entirely) of public order?

    Does the tax administration has discretionary power?

    Is there any unity of policy?

    What is the difference between interpreting the law and qualifying facts? (question of law/of facts)

    What is the legal qualification and its consequences?

    Is the taxpayer legally protected?


  • Questions?