The managing associate in Morais Leitão’s Tax team analyses, in comments to ECO, the tax simplification package presented by the European Commission and highlights the importance of reducing overlaps, uncertainty and risks of double taxation for companies.
Raquel Maurício, managing associate in Morais Leitão’s Tax team, comments to ECO on the proposals presented by the European Commission under the Tax Omnibus, a package aimed at simplifying direct taxation rules in the European Union and reducing the compliance burden on companies.
According to Raquel Maurício, the need for simplification comes against a backdrop of the globalisation and digitalisation of the economy and the adoption, in recent years, of new taxation and anti-tax avoidance mechanisms, including the Anti-Tax Avoidance Directive (ATAD) and Pillar Two, concerning the global minimum tax. These developments have contributed to greater complexity in the rules and an increase in companies’ reporting obligations.
“Many of these obligations are particularly burdensome and, in some cases, redundant or even contradictory,” says Raquel Maurício, who therefore welcomes the fact that, as the regulatory framework reaches a greater level of maturity, a simplification process is now underway.
Reducing overlaps and the risk of double taxation
Among the measures proposed by the European Commission are changes to the rules applicable to cross-border payments of dividends, interest and royalties between companies in the European Union, as well as adjustments to the rules laid down in ATAD. The Commission estimates that the tax simplification package could reduce companies’ compliance costs by around €7.9 billion per year.
For Raquel Maurício, the package represents an effort to better coordinate the various international income taxation mechanisms, particularly Pillar Two and the anti-abuse rules laid down in ATAD, helping to “reduce overlaps, uncertainty and the risk of double taxation”.
Companies should monitor the development of the proposals
Despite the potential impact of the changes, Raquel Maurício considers that it is not yet the time for companies to undertake an in-depth review of their internal processes.
At this stage, she instead recommends active monitoring, identifying the areas of greatest exposure, namely intra-group transactions, financing structures and dividend and royalty flows, while closely following the legislative process. This approach will allow companies to anticipate and assess the adjustments that may become necessary once the final framework has been defined.
The Tax Omnibus is still going through the EU legislative process, meaning that the proposed measures may be amended before their final approval.
Read the full article on ECO’s website.
