Problems relating to Trade and Investment on EU
14. Taxation Systems |
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Issue |
Issue details |
Requests |
Reference |
| (1) Disunity in Interpretation and Implementation of Transfer Price Taxation System | - Tightening in implementation of transfer price taxation system (TPTS) in each Member State is a factor of heavy cost increase, particularly documental requirements for a firm's subsidiary operating as group enterprises within the EU Member States. Moreover, TPTS in many cases impacts upon execution of the functional reorganisation or integration within the group of firm's subsidiary in EU as a risk element. | - It is requested that EU: -- materialises integrated implementation of TPTS that assures freedom of organisational planning within the EU Member States, and -- propels international cooperation that guarantees expulsion, without fail, of the double taxation. |
- Tax Law of each Member State - Transfer Pricing Taxation System |
| (Action) - At Japan-EU Regulatory Reform Dialogue, Government of Japan (GOJ) presented to EU its request for improvements. |
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| (Improvement) - EU established Joint Transfer Pricing Forum (JTPF) to study "A strategy for providing companies with a consolidated corporate tax base for their EU-wide activities", and to alleviate, especially, the burden for compliance with Transfer Price Taxation System shouldered by multinational enterprises operating in various Member States. Based upon the study at JTPF, the European Commission made a proposal on Code of Conduct related to transfer pricing taxation system and this proposal was approved in June 2006. This Code of Conduct has enabled implementation of "Code of Conduct on transfer pricing documentation for associated enterprises in the European Union (EUTPD)", provided, however, that a group of legal entities, if separately required by the taxation authority in a Member State will be required to prepare a separate individual documentation. (http://ec.europa.eu/taxation_customs/taxation/company_tax/transfer_pricing/forum/index_en.htm) |
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| (2) VAT is disintegrated within Member States in System, Procedure and Interpretation | - Under the EU directive, value added tax (VAT) within EU has been implemented at similar tax rates and in the similar method of tax levy, despite taxation system is a matter within the sovereign power of each member state. However, in regard to business within the EU member states, complexity remains on the VAT tax declaration procedure, such as reverse charge, particularly as regards cross border transactions within EU. The system design, for recording and maintaining the transactions, demands utmost care and scrutiny, heavily burdening taxpaying enterprises. - As regards VAT exemption, the following problems confront foreigners traveling within EU: -- Complexity in rules and procedures for filing tax declaration and return, -- Disunity of the rules within each member states, -- European court of justice decision in September 2013 directs the policy to harmonise the rules within EU. This decision directs tax levy upon virtually all foreign travellers also, without exception. This gives vent to imbalance, emanating from the heavy cost increase for in-bound travelling agents, a life-and-death problem in their competition against travelling agents outside EU. The enforcement date of the new policy remains ambiguous. Some member states have issued direction, while others have taken no action as yet. It is requested, EU promulgates its policy giving the full details with a sufficient grace period before the effective date of its implementation. |
- It is requested that EU takes the initiative in achieving the full harmonisation of the VAT taxation system within the EU Member States, and that each Member State joins the band wagon to reach this common goal. - It is requested that EU takes steps to: -- identify clearly its implementation policy (schedule and requisite preparation, etc.) -- avoid extreme unfairness in competition against the traveling agencies outside EU. |
- Tax Law of each Member State - EU Directives |
| (Info) - Effective January 2007, New Directive codifying the VAT registration in lieu of the Sixth VAT Directive forming the base of the EU VAT legislation has been enforced. The New Directive reforms the difficult to comprehend VAT legislation, which has been made complex by the repeated amendments. While it is effective in enhancing the general comprehension of the VAT legislation, it has no direct effect in elucidating otherwise complicated practical application of the VAT system. |
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| (Action) - At Japan-EU Regulatory Reform Dialogue, Government of Japan (GOJ) presented to EU prompting improvement in regard to the injury determination criteria. - The ultimate goal remains unchanged to impose VAT at the originating country, while various proposals for the VAT related regulations are presented toward establishment of the new harmonised and computerized VAT system within the Member States. |
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| (3) Cross Border Sales Using Internet | - It is difficult to harmonise, within EU, the (Manufacturer) suggested retail sales price. Moreover, cases have surfaced where retailers' sales activity via internet has become genralised, not only domestically but also externally. In as much as VAT rate is determined by the Seller's country, purchasers in the country of high VAT rate (such as Germany) tend to bypass the legitimate sales channel by purchasing from the country of relatively low VAT rate (such as Ireland). This trend curbs member firm's marketing policy. Incidentally, by right, consumers are responsible to pay VAT in their mother country. However, it appears contrary is the case. Leaving the going status quo as is will likely result in tax collection leakage in EU. | - It is requested that EU provides: -- some means of curbing internet sales, or -- mandate for payment of VAT in home country, where purchaser in high VAT rate country purchases from a country with low VAT rate. |
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| (4) Disunity of Car Tax, etc. within the EU Member States | - Car tax (bonus / malus) exists in the Netherlands / France, etc. based on the threshold value for the carbon dioxide value, while in Austria insurance premium varies commensurate with the vehicle's horse power, and Denmark applies its own unique car tax calculation method. Both the target and the threshold on taxation vary from country to country. Moreover, frequent changes in the threshold value make the product planning difficult. It requires increase in the development cost. | - It is requested that EU harmonises the car tax standard. | |
| (5) Exit Tax | - Tax that accrues from shifting the customer base to another newly established legal entity, etc. Due to the complexities in the relationship between member states, sales and purchases with assured performance based on agreements may not be possible in certain cases. MFS receives advice from consultants by payment of substantial consultation fees. |
- It is requested that EU considers new establishment of a consultation windows that enables lawful operation of foreign funded enterprises. | |
| (6) Report on Short Term Workers | - An enterprise operating in EU is required by law to record the number of visit days for non-resident visitors. Should the non-resident's stay in a member state exceed 60-days, the enterprise must confirm the number of days stayed and report the number to the local tax authority. Should the stay exceeds 183-days, the enterprise must pay corporate income tax. | - It is requested that EU: -- streamlines the rules. (In certain member states, reporting is necessary by calendar year, and in others by different periods.) -- simplifies the reporting standard such as filing the first report, in the case a stay of 183-days is exceeded. |
- All EU countries |
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