Double taxation problems in the EU

An online public consultation has just been launched by the European Commission to ask individuals, companies and tax advisers for information on double taxation problems that they have encountered when operating across borders within the EU.

EU Commissioner for Taxation and Customs Union, Audit and Anti-Fraud, Algirdas Šemeta, said double taxation can deter cross-border activity in the EU and the functioning of the Internal Market. This consultation will help assess the real scale and financial impact of double taxation for citizens and businesses. Proposals of the most appropriate and effective solutions will be made following the consultation.

The aim of the public consultation is to clearly identify the nature of the problems that EU taxpayers are facing and the extend to which many individuals and companies are encountering the problem of being taxed on the same income or profits in two or more different Member States.

When individuals and companies move between EU Member States they may become liable to tax in more than one Member State. For example, individuals who cross a border daily to go to work, or move to another country, or receive income or inheritances from another country, may face taxation both in their country of residence and in the other country in which they operate or from which they derive income. Companies which operate in more than one Member State may experience similar problems.

Citizens face difficulties, for example, when two different States impose taxes on the same person for the same profit, income or gain, or when two different taxable persons resident in different States are taxed on the same item.

There are mechanisms in place that are designed to prevent or relieve such international double taxation, such as double taxation conventions and national tax reliefs. However, it is not clear how well these mechanisms work in practice and whether they result in the effective elimination of double taxation.

The consultation concerns all direct taxes – income taxes, corporate taxes, capital gains taxes, withholding taxes, inheritance taxes and gift taxes.

The Commission is also inviting suggestions on how to effectively and rapidly remedy the double taxation identified.

Following the end of the consultation period, the Commission will publish a summary of all contributions received. It will also analyse the replies in detail and use them in preparing possible initiatives for EU action in the field of direct taxation.

Individual citizens, companies and tax advisers are invited to reply to the consultation by completing the questionnaire online

The consultation will run until 30 June 2010.

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