On the 20/12/2010, the European Commission published a Communication which outlined the most serious tax problems encountered by EU citizens during cross-border transactions and announced plans for their resolution.
The Communication announced plans covering areas such as cross-border income, inheritance taxes, dividend taxes, car registration taxes and e-Commerce. It proposes to make member states’ tax systems more compatible so that citizens would not be deterred from engaging in cross-border activities.
When EU citizens move to another member state, either for occupation, work or investing abroad, they can encounter double taxation and other difficulties such as claiming tax refunds and/or obtaining information on foreign tax rules.
The Commission announced recently plans to deal with issues such as cross-border income, inheritance taxes, dividend taxes, car registration taxes and e-Commerce. The Commission’s Communication also aims to see where further action could be taken, at both EU and national level, to make member states’ tax systems more compatible so that citizens will not be deterred from engaging in cross-border activities.
“Taxation has a crucial role to play in strengthening the internal market and re-building a strong and sustainable European economy. Good tax policies can promote employment, investment and growth. Present Communication is another step forward in overturning tax obstacles and promoting fair taxation within the EU, so that citizens can enjoy all the benefits that the Single Market has to offer”Algirdas Šemeta, Commissioner for Taxation, Customs, Anti-fraud and Audit.
Every year, cross-border tax issues make up a substantial part of all complaints and queries that EU citizens send to the Commission. The complaints cover a whole range of issues from the difficulties caused by complex foreign tax rules, to lack of clear information for foreigners, to conflicting systems in different Member States.
Cross-border workers face difficulties in receiving tax allowances, relief and deductions from foreign tax authorities, and are frequently subject to double taxation. Citizens buying foreign real estate often miss out on tax exemptions or must pay higher property taxes than residents, whilst those moving or buying cars cross-border face double registration taxes.
People with foreign investment income find it difficult to claim entitlements to relief from withholding taxes applied by foreign countries. Many people with foreign pension funds experience problems with deductions and cross-border transfers, while inheritances from another member state are often subject to higher succession duties or double taxation.
E-shopping is also severely hampered by tax obstacles such as complicated VAT rules and reporting requirements, with the result that only 7 per cent of goods traded within the EU are bought online from another Member State.
Half of the tax infringement proceedings that the Commission opens every year in the tax area relate to citizens’ complaints. However, infringements do not solve everything. The Commissions argue, that the best way to solve issues such as double taxation and administrative complexities lies in proper cooperation between member states. According to the present Communication, member states should design and implement their tax measures and practices in a way which does not deter citizens from engaging in cross-border activities. They should also coordinate more closely with each other in order to prevent mismatched tax rules from creating obstacles and barriers to the EU internal market.
The Commission intends to step up its activities in assisting the member states to make their tax systems more compatible, and to propose concrete measures to prevent or remove tax problems for EU citizens.
The Communication sets out a number of initiatives in this field, including:
- a Communication on Double Taxation in 2011, examining the extent and gravity of this problem across the EU, followed by legislative proposals in 2012, proposing solutions;
- proposals in mid-2011 to address cross-border inheritance tax problems;
- measures to resolve the double taxation that can arise when a car that is first registered in one member state is then moved to and re-registered in another member state;
- extension of a “one-stop-shop” system for e-Commerce, in order to make reporting obligations for businesses much simpler and easier for them to offer goods and services online to foreign consumers. Obstacles to e-Commerce will also be addressed within the review of the EU’s VAT System for which a consultation is now open (see: IP/10/1633);
- proposals for 2012 to solve problems related to the taxation of cross-border dividend payments.
In addition, the Commission intends to promote a wide dialogue amongst national authorities and stakeholders on additional measures to simplify taxation issues for the benefit of citizens and the internal market. Ideas include standardised tax claim and declaration forms throughout the EU, single info-points where workers and investors could get clear and reliable tax information, and special tax measures at national level to cater for the needs of mobile and border workers.
The Commission will give feedback on the progress made in tackling cross-border tax problems within the Citizenship report in 2013 (see IP/10/1390).
Source : European Commission Press Release 20/12/2010
For more information, see:
The above should be used as a source of general information only. It is not intended to give a definitive statement of the law.