background image
European Semester Spring Package 2023 Notes Need to Address Aggressive Tax Planning with Specific Recommendations for Luxembourg and Malta — Orbitax Tax News & Alerts

The European Commission has issued the European Semester Spring Package 2023, including country-specific recommendations for each of the 27 Member States, as well as a communication on these recommendations. With regard to taxation in general, the communication includes the following:

A balanced tax mix, effective tools to fight aggressive tax planning strategies and improved tax compliance contribute to the fair treatment of taxpayers and efficient funding of public services. Shifting part of the tax burden from labour to other types of taxes, including environmental and immovable property taxation, while duly taking account of the distributional impact of such a shift, would support the green transition and boost sustainable growth and job creation. Aggressive tax planning strategies by firms or individuals in one Member State can have negative spillover effects on the rest of the EU. This therefore calls for decisive and coordinated action. The adoption of the EU Minimum Tax Directive (Pillar 2) on a minimum effective tax rate of 15%, to be implemented by the end of 2023, has been a crucial milestone. Similarly, the continued modernisation and digitalisation of tax administrations should further reduce compliance costs and boost tax revenue.

Notable country-specific tax recommendations include recommendations in regard to aggressive tax planning for Luxembourg and Malta in 2023 and 2024:

Luxembourg: Increase action to effectively tackle aggressive tax planning, in particular by ensuring sufficient taxation of outbound payments of interest and royalties to zero/low-tax jurisdictions.

Malta: Effectively address features of the tax system that may facilitate aggressive tax planning by individuals and multinationals, including by ensuring sufficient taxation of outbound payments of interest, royalties and dividends, and amend the rules for non-domiciled companies.