The EU authorities are preparing the tax regime for the digital economy

The EU authorities are preparing the tax regime for the digital economy

Different EU bodies involved in the development of the tax regime, which is likely to have an impact on the blockchain-space, as well as companies that work with cryptocurrency.

A number of figures and bodies of the European Union, European Commission President Jean-Claude Juncker to the Council of Ministers of Finance and economy of the countries of the European economic community (ECOFIN), I consider it necessary the introduction of tax policy for the digital economy.

Management of human society has never been simple. In the era of nation-States, many believe that this task is each year becoming more difficult, not least due to the relatively young digital technologies that bring people together in a variety of ways that often have no relation to nationality.

The European Union (EU) drew attention to this trend, in particular its implications for existing European tax codes, many of which were developed in the days when e-Commerce was difficult to imagine. At the moment several EU authorities began to develop a tax regime is covered by the difficulties caused by the international sale of goods and services, both real and not, through the Internet.

Upcoming tax codes for the digital economy undoubtedly affected the cryptocurrency, companies or markets on the blockchain, despite the fact that they are not specifically mentioned in the public documents. However, the European court ruled that, as trading with Fiat currency, exchange digital assets are not subject to VAT.

The European Commission (EC) indicated the creation of a “digital Single market” as one of “10 political priorities” because it will bring “415 billion euros per year for the European economy, create jobs and transforms public services [EU]”. According to the EU, “stable normative tax base for the digital economy” is indispensable for such a market.

In General, any tax legislation for the digital industry should be introduced separately at the national level, not across the EU that can create an acute need for consistent, since an inconsistent policy create conditions for unfair competition and tax evasion. Representatives of member States plan to discuss possible schemes of taxation at the G20 meeting in April 2018. But the EU intends to “focus on solutions for the EU, if the progress at the national level proves too slow”. In any case, the EC “will continue to analyze policy options … before the creation of the possible proposals in the spring of 2018”.

The EC considers important the issues of “establishing and protecting the rights of collection of taxes in the countries where the company can provide services in digital form with a small physical presence or no”, and “definition of return on new digital business models based on intangible assets, data and knowledge”.

Intergovernmental Organization for economic cooperation and development (OECD) has already made some steps to develop such a tax regime. Although the OECD and is not a body of the EU, “countries that are part of the consensus” non-binding plan to implement the Project on tax minimization and elimination of profits, which includes the “action” called “tax the digital economy”.

The OECD is also engaged in a dialogue with the Council of Ministers of Finance and economy of the countries of the European economic community (ECOFIN), an informal body “composed of economic and Finance Ministers of all member States”. The Board normally holds monthly meetings, who attend “relevant European commissioners”. At these meetings, is “the coordination of economic policies of member States”.

At the meeting on 16 September ECOFIN “agreed to further evaluate the feasibility of the approach in two stages. The first phase will focus on potential short-term the adoption of a compensation fee,” which is imposed “on the turnover generated in Europe’s digital companies.” Meanwhile, “the decision aims to offer Estonia’s adoption of the concept of a digital permanent establishment will be examined by the European Commission as a long-term model agreement on long-term model would eliminate the need for [compensation fee]”.

From the results of the meeting that “the legislative statement in regard to collecting potentially will be created in the first quarter of 2018,” and this quick work of the ECOFIN can strengthen “the pressure on the OECD and the impact on the anticipated timeframe” because to avoid lag we need to hurry.

Shortly thereafter, the European Commission published an appeal to the European Parliament and the European Council with the proposal of the compensation fee and also the other two “short-term solutions.” One of them – “final income tax based on the gross income of certain payments to foreign providers of goods or services ordered online”, and the other collection “to profit from the provision of digital services or promotional activities”.

The authors of the document noted that prior to the introduction of such measures the authorities involved must confirm to comply with certain commitments previously agreed by the EU and its authorities, including “treaties on avoidance of double taxation” and the rules of the world trade organization.

At the meeting on 5 December (or possibly at the preparatory meeting held a few days before) ECOFIN “adopted conclusions on the taxation of profits in the industry’s digital economy”, which “will serve as the EU’s contribution to the debate on the international level, and as a beginning for further work at EU level” that will include “legislative proposals from the EC, expected in early 2018.” These findings have not been made public.

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