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European Union: Tax developments in response to COVID-19

General Information

This page offers an overview of tax developments being reported globally by KPMG member firms in response to the Novel Coronavirus (COVID-19).

The content will be updated regularly. However, due to the fast-moving pace of change, it may not always reflect the most current developments in a given jurisdiction. Please refer to the date of accuracy and refer to the relevant links, under additional information, for original source information.

Date accurate as of: 14 October 2020

Postponement of filing deadlines, including for EU mandatory disclosure rules (DAC6)

  • On June 3, 2020, the Council of the EU (formally) adopted the amendments to the Directive on Administrative Cooperation (DAC) allowing member states an option to defer by up to six months the time limits for the filing and exchange of the following information:
    • automatic exchanges of information on financial accounts of which the beneficiaries are tax residents in another member state (CRS/ DAC2 – three months deferral);
    • mandatory disclosure requirements (MDRs) for intermediaries and relevant taxpayers under (DAC6 – six months deferral).

The amendment - Council Directive (EU) 2020/876 of June 24, 2020 (hereinafter “the DAC6 Deferral Directive”), entered into force on June 27, 2020. With respect to DAC6 (MDR), the amendments as adopted give EU Member States the option to delay the deadlines for filing information on reportable cross-border arrangements by up to six months, as follows:

  • by February 28, 2021 (previously August 31, 2020) for arrangements where the first step was implemented between June 25, 2018 and June 30, 2020 (so-called “historical arrangements”).
  • the start date for the 30 days reporting deadline to begin by January 1, 2021 (originally July 1, 2020). This will also apply with respect to cross-border arrangements for which the reporting trigger occurs between July 1, 2020 and December 31, 2020. The deadline for a reportable cross-border arrangement that is made available for implementation or is ready for implementation, or where the first step in its implementation has been made during the deferral period will therefore be the end of January 2021.
  • April 30, 2021, for the first periodic report on marketable arrangements.

Most Member States have opted for a six-month deferral of reporting deadlines under DAC6, with the notable exceptions of Austria (three-month extension), Finland and Germany (no deferral). Note that Spain has not yet completed the DAC6 transposition process and is therefore not yet in a position to apply the rules. 

  • On July 29, 2020, the legal documents postposing the entry into application of the value added tax (VAT) e-commerce package by six months have been published in the Official Journal of the European Union — that is, the rules will apply as of July 1, 2021 instead of January 1, 2021.

Additional Information

EU Temporary State Aid Fremwork

  • On March 19, 2020, following consultation with EU Member States, the European Commission adopted a Temporary Framework for State aid measures to support the economy in the current COVID-19 outbreak. The Framework sets out temporary State aid measures that the European Commission considers compatible with the EU internal market and that can be approved rapidly upon notification by each Member State. The Framework provides for five types of aid:
    • Direct grants, selective tax advantages and advance payments, up to EUR 800,000 to a company to address its urgent liquidity needs.
    • State guarantees for loans taken by companies from banks, to ensure banks continue to provide loans to the customers who need them.
    • Subsidized public loans to companies, i.e. loans with favorable interest rates to help businesses cover immediate working capital and investment needs.
    • Safeguards for banks that channel State aid to the real economy, in particular support for small and medium-sized companies. It is noted that such aid is considered as direct aid to the banks' customers, not to the banks themselves.
    • Short-term export credit insurance.

Additional Information

  • On April 3, 2020, the European Commission announced the extension of the EU's State aid Temporary Framework to add additional measures to support the economy in the context of the coronavirus outbreak. The five additional measures are:
    • Targeted support in the form of deferral of tax payments and/or suspensions of employers' social security contributions to help avoid lay-offs due to the coronavirus crisis in specific regions or sectors that are hardest hit by the outbreak.
    • Targeted support in the form of wage subsidies for employees to help avoid lay-offs due to the coronavirus crisis in specific regions or sectors that are hit hardest by the outbreak.- More support for coronavirus related research and development (R&D) to address the current health crisis. 
    • More support for the construction and upgrading of testing facilities for products relevant to tackle the coronavirus outbreak, such as vaccines, medical equipment or devices, protective material and disinfectants. 
    • More support for the production of products relevant to tackle to coronavirus outbreak, such as vaccines, medical equipment or devices, protective material and disinfectants. 
  • On May 8, 2020, the European Commission adopted a second amendment to extend the scope of the State Aid Temporary Framework. This second amendment complements the types of measures already covered by the Temporary Framework and existing State aid rules, by setting out criteria based on which Member States can provide recapitalizations and subordinated debt to companies in need, whilst protecting the level playing field in the EU. 

Additional Information

  • On June 29, 2020, the European Commission adopted a third amendment to extend the scope of the State Aid Temporary Framework. The third amendment allows Member states to i) aid micro and small companies which were already in financial difficulty on December 31, 2019 and ii) provide incentives for private investors to participate in coronavirus-related recapitalisation measures.
  • On October 13, 2020, the Commission announced its decision to prolong all sections of the Temporary Framework for six months, i.e. until June 30, 2021, and the section to enable recapitalisation support for three months, i.e. until September 30, 2021.This fourth amendment also includes provisions to:
    • enable Member States to contribute, on a temporary basis, to the fixed costs of companies that are not covered by their revenues (up to a maximum of EUR 3 million per undertaking). The measure is intended to support companies facing a decline in turnover during the eligible period of at least 30% compared to the same period of 2019 due to the coronavirus outbreak.
    • adapt the conditions for recapitalisation measures under the Temporary Framework, in particular for the State's exit from enterprises where the State was an existing shareholder prior to the recapitalisation, through an independent valuation, whilst maintaining the safeguards to preserve effective competition in the Single Market. 
  • As at October 13, 2020, the European Commission had approved over 250 State Aid Measures adopted under the Temporary Framework and Article 107(2)b TFEU. Among those measures, tax related schemes include a French scheme deferring the payment of certain tax by airlines, a German scheme providing tax advantages including tax allowance, tax base reduction, tax deferment, and tax rate reduction and an Italian schemes to support companies and self-employed workers affected by coronavirus outbreak.

Additional Information

Guidance on customs issues

The European Commission also published guidance on customs issues relating to the COVID-19 pandemic. In particular, questions have emerged concerning the application of customs provisions relating to the customs decision-making process, customs procedures and customs formalities and the guidance identifies a number of existing provisions that provide solutions in these exceptional circumstances. Further details on customs-related measures are available in KPMG's Government Stimulus tracker. 

Additional Information

Recovery Plan for Europe

  • On July 21, 2020, the European Council reached agreement on the European Commission’s proposal for an emergency European Recovery Instrument – Next Generation EU, allowing the Commission to borrow up to EUR 750 billion on the markets. 
  • The funds may be used for back-to-back loans and for expenditure channeled through the multiannual financial framework (MFF – the EU’s seven-year budget). 
  • The funds raised will be allocated (EUR 390 billion in grants and EUR 360 billion in loans) to seven individual programmes, across three pillars:
    • Cohesion, resilience and values:
    • Cohesion policy funds ReactEU;
    • Recovery and Resilience Facility;
    • Union civil protection mechanism (RescEU).
    • Single market, Innovation and digital:
    • Horizon Europe;
    • InvestEU;
    • Natural resources and environment:
    • Rural Development;
    • Just Transition Fund (JTF).
  • More flexible emergency tools: flexibility of the EU budget will be provided through the Single Margin Instrument (SMI) that will provide additional financial means to respond to specific unforeseen events. 
  • EU leaders also agreed on three thematic special instruments to provide additional financial means for specific unforeseen events:
    • Brexit Adjustment Reserve to support the member states and economic sectors hardest hit by Brexit (EUR 5 billion)
    • European Globalisation Adjustment Fund to support workers who lose their jobs in restructuring events linked to globalisation (EUR 1.3 billion)
    • Solidarity and Emergency Aid Reserve (SEAR) to respond to emergency situations resulting from major disasters in member states and accession countries, and for rapid response to specific emergency needs within the EU or in third countries (EUR 1.2 billion).
  • The repayment by the Commission is scheduled until December 31, 2058 at the latest. The budget proposal includes a number of new own resources, which will include:
    • Phase 1: a non-recycled plastic waste based contribution (read Euro Tax Flash issue 434 for further details) -  to apply from January 1, 2021;
    • Phase 2: a Carbon Border Adjustment Mechanism and a digital levy – to be introduced by January 1, 2023;
    • Phase 3: a EU Emission Trading System;
    • Phase 4: other new own resources, for example, a financial transactions tax. 

The new digital levy will be considered if no global agreement is reached and would build on the work done by the OECD. A proposal on a digital levy will be put forward in the first semester of 2021, with a view of its introduction at the latest by January 1, 2023. 

Next steps

The Council will negotiate with the European Parliament in order to ensure finalisation of the work on all legal acts in accordance with the relevant legal basis.

Additional Information