How BEPS fits in with the EU’s tax agenda
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How BEPS fits in with the EU’s tax agenda

Klaus von Brocke and Jurjan Wouda Kuipers look at how BEPS recommendations interact with EU tax laws.

The European Union (EU) has actively participated in the entire OECD BEPS process. It was represented notably by the European Commission's Taxation and Customs Union Directorate-General (DG TAXUD).

In December 2012, ahead of the launch of the OECD BEPS initiative, DG TAXUD launched an initiative to address aggressive tax planning with the announcement of a set of immediate, medium- and long-term action points. Since then, it has continually worked through these points while trying to coordinate its own agenda with that of the OECD.

Alongside DG TAXUD, other Directorates-General – DG Market (transparency) and DG Competition (state aid) – contributed to the overall objective of reducing the phenomenon of BEPS. Furthermore, the European Council, with its Code of Conduct Group, as well as the European Parliament, came out with various initiatives to deal with the BEPS topic from an even broader perspective.

The following analysis serves to summarise and evaluate all stakeholders' roles and functions and their respective initiatives against the background of the OECD BEPS Project. It also provides practical insights into what companies should focus on and monitor to be able to recognise, at an early stage, the need for potential changes to the way they operate within the EU.

The Council of Ministers

Ordinary versus special legislative procedure

The Council of the EU includes government representatives from all member states. It negotiates and adopts new EU legislation (based on proposals from the European Commission), adapts it when necessary, and coordinates policies.

When adopting legislation, in most cases, the Council decides together with the European Parliament through the ordinary legislative procedure, also known as co-decision. Co-decision is used for policy areas where the EU has exclusive or shared competence with the member states. In certain areas, however, the Council takes decisions using special legislative procedures where the role of the Parliament is limited.

This is the case with direct tax legislation that is adopted under a special legislative procedure where the Council votes unanimously after consultation with the European Parliament and the Economic and Social Committee (one of the EU's specialised advisory bodies).

Code of Conduct 2.0

The Code of Conduct Group (Business Taxation) mainly deals with detecting and assessing potentially harmful tax measures that fall within the scope of the code of conduct (adopted in December 1997) for business taxation. It also oversees the provision of information on those measures.

Pursuant to the code of conduct, Member States have committed to abolish existing tax measures that constitute harmful tax competition and to refrain from introducing new ones in the future.

The code of conduct is not a legally binding instrument but its conclusions can have the power to exert a certain level of political influence, sometimes resulting in new legislation.

The Economic and Financial Affairs Council (ECOFIN), the legislative body of the European Union handling taxation composed of the economics and finance ministers from all member states, concluded, in December 2015, that the mandate of the Code of Conduct Group should be better used and strengthened. Among other things, the group has been asked to develop general guidance to prevent tax avoidance and BEPS activities.

Overview of current state aid investigations


Date of opening of formal investigation

Date of final decision

Subject matter


Feb 3 2015


Excess profit ruling system


Oct 16 2013


Corporate tax system


Oct 01 2014


Tax ruling practice


Jul 15 2015


Food chain inspection fee


Jul 15 2015


Tobacco sales


Jun 11 2014


TP tax ruling


Jun 11 2014

Oct 21 2015

TP tax ruling


Oct 7 2014


TP tax ruling


Dec 3 2015


(Foreign PE) tax ruling


Jun 11 2014

Oct 21 2015

TP tax ruling

Status as of Dec 11 2015

Legal developments

Parent-subsidiary-directive (adoption of an anti-hybrid loan clause; adoption of a general anti-abuse rule (GAAR))

In 2014, the ECOFIN adopted an amendment to the Parent-Subsidiary Directive (PSD) to prevent the double non-taxation of distributed profits within corporate groups resulting from hybrid loan arrangements (loans that are considered equity for one party and debt for the other).

The PSD was originally designed to eliminate tax obstacles in the area of profit distributions between groups of companies in the EU, by abolishing withholding taxes on payments of dividends between associated companies of different member states and preventing double taxation of parent companies on the profits of their subsidiaries.

In addition, in 2015 the Council adopted a general anti-avoidance rule (GAAR) to be incorporated into the PSD. Both amendments have to be transposed into domestic legislation no later than December 31 2015.

Adoption of amendments to Directive on Automatic Exchange of Information regarding tax rulings and advance pricing agreements (APAs)

In December 2015, the ECOFIN unanimously adopted amendments to the Directive on Automatic Exchange of Information regarding tax rulings and APAs.

Member states had until December 2015 to implement the directive in their laws. The new rules will apply from January 1 2017. Under the revised directive, member states will be required to exchange information automatically on advance cross-border tax rulings, as well as APAs.

Shareholder Rights Directive and EU country-by-country reporting (pending)

In July 2015, the European Parliament adopted changes to a legislative proposal made by the Commission. Among other proposals, the European Parliament called for amendments to the Accounting Directive and the Shareholder Rights Directive, including an obligation for certain multinational corporations (MNCs) operating in any industry to report country-by-country (CbC) information on a consolidated basis in the notes to financial statements, including: turnover; number of employees; value of assets and annual cost of maintaining those assets; sales and purchases; profit or loss before tax; tax on profit or loss; and public subsidies received.

The same proposal called for public disclosure of information on tax rulings by a certain category of MNC.

European Commission

DG TAXUD (March 2015 transparency package and June 2015 action plan; EU anti-BEPS directive and common consolidated corporate tax base (CCCTB))

The European Commission represents the interests of the European Union as a whole (not the interests of individual countries). The Commission's main roles are to propose legislation, and enforce European law, in that it is known as the guardian of the treaties. The Commission is divided into several departments: Directorate-Generals (DGs), and services. For tax matters, the most relevant are DG TAXUD (Taxation and Customs Union) and DG Comp (Competition).

Legal developments promoted by TAXUD

Transparency (March 2015)

In March 2015, the European Commission presented a package of tax transparency measures as part of its agenda to tackle perceived corporate tax avoidance and harmful tax competition in the EU. A key element is the introduction of automatic exchange of information between member states regarding their cross-border tax rulings, including APAs. Other elements include assessing possible new transparency requirements for multinationals and reviewing the Code of Conduct on Business Taxation.

EU response and alignment initiatives to OECD BEPS (CCCTB) – new action plan

In June 2015, the Commission released a comprehensive action plan to reform corporate taxation in the EU. The plan includes revisiting the 2011 EU CCCTB proposal. The Commission advocated making the CCCTB mandatory and implementing it in phases (that is, postponing the work on consolidation until a common corporate tax base has been agreed). The revamped CCCTB should, among other things, eliminate mismatches between national tax systems and reduce the scope for harmful tax competition.

The ECOFIN has suggested that the Commission split the CCCTB proposal by carving out measures against aggressive tax planning from a future CCCTB directive proposal and integrating them in an EU anti-BEPS directive proposal. Hence, the Commission is tasked to deliver two packages of legislative and non-legislative proposals:

  • New legislative proposals for a relaunch of the CCCTB project; and

  • A separate anti-BEPS package of legislative and non-legislative measures.

Interest and royalty directive recast

The ECOFIN supports a recast of the Interest and Royalty Directive, which should include a GAAR.

Stand-alone EU Anti-BEPS Directive

In December 2015, the ECOFIN tasked the Commission to come forward with a package of anti-BEPS measures in the form of a stand-alone EU Anti-BEPS Directive. BEPS Actions 2, 3, 4, 6, 7 and 13 may be covered by this directive. Further analysis on technical details still has to be made. This hard-law approach will be accompanied by a soft-law approach. OECD anti-BEPS recommendations not covered in the EU anti-BEPS directive will be left to the member states to implement.

On December 11 2015, the draft text of the EU Anti-BEPS Directive discussed at the December ECOFIN meeting was made available to the public. The draft directive sets out minimum standards to which all EU member states would need to adhere. It includes a definition of permanent establishment, an interest deduction limitation rule, controlled foreign company (CFC) rules, as well as a GAAR and a hybrid mismatch rule.

The draft text goes beyond the OECD recommendations by including provisions on an exit taxation rule and a switch-over clause allowing countries to deny exemption of foreign income from permanent establishments under certain circumstances.

Although, the European Commission has responsibility for legislative initiatives, the ECOFIN can ask the Commission to put forward proposals that it considers necessary. It is unclear to what extent the legislative proposal to be put forward by the European Commission will mirror or differ from the current ECOFIN draft, or what the final directive will look like. However, it is clear that the implementation of this Anti-BEPS Directive in its current form will have a significant impact on the taxation of MNCs and may trigger an unprecedented change in European taxation.

CbCR Directive

Besides the above Shareholder Right Directive proposal's suggestions on CbCR of information in relation to taxation, it is understood that the European Commission (DG FISMA or DG JUST) will make a CbCR of tax information proposal in March 2016. We could therefore potentially see three different EU interpretations of CbCR in 2016.

DG Competition

DG Competition is vested with special legal competence in relation to state aid law matters. It is regularly referred to as an EU-wide anti-trust regulatory body.

Legal developments promoted by DG Competition

State aid (pending or decided cases)

EU member states are generally not allowed to grant state aid to taxpayers. It is the task of the European Commission through its DG Competition to monitor compliance. DG Competition may open a state aid investigation if it finds out that a measure that could be considered state aid has been adopted without the Commission's prior approval. If a company has benefited from a tax regime that is found to be unlawful state aid, it may have to repay the tax saved as a result of the tax benefit, plus (compounding) interest.

Since 2013, the Commission has been scrutinising various tax rulings and regimes. In relation to two rulings that had been issued to two MNCs by the Netherlands and Luxembourg, the Commission announced, on October 21 2015, its conclusion that the Netherlands and Luxembourg had granted illegal state aid to these MNCs. Both member states announced plans to appeal to the EU General Court and, ultimately, to the Court of Justice of the European Union, if necessary.

European Parliament

As regards the ordinary legislative procedure (co-decision), the European Parliament is put on an equal footing with the Council for the adoption of legislative acts. For special legislative procedures, the Parliament only has a consultative role. And, on certain subjects (taxation) the European Parliament can also only give an advisory opinion (the consultation procedure).


The European Parliament formed the Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect (TAXE committee) in February 2015. Its mandate was to review member states' ruling practices. After months of public fact-finding hearings, the TAXE committee released a report that was adopted in a plenary session of the European Parliament on November 25 2015, by an overwhelming majority. The European Parliament, on December 2 2015, approved a measure to continue the committee's work for six months under a new mandate.


The Members of the European Parliament are divided up into standing committees. Among other things, these committees instruct legislative proposals or amendments. After the November 2014 illegal leaking of Luxembourg tax rulings and public interest in the Commission's ongoing state aid investigations, the European Parliament decided to launch the drafting of a legislative report on increasing transparency, coordination and convergence of corporate tax policies in the EU. On December 15, the European Parliament adopted a report with recommendations to the European Commission prepared by the ECON Committee. The Commission should now respond to the report, either by submitting a legislative proposal or by justifying why it decided not to honor the recommendations. The measures proposed in the report include EU-wide implementation of public country-by-country reporting for all multinationals in all sectors by the first quarter of 2016; expanding the scope of the newly adopted rules on automatic exchange of rulings and allowing the European Commission access to those rulings, as well as making certain information contained in the rulings public; a mechanism for member states to report to other member states and the Commission when they intend to introduce measures that could potentially constitute harmful tax practices; coordinating CFC rules; agreeing on a new approach to international tax agreements and tabling legislative proposals on hybrid mismatches, on a definition of 'permanent establishment', as well as of 'economic substance'.

Evaluation and likely outcome

Given the multiple BEPS initiatives being led by different EU bodies, there are legitimate concerns that all of this work will ultimately create a very unsystematic approach to tackling BEPS, with all parties – the member states, the Commission, ECOFIN, the European Parliament and other stakeholders, such as tax campaign groups, having varying interpretations of how the BEPS Action Plan recommendations should be implemented in the EU.

It will therefore be more critical than ever that businesses closely monitor what has been decided, recommended and implemented (and by whom) in order to manage what will surely be a highly uncertain and complex year in EU developments.



Klaus von Brocke


Office: +49 89 14331 12287

Klaus von Brocke is a partner at EY in Munich and leader of EY's EU tax services group. After his legal and business studies in Munich and Edinburgh, he worked as a scientific assistant for Klaus Vogel, of the International Tax Institute, in Munich. In 1994/95 he worked within the European Commission, DG 15 Internal Market-Direct Taxes and then joined a Big 4 consultancy company.

After finishing his doctorial dissertation on European tax law at the end of 2003 he joined EY in Munich as a senior manager. He became a partner at EY in July 2005 and presided over the German EU competence group. In January 2009 he was appointed head of EU Group in the EMEIA Area of EY, before being appointed to lead the EU tax services group in 2014.



Jurjan Wouda Kuipers


Office: +1 212 773 6464

Jurjan Wouda Kuipers is a member of EY's tax services practice in New York, where he heads the Luxembourg tax desk in the US. Jurjan frequently advises US multinationals on the tax aspects of centralising European operations, holding, financing or licensing activities in Luxembourg, as well as on the tax implications of pan-European acquisition strategies, mergers and joint ventures.

Jurjan has more than 27 years of experience in both Europe and the US. He has worked on a variety of international tax matters, including providing tax advice in connection with the structuring of mergers and acquisitions, cross-border investments and reorganisations, real estate transactions and cross-border financial instruments.

Jurjan is also the US-based representative of EY's European Union (EU) competency group, a network of individuals from EY member firms who closely follow pan-European developments, such as state aid, the CCCTB proposal and European Court of Justice cases and their impact.

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