Automatic exchange of information regarding tax issues

The Government has presented its proposal to Parliament regarding the mandatory, automatic exchange of information on advance rulings and pricing arrangements in the context of cross-border tax issues.

At the end of 2015, the EU adopted a proposal for a change in the Directive (2011/16/EU) introducing the mandatory, automatic exchange of information concerning tax issues. This proposal implies that information on advance rulings and pricing arrangements regarding cross-border tax issues is to be automatically provided between the member states’ tax administrations. In Sweden, it is the Tax Agency who is the authority in question. The purpose of this exchange of information is to create increased transparency and, thereby, amongst other things, counter-act the utilization by multinational groups of the various member states’ tax systems in achieving tax advantages.

The various types of advance rulings which, according to the proposal, can be included from a Swedish perspective are advance rulings from the National Tax Board, dialogue queries with the Tax Agency and Advance Pricing Arrangements, and these are to be provided by the authority in question (the Tax Agency). Advance rulings other than the afore-mentioned can, perhaps, come to be included, but there remains a testing of the application of law to determine the other types of decisions to be covered.

In the beginning, the member states, in implementing the automatic exchange of information, need to provide only the basic details. Information regarding advance rulings in cross-border tax issues referring to natural persons is not covered. If a tax administration in a member state wishes to receive further information (for example, the entire advance ruling or pricing arrangement) this can be requested and provided to the foreign authority. The Tax Agency is not, however, obliged to provide information which can lead to, amongst other things, the disclosure of business secrets.

Information between the countries can be shared in pace with the advance ruling/pricing arrangement being announced, changed or renewed. According to the proposal, the Tax Agency will also be obliged, with certain exemptions, to provide information on advance rulings/pricing arrangements which has been announced, changed or renewed from the beginning of 2012. The Government has proposed that these changes take effect on 1 January 2017.

Comments

The Government’s proposal has been expected since the EU member states adopted the change in the Directive at the end of 2015. The trend towards increased transparency as regards cross-border tax issues is a natural result of the current climate in which international groups operate, not the least due to BEPS (Base Erosion and Profit Shifting) and the EU’s, partially equivalent project, ATAP (Anti-Tax Avoidance Package). It is very likely that we will see, within the near future, further requirements for transparency as regards groups working in an international environment.

In terms of this proposal, companies should undertake a consequence analysis prior to applying for an advance ruling from the National Tax Board, in presenting dialogue questions to the Tax Agency or in applying for a pricing arrangement decision. As the exchange of information is mandatory, companies should carefully consider whether the information presented in an advance ruling/pricing arrangement comprises a business secret should the decision in question be available to parties who should not have access to that type of information. Even if the Tax Agency according to the proposal is not to provide information regarding, amongst other things, business secrets, it can, still, be difficult to determine what a business secret is. In other words, in practice, there can arise delineation problems as to which information the Tax Agency should be seen to share with the tax administration authorities in the other member states.