CFE’s Tax Top 5 – 24 February 2025

Last week, on 21 February 2025, President Donald Trump issued an Executive Order, entitled “Defending American Companies and Innovators from Overseas Extortion and Unfair Fines and Penalties”. The order aims to protect American businesses, particularly in the technology sector, from what it describes as discriminatory and extortive taxation and regulatory practices imposed by foreign governments.

The order asserts that digital services taxes (DSTs) introduced by several countries, including France, Austria, Italy, Spain, Turkey, the United Kingdom, and Canada, unfairly target American companies. It also highlights foreign regulations that restrict digital services, limit cross-border data flows, and impose additional costs on U.S. firms. These measures, according to the order, undermine American sovereignty, weaken national security, and harm the global competitiveness of U.S. businesses.

The order establishes a policy to counter such foreign actions through tariffs and other responsive measures. It directs the United States Trade Representative (USTR) to assess whether to renew or initiate investigations under Section 301 of the Trade Act of 1974 against countries with DSTs. The USTR, along with the Secretaries of the Treasury and Commerce, is tasked with identifying foreign trade and regulatory practices that harm U.S. firms and recommending appropriate countermeasures.

Additionally, the Executive Order instructs U.S. officials to examine whether foreign policies influence American technology firms to regulate content in a way that may restrict freedom of speech and political engagement. It also calls for a review of international tax practices that could undermine U.S. competitiveness and directs efforts to secure a permanent moratorium on customs duties for electronic transmissions.

The order outlines responsibilities for key agencies, including the Treasury, Commerce, and the USTR, to ensure that foreign policies do not disadvantage American companies. It also establishes a process for U.S. businesses to report unfair foreign taxation and regulations. This directive is part of the administration’s broader America First Trade Policy, aiming to safeguard U.S. economic interests and counter perceived unfair treatment of American businesses by foreign governments.

The Commission published a Q&A page on the US Reciprocal Tariff Policy on 18 February 2025, following remarks made by Donald Trump at Davos concerning the EU and trade. The European Commission’s document highlights the EU’s position on trade balances, VAT, and tariff structures, noting that the EU maintains a surplus in goods trade with the U.S. but a deficit in services. The document also argues that VAT is a neutral tax rather than a trade barrier. While the EU acknowledges tariff asymmetries in certain sectors, such as the 10% tariff on cars compared to the U.S. 2.5% rate, it points out that the U.S. imposes a significantly higher 25% tariff on pickup trucks. The EU expresses willingness to engage in trade negotiations but insists on a balanced and rules-based approach. The document underscores the tensions between the U.S. and the EU, particularly regarding digital services taxes and reciprocal trade measures, which the Trump administration now is seeking to counter through its latest Executive Order.

Updates to EU List of Non-Cooperative Tax Jurisdictions

Sitting in its ECOFIN configuration, the EU Council last week reviewed its “Blacklist” of non-cooperative tax jurisdictions. At the ECOFIN, the Council confirmed its list of non-cooperative tax jurisdictions without changes, maintaining the same 11 jurisdictions. While there have been positive developments, these jurisdictions remain non-compliant with EU tax standards and are urged to improve their legal frameworks. The jurisdictions on the List include:

• American Samoa
• Anguilla
• Fiji
• Guam
• Palau
• Panama
• Russia
• Samoa
• Trinidad and Tobago
• the US Virgin Islands
• Vanuatu

Additionally, the Council approved a state of play document (Annex II), which tracks commitments by jurisdictions to align with tax good governance principles. Two jurisdictions, Costa Rica and Curaçao, have fulfilled their commitments and are removed from this monitoring list. Meanwhile, Brunei Darussalam has committed to reforming its foreign-source income exemption regime by the end of 2025.

The EU list of non-cooperative jurisdictions, established in 2017, is a key part of the EU’s efforts to combat tax avoidance and promote tax transparency. The list is reviewed twice a year, with the next revision scheduled for October 2025. The Council’s Code of Conduct Group oversees the process and works closely with international bodies like the OECD Forum on Harmful Tax Practices (FHTP) to ensure tax compliance worldwide.

Register Now : CFE Forum | 27 March 2025 | Brussels

CFE Tax Advisers Europe will hold its 2025 CFE Forum in Brussels on 27 March, on the topic “Navigating Tax Transformation: From Compliance to Competitiveness”, where policymakers, tax experts, and industry leaders will explore the latest critical global and European tax developments.

The forum will feature four key panels:

• Global Tax Reform – Insights on BEPS, UN Tax Initiatives & EU Competitiveness, featuring experts from the European Commission, OECD, and PwC.
• ECJ Case-Law Updates – Examining major rulings like Apple’s state aid case and DAC6 cases, with speakers from the European Commission, Liege University, Tilburg University, and the Tax Foundation.
• Transfer Pricing & VAT – Exploring their complex interplay, with insights from Loyens & Loeff, Crowe Valente, and Procter & Gamble.
• Taxation for a Digital & Green Future – Discussing AI, digitalisation, and sustainability in taxation, featuring experts from the CFE Tax Technology Committee, BDO and Ashurst.

Further information and registration is available via the CFE website here.

EU Council Adopts News Electronic VAT Exemption Certificate

The EU Council has formally adopted new rules to replace paper VAT exemption certificates with an electronic form, aiming to simplify and digitalise VAT processes. This change will streamline procedures for businesses and administrations when importing VAT-exempt goods for embassies, international organisations, or armed forces.

The transition to electronic certificates will take effect on 1 July 2031, with a one-year period where both electronic and paper certificates can be used. IT specifications for implementation will be determined through expert discussions and Commission implementing acts.

The initiative is based on two legislative proposals introduced by the European Commission on 8 July 2024:

• A Council Directive amending Directive 2006/112/EC to establish legal conditions for the electronic certificate.

• A Council Implementing Regulation amending Regulation (EU) No 282/2011 to allow the temporary use of both paper and electronic certificates.

The European Parliament provided its opinion on 13 November 2024, and the Council has now officially adopted both legislative acts.

OECD Report: Taxing Capital Gains

The OECD Centre for Tax Policy and Administration will publish a report on 26 February titled Taxing Capital Gains: Country Experiences & Challenges, which examines how OECD countries tax capital gains and the implications of granting them more favourable tax treatment compared to other forms of income. Most OECD countries tax capital gains upon realisation, often at lower rates or with exemptions, and frequently provide additional relief for specific asset types, such as housing or closely-held businesses. The report analyses the rationale behind these tax preferences, noting that while some arguments—such as mitigating double taxation or adjusting for inflationary gains—are well-supported, evidence for other justifications, like incentivising investment and entrepreneurship, remains inconclusive.

The study highlights that current capital gains tax systems often create economic distortions, undermine equity, and limit revenue-raising potential. While alternative approaches, including targeted relief measures and modifications to the realisation basis of taxation, could help address these issues, they require a careful assessment of trade-offs. The report provides a foundation for evaluating potential policy reforms, offering insights into the challenges governments face in designing effective capital gains taxation while balancing economic efficiency, fairness, and revenue considerations.

The selection of the remitted material has been prepared by:
Aleksandar Ivanovski & Brodie McIntosh