Ukraine Facility’s first regular payments are on the way. No deal among EU ministers on new VAT rules

The 50-billion worth of Ukraine Facility received on Tuesday the final all-clear from the 27 EU ministers. This will pave the way for first up to 1.89 disbursements in pre-financing until regular payments linked to the implementation of reform and investment indicators under the Ukraine Plan start. The European Commission is determined to grant the first two tranches in September and later in November, as executive vice-president Valdis Dombrovskis stated in the press conference after the Economic and Financial Affairs EU Council. 

Payments will serve to Ukraine as a relief for the reconstruction and modernization needs and will be conditioned to the fulfilment of qualitative and quantitative steps measuring the implementation of the agreed reform and investments. With the deadline set for 2027, EU ministers also agreed on an indicative timetable for the disbursement. Ukraine is required to uphold along the way effective democratic mechanism, guard a multi-party parliamentary system and the rule of law and guarantee the respect of human rights. 

The meeting also resulted in a positive vote on the proposed law on safer and faster procedures to obtain double taxation relief, the so-called “Faster directive”. The EU ministers’ support of the draft sets out the position that the Hungarian presidency is called to advocate during the negotiation with European parliament representatives for the final version of the text. The proposed directive addresses the double taxation commitments on financial assets revenues for investors living abroad. Although in many cases in the EU the issue is tackled through bilateral treaties between Member States, the procedures to claim withholding tax relief vary considerably across the Union and are often far from being swift. After entering into force the directive will introduce a common EU digital tax residence certificate (eTRC) that tax-paying investors would be able to use to benefit from the fast-track procedures to obtain relief from withholding taxes. To fast-track the procedure Member States are asked to opt for a “relief-at-source” for payments on dividends or interest procedure or a “quick refund” system which sets a deadline for the reimbursement of overpaid withholding tax. The directive is set to further foster private investment in the European Union and to prevent tax fraud. 

The EU Council failed to make progress towards an agreement on the legislative package aiming at establishing common standards for information to be submitted by VAT-charged persons. The European Commission proposal envisages an obligation for the use of e-invoicing for cross-border transactions to contribute to the fight against fraud. 

Estonia vetoed the adoption of a common position among ministers on the basis that final customers would be burdened with additional costs once big platforms such as Uber, Airbnb and Booking were imposed with levying VAT obligations. The package also aims to make it possible to register for VAT purposes only once for all EU member states, by expanding and improving the functioning of the existing one-stop shop systems and reverse charge mechanisms.

Concerns over Chinese state subsidies to clean tech industry operators have revamped again in the political debate after the US administration quadrupled custom tariffs on electric vehicles and raised them for steel and aluminium as well as batteries and semiconductors. “As regards solar panels we are closely monitoring the situation and standing always ready to take necessary steps to protect the EU market”, Vice President Dombrovskis claimed after being confronted by journalists. “We had already launched several different probes in this context across different sectors of industry and the Commission is also now actively using the new foreign subsidies instrument which allows to intervene if third countries providers win public tenders thanks to foreign subsidies”, he added. 

The EU executive launched two investigations on April 3 against Chinese beneficiaries of a public tender for a solar park in Romania. Brussels started to conduct probes into whether Chinese participants benefited excessively from subsidies in bidding for a contract worth about 610 million euros. The European Commissioner for Internal Market Thierry Breton announced last Monday the closure of the investigation after the two bidders withdrew from the process.