One of the points discussed is the change to the formulation of a criterion concerning a statutory body. A modification requiring at least one of the statutory executives of an entity to be either a resident in the entity’s State of tax residence (the current requirement) or a resident in another Member State but in a place from which it is possible to commute daily to the entity’s State of tax residence (modification) has been considered.

There is also a discussion on the extension of the original three minimum economic substance criteria to four. The new criterion should be that “the majority of senior management meetings take place in the State of tax residence of the notifying entity”. In relation to this extension, there is also a discussion about how many of these criteria will need to be met and in what structure in order for the relevant entity not to be considered an entity without sufficient economic substance.

The current presidency has also considered the modification of the set of entities excluded from the application of the Directive. It has been discussed that entities with an annual turnover not exceeding EUR 100 thousand and a net book value of assets not exceeding EUR 1 million would not be subject to the Directive. The scope of the exclusion of regulated financial institutions from the regime of the Directive has been discussed as well.

Political consensus has not been found yet even in terms of tax implications in relation to existing double taxation treaties between EU Member States.

The current discussions within the Swedish presidency concern fundamental parameters of the Directive that were also modified by the European Parliament with its proposal in December 2022 (we presented these changes in the article published in February). However, this proposal does not seem to be in line with the current discussion mood of the EU Council, and it may be expected that the proposal of the European Parliament will not be reflected in the final text of the Directive in many aspects. Unanimous consent of the EU Council (of all representatives of governments of all Member States) will be required for the approval of the Directive. There is currently no political consensus on the proposals discussed, so the early approval of the Directive and its entry into force according to the timetable proposed (as of 1 January 2024) no longer seems realistic. It remains to be seen whether the next meeting of the Tax Working Group, scheduled for May this year, will bring any progress.