The directive will require member states to exchange information automatically on advance cross-border tax rulings, as well as advance pricing arrangements. This will remove the current discretion given to member states on what information they share, when and with whom. Member states receiving the information will be able to request further information.
The Commission will develop a secure central directory where the information exchanged will be stored. The directory will be accessible to all member states and, where it is required for monitoring implementation of the directive, to the Commission.
The new rules will be applied from 1 January 2017. Existing obligations for member states to exchange information will stay in place until that date.
In October, members of the European Parliament's Economic and Monetary Affairs Committee described the agreement as a "missed opportunity". In response to an announcement by the European Commission that the Economics and Financial Affairs Council of the European Union (ECOFIN) had reached agreement on the directive, European Parliament rapporteur Markus Ferber said that "if this is the final text, member states will have missed a great opportunity to create more transparency in taxation. National budgets will continue to suffer."
"We need an EU-wide systematic and mandatory procedure. For the moment, member states' tax authorities would not realise that tax ruling deals forged in other member states are undermining their own tax bases. Tax authorities should be obliged to exchange information on tax rulings and make them available to a central database at the European Commission," he said.
The Economic and Monetary Affairs Committee's purpose in meeting in October was to vote on a report by Ferber which looked at the Commission's original proposal. However, by the time they came to do so, the ECOFIN deal had been announced, "which watered down the Commission proposal even further", the statement said.
Tax expert Heather Self of Pinsent Masons, the law firm behind Out-Law.com, said: "It is important to note that while the exchange of information will be automatic, the rulings will not be made public. This is good, as it preserves taxpayer confidentiality. Otherwise the system could cause problems in relation to rulings for highly market sensitive transactions such as proposed cross border mergers."
"Businesses need to be able to obtain rulings because it brings more certainty to their tax affairs. However, it is understandable that the EU wants to share this information between tax authorities, and the directive will mean more transparency around the rulings that member states are handing out. This will bring a clearer focus to the state aid investigations which the Commission is carrying out into tax rulings granted to some multinationals," Self said.
The European Commission began investigating the tax ruling practices of certain member states in June 2013, and extended its requests for information to all member states in December 2014. In October 2015, it decided that tax rulings granted to Fiat Finance and Trade in Luxembourg and Starbucks in the Netherlands breached state aid rules. Luxembourg and the Netherlands are now required to recover the unpaid tax, although both have confirmed that they intend to appeal the Commission's findings.
Earlier this month the Commission announced that it would formally investigate 'double non-taxation' of McDonalds in Luxembourg.
Luxembourg finance minister Pierre Gramegna recently said that the Commission's investigations were causing uncertainty for business in the EU.
However, European commissioner for competition Margrethe Vestager has said that the Commission will continue enquiries into tax ruling practices in all EU member states and may open new cases if it sees "indications" that rules are not being complied with.