EU Mulls Relations With European Microstates

by Ulrika Lomas, Tax-News.com, Brussels

09 September 2011

Requests from San Marino, Andorra and Monaco to integrate and cooperate more deeply on tax and trade matters have been met favourably by the European Commission.

Following meetings between Herman Van Rompuy, President of the European Council, and Antonella Mularoni, Secretary of State for Foreign and Political Affairs in San Marino, Rompuy said:

“Mularoni and I had an exchange of views on relations between the EU and countries with small territorial dimension. Taking into account that in San Marino, there is a strong support among the political parties and in the population and with the general public for further strengthening (relations) with the EU, we discussed our future relationship and our future cooperation.”

“The EU, on its part, will continue its reflection as how to best develop our relations - not just with San Marino, but also with Andorra and Monaco. The EU institutions are exploring different options, which might include possible steps on further integration into the European Union and especially the EU's Internal Market and a possible new institutional framework. In this context, I wish to thank Ms. Mularoni for bringing San Marino's views to my attention.”

Monaco is the most integrated into the EU, partially due to its relations with France. It is already part of the EU Customs Territory and value-added tax (VAT) area, and applies most Directives in this and other areas. San Marino is less integrated than Monaco at present but participates in the EU's customs territory and VAT territory to some degree through a Cooperation and Customs Union Agreement. Andorra meanwhile is included in the Customs Union Territory.

Countries party to the European Union VAT Area opt to apply European VAT harmonization rules. Goods are only considered as imported or exported if they leave this area easing tax compliance and double tax issues. The European Union Customs Territory likewise allows goods to pass between member parties without the application of tariffs.

Each territory currently has their own agreements, either with the European Union or individual member states, laying out frameworks for the application of cross-border tax and the application of EU law.

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