17-03-2011
European Commission unveils its CCCTB proposal

Introduction

On 16 March 2011, the European Commission (EC) published the Proposal for a Directive (the Proposal) on a Common Consolidated Corporate Tax Base (CCCTB). The CCCTB would enable companies operating within the EU, to calculate their taxable profits on the basis of a single set of rules, which would provide an alternative to the current at arm’s length regime. Although it is far from certain that the Proposal will be enacted, it is worth understanding its main features.

Click here for the Proposal.

Characteristics

Under the Proposal, companies operating within the EU may opt-in to the CCCTB for a minimum period of 5 years. Once opted-in, the companies would be subject to the CCCTB regime, which has the following characteristic features:

- a consolidation of all the profits and losses of the opted-in companies within the EU territory;

- a "one-stop-shop" system for filing the corporate tax return;

- an asset depreciation system, pursuant to which one set of depreciation rules applies (in principle 25% over 4 years); and

- miscellaneous innovation-friendly rules (for instance an immediate and full deduction for expenditure on research buildings). 

The Proposal suggests that the company's tax base would be shared among the Member States, according to a specific formula which takes into account assets, labor and sales. Upon apportioning the tax base, the Member States would be entitled to levy tax according to their own corporate tax rate. The apportionment would be processed by the tax authorities of the company's principal Member State.

Practical relevance

At this stage, it is rather difficult to predict if and when the Proposal will be laid down in a Directive, which would have to be implemented by the Member States. Even though the shortcomings of the current at arm’s length system are widely acknowledged, the CCCTB has always remained a controversial topic between EU Member States. Historically, Member States have been very reluctant to shift their national tax jurisdiction to the EU, fearing they will lose too much budgetary control and tax competitiveness. For more information and Taxand’s Take, we refer to the Taxand website: www.taxand.com

Our Firm closely monitors the political process and publishes all the relevant developments. For more information please feel free to contact Rutger Hafkenscheid (rutger.hafkenscheid@vmwtaxand.nl).