On October 25, 2016 the European Commission revealed its plans to overhaul the way in which companies are taxed. The Commission’s plans consist out of the following 3 elements:
1. a proposal for a Council Directive on a Common Corporate Tax Base (CCTB) and a proposal for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB);
2. a proposal for a Council Directive on Double Taxation Dispute Resolution Mechanisms in the EU which lays down rules to resolve disputes between Member States on how to eliminate double taxation of income from business and the rights of taxpayers in this context;
3. a proposal for amendments to the Anti Tax Avoidance Directive proposing new measures aimed at stopping companies from exploiting loopholes, known as hybrid mismatches, between Member States' and non-EU countries' tax systems to escape taxation.
The Common Consolidated Corporate Tax Base (CCCTB)
This first element actually consists out of the following 2 proposals:
· A proposal for a Council Directive on a Common Corporate Tax Base (CCTB)
· A proposal for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB)
The CCCTB is a harmonised system to calculate companies' taxable profits in the EU. It offers one set of rules for companies to determine their tax base, rather than multiple national ones.
The CCCTB now proposed is a re-launch of the CCCTB proposal from 2011. According to the European Commission new elements in the re-launched proposal include a.o.:
· The CCCTB will be mandatory for the largest companies (companies with annual global revenues exceeding EUR 750 million)
· Support innovation through tax incentives for Research and Development (R&D) activities which are linked to real economic activity
· The CCCTB will remove the incentive for debt accumulation by encouraging companies to finance their activities through equity and by tapping into markets rather than turning to debt.
Click here to be forwarded to the proposal for a Council Directive on a Common Corporate Tax Base (CCTB) as released by the European Commission on October 25, 2016. Click here to be forwarded to the Annexes to the Proposal for a Council Directive on a Common Corporate Tax Base as released by the European Commission on October 25, 2016.
Click here to be forwarded to the proposal for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) as released by the European Commission on October 25, 2016. Click here to be forwarded to the Annexes to the Proposal for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB) as released by the European Commission on October 25, 2016.
Resolving Double Taxation Disputes
The second element of the European Commission’s plans is a proposal for a Council Directive on Double Taxation Dispute Resolution Mechanisms in the EU.
According to the European Commission the proposed Directive provides for the elimination of double taxation by agreement between the Member States including, if necessary, by reference to the opinion of an independent advisory body. The Directive focusses on business and companies, the main stakeholders affected by double taxation situations. It builds on the existing Union Arbitration Convention Transfer pricing and the Arbitration Convention, which already provides for a mandatory binding arbitration mechanism, but broadens the scope to areas which are not currently covered and adds targeted features to address the main shortcomings identified, such as enhancing enforceability and effectiveness of this mechanism.
Click here to be forwarded to the proposal for a Council Directive on Double Taxation Dispute Resolution Mechanisms in the European Union as released by the European Commission on October 25, 2016.
Proposal for Amendments to the Anti Tax Avoidance Directive
The third element of the European Commission’s plan is a proposal for amendments to be made to the existing Anti Tax Avoidance Directive. According to the European Commission this element contains new measures to stop companies from exploiting loopholes, known as hybrid mismatches, between Member States' and non-EU countries' tax systems to escape taxation.
Click here to be forwarded to the proposal for a Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries as released by the European Commission on October 25, 2016.
In addition to the proposal for a Council Directive amending Directive (EU) 2016/1164 as regards hybrid mismatches with third countries the Commission also published its Staff Working Document. Click here to be forwarded to the Staff Working Document.
Chapeau Communication
Furthermore the European Commission also published a so-called Chapeau Communication, outlining the political and economic rationale behind the proposals, as well as impact assessments on the CCCTB and the dispute resolution mechanism.
Click here to be forwarded to the so-called Chapeau Communication as released by the European Commission on October 25, 2016.
Q&A on the on the package of corporate tax reforms
The European Commission also published a Q&A on the on the package of corporate tax reforms. Click here to be forwarded to the Q&A on the package of corporate tax reforms as published by European Commission on October 25, 2016.
Click here to be forwarded to a press release issued by the European Commission on October 25, 2016 on its proposals for a package of corporate tax reforms.
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