Although we somewhat thought and secretly hoped that the BEFIT (Business in Europe: Framework for Income Taxation) proposal had died a silent death, the European Parliament has issued a press release that on September 24, 2025 MEPs of the Monetary Affairs Committee adopted their position on proposed legislation establishing a common way for calculating the tax base of multinationals operating in the European Union.

The vote, held in the Economic and Monetary affairs committee, adopted the text spearheaded by Evelyn Regner by 33 votes in favour, 19 against and 5 abstentions. It should be noted that the MEPs made five notable changes to the European Commission’s proposals.

I - Addition of a significant economic presence clause

While broadly backing the key elements of the Commission proposal, MEPs also add a ‘significant economic presence clause’ which states that companies having more than EUR 1 million in revenues in a member state will be considered to be permanently established there. This clause would help in the identification of which member states are to be considered for the apportionment of tax that multinational needs to pay in the EU. This would especially ensure that digital companies pay taxes in the jurisdictions where they are effectively making profits, whether by providing services or selling products, irrespective of whether they have an important physical presence there.

II - Introduction of a royalties limitation rule

To guarantee a minimal level of taxation of royalties, MEPs propose introducing a royalties limitation rule for companies forming part of a BEFIT group. If a company in the group pays royalties or licence fees to another group company that is taxed at less than 9%, the paying company must add those payments back to its own taxable income — unless the receiving company carries out substantive economic activity supported by staff, equipment, and offices.

III - Prevention of profit shifting

MEPs also propose introducing a rule to prevent companies from shifting profits to foreign subsidiaries in low tax jurisdictions that lack real economic activity. If those subsidiaries earn passive income (such as interest or royalties) and lack real economic activity, that income would need to be added to the parent company’s taxable income.

IV - Faster write-off for tax purposes for certain assets

Another amendment adopted by the committee provides for faster tax write-offs for certain assets that support EU climate, social, digital, or defence goals. This would help spur investment, achieve a sustainable transition and enhance the EU's ability to prevent and respond to emerging threats and crises.

V - Limitation to the offsetting of losses

Finally, to reduce abuse of potential losses, if a subsidiary’s loss creates a negative taxable amount, the parent company can use it to reduce its own taxable income but only for up to five years and shall be set off against the next positive BEFIT tax base. Moreover, the eventual tax deductions cannot reduce the company’s taxable income to below zero.

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