Strasbourg, 25 October 2016 Press release
The Commission has today announced plans to
overhaul the way in which companies are taxed in the Single Market, delivering
a growth-friendly and fair corporate tax system.
Re‑calibrated as part of a broader package of
corporate tax reforms, the Common Consolidated Corporate Tax Base
(CCCTB) will make it easier and cheaper to do business in the Single Market and
will act as a powerful tool against tax avoidance.
First tabled in 2011, the CCCTB was designed
to strengthen the Single Market for businesses. While Member States made considerable
progress on many core elements of the previous CCCTB proposal, they were unable
to reach a final agreement. Having sought the views of Member States,
businesses, civil society and the European Parliament, we are today bolstering
the pro-business elements of the previous proposal to help cross-border
companies cut costs, red tape and to support innovation. The re-launched CCCTB will also create a
level-playing field for multinationals in Europe by closing off avenues used
for tax avoidance.
Two further proposals aim to improve the current system
for dispute resolution on double taxation in the EU and to bolster existing
anti-abuse rules. Taken together, these measures will create a simple and
pro-business tax environment.
Vice-President Valdis Dombrovskis said:
"Tax policy should support the EU's goals of economic growth and social
justice. Today's proposals aim to boost growth and investment, support
enterprise and ensure fairness. The current corporate tax system treats
debt financing of companies more favourably than equity financing. Reducing
this debt-equity bias in the tax system is an important element of the Capital
Markets Union Action Plan and underlines our commitment to deliver on this
project."
Pierre Moscovici,
Commissioner for Economic and Financial Affairs, Taxation and Customs said: "With
the rebooted CCCTB proposal, we're addressing the concerns of both businesses
and citizens in one fell swoop. The many conversations I've had as Taxation
Commissioner have made it crystal-clear to me that companies need simpler tax
rules within the EU. At the same time, we need to drive forward our fight
against tax avoidance, which is delivering real change. Finance Ministers
should look at this ambitious and timely package with a fresh pair of eyes
because it will create a robust tax system fit for the 21st
century.”
To encourage swift progress, the CCCTB has
been broken down into a more manageable, two-step process. The common base can
be quickly agreed to unlock key benefits for both businesses and Member States.
Consolidation should be introduced soon afterwards and would allow all the
benefits of the complete system to be reaped.
1. The Common Consolidated
Corporate Tax Base (CCCTB)
With the CCCTB, companies will for the first
time have a single rulebook for calculating their taxable profits throughout
the EU. Compared to the previous proposal in 2011, the new corporate taxation
system will:
- Be mandatory for large multinational groups
which have the greatest capacity for aggressive tax planning, making certain
that companies with global revenues exceeding EUR 750 million a year will be
taxed where they really make their profits.
- Tackle loopholes currently associated with
profit-shifting for tax purposes.
- Encourage companies to finance their
activities through equity and by tapping into markets rather than turning to
debt.
- Support innovation through tax incentives
for Research and Development (R&D) activities which are linked to real
economic activity.
Corporate tax rates are not covered by the
CCCTB, as these remain an area of national sovereignty. However, the CCCTB will
create a more transparent, efficient and fair system for calculating the tax
base of cross-border companies, which will substantially reform corporate
taxation throughout the EU.
The CCCTB will improve the
Single Market for businesses
Companies will now be able to use a single
set of rules and work with their domestic tax administration to file one tax
return for all of their EU activities. With the CCCTB, time spent on annual
compliance activities should decrease by 8% while the time spent setting up a
subsidiary would decrease by up to 67%, making it easier for companies,
including SMEs, to set up abroad.
Growth-friendly activities such as R&D
investment and equity financing will be incentivised, supporting the wider objectives
of reviving growth, jobs and investment. Once fully operational, the CCCTB
could raise total investment in the EU by up to 3.4%.
Companies will be able to offset profits in
one Member State against losses in another. Tax obstacles such as double taxation
will be removed and the CCCTB will increase tax certainty by providing a
stable, transparent EU-wide system for corporate taxation.
The CCCTB will help to
combat tax avoidance
The CCCTB will eliminate mismatches between
national systems which aggressive tax planners currently exploit. It will also
remove transfer pricing and preferential regimes, which are primary vehicles
for tax avoidance today. It also contains robust anti-abuse measures, to stop
companies shifting profits to non-EU countries. Since the CCCTB will be
mandatory for the biggest multinational groups operating in the EU, those
companies most at risk of aggressive tax planning will be unable to attempt
large-scale tax avoidance.
The CCCTB will support
growth, jobs and investment in the EU
The CCCTB will offer companies solid and
predictable rules, a fair and level-playing field and reduced costs and
administration. This will make the EU a more attractive market in which to
invest and do business. The re-launched CCCTB will also support R&D, a key
driver of growth. Companies will be allowed a super-deduction on their R&D
costs, which will particularly benefit young and innovative companies which
choose to opt-in to the new system.
Finally, the CCCTB will take steps to address
the bias in the tax system towards debt over equity, by providing an allowance
for equity issuance. A set rate, composed of a risk-free interest rate and a
risk premium, of new company equity will become tax deductible each year. Under
current market conditions, the rate would be 2.7%. This will encourage
companies to seek more stable sources of financing and to tap capital markets,
in line with the goals of the Capital Market Union. It would also provide
benefits in terms of financial stability, as companies with a stronger capital
base would be less vulnerable to shocks.
2. Resolving Double Taxation
Disputes
The Commission has also proposed an improved
system to resolve double taxation disputes in the EU. Double taxation is a
major obstacle for businesses, creating uncertainty, unnecessary costs and
cash-flow problems. There are currently around 900 double taxation disputes in
the EU today, estimated to be worth €10.5 billion. The Commission has proposed
that current dispute resolution mechanisms should be adjusted to better meet
the needs of businesses. In particular, a wider range of cases will be covered
and Member States will have clear deadlines to agree on a binding solution to
double taxation.
3. Addressing Mismatches with
non-EU Countries
The third proposal in today's Package
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. Hybrid mismatches occur when countries have different rules
for taxing certain income or entities. Companies can abuse this to avoid being
taxed in either country. The Anti-Tax Avoidance Directive, agreed in
July, already addresses mismatches within the EU. Today's proposal completes
the picture by tackling mismatches with non-EU countries and is being made at
the request of the Member States themselves.
The Package also contains a Chapeau Communication, outlining the
political and economic rationale behind the proposals, as well as impact
assessments on the CCCTB and the dispute resolution mechanism.
These legislative proposals will now be
submitted to the European Parliament for consultation and to the Council for
adoption.