UK and International Tax news
Common Consolidated Corporate Tax Base
Friday 22nd April 2011
The EC has recently announced its proposal for a common system for calculating the tax base of businesses operating in the EU. The aim of their proposal is to significantly reduce the administrative burden, compliance costs and legal uncertainties that businesses in the EU currently face in having to comply with up to 27 different national systems for determining their taxable profits.
The proposed Common Consolidated Corporate Tax Base (CCCTB) would mean that groups would benefit from a “one-stop-shop” system for filing their tax returns and be able to consolidate all their profits and losses across the EU. Member States would maintain their full sovereign right to set their own corporate tax rate.
The EC estimates that, annually, the CCCTB will save businesses across the EU €700 million in reduced compliance costs, and €1.3 billion through consolidation. In addition, businesses looking to expand cross-border will benefit from up to €1 billion in savings. The CCCTB will also make the EU a much more attractive market for foreign investors.
The CCCTB aims to offer group companies one single set of corporate tax base rules to follow and the possibility of filing a single, consolidated tax return with one administration for their entire activity within the EU. On the basis of this single tax return, the group’s tax base would then be shared out amongst the Member States in which it is active, according to a specific formula. This formula will take into account three factors: assets, labour and sales. After the tax base has been apportioned, Member States will be allowed to tax their share of it at their own corporate tax rate. Under the CCCTB, Member States will continue to set their corporate tax rate at the level they see fit, as is their national prerogative.
The CCCTB would be optional for companies. Those that felt that they would benefit from a harmonised EU system could opt-in, while other companies could continue to work within their national systems.
The CCCTB has been identified as an important initiative of the Barroso II Commission in the context of the Europe 2020 Strategy. It has also been mentioned in a series of major policy documents that aim to remove obstacles to the Single Market and stimulate growth and job creation within the EU.
If you would like further details on the proposed CCCTB, please contact Keith Rushen on +44 (0)20 7486 2378.Contact Us