New Tax Rules to Make Business Across EU Easier

March 17, 2011 Taxation in EU

New Tax Rules to Make Business Across EU EasierThe European Commission is proposing a new EU-spanning set of rules, which it claims would make tax compliance easier and cheaper for multinational companies.

The European Commission (EC) has brought forward a blueprint for new taxation rules, aimed at radically overhauling the way corporate taxes are assessed on businesses operating across multiple EU member states. The announcement was made on March 16th, with the EC calling the news system the Common Consolidated Corporate Tax Base (CCCTB).

The CCCTB consists of a single set of unified taxation rules that would be applied to companies operating within the EU when assessing its taxable profits. The EC suggested that the differing corporate tax systems across the EU are a serious obstacle for for multinational, as organizations are required to follow different rules for each country in which they do business. The current rules combine to create significant compliance costs and complexities for large scale firms, and are often an overwhelming deterrent for small companies wishing to expand their operations across the EU.

Under the CCCBT a company’s overall tax base would be shared out between the member states in which the business operates, based on a pre-determined formula taking into account the assets, labor hiring and sales in each particular country. The involved member state would then apply their own tax rates to the share. The CCCBT will not affect a country’s ability to set its own tax rates.

If brought into law, the proposed system would be optional, with companies being free to opt into the CCCBT if they wish. According to EC estimates, large scale adoption of the rules could lead to EUR 700 million in reduced compliance costs for businesses, and an additional EUR 1.3 billion in tax reductions for participating organizations.

Photo by Andres Rueda