RSM Ireland

Re-launch by EU of Common Consolidated Corporate Tax Base (CCCTB)

In October 2016, the Commission proposed to re-launch the Common Consolidated Corporate Tax Base. The re-launched CCCTB will be implemented through a two-step process and will be mandatory for the largest groups in the EU.

The CCCTB proposal is the EU’s response to what they see as aggressive tax planning by multinationals. It marks the latest attempt by the European Commission to legislate on corporate tax matters. It proposes to implement a single set of rules for multinational companies to determine their profits in the EU, instead of the current practise of dealing with each individual EU country’s tax process. It follows on from the on-going BEPS project being run by the OECD and the recent Apple decision, demonstrating that taxation is likely to remain a key issue for the EU until they see the type of reform which they believe is needed.

In a bid to progress the implementation, the EU is proposing a phased approach. The first phase would introduce a new common corporate tax base by harmonising the rules by which companies calculate their taxable profits across the European Union. The second phase proves to be a more controversial aspect. It tackles the consolidation element. This would oblige companies to aggregate their profits across the EU and then divide out the taxable profits among member states. Each country would tax their share of the profits at their own national rate. These steps put a greater emphasis now on multinational companies paying taxes in the countries where economic activity takes places and in turn where profits are generated.

The proposal would be mandatory for companies with a turnover of more than €750 million. The EU commission believes the new CCCTB proposal will help ease compliance and administration burdens while also eliminating transfer-pricing. However, transfer-pricing issues between companies with a presence in the EU and other non-EU jurisdictions – including the US – will not be addressed by the current proposal.

EU finance ministers will give their response to the proposal in two weeks’ time, however experts say it could be some time before the first part of the proposal is agreed. In the last attempt to introduce the CCCTB on the reform agenda support was not forthcoming from countries such as the UK and Germany and of course, Ireland, who would see the later element, i.e. the consolidation aspect as a serious threat to Ireland’s economic well-being. Each member state has a veto over tax policy of this nature. Obviously, following the Brexit decision, it is likely that the UK will go its own way on tax policy, perhaps making it more attractive from a taxation perspective for inward investment.

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