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The European Commission (EC) has proposed a common consolidated corporate tax base (CCCTB) for companies operating in the European Union (EU), with the aim of reducing administrative burdens, compliance costs and legal uncertainties.
Cross-border businesses currently have to deal with up to 27 different rule books for calculating their tax base, and they must work with as many as 27 tax administrations. In addition, compan face a complex system of transfer pricing and cannot offset their losses in one member state against profits in another.
The CCCTB, which would be optional, is aimed at overcoming problems by offering companies a single set of corporate tax-base rules and the possibility of filing a single, consolidated tax return with one administration for their entire activity within the EU.
On the basis of the return, the company’s tax base would be shared out among the member states in which the business was active, according to a specific formula that would take into account three factors: assets, labour and sales.
After the tax base has been apportioned, member states would be allowed to tax their share of it at their own corporate tax rate. Under the CCCTB, member states would continue to set their corporate tax rate.
Peter Cussons, head of PwC UK’s EU direct tax group, said the proposal is ‘a major step forward for the commission in getting the CCCTB proposal to this stage’. He suggested that all companies operating cross border within the EU should evaluate the potential effect of the proposals on their EU corporation tax profiles and their European tax compliance functions. Mr Cussons added that it is unlikely a CCCTB would be implemented before 2014.
