An outline of the CCCTB (Common Consolidated Corporate Tax ...

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Depreciation in respect of business assets would be deducted exclusively by the economic owner of the asset, in other words the person who enjoys the benefits and incurs the risks attaching to an asset. If a single economic owner could not be identified, depreciation would be deducted by the legal owner. The acquisition cost of intangible assets would be depreciated individually on a straight-line basis over the period for which the asset enjoyed legal protection or for which the right was granted or, if that period could not be determined, for 15 years. (This solution was well received by the Member States). Assets depreciated on an individual basis (long term assets): The cost of acquiring, constructing or improving a business asset would be depreciated individually on a straight-line basis - at 2.5% per tax year in the case of buildings, and - at 4% per tax year in the case of long-term tangible assets. A long-term tangible asset would mean a tangible asset the useful life of which was 25 years or more (could be replaced by a 15-year reference period), or the acquisition or construction costs of which exceeded EUR 5 000 000 (criterion that should be abandoned). (Several Member States commented that this amount was too high, that the cost criterion was not linked to the useful life of the asset Business Europe took the opposite view, commenting that the amount was too low. The Commission now seems to be considering a 15-year threshold.) Where an individually depreciated asset was disposed of during a tax year, its written-down value for tax purposes would be deducted from the taxable base in that year. If the proceeds were reinvested in a replacement asset within a certain period, the excess of proceeds over written-down value should be deducted from the tax base in the year of disposal and from the depreciation base of the new replacement asset. This would mean that the taxation of gains on disposals of assets could be spread over the lifetime of replacement assets. The same would apply to pooled assets. Assets depreciated on a pooled basis: The declining-balance method would be applied at a rate of 20% per annum, and proceeds from disposals would be deducted from the residual value of the pool. (Business Europe asked for this rate to be raised to 30% because the decliningbalance method diminished the effective depreciation rate from year to year.) The depreciation base would be the written-down value of the assets pool at the beginning of tax year plus the acquisition, construction or improvement costs of business assets acquired or created during the year, less the proceeds from disposals of business assets and the sum of any compensation received for the loss or destruction of such assets during the tax year. If the depreciation base thus calculated were a negative amount, a balancing figure would be added to bring the depreciation base to zero, and the same figure would be added to the tax base. If 14
the depreciation figure were a positive amount, it would be reduced by 20% to obtain the written-down value of the pool for tax purposes. 4. Consolidation Consolidation is at the heart of the project and undoubtedly constitutes the principal benefit of the CCCTB scheme and the main reason why industry supports it. By freeing companies from compliance with intra-group transfer-pricing rules and allowing an immediate profit and loss consolidation, a consolidated base should help to make Europe a highly attractive area in which to do business as well as helping to establish a stable tax base in a competitive global environment. Consolidation would be based on the ‘all-in or all-out’ principle, which means that consolidation would be mandatory in all groups which had opted to use the CCCTB , for the qualifying companies as defined below and the permanent establishments located in a Member State of the EU. For a subsidiary to qualify for consolidation, at least 75% of its voting rights would have to be owned directly or indirectly (i.e. through a chain of ownership). This is the working assumption retained by the Commission, but it could be amended due to the potential manipulations as regards the 75% voting rights threshold and minority interests issue. For the purpose of calculating the parent company’s level of indirect ownership, the percentage stakes held by the companies in the ownership chain would be multiplied. Where a direct holding amounted to 75% or more, it would count as 100% for the purposes of this calculation, thereby ensuring that all subsidiaries in which the parent company directly or indirectly controlled 75% of the voting rights would be included in the consolidation and avoiding the fragmentation of groups. Conversely, a direct holding of 50% or less would count as zero. This would avoid manipulations designed to include in a group entities in which the group did not have a controlling stake. (Some divergent views were expressed by Member States regarding the consolidation threshold, one favouring a higher threshold of 90% and another arguing for a lower threshold of more than 50%. One Member State argued for strict multiplication of holdings to determine indirect ownership. Business Europe is in favour but would prefer a single 50% threshold for opting and consolidation.) A group would comprise an EU-resident parent company and its EU-resident subsidiaries, including permanent establishments 20 . 20 See in Appendix to this document, the different shareholding schemes triggering an application of the CCCTB regime. 15
Page 1 and 2: An outline of the CCCTB (Common Con
Page 3 and 4: - the common consolidated corporate
Page 5 and 6: • Consolidation: in accordance wi
Page 7 and 8: 5. a group of related companies whi
Page 9 and 10: The following would be exempted inc
Page 11 and 12: Taxes other than corporate income t
Page 13: (Consultation with the Member State
Page 17 and 18: When a group ceased to exist, unrel
Page 19 and 20: a group company and that company le
Page 21 and 22: the view that, since the exemption
Page 23 and 24: - limit manipulation of the tax-bas
Page 25 and 26: to tangible fixed assets to the exc
Page 27 and 28: company of an EU subgroup chosen by
Page 29 and 30: Where a new decision was taken, it
Page 31: At this stage, then, it is difficul

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