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

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The fact that the EU-resident parent company was itself controlled by a non-EU parent would not be an obstacle to consolidation of the EU-based part of the ownership chain. Likewise, the CCCTB would also cover a group of EU-resident subsidiaries under the common control of a non-EU-resident parent. The fact that the ownership chain of a group of EU companies included a non-EU link company (the so-called 'sandwich' situation) would not break the chain; this would ensure that taxpayers did not try to split single groups into multiple groups. A taxpayer would be part of a group from the date on which the 75% threshold was reached, and the same would apply to a subsidiary that fulfilled the aforementioned conditions, provided it met the criteria for at least six months. A taxpayer would be deemed to be 75% owned and therefore included in a consolidated group if it passed the 75% test at the beginning and at the end of the tax year and if the level of ownership never dropped to 50% or lower at any time during the tax year. The taxpayer would leave the group on the day when the ownership of voting rights - fell to 50% or below at any moment, or - fell below the 75% threshold and remained below it until the end of the tax year. The same would apply to a taxpayer’s subsidiaries. Companies entering and leaving a group should therefore start to consolidate on the date they enter the group and cease on the date they leave; their transitional tax year would thus be split into two parts. (Business Europe finds this preferable to any other solution but a discussion is still open regarding these rules which could thus be subject to future amendments.) Consolidation would not be proportional; it would cover the entire tax base of all entities belonging to a given group, subject to the rules applicable to transparent entities which need further clarification, and so it might not necessitate compensation of minority interests, since each member of a group would be apportioned a share of group profits and losses. Losses incurred by a taxpayer before entering a CCCTB group would not be taken into account in the consolidation. Such losses would be offset against the share of the future consolidated profits attributed to this taxpayer in accordance with national rules. Where consolidation resulted in an overall loss for the group, this loss would be carried forward at group level and set off against future consolidated profits before the net profits were shared out (net of the loss carried forward by the consolidated group) in order to guarantee that there were no ‘trapped' losses. For the sake of consistency with the principle of treating a group as far as possible as a single entity, no losses would be attributed to a taxpayer leaving a group. When a company was disposed of, any unrelieved losses carried forward at group level would therefore remain in the group. 16
When a group ceased to exist, unrelieved group losses would be attributed to the taxpayers belonging to the group at the moment of termination on the basis of the sharing-mechanism calculations for the date of termination. Intra-group transactions would have to be factored out: Companies belonging to a CCCTB group would be due to consolidate their tax bases since they reach the 75% threshold, thus entailing to factor out intra-group transactions in order only transactions between the group and third parties enter into the consolidated tax base. The consolidated tax base would not include any profits or losses on intragroup transactions between members of the consolidated group. This would relate to any profits or losses on the disposal of stocks, fixed assets, shares in consolidated companies or other tangible or intangible assets. Nor would the tax base include intra-group provisions. Factoring out intra-group transactions When the 75% ownership threshold was reached, companies in the CCCTB group would have to consolidate their profits and losses. In order to ensure that intra-group transactions 21 did not become subject to the rules on transfer pricing, such transactions would have to be factored out. In order to determine which intra-group transactions should be netted off, the services of the European Commission favour the enactment of a general rule, which would be accompanied by an indicative list of transactions to be factored out. Factoring-out methods would vary according to the type of asset. In the case of a non-depreciated asset, the European Commission considered three methods of factoring out intra-group transactions: � The first would involve completely ignoring intra-group transactions when calculating the tax base. The advantage of this method lies in its simplicity. The main drawback, however, is that it would result in the disappearance of some essential accounting data. These data could be useful if, for example, a company were sold or if the tax administration applied the rules on transfer pricing that are used in respect of third parties. � The second method would involve asking each company in the CCCTB group to calculate its tax base in accordance with the customary rules. This, by contrast, would mean that all internal transactions would be recorded 21 Intra-group transactions are transactions between companies belonging to the same consolidated group. 17
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 and 14: (Consultation with the Member State
Page 15: the depreciation figure were a posi
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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