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

a group company and that company left the group, such an operation would not be
taxable (see below). The question then arises as to whether it would be necessary
to have a mechanism for taxing the unrealised gain on underlying assets of the
departing company (see the box on anti-abuse provisions).
Treatment of income from shares and foreign sources and other passive income
The proposed scheme is based on the taxation of worldwide income. The directive
would take precedence over any agreement concluded between Member States in
the event of conflicting provisions, but current agreements with non-EU countries
could not be ignored. 22 The rules on the taxation of foreign income would therefore
have to provide an adequate level of protection for the tax base while minimising
potential conflict with existing bilateral agreements. To this end it might be
necessary to allow Member States to derogate temporarily from the directive in
certain cases in order to honour existing obligations under agreements with
countries outside the EU.
Four broad types of income need to be considered:
- income from permanent establishments,
- income from major shareholdings (a 10% minimum ownership, threshold applied
for the benefit of the parent-subsidiary regime),
- income from portfolio shareholdings (financial investments – i.e. ownership under
10%), and
- other ‘passive’ income – royalties, patent income, interest, etc.
For each of these categories it would be necessary to distinguish between income
from non–EU countries and income from EU sources.
As regards income from countries outside the EU, the principle of capitalimport
neutrality (CIN) would apply, meaning that such income would be exempt if
it took the form of dividends received from major shareholdings and the foreign
earnings of permanent establishments. At this stage, however, an anti-abuse
mechanism is envisaged in the form of a switch-over to the credit method where
the corporate tax rate in the source country is low, i.e. less than 40% of the
average rate in the participating Member States.
As for portfolio dividends (income from financial investments) and other passive
income, these would be taxed, and a credit would be granted for tax paid at
source.
In all cases where the aforementioned categories of foreign income accruing to a
member of a consolidated group were taxable, the income would be apportioned
among the Member States in accordance with the distribution key, and the same
22 On this sensitive issue it should, however, be noted that, at the Conference held in February 2008 by Vienna
University of Economics and Business Administration, some members of the academic community held that
the regime established by the CCCTB would be a new form of taxation that was not covered by bilateral
agreements or Article 2 of the OECD Convention (a view which was far from unanimous) and that a
provision on this matter was therefore unnecessary.
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