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

would apply to the ‘cost’ incurred by Member States as a result of granting tax
credits for tax paid abroad. A mechanism for calculating the limit of the credit to be
granted by each Member State would also be required.
As regards income from an EU source, where this was income from a
permanent establishment it would always be consolidated with the tax base of the
group or single company on which the permanent establishment depended.
Dividend income from major shareholdings would be consolidated (and
consequently factored out from consolidation) if the ownership requirements for
consolidation (75%) were met and would otherwise be treated in the same way as
income from non-EU countries, subject to an examination of the applicability of the
Columbus Containers judgment to the switch-over. In practice, the threshold for
switch-over mechanism is assessed in a way no EU Member State will fall into the
scope of this regime.
Income in the form of portfolio dividends (returns on financial investments) would
undergo the same treatment as dividends from non-EU countries, as would other
passive income: these dividends would be subject to tax, with a credit granted in
case a withholding tax would have been paid in the Member State where this
income has its source Income from EU sources would include domestic income.
(Numerous Member States have submitted comments because they have a
problem with this approach, although they have not proposed a more acceptable
solution. Most of them emphasise the great complexity of dealing with foreign
income, the difficult relationship with bilateral agreements concluded with countries
outside the EU, the calculation of tax credits and the difficulty of apportioning the
profit or loss of permanent establishments among the Member States in view of
their bilateral agreements with the source countries, particularly in the case of
Member States in which the foreign company has no permanent establishments.
Some Member States have suggested that potential derogations from the CCCTB
rules that would be implemented in order to fulfil the requirements of the existing
Tax Treaties concluded with countries outside the EU should not be subject to time
limits so as to avoid creating tension in the renegotiation of agreements with non-
EU countries.
Shareholdings
Dividends, capital gains and interest
The tax regimes that apply to shareholdings diverge widely from one Member State
to another.
In fact, some Member States consider that exemption of share dividends is, to all
intents and purposes, nothing more than a mechanism for the avoidance of double
taxation and that loan interest payable in connection with the acquisition of these
shares is therefore a deductible expense. Other Member States, conversely, take
20