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

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In fact, working document No 57 states that companies with more than 50% but less than 75% of their voting rights in common ownership 12 are recognised as members of a group and can therefore opt to use the CCCTB, but their profit or loss is not included in the consolidated trading result for tax purposes. Companies with 75% or more of their voting rights in common ownership are recognised as members of a group and can opt to use the CCCTB and have their profit or loss included in the consolidated group total for tax purposes. Nevertheless, changes are foreseen on this issue. The existence of this double threshold – eligibility to opt for the CCCTB if more than 50% of the voting rights of the company is in common ownership, and consolidation if 75% or more of the voting rights is commonly owned – is hotly contested, and most participants in the meeting of the extended CCCTB working group in December 2007 indicated their preference for a single opting and consolidation threshold. This, in fact, would serve to avoid the situation in which one group has two or more principal taxpayers – one principal taxpayer for opting purposes whose trading results would not necessarily be included in the consolidated tax base and one principal taxpayer for each consolidated 75% subgroup in a 50% opting group. With regard to the single threshold to be applied, the business experts unanimously proposed that the consolidation threshold be lowered from 75% to 50.1%. The effects of this lower consolidation threshold, however, would conflict with the interests of minority shareholders. The Member States, for their part, would generally prefer a single threshold set at 75%. As of today, a “double threshold approach” (50% for a CCCTB group, 75% for identifying the consolidated entities) seems definitively abandoned. Nevertheless, a reflexion is lead with respect the threshold of consolidation. This could conduct to require both a 75% ownership in capital (including rights to dividends) and a minimum of 50% in terms of voting rights (or other modalities in order to avoid manipulations due to a single threshold of 75% of voting rights). In fact, the issue generated by a single threshold of 75% of the voting rights is that a company would be intended to hold only 74% of these voting rights (slightly under the 75% threshold) in order to avoid the consolidation. In practice, the proposal will have to make provision for the following situations: 1. a single resident company in a Member State of the EU; 2. a single permanent establishment in the EU of a non-EU-resident company; 3. a single resident company with one or more permanent establishments in the EU; 4. a single non-EU-resident company with more than one permanent establishment in the EU; 12 The calculation of all the shareholding thresholds is based on the ownership of voting rights. Other cumulative criteria were proposed by the business and academic communities but are unlikely to be adopted. 6 Formatted: Bullets and Numbering
5. a group of related companies which, though more than 50% owned, are not consolidated for tax purposes (commonly owned voting rights greater than 50% but less than 75%); 13 6. a group of companies that are consolidated for tax purposes (commonly owned voting rights of 75% or more). Application and optional character: It is essential to note that the Commission, with the support of business community, intends to propose an optional arrangement, whereby eligible groups of enterprises could opt into the CCCTB or could choose not to. This freedom of choice would enhance the incentive effect of the CCCTB by encouraging Member States to make it competitive and uniform. On the other hand, the coexistence of two systems could impose a heavy administrative burden on the Member States. A majority of Member States is not favourable to an optional arrangement. Some of them have indicated that they would favour a mandatory common basis with an option for consolidation. Corporate tax liability as such would remain subject to national legislation, reflecting the principles underlying each Member State’s own fiscal policies. The directive, for its part, would specify which of the companies liable for national corporation tax could opt to use the CCCTB. Its provisions would apply to the types of company listed in an annex which were subject to corporate income tax or an equivalent form of taxation in a Member State (the relevant forms of taxation would also be listed in an annex) as well as companies not resident in the EU which had a similar form to EU companies and which were subject to one of the taxes that applied in the EU. Companies in these categories would be known as eligible companies. Eligible EU-resident companies could opt to use the CCCTB, while eligible companies based outside the EU could opt in on behalf of their permanent establishments in the EU. The option would be valid for five years and be automatically renewed for successive three-year periods thereafter, unless notice were given to the contrary. The companies in a group in which at least 75% of each company was in common ownership would have to opt in en masse or all remain outside the CCCTB scheme (‘all-in or all-out’ principle) for the duration of a validity period. In the event of company or group that had opted in being taken over by a group that had not, the option would remain in operation until the end of the current period, after which the new enlarged group would have to opt in or else withdraw its newly acquired company or group. Companies that opt in are referred to in the present paper as ‘taxpayers'. EUresident taxpayers would be liable to corporate tax on their worldwide income, without prejudice to the provisions of double-taxation agreements. Non-resident taxpayers would be liable for tax on business income attributable to a permanent establishment in the EU (the definition of a permanent establishment would be 13 Subject to the thresholds debate referred to above. 7
Page 1 and 2: An outline of the CCCTB (Common Con
Page 3 and 4: - the common consolidated corporate
Page 5: • Consolidation: in accordance wi
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 and 16: the depreciation figure were a posi
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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