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

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ased on the OECD definition, but more detailed and/or uniform criteria could be established by means of the comitology procedure. There would be no withholding taxes or other forms of taxation at source on payments of any kind made between taxpayers belonging to the same consolidated group. No decision, on the other hand, has yet been taken on payments made between two single taxpayers or separate consolidated groups, and this matter is currently the subject of a consultation process. 14 Withholding taxes and other taxation at source on payments made by a taxpayer to a nontaxpayer, whether EU-resident or not, would continue to be governed by the applicable national, Community or treaty provisions, as appropriate. (There have been numerous comments, especially from the Member States, on the lists, the need for common criteria, the treatment of transparent entities and the definition of a permanent establishment. Business Europe has expressed support for the elimination of withholding taxes on payments between taxpayers in separate consolidated groups too.) 3. The common tax base The tax base of individual companies: Unless otherwise provided in the context of consolidation, the calculation of the tax base would be the same for all companies that had opted into the CCCTB, whether or not they were eligible for consolidation 15 . It would be calculated as the difference between income subject to tax less exempt income (net of VAT and other taxes and duties) and deductible expenses and other deductible items (net of VAT, unless the VAT were nondeductible), calculated on an annual basis. (The tax year would be any 12-month period; detailed rules on opening and closing years and changes of tax year would still be required). Income would be defined to include income of any kind, whether monetary or nonmonetary, including not only trading income but also proceeds from the disposal of assets and rights, interest, dividends and other profit distributions, royalties, subsidies and grants, gifts, compensation and ex gratia payments. Income would not include equity or loans raised by the taxpayer. Both for the sake of adherence to the principle of a broad tax base and low tax rates and because of the difficulty involved in harmonising excessively divergent approaches, the definition of taxable income would be as broad as possible, and exempted forms of income would be kept to a minimum. 14 The choice here is between (a) eliminating taxation at source in respect of such payments and (b) introducing common rules on taxation at source and on double-taxation relief for the recipients of such payments. The latter solution would, in turn, raise the question of the apportionment of withholding tax and, in the case of a consolidated recipient, the cost of granting credits. 15 Under the reserve of the debate on the above mentioned thresholds. 8
The following would be exempted income: - subsidies directly linked to the acquisition, construction or improvement of a depreciable business asset, - proceeds from the disposal of pooled assets, and 16 - certain income from dividends and permanent establishments and capital gains (see rules on shareholding exemption below). Deductible expenses would mean all expenses incurred by the taxpayer for business purposes in the production, maintenance or securing of income, including costs arising from research and development or from the raising of equity or loans for business purposes. (Business Europe remains opposed to this ‘business-purpose test’, which, it says, would introduce too many uncertainties: checking that expenditure is used for business purposes is a matter for shareholders, not the tax administration. It is a tricky issue. There is nearly a consensus among the Member States on a mandatory test. The Commission will have a difficult choice to make as regards this issue). This definition would be accompanied by a list of non-deductible expenses, which would include: - profit distributions, repayments of equity or loans or any payments made or expenditure incurred for the benefit of shareholders or associated persons, - expenses relating to assets treated as non-business assets, - 50% of entertainment and representation costs, - appropriation of retained earnings which formed a part of equity (reserves), - corporate income tax, - bribes, - fines and penalties payable to a public authority for breach of any legislation, - management costs to the extent to which they were incurred by a company in deriving exempted income from dividends, permanent establishments and capital gains, - monetary gifts and donations except to charitable bodies meeting common criteria to be established under the comitology procedure, and - costs relating to the acquisition, construction or improvement of fixed assets except those relating to research and development. 17 All expenditure on staff would be treated as business expenditure on the assumption that Member States would subject any private element or benefits in kind to personal income taxation as they saw fit. Similar considerations would apply to assets purchased wholly or partly for the benefit of an employee. 16 The results of the disposal of the pooled assets will therefore reduce the balance sheet of the pool which will be written off in future years. 17 This results in an effective 100% deduction of research and development expenditure, even where it is tantamount to the acquisition of fixed assets. 9
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: 5. a group of related companies whi
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

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

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