Financial Services Ireland

Tax alert

European Commission proposes staged approach towards harmonised group tax base

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Mandatory Common Corporate Tax Base is the first step with Common Consolidated Corporate Tax Base as final step

Executive summary

On 25 October 2016, the European Commission (the Commission) announced a new package for corporate tax reforms. The package includes three separate legislative initiatives, namely: (i) a Directive on a Common Consolidated Corporate Tax Base (CCCTB); (ii) a Directive on Double Taxation Dispute Resolution Mechanisms in the European Union; and (iii) a Directive amending the Anti-Tax Avoidance Directive (ATAD) as regards hybrid mismatches with third countries. These legislative proposals will be submitted to the European Parliament for consultation and to the Council of the European Union for adoption.

The Package also contains a Chapeau Communication, outlining the political and economic rationale behind the proposals, as well as impact assessments on the CCCTB and the dispute resolution mechanism. 26 October 2016 Global Tax Alert European Commission proposes staged approach towards harmonized group tax base EY Global Tax Alert Library Access both online and pdf versions of all EY Global Tax Alerts. Copy into your web browser: 2 Global Tax Alert With respect to the CCCTB proposal, the Commission recognizes that elements of the original CCCTB proposals gave rise to difficult debates and consequently has proposed a staged approach. Accordingly, the proposal has been split into two directives, one covering a common corporate tax base (CCTB) and the other covering the CCCTB itself.

Discussions on the draft directive relating to the CCCTB will be postponed until the elements of the CCTB are agreed. The first stage in the re-launched proposals contains a set of rules to create a CCTB but does not include consolidation rules. These are broadly the same as the relevant aspects of the 2011 proposals, though they have been updated to take into account the European Union’s (EU’s) work on the ATAD.1 The proposals now also incorporate a notional interest deduction and a sup


According to the Commission, the C(C)CTB proposals are perhaps the most ambitious corporate tax reform ever proposed in the EU. Both would provide Member States with an entirely new system for taxing multinationals and it will have a significant effect on the taxation of multinational companies operating in the EU. If adopted, a broad range of structures (financing, holding, IP and supply chain structures) will be impacted. Global businesses with European activities may therefore wish to assess the impact of the proposals on their current structures and on future investments, and should monitor the follow up work by the Commission and the Council.

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John Hannigan

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