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EC proposes new business tax agenda: BEFIT replaces CCCTB

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The European Commission has issued its long-awaited Communication on business taxation for the 21st century designed to ‘promote a robust, efficient and fair business tax system in the European Union’.

The Commission’s main proposal is to present, by 2023, a new ‘business in Europe framework for income taxation’ (BEFIT), which will provide ‘a single corporate tax rulebook for the EU’. This will replace the pending proposal for a common consolidated corporate tax base, which will be withdrawn. BEFIT will build on the OECD’s two-pillar proposals, and provide for the allocation of profits between member states based on a formula (formulary apportionment). BEFIT will pave the way for further administrative simplifications, such as the possibility of a single EU corporate tax return for a group.

Other measures outlined in the Commission’s communication include:

  • a recommendation to allow the carry-back of certain losses up to €3m for years 2020 and 2021; 
  • addressing the debt-equity bias in corporate taxation through an allowance system (a new debt equity bias reduction allowance (DEBRA), by Q1 2022); 
  • proposing that certain large companies operating in the EU should have to publish their effective tax rates (the legislative proposal is expected by 2022); and
  • tackling the abusive use of shell companies through new tax anti-avoidance measures (ATAD 3, expected Q4 2021).

EU tax commissioner Paolo Gentiloni said: ‘BEFIT will cut red tape, reduce compliance costs, minimise tax avoidance opportunities, and support EU jobs and investment. It will also provide for fairer allocation of taxing rights between member states.’

The Commission has also confirmed that it will propose a digital levy, which will serve as an EU ‘own resource’.

Issue: 1532
Categories: News