Brussels, 08/02/2016 (Agence Europe) - In November of this year, the European Commission will present two proposals on a common consolidated corporate tax base (“CCCTB”), according to a European source.
The first proposal will aim to introduce a 'common corporate tax base' (CCTB'), while the second will deal with the 'consolidation' aspect of profits and losses. The Commission has previously explained that it hopes to move forward with the CCCTB in stages, given the difficulties encountered at the Council over the consolidation aspect. The CCTB will also be obligatory for businesses, as the Commission has previously indicated.
The proposed CCTB is expected to reflect the provisions of the anti-tax avoidance directive (ATAD) proposed on 27 January this year and the work carried out over the last four years on the rules on controlled foreign companies (CFC), the switch-over clause, the general anti-abuse rule and the limitation of the deduction of interest, according to another source. Readers may recall that the Commission removed many of the anti-tax optimisation elements from the initially proposed CCCTB to feed into the ATAD. According to the same source, possible new provisions of the CCTB/CCCTB will concern hybrid mismatches, the treatment of costs related to research and development, the debt equity tax bias and a cross-border losses relief mechanism to compensate for the delay in the consolidation aspect.
Although the proposal regarding the limitation of the deduction of interest of the ATAD is an anti-tax planning measure, the Commission intends here to reinforce the planned Capital Markets Union. In the public consultation on the CCCTB, it proposed three options: comprehensive business income tax ('CBIT'), allowance for corporate equity ('ACE') or the cost of capital allowance ('COCA'). The responses to the public consultation showed a clear preference for the ACE, according to this source. The ACE allows interest paid and notional interest corresponding to the remuneration of own funds to be deductible.
At a tax conference hosted by the European Banking Federation, furthermore, one participant listed the open questions for the banks under a 'CCTB': a rule specific to financial institutions for the limitation of the deductibility of interest or the treatment of regulatory hybrid own funds in the rules on hybrid mismatches (the OECD came to no conclusions on this issue).
It should be stressed that the CCTB will provide for a common approach and will not be a 'de minimis' directive like the ATAD. This means that it will not be possible for the states to go further or less far than the CCTB.
Despite the tweaks the Commission is to make to its proposal, it is still unlikely that it will be the subject of unanimity among the states to move forward. Reinforced cooperation could be one option.
Among the other fiscal initiatives the Commission is planning for this year is the question of a dispute settlement mechanism resulting from dual taxation affecting businesses from different member states. The aim will be to find out whether the scope of the Arbitration Convention should be extended within the EU and whether it should be turned into an EU instrument, the Commission stated in its action plan of June 2015. A public consultation is to be launched this week. An action plan on the VAT system is anticipated for 16 March. An initial guideline debate is expected to take place at the college of commissioners on 17 February. (Original version in French by Elodie Lamer)