At the meeting of ambassadors of the Member States to the EU (Coreper) on Wednesday 30 March, the French Presidency of the Council of the European Union presented a new compromise proposal on the directive aimed at transposing the OECD agreement reforming the taxation of large companies into EU pillar II.
While several countries had expressed doubts about the dossier at the Ecofin Council in early March (see EUROPE 12908/24), only Poland stuck to its guns on Wednesday.
Indeed, the Polish authorities are keen to link Pillar I, which relates to the reallocation of taxation rights of multinationals – currently being negotiated at OECD level – to Pillar II.
The French Presidency maintains its proposal to support the agreement on the directive with a specific EU Council declaration. French Economy Minister Bruno Le Maire “hopes to be able to reach an agreement at the next Ecofin Council”, which will take place on Tuesday 5 April in Luxembourg, a European diplomat told EUROPE. “Negotiations are ongoing and a compromise can be reached, but it is difficult”, he added.
However, the new compromise has convinced the other Member States. “We are making progress”, said another diplomat who was contacted by EUROPE. “We are nearly at the end, but we are not certain since we need unanimity”, he said.
In order to convince other reluctant countries, the French Presidency proposed adjusting the modalities of the transitional option by extending the period of application for the income inclusion rule to 6 years. Moreover, in order to benefit from this option, a maximum of twelve parent companies established in a Member State will be needed, instead of ten.
Furthermore, the Directive also makes it possible to collect and levy tax from subsidiaries that are located in countries other than the parent company’s where that tax rate is lower. Member States should be able to choose to apply this rule and to notify the European Commission in advance.
Finally, the EU Council proposed empowering the European Commission to adopt delegated acts in order to establish a list of third country jurisdictions that have implemented a legal framework into their national law that can be deemed equivalent to the income inclusion rule.
However, the compromise proposal “emphasises that the recourse to a delegated act in this specific context should not be considered as a precedent for other legislative instruments adopted under the special legislative procedure, given the decision making process proper to tax matters”.
Read the French compromise proposal: https://aeur.eu/f/11i (Original version in French by Anne Damiani)