European Parliament examines feasibility of 28^th tax regime for companies

On Wednesday 3 June, the European Parliament’s Committee on Economic and Monetary Affairs adopted, by 36 votes to 18 with one abstention, a draft report on the tax dimension of the EU Inc. initiative, the new optional 28^th regime for companies.

This draft regulation, which seeks to enable companies to be created within 48 hours with less than €100 and to allow them to operate throughout the EU, includes a section on the taxation of stock options and employee profit-sharing schemes, while attempting to harmonise the taxation of capital gains or share purchases, but no other tax harmonisation measures.

The adopted own-initiative report therefore relates to the feasibility of a 28^th tax regime. “It should be noted that, for a 28^th tax regime to be feasible under the existing Treaty framework, it could take the form of enhanced cooperation, either through an opt-in or opt-out structure of the relevant tax directive, through the inclusion of a sunset clause, or through a combination of these approaches”, explains the draft report tabled by Slovak MEP Ľudovít Ódor (Renew Europe) at the outset.

“On this potential tax module the report proposes targeted coordination measures, such as a consolidated corporate income tax, standardised tax returns, simplified VAT procedures, and streamlines withholding tax rules”.

The report also underlines the need to put measures in place to ensure that this regime does not become a tool for tax avoidance, tax competition or abusive tax shopping.

The rapporteur also welcomes the European Commission proposal on the optional use of EU employee stock options (EU-ESO) and the principle that taxation should occur at the employee disposal stage and should benefit from the same tax treatment as that applicable to other employee stock options or similar instruments under national law. European Parliament nevertheless considers that this provision should be mandatory.

The text also adds that “[...] gains shall be treated as capital income rather than employment income, therefore aligning employee incentives with long-term company growth and removing the distorting effect of upfront taxation”.

All the compromise amendments were adopted.

Link to the draft report: https://aeur.eu/f/m6c (Original version in French by Solenn Paulic)