The Commission recently published its plans to re-launch the Common Consolidated Corporate Tax Base (CCCTB). The plan is to implement the CCCTB in two steps; the first being to introduce common tax rules for calculating taxable profits of group of companies (CCTB) and the second step is full consolidation on a mandatory basis under CCCTB. Corporate tax rates are not impacted by the CCCTB.

The CCCTB is a harmonised system to calculate companies’ taxable profits in the EU. It proposes to apply one set of rules for companies to determine their tax base, rather than multiple national ones and companies in a group will have to file a single tax return for all of their EU activities. Companies in the CCCTB system will be able to offset losses arising in one Member State against profits arising in another. The Commission views the CCCTB as a potentially powerful instrument to fight tax avoidance.

Key features of the re-launched CCCTB are as follows:

• The CCCTB will be mandatory for all groups with global consolidated revenues of more than €750 million.
• Companies will be given a super-deduction for their R&D costs.
• The CCCTB will remove the incentive for debt accumulation by providing a “Growth and Investment” (AGI), which will give companies equivalent benefits for equity as they get for debt.
• Once a company’s consolidated tax base has been established under CCTB, each Member State in which the company has activities will have the right to tax part of this base. The proportion of the company’s base that a Member State can tax will be decided based on 3 equally weighted factors:
• The assets the company has in that Member State (e.g. buildings, machinery).
• The labour the company has in that Member State (i.e. the number of employees and employment costs).
• The sales that the company made in that Member State. The sales factor will be calculated on the basis of destination (i.e. where the goods are sold/dispatched to or where the service is carried out).

The legislative proposals for the CCCTB will now be submitted by the Commission to the European Parliament for consultation and to the Council for adoption. Direct taxation matters must receive the unanimous support of ECOFIN before such measures can be adopted. For full details of the relaunched CCCTB are available here.