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Tax Centre of Excellence

News Alert
April 2011
Draft directive on a Common Consolidated Corporate Tax Base within the EU
On March 16, 2011, the European Commission published a draft directive on a Common Consolidated Corporate Tax Base (“CCCTB”). The CCCTB is a single set of rules that a company or a group of companies operating within the EU could use to calculate their taxable profits, rather than different rules in each Member State in which they operate. The proposed CCCTB could partially replace the current OECD transfer pricing rules. Application of the CCCTB would be optional, meaning that companies would be able to continue using the domestic regimes and the current transfer pricing rules. A company or a group of companies operating in more than one Member State would be able to file only one single consolidated corporate income tax return with one tax administration for its entire EU operations, the return is filed with the tax authority in the state of which the parent company of the group is a tax resident. The results of the individual group companies are consolidated in the CCCTB if two tests are met throughout the tax year and after a minimum holding period of nine months: 1. 2. Control (50% of the voting rights in a group company), and; Ownership (75% of the equity or profit rights) These rules deal with (amongst others) exemption of certain types of income (such as dividends or capital gains from companies outside of the group), depreciation of fixed assets and loss carry forward. In addition, the CCCTB has a general anti-abuse rule, as well as specific anti-abuse rules (for instance with respect to interest payments to companies located in tax havens). A major benefit of the CCCTB is that profits or losses from transactions within the group are excluded from the consolidated tax base. However, for transactions with companies outside of the group (i.e. EU), the “at arm’s length” principle remains applicable. Formulary apportionment In this formula, labour consists of payroll and the number of employees (each counting for half), whereas the asset factor comprises of fixed tangible assets. Intangibles and financial assets are not included in the formula. The profit apportioned to each member state is taxed against the domestic corporate income tax rate of each state. The proposed directive will now have to be discussed and agreed upon by the Member States within the EU Council, following the opinion of the European Parliament. Unfortunately, it is difficult to predict if and when the CCCTB will be accepted by the Member States.

Companies can opt-in to the CCCTB for a minimum period of five years for all qualifying subsidiaries (all-in or all-out). On the same all-in or all-out basis, nonEU companies are also able to apply the CCCTB for their activities within the EU. Calculation of tax base Like any tax system, the CCCTB contains a (detailed) set of rules for determining the consolidated tax base.

If you would like to learn more about the developments with respect to The consolidated tax base is apportioned the CCCTB, please do not hesitate to to the Member States in which the group contact your local expert or Guido van is active in accordance with the following Asperen or Gert Van den Berg listed formula: below. Guido van Asperen E gvasperen@rsmnl.nl Labour X Assets X Sales X Tax base of group * CCCTB + + = T +31 (0)23 5300 426 company X
Labour Group Assets Group Sales Group

Gert Van den Berg E g.vandenberg@rsm-belgium.be T +32 (0)3 242 83 00

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