EU Common Corporate Tax rules are coming....

[Martin Everson]

The initial plan is for multinationals but I can see where this is going ca#"!.

Your gonna end up with a company based in Ireland lets saying paying the new 15% corporate tax rate. But then if this new rule comes in and all their customers are in France that year they would in principle be subject to a 25% French corporate tax rate due to the apportionment of income to Frances corporate tax rate...lol. It sounds fair on paper but you could end up in a situation where you have no idea what your tax rate is gonna be each year....lol.

https://home.kpmg/xx/en/home/insigh...n-business-taxation-for-the-21st-century.html
https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_2431

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Action 5: Business in Europe: Framework for Income Taxation (BEFIT)

BEFIT will provide for common rules for determining the corporate tax base and for the allocation of profits between Member States, based on a pre-defined formula (formulary apportionment). The proposal will build on the principles agreed upon under Pillar 1 and Pillar 2, and further adapt these to ensure suitability for an extended use within the EU Single Market.

In short, BEFIT would consolidate the profits of the EU members of multinationals into a single tax base, to be subsequently allocated to Member States using a formula that will replace the current transfer pricing rules. The formula will be developed by considering issues such as giving appropriate weight to sales by destination, reflecting the importance of the market where a multinational group does business, assets (including intangibles) and labor (personnel and salaries). Once allocated, profits will be taxed using the common principles of an EU corporate tax base.

The pending Common Consolidated Corporate Tax Base (CCCTB) proposal will be withdrawn in light of this new initiative. Once implemented, BEFIT could represent a stepping stone for the introduction of an even more ambitious initiative, i.e. the possibility of a single EU corporate tax return for a group.

----- quote end

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[Marzio]

Hopefully CH will not fall for this idiocracy

 

[HoneyBoo]

marzio said:
Hopefully CH will not fall for this idiocracy
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Just like CH failed to maintain its neutrality with Russia/Ukraine (soon China/Taiwan), it will succumb to this as well, they are literally cornered.

I think we will see some major countries leaving the EU, Italy for example has chances of leaving the bloc.
In regards to taxation, small nations will become attractive by not participating in these agreements.

 

[Offshr]

menzu said:
Just like CH failed to maintain its neutrality with Russia/Ukraine (soon China/Taiwan), it will succumb to this as well, they are literally cornered.

I think we will see some major countries leaving the EU, Italy for example has chances of leaving the bloc.
In regards to taxation, small nations will become attractive by not participating in these agreements.
Click to expand...

No countries would leave the EU as without single market they quickly will go down to recession.

Martin Everson said:
The initial plan is for multinationals but I can see where this is going ca#"!.

Your gonna end up with a company based in Ireland lets saying paying the new 15% corporate tax rate. But then if this new rule comes in and all their customers are in France that year they would in principle be subject to a 25% French corporate tax rate due to the apportionment of income to Frances corporate tax rate...lol. It sounds fair on paper but you could end up in a situation where you have no idea what your tax rate is gonna be each year....lol.

https://home.kpmg/xx/en/home/insigh...n-business-taxation-for-the-21st-century.html
https://ec.europa.eu/commission/presscorner/detail/en/qanda_21_2431

----- quote start

Action 5: Business in Europe: Framework for Income Taxation (BEFIT)

BEFIT will provide for common rules for determining the corporate tax base and for the allocation of profits between Member States, based on a pre-defined formula (formulary apportionment). The proposal will build on the principles agreed upon under Pillar 1 and Pillar 2, and further adapt these to ensure suitability for an extended use within the EU Single Market.

In short, BEFIT would consolidate the profits of the EU members of multinationals into a single tax base, to be subsequently allocated to Member States using a formula that will replace the current transfer pricing rules. The formula will be developed by considering issues such as giving appropriate weight to sales by destination, reflecting the importance of the market where a multinational group does business, assets (including intangibles) and labor (personnel and salaries). Once allocated, profits will be taxed using the common principles of an EU corporate tax base.

The pending Common Consolidated Corporate Tax Base (CCCTB) proposal will be withdrawn in light of this new initiative. Once implemented, BEFIT could represent a stepping stone for the introduction of an even more ambitious initiative, i.e. the possibility of a single EU corporate tax return for a group.

----- quote end
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Would it be applicable to private asset holding business one day?

 

[Candoit]

So Lux is going to be the biggest loser, they will be back to milking cows

 

[Offshr]

Candoit said:
So Lux is going to be the biggest loser, they will be back to milking cows
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Multinationals will figure out something as always.
It is the commoners who will suffer the most, as always.

 

[Martin Everson]

Offshr said:
Would it be applicable to private asset holding business one day?
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It will apply to all businesses doing EU cross border business eventually I feel. Just think EU VAT MOSS system and you get the picture 🙁.

Offshr said:
Multinationals will figure out something as always.
It is the commoners who will suffer the most, as always.
Click to expand...

Yes they 100% will. Lets be clear this plan will affect mostly US big tech companies i.e FB, TWT, AMZ, GOOGL, APPL, MSFT etc that have complex tax affairs in EU. It may also cause tensions like when France tried to implement the tech tax below.

https://edition.cnn.com/2020/11/25/tech/france-digital-taxes/index.html

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[Marzio]

Brexit was painful but if EU will follow this path and UK will get rid of that idiot that wants to rise corporate taxes, it will pay off in the long run. No DAC6 and no BEFIT would be enough of a compelling reason to settle there.

 

[Martin Everson]

https://www.politico.eu/article/commission-plans-eu-business-tax-overhaul/
--- quote start

A planned reform of EU corporate taxation would substitute national business tax rules, EU Economy Commissioner Paolo Gentiloni said Monday.

The "Business in Europe Framework for Income Taxation," or BEFIT, would "replace national corporate tax systems for the companies in scope, thus reducing compliance costs and barriers to cross-border investment," he said at an EU tax event Monday.

It would draw on a global deal on a two-legged corporate tax that was agreed between more than 130 countries in 2021, and consists of the reallocation of taxable profits (known as Pillar One) and of a minimum corporate tax base of 15 percent (known as Pillar Two), the latter of which the EU is struggling to ratify due to subsequent vetoes first by Poland and now by Hungary.

But it would "go further," Gentiloni said. It would have "the key features of a simplified common tax base and allocation of taxable profits between member states," thus diminishing taxation policies within the bloc whereby countries seek to attract businesses by luring them with favorable tax regimes.

The reform is currently scheduled for the second quarter of 2023, according to the Commission's own work program. A public consultation runs until January 26.

Taxation initiatives are always tricky as they require consent of all 27 EU countries.

--- quote end

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Please note my posts should not be taken as financial or tax advice. Please seek professional advice in that respect.

 

[Marzio]

Martin Everson said:
A planned reform of EU corporate taxation would substitute national business tax rules,
Click to expand...

Did Bulgaria, Hungary, Malta, Cyprus and Ireland all agree to this?

 

[algotrader]

marzio said:
Did Bulgaria, Hungary, Malta, Cyprus and Ireland all agree to this?
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"The minimum 15% tax rule is designed to apply to large multinational groups that earn annual consolidated revenue of at least EUR 750m."

https://www.ey.com/en_bg/tax/tax-di...Te minimum 15% tax rule,of at least EUR 750m.For special countries like Estonia with 0% on non-distributed profits implementation will be posponed to 2030:
"In a meeting held on 5 April 2022, the EU Economic and Financial Affairs Council (ECOFIN) reached an agreement that will allow Estonia to postpone the implementation of the global minimum tax until 2030. "
https://www.bdo.global/en-gb/micros...ia's-implementation-of-the-global-minimum-tax

 

[Marzio]

algotrader said:
"The minimum 15% tax rule is designed to apply to large multinational groups that earn annual consolidated revenue of at least EUR 750m."
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I thought the article talked about an overhaul of the EU taxation, not limited to multinational groups. My bad.

 

[khinkali]

algotrader said:
For special countries like Estonia with 0% on non-distributed profits implementation will be posponed to 2030
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So it's not just minimum tax. It's also a move to tax unrealised capital gains.

No doubt there will be many schemes across the EU such as investment zones, reinvestment allowances, accelerated depreciation, super deduction, etc.

Lots more work for officials and big bills for tax professionals. These poachers and gamekeepers can swap jobs now and again to make sure they all get a bite at the cherry.

It starts at €750m but history tells us, these types of schemes become all-embracing over time.

It looks like successful regulatory capture for big businesses who consistently lobby for a complex tax environment that smaller competitors can't navigate.

 

[BritishSecret]

Offshr said:
Multinationals will figure out something as always.
It is the commoners who will suffer the most, as always.
Click to expand...

What will they use as a workaround then?