On March 16, 2011, the European Commission published the long awaited draft directive on a common consolidated corporate tax base ('CCCTB'). A CCCTB is a single set of rules that would allow companies operating within the EU to calculate their taxable profits according to one set of rules, those of the new ‘common’ EU tax base.
The rules are likely to have the biggest impact on corporate groups operating within the EU rather than on individual companies. For such groups this means that they would have to comply with just one EU system for computing taxable income, rather than different rules in each Member State in which they operate. Groups using the CCCTB would be able to file a single consolidated tax return for the whole of their activity in the EU. The consolidated taxable profits of the group would be shared out to the individual companies by a formula so that each Member State can then tax the profits of the companies in its State at its own tax rate.
In determining the tax base for companies operating under the CCCTB, the respective national laws, for example in respect of the deductibility of interest, asset depreciation, etc., are no longer relevant. However, CCCTB will not change the nominal tax rate applicable to companies in the respective jurisdictions. But since the taxable base could be different under CCCTB than under the current national rules, this could result in a change in the effective tax rate, both for the group as a whole and for each company
Key element
A key element of a CCCTB is that results on intra-group transactions would be neutralised, thus removing transfer pricing issues and arm's length discussions. A CCCTB could also result in cross-border loss consolidation. Applying the CCCTB would be optional for taxpayer groups, rather than compulsory.
This proposal will now be discussed within the EU Council where it would need agreement from all EU Member States before it can be introduced. There is currently no date planned for its introduction and it is also possible that, if it is adopted, this may be in an amended form.