Finland: The European Commission Proposes A System Of Common Consolidated Corporate Tax Base

The European Commission presented on 16 March 2011 a proposal that calls for a common system for calculating the tax base of business operating in the EU. At the moment, a company active within the whole EU can be forced to comply with up to 27 different national tax systems. The new Common Consolidated Corporate Tax Base (CCCTB) seeks to reduce the administrative burden, compliance costs and legal uncertainties by creating a "one-stop-shop" system where the profits and losses across the EU could be consolidated.

Today companies that operate cross-border need to deal with the different tax rules and tax administrations for every country they operate in. They also need to consider how business within the group needs to be taxed using the complex system of transfer pricing. Furthermore, companies cannot take into account potential losses or profits it has accrued in one Member State to gain credit in another. In the future, companies could declare and file their tax return in one Member State to encompass all their operations within the EU, thus allowing consolidation of profits and losses at EU level.

According to the proposal the CCCTB will be optional for companies, assuming that certain eligibility criteria are met. The minimum time for an opt-in is five years to avoid companies to opt in and out for tax planning purposes. The proposal also extends to non-EU companies for the branches or subsidiaries located within the EU. The proposal would not only strengthen the EU's global competitiveness, but also significantly reduce the costs for large companies and SMEs to expand their operations beyond domestic markets.

Before the proposal can be accepted to be implemented into national law, the European Parliament will be heard and matter needs to be discussed and agreed by the Member States in the Council. Although the Commission envisions that the directive could be released already in 2013, possibly entering into force 2014, the adoption of the proposal in the presented form is surrounded by much political uncertainty as it the demands unanimous support of the 27 Member States.

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