On 12 September 2023, the European Commission adopted a key package of initiatives to reduce tax compliance costs for large, cross-border businesses in the European Union. For companies operating across the EU, it can be stated that – beyond corporate income tax rates and domestic incentives – each national system has its own variety of features, practices, interpretations and administrative requirements. The high level of complexity entails high tax compliance burdens and – in the bigger picture – an uneven playing field for those companies operating in the internal market.
With the proposed harmonized corporate income tax base and simplified transfer pricing administration under the so-called “Business in Europe: Framework for Income Taxation (BEFIT)”-proposal, the Commission aims to reduce the administrative burden on tax authorities and taxpayers. The new, simpler rules could reduce tax compliance costs for businesses operating in the EU by up to 65%.
So, if you are in the business of managing the tax compliance of large property portfolios on an international level, the following could very well be of interest in the long run.
Who is in scope?
The new rules will apply – in general – to EU-based companies and permanent establishments that are part of a multinational group or a sizeable domestic group with a consolidated turnover of at least €750 million.
For those groups with headquarters in third countries, their EU group members may also be required to apply the rules provided that certain thresholds are met (an annual combined revenue of at least €50 million in at least two of the last four fiscal years or at least 5% of the total revenues of the group). This would ensure that the requirements of the proposal are proportionate to its benefits.
Groups with a lower turnover than €750 million, may – under certain conditions – choose to apply the BEFIT rules instead of the “regular” corporate tax regime. This choice applies for five years. After that, these groups can choose to go back to the regular regime.
