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By Joe Kirwin

Dec. 22 — The European Commission is considering whether to divide draft legislation proposing a common consolidated corporate tax base (CCCTB) and a range of other measures into two separate laws so that key initiatives outlined in the OECD's action plan on base erosion and profit shifting can be introduced separately.

Although the European Parliament opposes splitting up the CCCTB proposal, the notion is being deliberated after the finance ministers of the 28 EU member states backed it at a Dec. 8 Council of Economic and Financial Affairs meeting ().

European Commission officials said that dividing up the CCCTB proposal and creating a separate directive to tackle BEPS could expedite implementation among EU member nations of the key measures included in the Organization for Economic Cooperation and Development's BEPS package.

Luxembourg's Idea

Luxembourg—holder of the rotating EU presidency through Dec. 31, after which it passes to the Netherlands—put forward the idea of splitting the CCCTB.

“It has been the EU finance ministers' view that the European Commission should opt for an anti-BEPS directive that includes a number of the OECD reform actions that are covered in the CCCTB,” Luxembourg Finance Minister Pierre Gramegna said at a news conference after the Dec. 8 meeting. “There is a consensus among the EU member states on this as the EU wants to play a leading role in ensuring that the OECD BEPS reforms are swiftly implemented.” 

The Luxembourg plan would mean that one piece of legislation would propose a CCCTB, but this would be missing some elements, which would be introduced in another new directive implementing the anti-BEPS measures. The anti-BEPS directive would include the following proposals:

  • a uniform definition of permanent establishment based on the OECD recommendations;
  • a rule restricting interest deductions based on a fixed ratio of earnings before interest, taxes, depreciation and amortization (EBITDA);
  • a switch-over clause to ensure taxation of dividends and capital gains for companies in low-tax foreign jurisdictions;
  • rules for exit taxation;
  • rules for addressing mismatches arising due to hybrid entities;
  • an anti-abuse rule allowing tax authorities to ignore an arrangement where the main purpose is to obtain a tax advantage that defeats the object or purpose of the law and where the arrangements aren't regarded as genuine; and
  • controlled foreign company rules dealing with entities established in foreign countries subject to a low level of taxation.

The European Commission plans to present its revised tax package on Jan. 27, 2016.

EU Parliament Opposes Change

Despite the European Parliament urging the commission to either propose legislation to introduce a CCCTB or explain within three months why it will not do so, it remains opposed to any split in legislation ().

According to some parliamentary members, dividing the legislation into two would undermine efforts for a common corporate tax base.

“Splitting BEPS and CCCTB means to push the CCCTB aside,” said Sven Giegold, a German member of the European Parliament and a prominent member of the EU special TAXE committee on tax rulings and the Committee on Economic and Monetary Affairs. “Even agreeing on the limited BEPS agenda seems to be a cumbersome endeavor for the Council's consensus decision making. Once international obligations are fulfilled, the political will for a truly common corporate tax base will be exhausted,” he told think and code in a Dec. 21 interview....

To contact the reporter on this story: Joe Kirwin in Brussels at [email protected]

To contact the editor responsible for this story: Rita McWilliams at [email protected]

For More Information

Details on the anti-BEPS proposals are at .

Explanatory notes on the anti-BEPS proposals are at .

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