What Is The CCCTB

What is the CCCTB?
Related
 EC proposes common tax system | 16/03/2011
The European Commission's guide to the proposed Common Consolidated

Corporate Tax Base
What is the Common Consolidated Corporate Tax Base (CCCTB)?
The Common Consolidated Corporate Tax Base is a single set of rules

that companies operating within the EU could use to calculate their
taxable profits. In other words, a company or group of companies
would have to comply with just one EU system for computing its
taxable income, rather than different rules in each Member State in
which they operate. In addition, under the CCCTB, companies active in
more than one EU Member State would only have to file a single tax
return for the whole of their activity in the EU.
How would CCCTB work in practice?
The CCCTB would make it possible for companies or groups of companies

to consolidate all profits and losses across the EU, thereby
recognising their cross-border activity. The single consolidated tax
return would be used to establish the tax base of the company, after
which all Member States in which the company is active would be
entitled to tax a certain portion of that base, according to a
specific formula based on three equally-weighted factors (assets,
labour and sales). This would all be done through the tax authorities
of the company's principal Member State (i.e. through a one-stop-shop
system).
Under the proposed Directive, clear procedural rules are set out on
how companies should opt-in to the CCCTB system, how they should
submit their tax returns, how the relevant forms should be harmonised
and how audits should be coordinated. For each company or group, the
tax return for the whole of their activities within the EU would be
filed through the tax authorities in their principle Member State,
and this same Member State would be responsible for coordinating the
appropriate checks and follow up on the return.
Why do we need the CCCTB in the EU?
The CCCTB would make things far cheaper and simpler for businesses by
creating one set of rules for calculating the tax base of a company
or group, and by setting up a one-stop-shop system for filing tax
returns. Currently, companies have to deal with 27 different
rulebooks for calculating their taxable profits, and must file
returns with the tax authorities in each Member State in which they
are active. This results in high compliance costs, administrative
burdens and complex re-adjustments. The complicated transfer pricing
system which is currently in place for intra-group transactions is
particularly expensive and burdensome for businesses operating within
the EU, and can lead to disputes between Member State administrations
and result in double taxation of companies.
Furthermore, by allowing the consolidation of profits and losses at

EU level, the CCCTB would enable the cross border activities of
businesses to be fully taken into account and would avoid over
taxation.
Is the CCCTB a first step towards harmonisation of tax rates?
No. The CCCTB is not about tax rates, and the Commission has no plans
to harmonise Member States’ corporate tax rates. Member States will
continue to decide their own corporate tax rates, as is their
sovereign right. Where this does not lead to distortions, differences
in tax rates allow a certain degree of tax competition to be
maintained in the Internal Market. What the CCCTB will do, however,
is create more transparency with regard to the effective corporate
tax situation in Member States, thus creating fairer tax competition
within the EU. The CCCTB will also be far more effective in boosting
EU competitiveness globally than any measure related to uniform
corporate tax rates.
Why has the Commission proposed that the CCCTB should be optional for
companies?
The CCCTB would be optional, allowing companies that felt that they
would truly benefit from this harmonised system to opt-in, while
other companies could continue to work within their national systems.
This is a common sense approach, as it means that companies that have
no intention of expanding beyond their national borders, and
therefore will only ever work within one system, do not have to shift
needlessly to a new tax system. The Commission also believes that a
compulsory CCCTB would be out of line with the principle of
subsidiarity, as it would mean that EU measures were being introduced
to cover purely domestic, as well as EU-level, activity.
Why is consolidation an important part of this system?
Consolidation is a crucial aspect of the CCCTB because it means that

a company's cross-border activity within the EU will be fully
recognised.
For example, today a group can add the profits of one subsidiary in
Member State A to the losses of another subsidiary in the same Member
State A to arrive at a net profit or loss. However, the same group
cannot take into account losses it may accrue in another Member State
B. This means that, even if the group’s losses in one Member State
were bigger than its profits elsewhere in the EU (i.e. there was a
net loss), it would still have to pay tax in the Member States where
any profits were made. There is no cross-border loss relief. Under
the CCCTB, the group would be allowed to add its profits and losses
from all subsidiaries throughout the EU together, to reach a net
figure. Tax would then be paid on the group’s net profit for the
whole of the EU. This reflects the true spirit of a Single Market.
In addition, consolidation would eliminate the need for the complex

transfer pricing system that is currently in place for cross-border
intra-group sales. Given that transfer pricing is one of the most
burdensome and most expensive aspects of corporate taxation for
enterprises, its elimination will lead to significant benefits for
companies and groups within the EU.
Will the CCCTB help to attract foreign direct investment?
The CCCTB can make the EU a much more attractive market for foreign
investors. For example, at the moment, companies operating in third
countries such as the USA or China only have to deal with one
national tax system. This is compared to a European system of 27
different sets of rules, which creates far more complexity and costs.
A single set of rules for the corporate tax base, and a one-stop-shop
system for filing tax returns, would make the EU a much easier place
for foreign firms to invest in. Many third countries have already
indicated to the Commission that the CCCTB would help to make the EU
a more interesting market for foreign investment.
Will there be a different tax rate for CCCTB than for the national
system?
Member States will continue to decide on their own corporate tax

rates, including the rate for companies working within the CCCTB (as
the CCCTB deals only with the tax base, not the tax rate). A Member
State could choose to apply a different tax rate for the CCCTB if its
own national base was extremely different and it wanted to maintain
the same effective tax rate (i.e. the real level of tax paid once the
rate, base and various deductibles are taken into account). For
example, if the CCCTB base were broader than the national base, the
Member State may choose to set a lower rate for the CCCTB to maintain
the same effective tax rate. Another possibility is that Member
States will align their national bases close enough to the CCCTB in
order to avoid having different rates for the two. It will be for
each Member State to decide the approach it considers best for its
own national needs.
Could CCCTB contribute to greater tax competition?
In creating a uniform base, the CCCTB will provide greater

transparency and should therefore ensure that competition takes place
on the effective tax rate, rather than on potentially hidden elements
in different bases. This should result in more open and fairer tax
competition. Member States would continue to set the corporate tax
rates for their territories. It will be for each Member State to
decide the approach that best fits its own national budgetary needs
and tax policy mix.

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What is the CCCTB?

The European Commission's guide to the proposed Common Consolidated

What is the Common Consolidated Corporate Tax Base (CCCTB)?

The Common Consolidated Corporate Tax Base is a single set of rules

How would CCCTB work in practice?

The CCCTB would make it possible for companies or groups of companies

Furthermore, by allowing the consolidation of profits and losses at

Is the CCCTB a first step towards harmonisation of tax rates?

Why is consolidation an important part of this system?

Consolidation is a crucial aspect of the CCCTB because it means that

In addition, consolidation would eliminate the need for the complex

Will the CCCTB help to attract foreign direct investment?

Member States will continue to decide on their own corporate tax

Could CCCTB contribute to greater tax competition?

In creating a uniform base, the CCCTB will provide greater

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