BEFIT

Previous Proposals

Source: GPT-3, no further research done, probably not entirely correct

• Common Consolidated Corporate Tax Base (CCCTB): CCCTB is a proposed EU initiative aimed at standardizing the calculation of taxable income for multinational companies operating within the EU. It seeks to harmonize the rules for calculating taxable profits across EU member states to reduce tax base disparities and administrative burdens.
• Code of Conduct on Business Taxation: The EU Code of Conduct Group on Business Taxation works to address harmful tax competition and tax avoidance practices within the EU. It has developed criteria to identify and discourage harmful tax regimes and practices among EU member states.
• Anti-Tax Avoidance Directive (ATAD): ATAD is an EU directive aimed at combating tax avoidance practices across member states by establishing common minimum standards for certain anti-avoidance measures. It addresses areas such as interest deductibility, controlled foreign company rules, and hybrid mismatches.
• BEPS Action Plan: The OECD’s Base Erosion and Profit Shifting (BEPS) project aims to address tax avoidance strategies used by multinational companies to shift profits to low-tax jurisdictions. While not specific to the EU, BEPS initiatives and recommendations have influenced EU tax policy discussions and regulations.
• EU Tax Directives: Various EU tax directives cover areas such as the taxation of savings income, parent-subsidiary relationships, and mergers within the EU. These directives aim to coordinate tax policies among member states and reduce barriers to cross-border business activities.

BEFIT Proposal

• corporate income tax across entire EU
  • funding of EU member states
• should make income tax calculation across EU easier
• mandatory for groups with >750 EUR revenue
  • only 150 countries within Austria
  • apply where it matters most
  • for the rich and the beautiful
• optional for SME groups with <750 EUR with consolidate statements
• IFRS or “acceptable accounting standard in the Union” local GAAP of MS
  • one accounting standard for entire BEFIT group
    • e.g. everyone with IFRS or everyone with Austrian GAAP

Notes on Exam 2

examinfo

• BEFIT may be printed out
• treat it as law, even though it is just a proposal and not current law
• exam will mostly cover content of the lectures, but not only the content of the lectures

Dividends

• how Dividend payments are handled
• dividend income is not taxed for companies
  • cascading effect → taxed twice/mulitple times when moving from subsidiary to parent company
  • if it was taxed → no subsidiaries for cascading effects due to tax burdens
  • “dividend exemption” not for 95% of dividends income
    • only for large dividend receivers (>10% of profits)
    • originated from Germany
      • aim is to collect more money from dividend payments
    • Germany forced this legislation with its veto rights
• dividend income taxed for individuals
  • part of personal income

Tax Base Definition

• tax base is financial accounting net income/loss + provisions
  • BEFIT adjustments
• expenses only deductible if in business interest
• there may be national adjustments to their national part of the income tax
• plans for a “better” formula for tax base definition
  • possible factors: Labor, Capital, Wages, etc
  • MS still have not found consensus (until 2035)
  • still unclear if MS would even accept different formula

Aggregation and Allocation

• European profit pool of all subsidiaries
  • then allocated to individual subsidiaries/companies
• baseline allocation by contribution to pool i.e. individual profits
  • losses count as 0, not as negative tax burden i.e. tax benefit
    • but still less tax burden for profit makers
  • gliding 3-year average → less spikes
  • if across multiple member states → individual MS cannot tax as much, even if profit was generated in this MS
    • cross-border loss sharing
• group-level loss is carried over indefinetly

Little Case Study 1

crossed = not deductible

• Accounting Profit 1m
• 120k receivables (100k inventory)
  • profit != cash
• • 100k inventory (production)
• 2.5m building self-constructed
  • depreciation will then do the deductibility
  • not deductible at moment of construction
• 200k R&D expenses
• +50k pension provisions
  • accrued future cost, just excessive provisions are not deductible
• 400k cartel fine paid
  • if deductible, would soften the penalty
• 500k profit of last year distributed (dividends)
  • taxed differently → Dividends

Case Study 3

• company A and B are in a group
• netting of profit/loss
• company A has profit of 100
• company B has
  • profit of 50 → group profit of 150
  • loss of 50 → group profit of 50
  • loss of 200 → group loss of 100