2022-10-18-KPMG_s_EU_Tax_Centre-Euro_Tax_Flash_from_KPMG_s_EU_Tax_Centre_6页_299kb

Summary of KPMG's Euro Tax Flash on BEFIT Proposal

Background

The European Commission proposed the Business in Europe: Framework for Income Taxation (BEFIT) to address the absence of a unified corporate tax system in the EU. This is driven by concerns that varying tax rules create competitiveness issues, investment distortions, and higher compliance costs. BEFIT is part of a broader effort to promote a fair and efficient tax system, building on previous initiatives like the Common Consolidated Corporate Tax Base (CCCTB), which was withdrawn in favor of BEFIT in 2021.

BEFIT Objectives and Policy Options

BEFIT aims to simplify the European single market by reducing complexity and compliance burdens associated with 27 distinct tax systems. Key policy options include determining the scope (e.g., revenue thresholds starting at €750 million or lower for SMEs), calculating the common tax base based on modified financial accounting standards, and allocating taxable profits using formulary apportionment. This method relies on factors like tangible assets, labor, and sales, potentially including intangibles as a fourth factor.

Scope and Tax Base

The scope allows for groups with high global revenues to be covered, with optional inclusion for SMEs. For tax base calculation, the EC considers adapting financial standards and applying adjustments such as depreciation rules, anti-abuse measures, and transfer pricing changes to align with goals like Pillar Two of the OECD's BEPS 2.0 framework.

Allocation of Profits

Profits are allocated to EU Member States based on a formula apportionment method inspired by Pillar One, using factors like tangible assets, labor, and sales. Options for weighting these factors and accounting for inter-group transactions and OECD benchmarks are under discussion.

Administration

BEFIT seeks to simplify processes through streamlined filing, coordinated tax authority interactions, and alternative dispute resolution to reduce administrative costs for taxpayers.

Next Steps

The European Commission invites public feedback by January 5, 2023, on aspects including the scope, calculation methods, profit allocation, and administrative enhancements. Feedback will refine the initiative, with a legislative proposal expected in Q3 2023.

ETC Comment

KPMG notes that BEFIT incorporates OECD Pillar One principles but may face challenges due to potential conflicts with other proposals and the need for unanimous Council approval. It aims to support SMEs and ensure a level playing field, though EC statements emphasize benefits for start-ups and smaller businesses in the EU single market.