The Common Consolidated Corporate Tax Base (CCCTB) is a proposal for a common tax scheme for the European Union developed by the European Commission and first proposed in March 2011 that provides a single set of rules for how EU corporations calculate EU taxes, and provide the ability to consolidate EU taxes. Corporate tax rates in the EU would not be changed by the CCCTB, as EU countries would continue to have their own corporate tax rates.
The original proposal stalled, largely due to objections from countries such as Ireland and the UK. In June 2015, the commission announced they will submit a relaunched CCCTB proposal in 2016, featuring two key changes compared to the initial proposal: First it would become mandatory (not voluntary) for corporations to apply the CCCTB regime, and second the "consolidation part" will be postponed for a later follow-up proposal.
In May 2021, the Commission expressed its intention to withdraw the CCCTB proposal, replacing it with a new framework for income taxation for businesses in Europe (Business in Europe: Framework for Income Taxation or BEFIT). However, the Commission work programme for 2022 published in November 2021 did not include the CCCTB as one of the withdrawn proposals.
Concept
The concept of CCCTB requires all EU Member States or just a group of them to develop a set of common rules for determining the tax base of companies with operations in several EU Member States. In every participating Member State corporations could subsequently opt for the adoption of this common European tax base to be used regarding all their activities within the EU. As framework for defining such a common European tax base the International Financial Reporting Standards (IFRS) have been suggested. Furthermore, the group's tax base is intended not to include intra-group profits.
Administration
Depending on the location where the parent of the EU group resides, the corresponding Member State is responsible for assessing the group's tax base. However, the corporate income tax rate will be determined by each individual Member State. Correlated, the overall profit of the group needs to be allocated to the individual Member States to be taxed there. This allocation has to be regulated by the terms of a formula the participating Member States have previously agreed upon. The so-called formula apportionment (FA) usually employs factors like capital, sales and labour on which the allocation is based. Prior to the allocation, these factors need to be weighted. Finally, every allocated share of profit is taxed in the respective Member State with the relevant corporate tax rate.
Mechanism
Each member of an EU-group, i.e., the parent and related subsidiaries residing in the EU which constitute the group, computes its profits separately according to the same harmonized tax rules. The profits of each member are added and consolidated at the level of the group's parent. Group income is allocated according to a specific formula to the Member States where companies of the group are located. Allocated profits are taxed according to the national tax rates.
Scope of the CCCTB group
Consolidated group
In financial accounting, subsidiaries are included into consolidated statements, if they are controlled by their parent. This is usually assumed when the shareholding exceeds 50%. Strictly legal criteria make it easy to decide for tax purposes whether a company is part of the group or not. However, the participation threshold should be higher in order to avoid excessive tax planning. A high participation threshold (e.g., 75% or 90%) takes into account that consolidation implies a high degree of economic integration of the members of the group. Moreover, in this case the subsidiary's profit accrues mainly to the parent. The European Commission proposes that a company is included into the CCCTB group if the shareholding exceeds 50% and more than 75% of the capital is owned by the parent (all-in-all-out).
Formula apportionment
The CCCTB replaces separate accounting by formula apportionment. In general, the following factors could be applied for the allocation of corporate income:
Microeconomic factors: Capital, labour and/or sales; Value added of the group in each Member State. Macroeconomic factors: E.g. gross national product.
The allocation system should aim at simplicity and legal certainty. The formula apportionment should include allocation factors to be fair (inter-nation-equity) by reflecting the economic activity in the Member States.