Logo gray

Harmonized corporate income taxation on the horizon in the EU

On 18 May 2021 the European Commission unveiled a Communication on Business Taxation for the 21st century which takes into account the G20 and OECD discussions on global tax reform aiming to ensure adequate public revenues over the coming years, and it also sets out both a short- and a long-term vision to support the EU's recovery from the COVID-19 pandemic.


First of all, the Commission announced an ambitious plan for a new framework for income taxation for business in the EU (Business in Europe: Framework for Income Taxation (“BEFIT”) by 2023. The Commission sets out several aims for BEFIT: provide a single corporate tax rulebook for the EU; distribute a fairer allocation of taxing rights between Member States; reduce compliance costs; minimize tax avoidance opportunities and support investment in the EU Single Market. According to the plans, BEFIT will provide common rules for determining the corporate tax base and for the allocation of profits between Member States, based on a pre-defined formula.


In short, BEFIT would consolidate the taxable profits of the multinational enterprises of the EU Member States into a single tax base, to be subsequently allocated to Member States using a formula (considering the weight to sales by destination, assets and labor) that would replace the current transfer pricing rules. Previously the CCCTB proposal, which contains very similar plans, has met with strong resistance from some Member States, therefore, further amendments are expected before the proposal is adopted.