27 May 2002

FEE warning about Company Taxation Obstacles

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Referring to the latest Commission Communication “Towards an Internal Market without tax obstacles” the Fédération des Experts Comptables Européens (FEE) warned that a legal challenge to Member States' tax laws on controlled foreign companies for being incompatible with the Internal Market is only a matter of time. This will result in a considerable revenue loss for those Member States that are relying on CFC legislation to remove distortions in the allocation of investment.

FEE's position paper on Controlled Foreign Company Legislations in the EU consists of a comprehensive study of tax laws regarding Controlled Foreign Companies (CFC), and it considers how CFC rules are structured and applied by individual EU Member States.

The paper makes the following three recommendations:

That no CFC legislation should be applicable within the internal market, provided that the tax regime of the subsidiary is in line with the prescriptions of the Code of Conduct;

A better coordination in the tax treaty policy towards non-EC countries with regard to the application of CFC rules, to avoid distortions in the allocation of resources within the internal market; and

A better coordination is needed among the different CFC legislations in place in the EU Member States, to avoid international double or multiple taxations.

Currently the nine EU countries with CFC legislation are aiming at different goals. Some countries try to achieve more than one goal at the same time, and sometimes these different aims appear to be in conflict with each other.

Press release
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