15 January 2008

Tax treatment of cross-border corporate losses

Parliament adopted an own initiative report, drawn up by Piia-Noora Kauppi (EPP, FI) in response to a Commission communication on the subject, stating that differing company tax regimes create obstacles to entering different national markets and the proper functioning of the internal market, distort competition and prevent the maintenance of a level playing field.

Parliament stresses that any measure for cross-border loss relief should be defined and implemented on the basis of a multilateral, common approach and coordinated action by Member States. This would only be an intermediate solution, say MEPs, pending the introduction of a Common Consolidated Corporate Tax Base, which would be a comprehensive long term solution for tax obstacles linked to the cross-border off-setting of profits and losses.

Action in favour of groups of companies doing business in several Member States should be a priority, as these often suffer different treatment from groups operating within one country, which in most Member States are effectively treated as a single entity. While extending domestic regimes is difficult where the tax bases differ, Parliament believes that as far as possible, corporate groups present in several Member States should be treated in the same way as those in a single Member. Particular attention needs to be given to the needs of small- and medium-sized enterprises. State

While avoiding double taxation, any solution would also need to prevent one loss being off-set twice and tax avoidance. The concept of what constitutes a ‘corporate group’ would also need to be carefully defined to avoid opportunistic distribution of profits and losses among Member States.

Text adopted

Commission Communication

© Graham Bishop