- The Initiative called Business in Europe: Framework for Income Taxation initiative (BEFIT) proposes a common EU corporation tax framework comprising a single set of rules for calculating, consolidating and sharing tax bases. This may be relevant for UK groups with presence in the EU.
- Groups with annual combined revenues of at least EUR 750 million will be in scope of BEFIT, with respect to their EU group entities that meet a 75% ownership threshold (“the BEFIT group”). For non-EU headed groups, BEFIT would only apply if the revenues of the BEFIT group within the EU exceed 5% of the total group revenues or account for at least EUR 50 million in combined revenue in two or more of the last four years.
- Multinational or domestic groups that prepare consolidated financial statements but do not meet the EUR 750 million threshold may apply BEFIT on an optional basis.
- The BEFIT tax base of each BEFIT group member is determined as a result of a series of adjustments to its financial statements (reconciled into accounting standard of the filing entity, i.e. national accounting standard or IFRS), it is then aggregated into a total amount and allocated among BEFIT group members.
- Under the currently proposed transitional rules, for the first seven years the BEFIT tax base is to be allocated to BEFIT group members based on the average of taxable results for three prior years. The EC intends to propose a permanent allocation mechanism (formulary apportionment) at a later stage .
- Member states have discretion to make further adjustments (incentives, deductions etc.) to their allocated share of BEFIT tax base under domestic law.
- A BEFIT information return is to be filed with the tax authority of a member state where the group's filing entity is tax resident. A 'BEFIT team', comprised of representatives of each EU member state’s tax authority where the BEFIT group has group members, would examine and approve the BEFIT information return. Following this, each individual BEFIT group member would have to file its individual tax return with its national tax authority.
- Most respondents to the public consultation that ran until 24 January 2024 thought that Pillar Two rules needed to be given time to operate for a few years and generate feedback, before the new regime is considered. They also generally called for a greater simplification and alignment with Pillar Two.
- Timing: The directive requires unanimous approval by member states. If adopted in its current form, the new rules would be implemented by 1 January 2028 and would apply as from 1 July 2028. A progress report on BEFIT is expected by the end of the Belgian presidency in June 2024.
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