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New EU corporate tax plan embraces “digital presence”

Firms will be taxed where they earn their profits under new proposals for a harmonised corporate tax system which also considers their online activities to calculate their tax

Firms will be taxed where they earn their profits under new proposals for a harmonised corporate tax system which also considers their online activities to calculate their tax

The planned “Common Consolidated Corporate Tax Base”, part of a wide-ranging proposal to create a single, clear and fair EU corporate tax regime was approved last week with the objective of creating a tax system for the 21st century global and digital economy.

Digital presence

Benchmarks to determine whether a firm has a “digital presence” within an EU member state are being developed.

The Economic and Monetary Affairs Committee urges to monitor different standards such as the number of users, digital contracts and the volume of digital content collected. These measures will allow producing a clearer picture of where a firm generates its profits, indicating where it should be taxed, independently of whether it has a fixed place of business in that country or not.

Personal data is intangible but highly valuable asset mined by tech-firms, but is currently not considered when calculating their tax liabilities.

One-stop shop for tax

The aim of this proposal is to stamp out the current practice of firms moving their tax base to low-tax jurisdictions.

Once the proposals take effect, a single set of tax rules would apply in all member states. Firms would no longer have to deal with 28 different sets of national rules, and would also be accountable to a single tax administration (one-stop shop).
The legislation would cover groups of companies with a consolidated turnover exceeding 750 million of euros.

Next step

The reports will now be voted on by Parliament as a whole at the March plenary session.