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Παρασκευή, 3 Δεκεμβρίου, 2021
ΑρχικήEnglish EditionA step towards corporate tax harmonization

A step towards corporate tax harmonization

By Maria Douka, 

Back in 1993, when the European Union was firstly established, replacing the European Economic Community, its member states aspired to create a political and economic union. As years passed by, the EU’s sectors of competency have expanded, leaving little margin for member states to act and decide in a sovereign way. Although this process of integrating more and more sectors into the EU’s competency is undoubtedly beneficial for both the EU and its member states, it is a fact that it has given birth to certain problems as well. One of these problems, that was caused by the freedoms deriving from the European Single Market, is the facilitation of tax fraud, which has been estimated to cost the EU about 1 trillion euro annually (according to data published on the website of the European Commission). More particularly, the free market has provided companies with the opportunity to establish subsidiaries and other connected companies in member states with low taxation, having no real activity other than the collection of their profits, which therefore are being taxed on a lower tax rate.

Firstly, it should be mentioned that taxation initially constituted one of the sectors which was left under the jurisdiction of the member states, where the EU’s intervention was fable. As years went by, the competitive conditions which were developed inside the single market and the interdependence of the taxation systems of the member states, made the necessity for the harmonization of the member states’ domestic legislations in the fiscal sector, clear.

This harmonization was harder to complete in the sector of direct taxation, due to the provisions of the TFEU, that specifically and expressly regulate indirect taxation (art. 113 TFEU). For direct taxation this is not the case. The intervention of the EU to the sector of direct taxation is not expressly permitted by the EU primary law, though it can be justified as a means for the fulfillment of the aims set by art. 115.

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As a means to confront the phenomenon of tax fraud, so harmful for the EU economy, the European Commission submitted a proposal for the adoption of a Council Directive, regulating the establishment of a common set of rules based on which, the corporate tax base is estimated within the Union. Although the proposal refers to one single plan, its distinction into two separate Directives was decided with both of them regulating a different stage towards the accomplishment of the harmonization of the tax legislations of all 27 member states, as far as the corporate tax base is concerned and the establishment of one single, common and consolidated corporate tax base (CCCTB). These two distinct stages are interconnected, in a way, so that the completion of the first one -meaning the adoption of a single and uniform set of rules- based on which the corporate revenue, that should be imposed to taxation, will be calculated and will constitute a prerequisite for the activation of the second stage.

The application of the first stage’s rules, will be obligatory for some corporations. For example, multinational companies that are members of groups or corporations that have annual profits above a certain level are set in this Directive. Concerning these corporations, the risk of tax fraud is deemed to be higher, due to the intra-group transactions that may facilitate the commitment of tax fraud, as a means of manipulation of the amount of corporate profit that is subject to corporate tax or due to the high amount of profits. For corporations that are considered to be less risky, the application of the first stage’s rules is optional. The harmonization refers to rules regulating the profits, the revenues and the assets that are subject to or excluded from taxation and expenses that are tax deductible. In other words, over-passing the technical details of the Proposal, about how the calculations should take place, we may undoubtedly refer to a set of general principles that regulates the calculation of the amount of corporate income that is subject to taxation, in a common way among all member states.

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In continuation, having used a uniform method for the estimation of the income that is subject to tax, we may proceed to the second stage, the one of the consolidation, regulated by the Proposal for a Council Directive 2016/0036. In this stage, the European Commission proposes that the tax bases, calculated in a common and harmonized way for every company that is member of a group, should be added together and allocated to member states for tax submission, based on a common set of rules. After this procedure, the group will be left with one, consolidated tax base for its total income. It should be noted here, that this Directive, when in force will limit the margin of application of DTTs between member states.

The members of the group submit only one consolidated tax return before the principal tax authority, in which certain elements should be mentioned, such as the identification of the principal taxpayer and the members of the group, the calculation of each group member’s tax base and the calculation of the consolidated tax base. After the submission of the tax return has taken place, the consolidated results are allocated between the relevant member states, according to a common formula that takes into consideration the sales, the payroll, the number of employees and the assets of each member company and the group.

Since 2018, the European Parliament has already given its consent for the vote of the Directives that aim to add one more shield to the EU’s economy protection against abusive practices. Were the proposal applied successfully, it would be able to put an end to the practice of intragroup transactions, for reasons of lower taxation, since the allocation of group’s profits would take place in a centralized manner within the EU. It undoubtedly constitutes an aspiring plan that means to give birth to a new era in the Single Market that is to be more functional and secured.

  • Alomar, S. Daziano, Th. Lambert, J. Sorin, Grandes Questions Europeennes, Armand Colin, 4th Edition
  • Denis Weber, CCCTB Selected Issues, Wolters Kluwer, Law and Business, Kluwer Law International, 2012
  • Treaty on the Functioning of European Union
  • 2016/0336 Proposal for a Council Directive on a Common Consolidated Corporate Tax Base (CCCTB), 25.10.2016, COM(2016)683 final
  • 2016/0037 Proposal for Council Directive on a Common Corporate Tax Base, 25.10.2016. COM(2016)685 final



Maria Douka
Born in Athens, she graduated Athens Law School and currently works as a legal associate in the legal department of a banking company, where she handles issues and cases of corporate and banking law and offers legal consultancy services. She has obtained an LL.M. from the University of Bordeaux on public law and an MSc from Alba – The American College of Greece in Business for Lawyers. She is particularly interested in classic literature, theater and traveling.