France and Germany agree a common position paper on CCCTB

Jun 26, 2018

France and Germany recently issued a common position paper on the proposal for a Common Corporate Tax Base (CCTB) which suggests a number of modifications to the measures proposed by the Commission.

The position paper makes the following proposals:

  • France and Germany favour the compulsory application of the CCTB Directive to companies subject to corporate tax.
  • The profit and loss recognition rules proposed by the CCTB Directive should be supplemented with a general rule providing that the tax base is determined on the basis of accounting principles and calculated by applying the business asset comparison method, in order to apply a simple and comparable method and keep bureaucratic effort at a minimum.
  • A harmonised corporate tax base should not feature any tax incentives, including research and development and equity financing.
  • Both countries do not support introducing provisions on cross-border loss relief.
  • The CCTB Directive should expressly state that national group taxation systems are to remain in force until implementation of the CCCTB Directive.
  • France and Germany are not in favour of the adoption of delegated acts and all material legal rules should be directly set out in the Directive.
  • The CCTB Directive should be introduced over a transitional period of at least 4 years.
  • Amendments to the Directive are suggested under the following topics:
    • revenues and expenses rules,
    • asset depreciation rules,
    • tax loss rules,
    • rules for making hedging instruments,
    • provisions and special provisions for insurance undertakings.
  • France and Germany support the inclusion of anti-BEPS measures subject to certain amendments.
  • Both countries consider that transfer pricing provisions should remain in the competence of the member states until the implementation of CCCTB-Directive.
  • France and Germany want controlled foreign company provisions reflected in the CCTB Directive subject to a number of amendments.
  • France and Germany support the introduction of a limitation rule on the deduction of interests, royalties and other remunerations paid in a country with a favourable tax regime (i.e. a tax regime leading to a tax rate below a certain percentage).

 The Commission re-launched the CCCTB in October 2016. The proposed Directive is subject to unanimous agreement by member states before it can be implemented.