On the proposal for a Council directive on Business in Europe: Framework for Income Taxation (BEFIT)
A-10-2025-0194
Committee on Economic and Monetary Affairs · Rapporteur: Evelyn Regner
- Voted on · Adopted 370–160–107 · See the decision →
- Full procedure 2023/0321
Written by a language model from the full text only; every figure comes from the text. The paragraph links open the paragraph a statement rests on — check the text itself before relying on it.
Parliament's amended version of the proposed Council directive on Business in Europe: Framework for Income Taxation (BEFIT) sets common rules for computing and allocating the corporate tax base of large cross-border groups in the EU.¶¶ It extends the permanent establishment concept to include significant economic presence, lowers the ownership threshold for group membership, and adds rules on royalties, controlled foreign companies, and accelerated depreciation.¶¶¶ The transition period for the allocation rule is shortened to 2033, and the Commission must propose a permanent allocation method based on sales, labour, assets, and digital presence.¶¶¶ Penalties for non-filing or misreporting are set at a minimum of 0.1% of group turnover, and the BEFIT information return deadline is extended to six months.¶¶¶
Committee position. The Committee on Economic and Monetary Affairs proposes to approve the Commission proposal as amended, with changes including a lower ownership threshold, new anti-avoidance rules, and a permanent allocation formula.¶¶¶
Key points
- Approves the Commission proposal as amended and calls on the Commission to alter its proposal accordingly.¶¶
- Extends the permanent establishment concept to include significant economic presence when revenues from a Member State exceed EUR 1,000,000.¶¶
- Lowers the ownership threshold for group membership from 75% to 50%.¶¶
- Adds a royalties limitation rule: royalty costs are included in income if the recipient's effective tax rate is below 9%, unless substantive economic activity is shown.¶
- Adds controlled foreign company rules including non-distributed income from financial, intellectual property, and other passive activities, with exceptions for substantive activity.¶
- Sets accelerated depreciation for assets contributing to climate, social, defence, or digital goals, with implementing acts and reviews every five years.¶
- Shortens the transition period for the allocation rule to end by 30 June 2033, and raises the high-risk zone threshold for intra-group transactions to 15%.¶¶¶
- Requires the Commission to propose a permanent allocation method based on sales, labour, assets, and digital presence before the transition period ends.¶
- Sets penalties for failure to file or deliberate misreporting at a minimum of 0.1% of BEFIT group turnover.¶¶
- Extends the deadline for filing the BEFIT information return to six months after the fiscal year end.¶
- Allows Member States to apply post-allocation adjustments, but prohibits output-based incentives like patent boxes.¶¶
Who is affected
- Large cross-border groups with annual revenues of EUR 750 million or more, and smaller groups that opt in.¶
- Digital businesses without physical presence may now be taxed in Member States where they have significant economic presence.¶¶
- Member States must implement new rules on permanent establishment, royalties, controlled foreign companies, and penalties.¶¶
Figures and deadlines
- EUR 1,000,000 revenue threshold for significant economic presence in a Member State.¶
- 50% ownership threshold for group membership, down from 75%.¶¶
- 9% effective tax rate threshold for the royalties limitation rule.¶
- 0.1% of turnover minimum penalty for non-filing or misreporting.¶¶
- Six months after fiscal year end for filing the BEFIT information return.¶
- 30 June 2033 as the end of the transition period.¶¶
- 15% increase threshold for high-risk zone in intra-group transactions.¶¶
Legal basis: Article 115 of the Treaty on the Functioning of the European Union¶