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REPORT (COM(2023)0528 – C90340/2023 – 2023/0320(CNS))

On the proposal for a Council directive establishing a Head Office Tax system for micro, small and medium sized enterprises, and amending Directive 2011/16/EU

A-9-2024-0064

Committee on Economic and Monetary Affairs · Rapporteur: Lídia Pereira

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Parliament's amended version of the Commission proposal for a Council directive establishing a Head Office Tax system for micro, small and medium-sized enterprises (SMEs), and amending Directive 2011/16/EU. It lets an SME compute the taxable result of its permanent establishments and up to two subsidiaries under the rules of the Member State where its head office is resident for tax purposes. The option is voluntary, runs for a renewable period of seven fiscal years, and is handled through a one-stop-shop: the filing authority in the head office Member State. It excludes income from shipping activities covered by a tonnage tax regime, sets anti-abuse conditions, and requires the Commission to evaluate the rules after five years. It shortens the deadlines for notification and information exchange and moves the transposition date to 31 December 2024, with application from 1 January 2025.

Committee position. The Committee on Economic and Monetary Affairs approves the Commission proposal as amended. It widens access by limiting eligibility requirements, makes the option last a renewable seven years, and shortens deadlines for SME applications and information exchange.

Key points

  1. The directive lays down rules for computing the taxable result of permanent establishments and subsidiaries of SMEs that meet the criteria in Article 2(1).
  2. An SME qualifies if it operates in other Member States through one or more permanent establishments and/or up to two subsidiaries.
  3. The head office may opt in if the joint turnover of its permanent establishments and subsidiaries did not exceed, for the last three fiscal years, triple the turnover of the head office.
  4. The head office must have been resident for tax purposes in the head office Member State during the last fiscal year, or since its establishment if more recent.
  5. Once it opts in, the head office applies the rules to all its permanent establishments or subsidiaries in other Member States, including new ones from the moment of establishment.
  6. Income from shipping activities subject to a tonnage tax regime in the head office Member State is excluded from the rules; the exclusion is to be evaluated after five years.
  7. The head office notifies its choice to the filing authority at least two months before the end of the preceding fiscal year; the authority verifies eligibility within one month.
  8. The option applies for a renewable period of seven fiscal years and ends early if, among other reasons, the SME is no longer an SME or sets up more than two subsidiaries.
  9. The head office files a single tax return with the filing authority, which collects the tax for each permanent establishment and subsidiary at the host Member State's rate and transfers it.
  10. Host Member States may request joint audits, and the head office Member State must invite the host Member State to a joint audit it initiates.
  11. The Commission must evaluate the directive five years after it starts to apply, examining a possible extension of scope and the appropriateness of the eligibility and exclusion criteria.
  12. Member States must adopt and publish the measures to comply by 31 December 2024 and apply them from 1 January 2025.

Who is affected

  • Micro, small and medium-sized enterprises operating cross-border through permanent establishments or up to two subsidiaries, which may opt into the simplified rules.
  • Member States' tax authorities, which verify eligibility, exchange information, collect and transfer tax, and may conduct joint audits.
  • SMEs with shipping income covered by a tonnage tax regime, which are excluded from the rules for that income.
  • Taxpayers whose personal data is processed, which may be retained only as long as strictly necessary and not more than seven years.

Figures and deadlines

  • 24 million SMEs established in the Union represent two thirds of private sector jobs and 99 % of all businesses.
  • SMEs spend approximately 2,5 % of their turnover on compliance costs related to tax obligations.
  • Corporate income taxes-related compliance costs of very small enterprises represent 90 % of the estimated yearly Union businesses compliance costs of EUR 54 billion.
  • 130 000 companies filed their VAT return via the one-stop-shop and more than EUR 17 billion was collected in VAT revenue, in 2022.
  • The option applies for a renewable period of seven fiscal years.
  • The retention period for personal data shall not exceed seven years.
  • Member States shall adopt and publish compliance measures by 31 December 2024 and apply them from 1 January 2025.

Legal basis: Article 115 of the Treaty on the Functioning of the European Union.