Sittings · Document
SPECIAL LEGISLATIVE procedure
Follow up to the European Parliament legislative resolution 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
1. Rapporteur: Lídia PEREIRA (EPP / PT)
2. Reference numbers: 2023/0320 (CNS) / A9-0064/2024 / P9_TA(2024)218
3. Date of adoption of the resolution: 10 April 2024
4. Legal basis: Article 115 of the Treaty on the Functioning of the European Union
5. Competent Parliamentary Committee: Committee on Economic and Monetary Affairs (ECON)
6. Commission's position: takes note of the amendments proposed by the European Parliament, while reserving its detailed position on these while the discussion in the Council is ongoing.
In this light, the Commission welcomes the ambitious European Parliament opinion and underlines that it can agree with the spirit of most of the amendments, as these are in line with the objectives of the proposal and reflect the underlying principles of the proposed policy choices. The Commission wishes to note, in particular, the following amendments:
AM 14 on organising an information campaign in all Union official languages for Small and Medium-Sized Enterprises (SMEs). Such a campaign can only increase the visibility of the proposal and contribute to the success of the directive, once adopted. It will be important to ensure that SMEs are aware of the advantages of the system and have access to the relevant information, such as how to exercise the option and how to interact with the Head Office Tax administration. In this vein, the Commission already gives useful information on the general principles of the proposal on its dedicated TAXUD webpage, available in all EU official languages. Moreover, it is organizing dedicated webinars for SMEs to become acquainted with the proposal.
AM 44 on extending the application of Head Office tax rules to periods of seven years. The proposal provides for a renewal of the option after five years if the requirements continue to be met, to take into account the evolution of the concerned SMEs, and given the duration of many of the national statutes of limitations. An increase to apply head office tax rules for seven years would not impact significantly on this aim, as long as all other requirements are met throughout the seven-year period. Therefore, the Commission could support this amendment, should the Council agree to include this in its compromise text.
AM 58 on providing tax assistance to the SME, as smaller taxpayers are faced with more difficulty in carrying out their tax compliance obligations and incur significant compliance costs, particularly in cross-border situations. Therefore, the Commission could support this amendment, should the Council agree to include it in its compromise text. While it remains the responsibility of the taxpayer to be diligent and comply with its tax obligations, the national tax administrations could nevertheless facilitate this, to the extent possible, by providing for more streamlined procedures and simplified processes, both for the taxpayer and the tax administration.
AM 67 on the request to draft guidance - by means of implementing acts – on how to deal with mismatches in tax treatment. The amendments aim to give more legal certainty to the taxpayer, but also to ensure a binding solution to specific instances of mismatches. Any EU proposal should aim at harmonising the areas where action at EU level is necessary for the attainment of its objectives and where harmonisation adds value compared to individual actions by the Member States. As the so-called “fringe benefits” as a sort of “remuneration for employees” are not a common feature of the Member States’ tax systems, the tax treatment is also very different and specific. It follows that mismatches may not occur amongst all Member States, but only in specific bilateral situations and depending on the circumstances. The Commission shares the spirit of the amendment, and could accept it if the Council aligned with this position, but at this stage, it considers it to be premature to draft guidance before it is actually revealed that a problem occurs systematically. It is envisaged that the Commission assesses the prospect for drafting such guidance, based on the findings of the evaluation of the functioning of the Directive.
AMs 73 and 74 on accommodating additional rules on joint audits. The Commission shares the spirit of the amendment and could accept it if the Council aligned with this position. A request for a joint audit can be made by the tax authority of the Head Office Member State on the basis of the existing legal framework under the Directive on administrative cooperation in the field of taxation (DAC). For this reason, it was not deemed necessary to add a specific provision to the Head Office Tax proposal. On the other hand, the DAC provision on joint audits does not include an obligation of the addressee to accept it. Thus, a mandatory joint audit seemed an appropriate tool to make available to the Host Member State, as the authorities of this State cannot verify, on their own, the application of the tax rules of the Head Office Member State in respect of the computation of the taxable result of the permanent establishment.
AM 81 on shortening the retention period regarding data to maximum seven years (instead of ten years, as provided by the proposal). The Commission could support it, should the Council agree to include this in its compromise text. Following the recommendations of the European Data Protection Supervisor (EDPS), the on-going discussions in Council will consider the aforementioned recommendations. It cannot be excluded that certain amendments be introduced during the negotiations, or that the recitals will clarify further the scope of the relevant provisions. The Commission will continue to work with Member States during the Council meetings to ensure that the EDPS’ concerns be appropriately addressed.
AMs 83 and 85 on inserting a specific provision in the review clause based on which the Commission will also evaluate specific aspects in the report, such as: whether to apply the Head Office tax system to one or more subsidiaries of the SME; the possibility to extend the scope, in particular to other types of companies; the adequacy of the eligibility requirements; the appropriateness of the turnover thresholds; the exclusion of SMEs with more than two subsidiaries; the exclusion of the shipping sector; further streamlining of the procedure and also if there are any lessons to learn from the application of the Directive to corporate taxation in general. Furthermore, Parliament calls on the Commission to further evaluate legal obstacles such as the lack of a common definition of a permanent establishment. The Commission shares the view that it will be necessary to undertake a thorough evaluation of the functioning of the directive in due time, as provided for in the review clause (Article 19). The specific elements of such an evaluation however can be determined with more accuracy at a later stage. Thus, while the Commission shares the spirit of the amendment, and could accept it if the Council aligned with this position, it does not consider it opportune to commit at this early stage on such specific elements, as any evaluation is always dependent primarily on the type of data available and its quality.