What changed between the draft committee report and the plenary report

Article 6 – paragraph 2: 2. The filing authority shall verify whether the eligibility requirements set out in Article 4 are met and shall inform the head office of its findings within one month of the notification referred to in paragraph 1.

Change 5

Removed:Article 6 – paragraph 3 – subparagraph 1: 3. If the eligibility requirements are met, the filing authority shall inform the tax authorities of the host Member States within one month of the notification referred to in paragraph 1 that the taxable result of the relevant permanent establishments shall be computed in accordance with the head office taxation rules as of the following fiscal year, as applied in the head office Member State. The tax authority of the host Member State(s) shall communicate to the filing Authority the applicable tax rate.

Added:Article 6 – paragraph 2 a (new): 2a. The filing authority shall obtain confirmation from the host Member State that the establishment in the host Member State constitutes a permanent establishment for the purposes of bilateral tax treaties.

Change 6

Changed:Article 6 – paragraph 3 – subparagraph 4:1: 3. If the filingeligibility authorityrequirements concludesare thatmet, the eligibilityfiling requirementsauthority areshall notinform met,the ittax shallauthorities informof the headhost officeMember States within one month of the notification referred to in paragraph 1 that the taxable result of the relevant permanent establishments and subsidiaries shall be computed in accordance with the head office maytaxation appealrules againstas itof the following fiscal year, as applied in accordancethe withhead office Member State. The tax authority of the nationalhost law.Member State(s) shall communicate to the filing Authority the applicable tax rate.

Change 7

Removed:Article 7 – paragraph 1: 1. The head office that has opted to apply head office taxation rules to its permanent establishments in one or more host Member States shall apply those rules for an indefinite period of time.

Added:Article 6 – paragraph 3 – subparagraph 3: The host Member State may challenge the decision of the filing authority regarding the fulfilment of the eligibility requirements in accordance with the provisions set out in Article 13. In that case, the national rules of the head office Member State are applied. Notwithstanding such proceedings, the SMEs may start applying the head office taxation rules.

Change 8

Changed:Article 76 – paragraph 13 a– (new):subparagraph 1a.4: TheIf the filing authority concludes that the eligibility requirements are not met, it shall inform the head office within one month of the notification referred to in paragraph 1 and the head office may decideappeal toagainst terminateit thein applicationaccordance ofwith headthe officenational taxationlaw rulesand bycontinue notifyingto apply the filinghead authorityoffice abouttaxation suchrules. aThe decisionfinal atdecision leastshall twoonly monthshave beforelegal theeffects endas of the following fiscal year.

Change 9

Removed:Article 7 – paragraph 1 b (new): 1b. The filing authority shall regularly check that the head office continues to meet the eligibility requirements set out in Article 4.

Added:Article 6 – paragraph 4: 4. Where a host Member State concludes that the presence of an SME in its territory qualifies as a permanent establishment or a subsidiary, it shall inform the filing authority. Upon that information, the filing authority shall inform the competent tax authority of the host Member State on whether the head office applies the head office taxation rules in respect of its permanent establishments or subsidiaries. The head office must be duly informed about these procedures, without undue delay.

Change 10

Changed:Article 7 – paragraph 11: c1. (new):The 1c.head Inoffice thethat eventhas ofopted terminationto underapply paragraphhead 1a,office thetaxation filingrules authorityto shallits informpermanent theestablishments taxor authoritiessubsidiaries ofin theone or more host Member States of suchshall terminationapply withinthose onerules monthfor ofa therenewable receiptperiod of the notification referred to inseven paragraphfiscal 1a.years.

Change 11

Removed:Article 7 – paragraph 2: deleted

Added:Article 7 – paragraph 2: 2. At the end of the period referred to in paragraph 1, the head office taxation rules shall cease to apply in respect of the permanent establishments and subsidiaries situated in the host Member States, unless the head office notifies to the filing authority its option to renew the application of the head office taxation rules, in accordance with the procedure set out in Article 9.

Change 12

Changed:Article 8 – paragraph 1:1 – introductory part: 1. The option to apply the head office taxation rules shall be terminated whenbefore the SMEend of the seven-year period referred to in Article 2(1) transfers its tax7(1) residencefor outany of the head office Member State; / (deleted) /following (deleted)reasons:

Change 13

Added:Article 8 – paragraph 1 – point a: (a) the SME referred to in Article 2(1) transfers its tax residence out of the head office Member State, if the SME wishes to stop applying the taxation rules;

Added:Article 8 – paragraph 1 – point b: (b) for the last three fiscal years, the joint turnover of its permanent establishments and subsidiaries exceeded an amount which is equal to triple the turnover of the head office;

Added:Article 8 – paragraph 1 – point b a (new): (ba) the SME referred in Article 2(1) is no longer considered to be an SME;

Added:Article 8 – paragraph 1 – point b b (new): (bb) the SME referred to in Article 2(1) sets up more than two subsidiaries.

Article 8 – paragraph 2: 2. The head office taxation rules shall cease to apply as of the fiscal year that follows the one in which the reason referred to in paragraph 1 occur.

Change 14

Removed:Article 9: deleted / (deleted) / (deleted) / (deleted)

Added:Article 8 – paragraph 3: 3. The filing authority shall inform the host Member States of the termination referred to in paragraph 1 as soon as possible and, in any case, before the end of the fiscal year in which the reasons for the termination occurred.

Removed:Article 10 – title: Exclusion from the head office taxation rules

Added:Article 8 – paragraph 4: 4. If the SME referred in Article 2(1) transfers its tax residence to another Member State, it may opt to apply the head office taxation rules of its new Member State of tax residence in accordance with Articles 4 to 7. This shall be considered a new option. The requirement set out in Article 4(1), point (b), shall not apply if the transfer of the tax residence of the SME has been carried out for valid commercial reasons within the meaning of Article 15(1), point (a), of Council Directive 2009/133/EC.

Change 15

Changed:Article 10 – paragraph 1 – introductory part: The head office shall not be entitled to continuerenew tothe applyoption for applying the head office taxation rules if any of the following situations occurred:

Change 16

Removed:Article 10 – paragraph 1 – point a: deleted

Added:Article 10 – paragraph 1 – point a: (a) for any three fiscal years taken separately, the joint turnover of the permanent establishments or subsidiaries exceeded an amount which is equal to triple the turnover of the Head Office;

Removed:Article 11 – paragraph 8: 8. If the tax authority of the host Member State rejects the draft tax assessment notice, it shall revise this draft tax assessment in connection with the attribution of profits to the permanent establishment in accordance with the provisions laid down in the applicable convention for the avoidance of double taxation to which the host and head office Member States are party. After the attribution of profits to the permanent establishment has been revised and communicated to the filing authority in accordance with Article 8ae of Directive 2011/16/EU, the filing authority shall re-compute the taxable result in accordance with the taxation rules of the head office Member State, and a revised tax assessment shall be issued by this Member State. The taxpayer shall be entitled to appeal against this revised tax assessment before the courts of the head office Member State. Any dispute concerning the amount of profits attributable to the permanent establishment shall be settled in accordance with the applicable convention for the avoidance of double taxation, or the provisions set out in Council Directive (EU) 2017/1852 of 10 October 2017.

Added:Article 10 – paragraph 1 – point b: (b) the SME set up more than two subsidiaries within the Union;

Added:Article 10 – paragraph 1 – point c: (c) the criterion set out in Article 2(1), point (d) has not been met for three consecutive fiscal years.

Added:Article 11 – paragraph 1: 1. The head office shall file the Head office taxation tax return with the filing authority. The head office Member State shall assist the SME in the elaboration of the tax return, in particular regarding the attribution of taxable result to each permanent establishment and subsidiary in other Member States.

Added:Article 11 – paragraph 2 – point b: (b) the tax liability of the SME with regard to the taxable result of each permanent establishment and up to two subsidiaries in other Member States. The tax liability shall be computed by applying the national tax rate of the respective host Member State to the taxable result, as it was computed in accordance with the head office taxation rules.

Added:Article 11 – paragraph 3 – introductory part: 3. Where one or more permanent establishment of the SME are not required to prepare separate financial accounting statements under the law of the host Member State, the head office taxation tax return shall include the following information:

Added:Article 11 – paragraph 3 – point a: (a) assets and liabilities attributed to the permanent establishments and up to two subsidiaries;

Added:Article 11 – paragraph 3 – point b: (b) profits attributable to the permanent establishments) and up to two subsidiaries in other Member States.

Added:Article 11 – paragraph 4 – point b: (b) a draft tax assessment notice for each permanent establishment and subsidiary.

Added:Article 11 – paragraph 5 – subparagraph 1 – point b: (b) a draft tax assessment notice for the relevant permanent establishments and the subsidiaries;

Added:Article 11 – paragraph 8: 8. If the tax authority of the host Member State rejects the draft tax assessment notice, it shall revise this draft tax assessment in connection with the attribution of profits to the permanent establishment and the subsidiaries in accordance with the provisions laid down in the applicable convention for the avoidance of double taxation to which the host and head office Member States are party. After the attribution of profits to the permanent establishment and the subsidiaries has been revised and communicated to the filing authority in accordance with Article 8ae of Directive 2011/16/EU, the filing authority shall re-compute the taxable result in accordance with the taxation rules of the head office Member State, and a revised tax assessment shall be issued by this Member State. The taxpayer shall be entitled to appeal against this revised tax assessment before the courts of the head office Member State. Any dispute concerning the amount of profits attributable to the permanent establishment and the subsidiaries shall be settled in accordance with the applicable convention for the avoidance of double taxation, or the provisions set out in Council Directive (EU) 2017/1852 of 10 October 2017.

Added:Article 11 – paragraph 9: 9. Where, under the tax rules of the host Member State, certain expenses associated with the employees of the permanent establishment or the subsidiary are deductible for tax purposes insofar as the respective amounts are taxed at the level of the employee or are subject to social security charges, and there is no similar tax treatment in the head office Member State allowing for such deduction, the head office and host Member States shall, with the guidance of the Commission, take appropriate measures to prevent possible mismatches.

Added:Article 11 – paragraph 9 a (new): 9a. The Commission shall, by means of implementing acts, lay down guidance on appropriate measures regarding mismatches as referred to in paragraph 8 of this Article. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 15.

Added:Article 12 – title: Collection of tax due by the permanent establishments and subsidiaries in the host Member States

Added:Article 12 – paragraph 1: 1. The head office shall settle, through the filing authority, the income tax liabilities with regard to both its taxable result and the taxable result of its permanent establishments and subsidiaries in the host Member States.

Added:Article 12 – paragraph 2: 2. The filing authority shall collect the tax corresponding to the tax liability of each permanent establishment and subsidiary of the head office in the Union, apply the tax rate the respective host Member State and transfer the relevant amount to the competent authority of the respective host Member State without delay.

Added:Article 12 – paragraph 3: 3. The Commission shall, by means of implementing acts, lay down the practical arrangements necessary to ensure the collection and transfer of the tax corresponding to the tax liability of the permanent establishments or the subsidiaries from the head office Member State to the host Member State. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 15.

Added:Article 13 – paragraph 1: 1. Unless specified otherwise, the rules of this Directive shall not affect the national rules of Member States that govern local tax audits, legal remedies and proceedings, or the dispute resolution mechanisms available at the level of the Union or provided for in the applicable bilateral tax conventions on the avoidance of double taxation. The commercial, accounting and fiscal obligations of a permanent establishments and subsidiaries pursuant to the national rules of the host Member State shall not be affected by this Directive.

Added:Article 13 – paragraph 2: 2. The tax authorities of the host Member State may request that an audit be carried out jointly with the filing authority covering the computation of the taxable result of the permanent establishment or the subsidiary in accordance with the head office taxation rules, the attribution of profits to the permanent establishment and/or the subsidiary and/or the applicable tax rate. Joint audits shall be conducted in accordance with Council Directive 2011/16/EU18 . Notwithstanding Directive 2011/16/EU, the request for a joint audit may be also made by the tax authority of the head office Member State to the tax authority of the host Member State of each permanent establishment or subsidiary.

Added:Article 13 – paragraph 2 a (new): 2a. If an audit is to be carried out at the initiative of the head office Member State, the head office Member State shall invite the host Member State to carry out such audit jointly.

Directive 2011/16/EU

Change 17

Changed:Article 14 – paragraph 1 – point 2, Article 8ae – paragraph 1: 1. If a head office as defined in Article 3, point (2), of Directive on establishing a Head Office taxation rules for micro, small and medium sized enterprises20, which opts to apply the head office taxation rules to its permanent establishment(s)establishments or its subsidiaries in accordance with Article 6 of that, meets the eligibility requirements for applying such rules, the competent authority of the Member State of the head office shall by means of automatic exchange of information communicate to the competent authority of the Member State of the permanent establishment or the subsidiaries that the taxable result of the relevant permanent establishment or the subsidiaries is to be computed in accordance with the head office taxation rules. Such communication shall take place within one month from the notification by the Head Office of its option to apply head office taxation rules.

Directive 2011/16/EU

Change 18

Changed:Article 14 – paragraph 1 – point 2, Article 8ae – paragraph 2: 2. The competent authority of the Member State of the permanent establishment or the subsidiary shall communicate to the competent authority of the Member State of the head office the tax rate applicable for the purpose of determining the tax liability of the permanent establishment(s)establishments or the subsidiaries situated on its territory, within two months from the notification by the competent authority of the Member State of the head office of the decision on the application of the head office taxation rules.

Change 19

Added:Directive 2011/16/EU

Added:Article 14 – paragraph 1 – point 2, Article 8ae – paragraph 3: 3. The competent authority of the Member State of the head office shall by means of automatic exchange of information communicate the information specified in paragraph 2 of this Article to the competent authorities of the Member States of the permanent establishments or the subsidiaries in accordance with the practical arrangements adopted pursuant to Article 21.

Added:Directive 2011/16/EU

Added:Article 14 – paragraph 1 – point 2, Article 8ae – paragraph 4 – point iii: (iii) a draft tax assessment notice for the relevant permanent establishments and subsidiaries;

Added:Directive 2011/16/EU

Added:Article 14 – paragraph 1 – point 2, Article 8ae – paragraph 6: 6. Where the tax authority of the Member State of the permanent establishments or subsidiaries revises the draft tax assessment notice in connection with the attribution of profits to the permanent establishment or subsidiary in accordance with the provisions laid down in the applicable bilateral convention for the avoidance of double taxation between the host and head office Member States, after rejection of the draft tax assessment notice issued by the head office Member State, the competent authority of the Member State of the permanent establishments or subsidiaries shall communicate such revised tax assessment notice to the competent authority of the Member State of the head office, within one month from its issuance, for the purpose of re-computing the taxable result of the permanent establishment or subsidiary, issuance of a revised tax assessment and collecting the tax.

Article 17 – paragraph 1: The European Parliament shall be informed by the Commission of the adoption of delegated and implementing acts, of any objection formulated to them, and of the revocation of the delegation of powers by the Council.

Change 20

Changed:Article 18 – paragraph 2: 2. Information, including personal data, processed in accordance with this Directive shall be retained only as long as strictly necessary to achieve the purposes of this Directive (the ‘retention period’), in particular, verification of eligibility requirements and determination of the tax liability of the taxpayers, in accordance with each data controller’s domestic rules on the statute of limitations. The retention period shall start when personal data is processed for the purposes of this Directive for the first time and shall,shall in any event,event not exceed fiveseven years.

Change 21

Removed:Article 19 – paragraph 1 a (new): 1a. The report referred in paragraph 1 shall evaluate, among other relevant aspects, the adequacy of the eligibility requirements laid down in Article 4 in view of adhesion of SMEs to the head office taxation rules and, in particular, the appropriateness of a possible requirement relating to the joint turnover of the permanent establishments.

Added:Article 19 – paragraph 1: 1. Five years after this Directive starts to apply, the Commission shall examine and evaluate its functioning and report to the European Parliament and the Council to that effect. In the report, the Commission shall, inter alia, examine whether the head office taxation rules should be also applied to one or more subsidiaries of the SMEs. The report shall, where appropriate, be accompanied by a proposal to amend this Directive.

Removed:Article 20 – paragraph 1 – subparagraph 1: 1. By 31 December 2024, the Member States shall adopt and publish the measures necessary to comply with this Directive. They shall immediately inform the Commission thereof.