What changed between the draft committee report of 21 Nov 2023 and the draft committee report of 12 May 2025

DRAFT EUROPEAN PARLIAMENT LEGISLATIVE RESOLUTION

6 unchanged paragraphs

on the proposal for a Council directive on Business in Europe: Framework for Income Taxation (BEFIT)

(COM(2023)0532 – C90341/2023 – 2023/0321(CNS))

(Special legislative procedure – consultation)

The European Parliament,

– having regard to the Commission proposal to the Council (COM(2023)0532),

– having regard to Article 115 of the Treaty on the Functioning of the European Union, pursuant to which the Council consulted Parliament (C90341/2023),

Changed:– having regard to Rulesthe 82budgetary ofassessment itsby Rulesthe ofCommittee Procedure,on Budgets,

Removed:– having regard to the letter from the Committee on Budgets,

Added:– having regard to the reasoned opinions submitted, within the framework of Protocol No 2 on the application of the principles of subsidiarity and proportionality, by the Swedish Parliament, the Maltese Parliament, and the Irish Houses of the Oireachtas, asserting that the draft legislative act does not comply with the principle of subsidiarity,

Changed:– having regard to the report ofRules the84 Committeeand on58 Economicof andits MonetaryRules Affairsof (A90000/2023),Procedure,

Change 1

Added:having regard to the report of the Committee on Economic and Monetary Affairs (A10-0000/2025)

5 unchanged paragraphs

1. Approves the Commission proposal as amended;

2. Calls on the Commission to alter its proposal accordingly, in accordance with Article 293(2) of the Treaty on the Functioning of the European Union;

3. Calls on the Council to notify Parliament if it intends to depart from the text approved by Parliament;

4. Asks the Council to consult Parliament again if it intends to substantially amend the Commission proposal;

5. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Change 2

Removed:Recital 5: (5) The environment for doing business in the internal market should be made more attractive with the aim to stimulate growth and investment in the Union. For this purpose, the enactment of a common framework of corporate tax rules should be prioritised, in order to make it easier for businesses to comply with such rules when they operate across borders and also to encourage those who wish to further expand abroad to do so. A single set of corporate tax rules for international activity is expected to result in enhanced tax certainty and less tax disputes, as it would tackle distortions and decrease the number of cases of double and over-taxation. Harmonisation of rules also implies less opportunities to abuse some specific national tax provisions in a pan-European context. With an allocation of the taxable base, which is based on tangible factors such as labour, assets and sales, the common framework of corporate tax rules will mitigate tax avoidance and aggressive tax planning. Due to the critical importance of sustainable tax revenue for Member States' budgets, including investment in the digital, green and social transitions, in research and development and for the provision of public services, especially for the most vulnerable households, it is essential to ensure that the harmonisation of profit determination rules in the Union will not lead to lower effective tax rates and lower revenues for Member States. In addition, it would be critical to ensure for the future that…

Added:Recital 2: (2) The existence of 27 different corporate income tax systems in the Union gives rise to complexity in tax compliance and leads to unfair competition for businesses, and can lead to cross-border aggressive tax planning as well as double taxation and double non-taxation. That has become more evident as globalisation and digitalisation of the economy have significantly altered the perception of land borders and business models. As governments have tried to adapt to that new reality, a fragmented response among Member States has led to further distortions in the internal market. The various legal frameworks inevitably lead to different tax administration practices across the Member States as well. This often entails long procedures characterised by unpredictability and inconsistency along with high compliance costs, which can impact cross-border investments. That complexity can hinder businesses’ expansion in the internal market, with a negative impact on innovation, competitiveness and jobs. Companies need a workable single tax framework in order to be able to develop their commercial activity across the internal market.

Removed:Recital 6: (6) Creating a system that attains a degree of uniformity across the Union, at least amongst the taxpayers that it is chiefly addressed to, is of crucial importance. Accordingly, and considering the efforts that both tax administrations and businesses have made to implement the framework of a global minimum level of taxation, it would be important to capitalise on this achievement and design rules that remain as close as possible to the OECD/G20 Model Rules and Directive (EU) 2022/2523. On this basis, the common framework of rules should be mandatory for groups with a taxable presence in the Union provided that they have annual combined revenues of EUR 750 000 000 or more based on their consolidated financial statements. Once the transition period lapses, such threshold should be set at EUR 40 000 000 or more, in line with the definition of large groups within the meaning of Directive 2013/34/EU of the European Parliament and of the Council1a. In this way, the scope would thus be targeted at businesses that are most likely to have cross-border activities and, thereby, can benefit from the simplification which a common legal framework would offer. The threshold would also provide alignment with Directive (EU) 2022/2523 for a consistent approach in the Union. / 1a Directive 2013/34/EU of the European Parliament and of the Council of 26 June 2013 on the annual financial statements, consolidated financial statements and related reports of certain types of undertakings, amending D…

Added:Recital 3: (3) Albeit different in their design, the fundamental features of corporate income tax systems are similar as they lay down rules aiming towards the same objective, i.e., to arrive at a taxable base for businesses. In this vein, to support the proper functioning of the internal market, the corporate tax environment in the Union should be shaped according to the principle that companies pay their fair share of tax in the jurisdictions where their profits are generated. Therefore, it would be important for businesses which operate on the internal market that Member States introduce a common legal framework to harmonise the fundamental features of corporate income tax systems with a view to simplifying tax rules, fighting against tax avoidance, reducing administrative burden and ensuring a fair competition. Provisions regarding the corporate income tax rate should, however, remain at the discretion of Member States within the framework of Council Directive (EU) 2022/2523 on ensuring a global minimum level of taxation for multinational enterprise groups and large-scale domestic groups in the Union.

Removed:Recital 7: (7) Although the threshold would be determined on the basis of the combined revenues of the group on a global basis, the remit of the provisions should be limited to members of the group operating on the internal market as Union law only applies within the Union and does not bind non-Member States. Only the Union sub-set of such a group should therefore be captured. This would include companies which are resident for tax purposes in a Member State and their permanent establishments operating in a Member State as well as the permanent establishments in the Union of third country companies of the same group. Considering that the concept of a permanent establishment is dealt with within bilateral tax treaties and national law and although the definition features some common principles, there is still a degree of divergence worldwide.

Added:Recital 5: (5) The environment for doing business in the internal market should be made more attractive with the aim to stimulate growth and investment in the Union. For this purpose, the enactment of a common framework of corporate tax rules should be prioritised, in order to make it easier for businesses to comply with such rules when they operate across borders and also to encourage those who wish to further expand abroad to do so. A single set of corporate tax rules for international activity is expected to result in enhanced tax certainty and less tax disputes, as it would tackle distortions and decrease the number of cases of double and over-taxation. Furthermore, as tax revenue sustainability is key to Member States’ budgets, including to invest in infrastructure, research and development and green and social transitions and to deliver public services, it is essential to design profit determination rules in the Union that will not result in lower revenues for Member States. In addition, it would be critical to ensure for the future that the allocation of revenues is performed in accordance with a tool based on solid parameters that cannot be abused.

Removed:Recital 10 a (new): (10a) A fair taxation of passive income such as interest is required. It is therefore appropriate to lay down an interest limitation rule applicable to BEFIT group members in such a way as to reduce the debt-equity bias that can occur via an over-reliance to intra-group debt financing and to reduce the scope for base erosion and profit shifting through excessive interest payments.

Added:Recital 6: (6) It is indeed critical to create a system that achieves a degree of uniformity across the Union, at least amongst the taxpayers that it is chiefly addressed to. Accordingly, and considering the efforts that both tax administrations and businesses have made in order to implement the framework of a global minimum level of taxation, it would be important to capitalise on this achievement and design rules that remain as close as possible to the OECD/G20 Model Rules and Directive (EU) 2022/2523. On this basis, the common framework of rules should be mandatory for groups with a taxable presence in the Union provided that they have annual combined revenues of more than EUR 750 000 000 based on their consolidated financial statements. In this way, the scope would thus be targeted at businesses that are most likely to have cross-border activities and, thereby, can benefit from the simplification which a common legal framework would offer. The threshold would also provide alignment with Directive (EU) 2022/2523 for a consistent approach in the Union. An enlargement of the scope of this Directive should be assessed a few years after the BEFIT framework has entered into force.

Removed:Recital 10 b (new): (10b) To guarantee a minimal level of taxation of royalties, a royalties limitation rule for BEFIT group members should be introduced in accordance with the Subject to Tax Rule1a as proposed by the OECD/G20 Inclusive Framework in Pillar II. / 1a OECD (2023). Tax Challenges Arising from the Digitalisation of the Economy – Subject to Tax Rule (Pillar Two): Inclusive Framework on BEPS, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris, https://doi.org/10.1787/9afd6856-en.

Added:Recital 7: (7) Although the threshold would be determined on the basis of the combined revenues of the group on a global basis, the remit of the provisions should be limited to members of the group operating on the internal market as Union law only applies within the Union and does not bind non-Member States. Only the Union sub-set of such a group should therefore be captured. This would include companies which are resident for tax purposes in a Member State and their permanent establishments, including any significant economic presence, operating in a Member State as well as the permanent establishments in the Union of third country companies of the same group. Considering that the concept of a permanent establishment is dealt with within bilateral tax treaties and national law and although the definition features some common principles, there is still a degree of divergence worldwide.

Removed:Recital 10 c (new): (10c) A fairer taxation of passive income also requires robust Controlled Foreign Company (CFC) rules for BEFIT group members in order to make them more resilient against profit shifting.

Added:Recital 7 a (new): (7a) The Union should lead international discussions on making international corporate taxation fit for the future including by promoting a form of harmonisation of rules and an allocation of the taxable base for large multinationals.

Removed:Recital 12: (12) To achieve the key objective of creating a simplified corporate tax framework, the preliminary tax results for each group member should be aggregated into one single common tax base, to subsequently allocate this base to eligible group members. The tax adjustments to the financial statements would produce preliminary tax results for each group member. These results would then be aggregated, which would allow for cross-border loss relief between BEFIT group members, and subsequently, the aggregated tax base would be allocated to group members based on a transition allocation rule; this would pave the way towards a permanent mechanism. That permanent mechanism should be based on a formulary apportionment including three sets of tangible factors: labour, assets, and sales. It will render the need for intra-BEFIT group transactions to be consistent with the arm’s length principle redundant.

Added:Recital 8 a (new): (8a) This Directive should lay down rules extending the concept of a permanent establishment so as to include a significant economic presence through which a business is wholly or partly carried on. The underlying objective is to improve the resilience of the internal market as a whole in order to address the challenges of taxation of the digital economy. The increased importance of services, accelerated by the digitalisation of the economy, has led to recent proposals, as embedded in the OECD/G20 Pillar One proposal, to define significant economic presence as a taxable nexus based on a purely quantitative threshold of sales in any given country in order to capture all sectors and ensure simplicity. That objective cannot be sufficiently achieved by the Member States acting individually because digital businesses are able to operate cross-border without having any physical presence in a jurisdiction and rules are therefore needed to ensure that digital businesses pay taxes in the jurisdictions where they make profits, whether by providing services or selling products ( ‘sales’).

Removed:Recital 14: (14) To provide space for growth and investment, Member States would also be allowed to individually apply additional post-allocation adjustments (e.g. tax treatment of pension contributions) in areas not covered by the common framework. Member States would also be free to further adjust their allocated share without a ceiling to ensure national policy choices in this area. The post-allocation adjustment, however, should focus on input-based tax incentives. Member States should refrain from offering output-based tax incentives such as patent boxes and other intellectual property regimes. Most importantly, Directive (EU) 2022/2523 would effectively set a ceiling which would effectively ensure that the effective tax rate is at least 15%.

Added:Recital 8 b (new): (8b) In order to provide for a robust definition of a taxable nexus of a business in a Member State, whether or not the business is digital, it is necessary that such a definition is based on the revenues from any sales, including from the supplied digital services. The definition included in this Directive is identical to the definition agreed upon in the framework of the OECD/G20 Pillar One proposal, in order to ensure coherence between this Directive and that international framework. The Union should lead by example in the international tax reform discourse, in order to provide certainty to taxpayers.

Removed:Recital 15: (15) Some Member States operate corporate tax systems which are built on principles that differ from the most common approach, such as distribution-based tax systems. It is therefore of prime importance to put in place the necessary adjustments, in order to ensure a workable interaction with those systems. The solution could be sought in certain post-allocation adjustments. These would entail that the part which would be allocated to a group member under a distribution-based system has to be modified in proportion to the distributions made during the fiscal year. The essence of a distribution-based tax system would be fully retained, considering that the distribution marks a timing point for taxing the allocated part and accordingly determine how much of this would need to be taxed. In this regard, it should be envisaged to operate a carry-forward mechanism, to ensure that the allocated part which is not taxed in the current year would be taxable in the following years. The inclusion of distribution-based tax systems within the scope of this Directive should be assessed after five years.

Added:Recital 9: (9) The objective of simplifying the current rules underscores the envisaged initiative, improving the efficiency and competitiveness of the internal market. Therefore, the rules on the computation of the tax base should be built by applying a limited series of tax adjustments to the financial statements of each group member. These limited adjustments would represent common adjustments that are necessary to convert the financial accounting statements into a tax base. Considering the need for alignment with Directive (EU) 2022/2523, the adjustments should resonate with that framework, which should also facilitate implementation for Member States and businesses that would already be familiar with the general principles. In that framework, the payment of top-up tax due in accordance with Directive (EU) 2022/2523 or in application of a qualified domestic top-up tax as referred to in that Directive, or any other alternative minimum taxes recognised in an international forum such as the OECD or the United Nations, should be taken into consideration.

Removed:Recital 17: (17) A common framework for corporate taxation would necessarily feature an administration system, which should ideally provide for a degree of tax certainty and simplification. To promote uniformity, the administration system would have to build on the importance of operating a centralised point of reference for dealing with a number of common issues, such as an Information Return for the entire group, and ensuring an adequate degree of confidentiality, security, coordination and collaboration amongst national tax administrations. At the same time, and during the transition period, the administration system should fully respect national tax sovereignty as local tax returns, audits and dispute settlement would have to remain primarily at the level of the Member States.

Added:Recital 10 a (new): (10a) In order to achieve the objective of a simplified tax framework and in order for this Directive to adequately complement Directive (EU) 20XX/XX1a on laying down rules on a debt-equity bias reduction allowance and on limiting the deductibility of interest for corporate income tax purposes, the rules laid down in this Directive on the deductibility of interest should align with the ones provided for in Directive (EU) 20XX/XX, where applicable. / 1a OJ L , , p. .

Removed:Recital 18: (18) To ensure that the rules of the common framework are implemented and enforced correctly, Member States should lay down rules on penalties applicable to infringements of national provisions adopted pursuant to this Directive. Such penalties should be effective, proportionate and dissuasive. Those penalties should be set at a minimum rate of 0,1 % of the turnover of the BEFIT group in case of failure to file the BEFIT information return accordingly and in case of confirmed intentional misreporting of filing information return.

Added:Recital 11 a (new): (11a) In order to spur investment and achieve a sustainable transition, Member States should be incentivised to adopt targeted accelerated depreciation rules. Such temporary rules should stimulate sustainable economic growth, create jobs, guarantee energy security and foster innovation in sustainable technologies. To operationalise those incentives, the Commission should be mandated to adopt implementing acts.

Removed:Recital 19: (19) To optimise the benefits of having a common legal framework for computing the corporate tax base in the internal market, the application of the rules should be optional for groups, including SME groups, who earn annual combined revenues of less than EUR 750 000 000 and, as of 1 July 2035, of less than EUR 40 000 000, as long as they prepare consolidated financial statements and have a taxable presence in the Union. By keeping the application of the rules open to groups of a smaller size, more groups with cross-border structures and activities may benefit from the simplification that the common framework offers.

Added:Recital 12: (12) To achieve the key objective of creating a simplified corporate tax framework, the preliminary tax results for each group member should be aggregated into one single common tax base, in order to subsequently allocate this base to eligible group members. The tax adjustments to the financial statements would produce preliminary tax results for each group member. These results would then be aggregated, which would allow for a capped cross-border loss relief between BEFIT group members, and subsequently, the aggregated tax base would be allocated to group members based on a transition allocation rule; this would pave the way towards a permanent mechanism. The permanent mechanism should be based on a formulary apportionment including, but not limited to, three sets of tangible factors: labour, assets and sales. It would render the need for intra-BEFIT group transactions to be consistent with the arm’s length principle redundant. It would have the advantage of using more recent country-by-country reporting (‘CbCR’) data and the information gathered during the transition period. This will also allow for a more thorough assessment of the impact that the implementation of the two-pillar approach is expected to have on national tax bases and the BEFIT group tax bases, and therefore, reduce tax compliance costs for companies. In this way, it would still become possible to materialise the key objective of tax neutrality in the internal market, which would reduce instances of double …

Removed:Recital 21 a (new): (21a) Each BEFIT group should have a filing entity, which should determine the country of the filing authority and the competent tax authority which will lead the BEFIT team. As a matter of principle, the filing authority should be based in the Member State where the parent company of the BEFIT group is resident for tax purposes. When the BEFIT group is owned by a firm headquartered in a third country, the filing entity should be the European intermediate parent undertaking, where there is one.

Added:Recital 14: (14) To provide space for growth and investment, Member States would also be allowed to individually apply additional post-allocation adjustments (e.g. tax treatment of pension contributions) in areas not covered by the common framework. Member States would also be free to further adjust their allocated share without a ceiling in order to ensure that Member States can make their national policy choices in this area. The post-allocation adjustment should, however, focus on input-based tax incentives. Member States should refrain from offering output-based tax incentives such as patent boxes and other intellectual property regimes.

Removed:Recital 21 b (new): (21b) By 31 December 2026, the Commission should, where appropriate, submit a legislative proposal for a harmonised, common European taxpayer identification number. This will in turn not only facilitate the communication between the representatives of Member States and the BEFIT team, but also increase the efficiency of tax information exchange within the Union.

Added:Recital 14 a (new): (14a) The Commission and the Member States should ensure the coherence and alignment of this Directive with the OECD/G20 Model Rules and with Directive (EU) 2022/2523, in particular as regards the calculation of the effective tax rate on a country-by-country basis, which could be undermined by the cross-border loss relief between BEFIT group members envisaged in this Directive. That dimension should be assessed in the revision of this Directive.

Removed:Recital 23: (23) The retention period of at least 10 years is justified to allow Member States to comply with most statute of limitations.

Added:Recital 15: (15) Some Member States operate corporate tax systems which are built on principles that differ from the most common approach, such as distribution-based tax systems. It is therefore of prime importance to put in place the necessary adjustments, in order to ensure a workable interaction with those systems. The solution could be sought in certain post-allocation adjustments. These would entail that the part which would be allocated to a group member under a distribution-based system has to be modified in proportion to the distributions made during the fiscal year. The essence of a distribution-based tax system would be fully retained, considering that the distribution marks a timing point for taxing the allocated part and accordingly determine how much of this would need to be taxed. In this regard, it should be envisaged to operate a carry-forward mechanism, to ensure that the allocated part which is not taxed in the current year would be taxable in the following years. The possible inclusion of distribution-based tax systems within the scope of this Directive should be assessed after five years.

Removed:Article 1 – paragraph 3: 3. A company or a permanent establishment which is subject to this Directive shall cease to be subject to the national corporate tax law establishing a corporate income tax base in all Member States where it is established in respect of all matters regulated by this Directive, unless otherwise stated in this Directive. Provisions regarding the corporate income tax rate remain at the discretion of the Member States within the framework of Directive (EU) 2022/2523.

Added:Recital 17: (17) A common framework for corporate taxation would necessarily feature an administration system, which should ideally provide for a degree of tax certainty and simplification. To promote uniformity, the administration system would have to build on the importance of operating a centralised point of reference for dealing with a number of common issues, such as an Information Return for the entire group, and ensuring an adequate degree of confidentiality and security, as well as coordination and collaboration amongst national tax administrations. At the same time, during the transition, the administration system should fully respect national tax sovereignty as local tax returns, audits and dispute settlement would have to remain primarily at the level of the Member States.

Removed:Article 2 – paragraph 1 – point a: (a) they belong to a domestic group or to a multinational enterprise group (‘MNE group) which prepares consolidated financial statements and: / (i) during a transition period from 1 July 2028 to 30 June 2035, had annual combined revenues of EUR 750 000 000 or more in at least two of the last four fiscal years; / (ii) from 1 July 2035, had annual combined revenues of EUR 40 000 000 or more in at least two of the last four fiscal years;

Added:Recital 18: (18) To ensure that the rules of the common framework are implemented and enforced correctly, Member States should lay down rules on penalties applicable to infringements of national provisions adopted pursuant to this Directive. Such penalties should be effective, proportionate and dissuasive. They should be set at a minimum rate of 0,1 % of the turnover of the BEFIT group in the event of a failure to comply with the requirements laid down in this Directive to file the BEFIT information return, and in the event of a deliberate misreporting in the BEFIT information return.

Added:Recital 19: (19) To optimise the benefits of having a common legal framework for computing the corporate tax base in the internal market, the application of the rules should be optional for groups, including SME groups, who earn annual combined revenues of less than EUR 750 000 000, and, as of 1 July 2035, of less than EUR 40 000 000, as long as they prepare consolidated financial statements and have a taxable presence in the Union. By keeping the application of the rules open to groups of a smaller size, more groups with cross-border structures and activities may benefit from the simplification that the common framework offers. Companies choosing to be covered by this Directive should benefit from Member States' and the Commission's technical assistance to comply with the new rules and therefore foster their cross-border activities.

Added:Recital 21 a (new): (21a) Each BEFIT group should have a filing entity, which should determine the country of the filing authority and the competent authority which will lead the BEFIT team. As a matter of principle, the filing authority should be based in the Member State where the parent company of the BEFIT group is resident for tax purposes. Where the BEFIT group is owned by a firm headquartered in a third country, the filing entity should be the Union intermediate parent entity, where there is one.

Added:Recital 21 b (new): (21b) Before this Directive enters into force, the Commission should, where appropriate, submit a legislative proposal for a harmonised, common European taxpayer identification number. This would not only facilitate the communication between the representatives of Member States and the BEFIT team, but also increase the efficiency of tax information exchange within the Union.

Added:Recital 23: (23) The retention period of at least 10 years is justified in order to allow Member States to comply with most statute of limitations.

Added:Recital 25 a (new): (25a) This Directive is also relevant from a Union own resources perspective, as set out in the legally binding roadmap of 2020 on own resources1a, and the 2021 Communication on the next generation of own resources for the Union budget. A BEFIT-based own resource should link the financing of the Union budget to the benefits enjoyed by companies operating in the internal market and create a strong and stable resource over time. Under a BEFIT-based own resource, Member States should transfer part of their corporate income tax revenues to the Union budget. The roadmap provided for in the Interinstitutional Agreement foresees a new own resource linked to corporate taxation as part of a basket of new revenue sources and, in that respect, the BEFIT initiative constitutes an excellent starting point for a new own resource. / 1a Interinstitutional Agreement between the European Parliament, the Council of the European Union and the European Commission on budgetary discipline, on cooperation in budgetary matters and on sound financial management, as well as on new own resources, including a roadmap towards the introduction of new own resources (OJ L 433I, 22.12.2020, p. 28, ELI: http://data.europa.eu/eli/agree_interinstit/2020/1222/oj).

Added:Article 1 – paragraph 2 – point e a (new): (ea) extending the concept of a permanent establishment.

Added:Article 1 – paragraph 3: 3. A company or a permanent establishment which is subject to this Directive shall cease to be subject to the national corporate tax law establishing a corporate income tax base in all Member States where it is established in respect of all matters regulated by this Directive, unless otherwise stated in this Directive.

Added:Article 2 – paragraph 1 – point a: (a) they belong to a domestic group or to a multinational enterprise group (‘MNE group’) which prepares consolidated financial statements and had annual combined revenues amounting to: / - from 1 July 2028 to 30 June 2035: EUR 750 000 000 or more in at least two of the last four fiscal years; / - from 1 July 2035: EUR 40 000 000 or more in at least two of the last four fiscal years.

Article 2 – paragraph 2: 2. By way of derogation from paragraph 1, this Directive shall not apply to companies or permanent establishments with an ultimate parent entity outside the Union where the combined revenues of the group in the Union either do not exceed 3% of the total revenues for the group based on its consolidated financial statements or the amount of EUR 40 million in at least two of the last four fiscal years. This shall be without prejudice to the right of opting in under paragraph 7.