The European Commission recently published two draft directives: the Council Directive on Business in Europe: Framework for Income Taxation (BEFIT) and the Council Directive on transfer pricing. If enacted, the directives will harmonize taxation within the European Union by establishing rules to determine a common tax base and further codify and harmonize transfer pricing rules in Europe.
- The BEFIT rules will apply on a mandatory or optional basis.
- The new rules will be mandatory for :-
- (i)EU-headquartered groups with an annual combined revenue of EUR750 million or more in at least 2 of the last 4 fiscal years and
- (ii) for groups headquartered in third countries (such as the US), if the EU companies of the group raise at least EUR50 million of annual combined revenue or at least 5 percent of the total revenue of the group based on its consolidated financial statements in at least 2 of the last 4 fiscal years.
- Smaller groups preparing consolidated financial statements may choose to opt in for the application of the BEFIT rules and will be bound by the rules for a period of five years.