Common Consolidated Corporate Tax Base Proposal Approved by EU Committee: An EU Parliament committee voted yesterday to approve the Common Consolidated Corporate Tax Base (CCCTB), which would create a single EU corporate tax regime. The committee also approved the Common Corporate Tax Base (CCTB), a separate, complementary measure that would create the basis for the harmonized EU corporate tax system. These proposals would look to an entity’s “digital presence” within an EU member state, which may make the entity liable to tax even if it does not have a fixed place of business in that country. These proposals will be voted on by the EU Parliament as a whole in March.
EU Court of Justice Rules that Interest Deduction Limitation Violates Freedom of Establishment: Today, the Court of Justice of the European Union issued its judgment in the joined cases X NV and N BV v. Staatssecretaris van Financiën. The case concerned the Dutch interest deduction limitation rule which disallows the deduction of interest paid by a Dutch corporate taxpayer to a related party in connection with a capital contribution to a subsidiary. The interest deduction limitation rule can be avoided by consolidation, which would have prevented the capital contribution from being recognized for tax purposes; however, under Dutch law, consolidation is only available to Dutch resident subsidiaries and not for subsidiaries resident in other EU member states. As a result, the Court of Justice ruled that the interest deduction limitation infringes on the freedom of establishment provision of the Treaty on the Functioning of the European Union. In response, the Dutch State Secretary of Finance announced forthcoming legislation to alter the Dutch tax consolidation regime.