European Commission Implements New Taxation System: BEFIT

The European Commission has announced a set of initiatives under the name “Business in Europe: Framework for Income Taxation” (#BEFIT), establishing unified rules for determining the tax base for groups of companies and the CFC.

1. New Taxation Standards: BEFIT replaces the previously withdrawn CCTB and CCCTB concepts.
2. Mandatory Application: Groups with an annual income of €750 million and 75% ownership rights in the EU are required to use BEFIT. For groups outside the EU, BEFIT is mandatory under certain revenue conditions in Europe.
3. Optional Rules: Small groups can apply BEFIT for 5 years while preparing financial statements.
4. Unified Rules: BEFIT will allow groups to calculate the tax base under unified rules with special exceptions for certain industries.
5. Tax Base Distribution: From 2028 to 2035, BEFIT will allocate the tax base among group members based on previous financial results.
6. Taxation Adjustments: Changes have been made for dividends, losses, cross-border transactions, and business reorganization.
7. Simplified Reporting: The “single window” system for group tax declarations in one of the EU member countries.
8. Individual Reporting: BEFIT group members are required to submit individual tax declarations at the local level.
9. Harmonization of Rules: The package includes a proposal for harmonizing taxation rules in the EU.
10. Effective Date Plan: BEFIT proposals will come into force from July 1, 2028 (or from 2029 for the financial year ending December 31, 2028), while changes for the CFC will take effect from January 1, 2026.

These changes will enable groups of companies to manage accounting and taxation more efficiently, complying with unified standards and streamlining processes.