BEFIT Proposal Directive14 January 2025

BEFIT (Business in Europe: Framework for Income Taxation) is a proposal by the European Commission, launched on September 12, 2023, aimed at creating a unified corporate income tax system within the European Union. It replaces an older proposal (CCCTB) and seeks to modernize taxation in an increasingly globalized and digitized economy.
How does BEFIT work?
- Unified tax base: All companies within a multinational group will calculate their tax base using common rules based on financial accounting statements.
- Consolidation and offsetting: The tax bases of the group will be combined, allowing losses in one country to offset profits in another.
- Profit allocation: Each company in the group will receive a share of the total tax base, based on the average profits from the last three years.
- National adaptation: Each member state will apply its own tax rates to the allocated tax base.
Why is BEFIT needed?
Currently, companies must comply with 27 different tax systems in the EU, leading to:
· High costs and tax uncertainty;
· Uneven competition compared to companies in more tax-unified regions;
· Discouragement of cross-border investments.
With BEFIT, compliance costs could decrease by up to 65%, according to estimates.
Who is targeted by BEFIT?
· Mandatory: Multinational groups with consolidated revenues exceeding EUR 750 million.
· Optional: Smaller groups and SMEs with activities in multiple countries can opt to apply BEFIT rules.
· Non-EU companies: The rule applies if EU revenues exceed EUR 50 million or account for over 5% of the group’s total revenues.
BEFIT aligns with international standards on global minimum taxation and supports the fight against tax evasion.
Advantages of BEFIT
· Simplification: Common rules reduce bureaucracy and clarify tax reporting.
· Transparency: Increases predictability for companies and reduces risks of aggressive tax planning.
· Competitiveness: Facilitates investments and supports economic growth.
The BEFIT proposal is a significant step toward simplifying corporate taxation in Europe. If adopted, it will reduce costs, bureaucracy, and tax uncertainty, making it easier for companies to operate within the EU. However, implementation will require initial investments in reporting systems and adaptation to the new rules. Cabot Transfer Pricing has a team of specialists ready to assist you in such situations. For more details, do not hesitate to contact us: https://cabot-tp.ro/contact/