Directive establishing a head office tax system for micro, small and medium-sized enterprises (SMEs) - a BusinessEurope position paper

Key messages

• BusinessEurope welcomes the Commission’s proposed head office tax system rules as these have the potential to reduce tax compliance costs significantly for SMEs operating cross-border through permanent establishments. In particular, we welcome the proposed one-stop-shop approach for tax compliance purposes which would allow in-scope SMEs to interact exclusively with the tax administration of their head office’s member state for opting in, filing obligations and tax payments.
• In order to maximise the benefits of the proposed rules, the eligibility criteria could be amended to allow taxpayers to benefit from the proposed regime from the first year of existence of permanent establishments, as opposed to the second year, outside the Member State of the head office. In addition, given the potential that the proposed rules have in fostering co-operation between tax administrations in the EU, we recommend a pilot mode at the EU level. This approach would allow for a practical examination helping to draw the benefits and address any challenges that may arise for both businesses and tax administrations.
• Whilst we recognise that the implementation of the new rules may result in occasional distortions of competition due to the varying tax rules for comparable businesses, we believe that the impact will be limited, given the relatively small number of companies falling within the scope of the proposed regime.