BEFIT – Business in Europe: Framework for Income Taxation

BEFIT (Business in Europe: Framework for Income Taxation) is a directive proposal (COM(2023) 532) put forward by the European Commission on 12 September 2023 for a common corporate income tax base across the EU. It aims to simplify tax computation for groups operating in multiple EU member states and to strengthen fair taxation.

• Core concept: Consolidation of taxable income of all EU group members; subsequent allocation according to formula factors
• Allocation key: Transitional phase — average of each group member's taxable results over the preceding three years; long-term formula-based allocation (revenue, employees, assets)
• Threshold: Group revenue exceeding EUR 750 million
• Status: Proposal; Council negotiations ongoing; not yet adopted

BEFIT is the successor to the failed proposals for a Common Corporate Tax Base (CCTB) and a Common Consolidated Corporate Tax Base (CCCTB), which the Commission had already put forward in 2011 and again in 2016. These failed due to the unanimity requirement in tax matters.

The BEFIT proposal was presented as part of a package together with the proposal for a Transfer Pricing Directive and a withholding tax simplification directive (FASTER) on 12 September 2023. In parallel with BEFIT, the results of OECD Pillar Two implementation (minimum tax) in member states are used to create a transitional mechanism.

BEFIT, if adopted, would apply to:

• EU-resident companies and EU permanent establishments belonging to a group with consolidated annual revenue of at least EUR 750 million
• Optional opt-in for smaller groups below the threshold

Not covered: sole traders and partnerships not subject to corporate income tax.

• Preparation of a consolidated BEFIT tax base for all EU group members
• Application of common rules for depreciation, provisions and loss relief
• Allocation of consolidated tax result according to BEFIT formula
• One-stop-shop for BEFIT tax return with the lead filing member state
• Local tax assessment by each member state based on the allocated share

1 correction:
- Allocation key incorrectly described — no relation to OECD Pillar Two Average Effective Tax Rate
1 update:
- key_dates incomplete — developments from 2024/2025 missing
1 clarification.
3 notes.