Changes from plenary report to adopted text

Article 7 – paragraph 1: 1. The head office that has opted to apply head office taxation rules to its permanent establishments or subsidiaries in one or more host Member States shall apply those rules for a renewable period of seven fiscal years.

Article 7 – paragraph 2: 2. At the end of the period referred to in paragraph 1, the head office taxation rules shall cease to apply in respect of the permanent establishments and subsidiaries situated in the host Member States, unless the head office notifies to the filing authority its option to renew the application of the head office taxation rules, in accordance with the procedure set out in Article 9.

Article 8 – paragraph 1 – introductory part: 1. The option to apply the head office taxation rules shall be terminated before the end of the seven-year period referred to in Article 7(1) for any of the following reasons:

Article 8 – paragraph 1 – point a: (a) the SME referred to in Article 2(1) transfers its tax residence out of the head office Member State, if the SME wishes to stop applying the taxation rules;

Article 8 – paragraph 1 – point b: (b) for the last three fiscal years, the joint turnover of its permanent establishments and subsidiaries exceeded an amount which is equal to triple the turnover of the head office;

Article 8 – paragraph 1 – point b a (new): (ba) the SME referred in Article 2(1) is no longer considered to be an SME;

Article 8 – paragraph 1 – point b b (new): (bb) the SME referred to in Article 2(1) sets up more than two subsidiaries.

Article 8 – paragraph 2: 2. The head office taxation rules shall cease to apply as of the fiscal year that follows the one in which the reason referred to in paragraph 1 occur.

Article 8 – paragraph 3: 3. The filing authority shall inform the host Member States of the termination referred to in paragraph 1 as soon as possible and, in any case, before the end of the fiscal year in which the reasons for the termination occurred.

Article 8 – paragraph 4: 4. If the SME referred in Article 2(1) transfers its tax residence to another Member State, it may opt to apply the head office taxation rules of its new Member State of tax residence in accordance with Articles 4 to 7. This shall be considered a new option. The requirement set out in Article 4(1), point (b), shall not apply if the transfer of the tax residence of the SME has been carried out for valid commercial reasons within the meaning of Article 15(1), point (a), of Council Directive 2009/133/EC.

Article 10 – paragraph 1 – introductory part: The head office shall not be entitled to renew the option for applying the head office taxation rules if any of the following situations occurred:

Article 10 – paragraph 1 – point a: (a) for any three fiscal years taken separately, the joint turnover of the permanent establishments or subsidiaries exceeded an amount which is equal to triple the turnover of the Head Office;

Article 10 – paragraph 1 – point b: (b) the SME set up more than two subsidiaries within the Union;

Article 10 – paragraph 1 – point c: (c) the criterion set out in Article 2(1), point (d) has not been met for three consecutive fiscal years.

Article 11 – paragraph 1: 1. The head office shall file the Head office taxation tax return with the filing authority. The head office Member State shall assist the SME in the elaboration of the tax return, in particular regarding the attribution of taxable result to each permanent establishment and subsidiary in other Member States.

Article 11 – paragraph 2 – point b: (b) the tax liability of the SME with regard to the taxable result of each permanent establishment and up to two subsidiaries in other Member States. The tax liability shall be computed by applying the national tax rate of the respective host Member State to the taxable result, as it was computed in accordance with the head office taxation rules.

Article 11 – paragraph 3 – introductory part: 3. Where one or more permanent establishment of the SME are not required to prepare separate financial accounting statements under the law of the host Member State, the head office taxation tax return shall include the following information:

Article 11 – paragraph 3 – point a: (a) assets and liabilities attributed to the permanent establishments and up to two subsidiaries;

Article 11 – paragraph 3 – point b: (b) profits attributable to the permanent establishments) and up to two subsidiaries in other Member States.

Article 11 – paragraph 4 – point b: (b) a draft tax assessment notice for each permanent establishment and subsidiary.

Article 11 – paragraph 5 – subparagraph 1 – point b: (b) a draft tax assessment notice for the relevant permanent establishments and the subsidiaries;

Article 11 – paragraph 9: 9. Where, under the tax rules of the host Member State, certain expenses associated with the employees of the permanent establishment or the subsidiary are deductible for tax purposes insofar as the respective amounts are taxed at the level of the employee or are subject to social security charges, and there is no similar tax treatment in the head office Member State allowing for such deduction, the head office and host Member States shall, with the guidance of the Commission, take appropriate measures to prevent possible mismatches.

Article 11 – paragraph 9 a (new): 9a. The Commission shall, by means of implementing acts, lay down guidance on appropriate measures regarding mismatches as referred to in paragraph 8 of this Article. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 15.

Article 12 – title: Collection of tax due by the permanent establishments and subsidiaries in the host Member States

Article 12 – paragraph 1: 1. The head office shall settle, through the filing authority, the income tax liabilities with regard to both its taxable result and the taxable result of its permanent establishments and subsidiaries in the host Member States.

Article 12 – paragraph 2: 2. The filing authority shall collect the tax corresponding to the tax liability of each permanent establishment and subsidiary of the head office in the Union, apply the tax rate the respective host Member State and transfer the relevant amount to the competent authority of the respective host Member State without delay.

Article 12 – paragraph 3: 3. The Commission shall, by means of implementing acts, lay down the practical arrangements necessary to ensure the collection and transfer of the tax corresponding to the tax liability of the permanent establishments or the subsidiaries from the head office Member State to the host Member State. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 15.

Article 13 – paragraph 2: 2. The tax authorities of the host Member State may request that an audit be carried out jointly with the filing authority covering the computation of the taxable result of the permanent establishment or the subsidiary in accordance with the head office taxation rules, the attribution of profits to the permanent establishment and/or the subsidiary and/or the applicable tax rate. Joint audits shall be conducted in accordance with Council Directive 2011/16/EU18 . Notwithstanding Directive 2011/16/EU, the request for a joint audit may be also made by the tax authority of the head office Member State to the tax authority of the host Member State of each permanent establishment or subsidiary.

Article 13 – paragraph 2 a (new): 2a. If an audit is to be carried out at the initiative of the head office Member State, the head office Member State shall invite the host Member State to carry out such audit jointly.

Directive 2011/16/EU

Article 14 – paragraph 1 – point 2, Article 8ae – paragraph 1: 1. If a head office as defined in Article 3, point (2), of Directive on establishing a Head Office taxation rules for micro, small and medium sized enterprises20, which opts to apply the head office taxation rules to its permanent establishments or its subsidiaries in accordance with Article 6 of that, meets the eligibility requirements for applying such rules, the competent authority of the Member State of the head office shall by means of automatic exchange of information communicate to the competent authority of the Member State of the permanent establishment or the subsidiaries that the taxable result of the relevant permanent establishment or the subsidiaries is to be computed in accordance with the head office taxation rules. Such communication shall take place within one month from the notification by the Head Office of its option to apply head office taxation rules.

Directive 2011/16/EU

Article 14 – paragraph 1 – point 2, Article 8ae – paragraph 2: 2. The competent authority of the Member State of the permanent establishment or the subsidiary shall communicate to the competent authority of the Member State of the head office the tax rate applicable for the purpose of determining the tax liability of the permanent establishments or the subsidiaries situated on its territory, within two months from the notification by the competent authority of the Member State of the head office of the decision on the application of the head office taxation rules.

Directive 2011/16/EU

Article 14 – paragraph 1 – point 2, Article 8ae – paragraph 3: 3. The competent authority of the Member State of the head office shall by means of automatic exchange of information communicate the information specified in paragraph 2 of this Article to the competent authorities of the Member States of the permanent establishments or the subsidiaries in accordance with the practical arrangements adopted pursuant to Article 21.

Directive 2011/16/EU

Article 14 – paragraph 1 – point 2, Article 8ae – paragraph 4 – point iii: (iii) a draft tax assessment notice for the relevant permanent establishments and subsidiaries;

Directive 2011/16/EU

Article 14 – paragraph 1 – point 2, Article 8ae – paragraph 6: 6. Where the tax authority of the Member State of the permanent establishments or subsidiaries revises the draft tax assessment notice in connection with the attribution of profits to the permanent establishment or subsidiary in accordance with the provisions laid down in the applicable bilateral convention for the avoidance of double taxation between the host and head office Member States, after rejection of the draft tax assessment notice issued by the head office Member State, the competent authority of the Member State of the permanent establishments or subsidiaries shall communicate such revised tax assessment notice to the competent authority of the Member State of the head office, within one month from its issuance, for the purpose of re-computing the taxable result of the permanent establishment or subsidiary, issuance of a revised tax assessment and collecting the tax.

Article 17 – paragraph 1: The European Parliament shall be informed by the Commission of the adoption of delegated and implementing acts, of any objection formulated to them, and of the revocation of the delegation of powers by the Council.

Article 18 – paragraph 2: 2. Information, including personal data, processed in accordance with this Directive shall be retained only as long as strictly necessary to achieve the purposes of this Directive (the ‘retention period’), in particular, verification of eligibility requirements and determination of the tax liability of the taxpayers, in accordance with each data controller’s domestic rules on the statute of limitations. The retention period shall start when personal data is processed for the purposes of this Directive for the first time and shall in any event not exceed seven years.

Article 19 – paragraph 1: 1. Five years after this Directive starts to apply, the Commission shall examine and evaluate its functioning and report to the European Parliament and the Council to that effect. In the report, the Commission shall, inter alia, examine whether the head office taxation rules should be also applied to one or more subsidiaries of the SMEs. The report shall, where appropriate, be accompanied by a proposal to amend this Directive.

Article 19 – paragraph 2: 2. Member States shall communicate to the Commission relevant information for the evaluation of the Directive, in accordance with paragraph 3, including aggregated data regarding the number of eligible SMEs compared to SMEs that opted in, their turnover and compliance costs relative to turnover; data on the number of SMEs that expanded cross-border by setting up a permanent establishment and the number of SMEs that disqualified due to creating more than two subsidiaries, or the compliance costs for SMEs that apply the option.

Article 19 – paragraph 2 a (new): 2a. The Commission shall evaluate potential legal obstacles in applying this Directive such as the lack of a common and harmonised definition of permanent establishments and subsidiaries in the Union, taking into account international standards.

Article 20 – paragraph 1 – subparagraph 1: By 31 December 2024, the Member States shall adopt and publish the measures necessary to comply with this Directive. They shall immediately inform the Commission thereof.

Article 20 – paragraph 1 – subparagraph 2: They shall apply those measures from 1 January 2025.