Changes from report parliamentary committee draft to plenary report

The Proposal for a Council Directive establishing a Head Office Tax system for micro, small and medium sized enterprises and amending Directive 2011/16/EU, the HOT Initiative, represents a window of opportunity for Member States to facilitate the business environment in the Single Market. As part of the SME Relief Package, this proposal pursues the fundamental goal of simplifying the legal and administrative framework in which Europe´s 24 million SMEs create jobs, growth and wealth.

Tax compliance represents an excessive burden on companies, especially on Small and Medium Enterprises (SME) that spend approximately 2,5% of their turnover on tax-related administrative procedures. These companies are the core of the European economy, amounting to 99% of EU´s businesses. SMEs are strategic to create jobs, to boost the competitiveness of our economy and to promote a fair and transparent competition within our Single Market.

The main priorities of EU legislation must be facilitation, simplification and reduction of excessive burdens, including administrative and tax burdens. The HOT Initiative must be interpreted in the context of a broader legislative agenda to support SMEs and to take on the combat against bureaucracy. This perspective require that any new piece of legislation represent less burden and more accessibility to the opportunities of the Single Market. We want our SMEs to prosper in their national markets, but in a fully integrated Single Market, we have to guarantee the conditions for any company to operate in any of the 27 EU jurisdictions without any obstacle. The HOT Initiative pursues this goal and the Commission proposal represents, already, a step ahead on this direction.

The rapporteur understands that, although the nature of the legislative procedure (a consultation procedure under Article 115º TFEU), the European Parliament have an important role on calling the Council for a swift and efficient adoption of the HOT Initiative. That is why the rapporteur proposes to shorten the deadline for the transposition of this Directive. European businesses need a strong signal of support from the EU in the complex and volatile context of today.

The report intends to go beyond the proposal and transform the good starting point into a real instrument at the service of European SMEs. The proposed amendments try to increase the ambition of the proposal while safeguarding the feasibility of this new system. First, the rapporteur proposes to limit the eligibility requirements to widen the access to the system while maintaining the scope. Second, the rapporteur proposes to transform the system and guarantee an indefinite duration for the application of the rules, freeing SMEs for more compliance costs regarding renovation processes. Third, the rapporteur shortens the deadlines for applications from SMEs and for national authorities to exchange information, guaranteeing a quicker and more efficient system of applications.

The HOT Initiative represents an opportunity for the EU to send a clear signal to European SMEs and to reconfirm our Single Market as a place of opportunities for European business to thrive and contribute for the creation of jobs and for the boost of our market´s competitiveness.