Changes from report parliamentary committee draft to plenary report

Change 6

ChangedRecital 25 a (new): (25a) ThisIn Directiveline iswith alsothe relevantlegally frombinding aroadmap Unionon new own resources perspective, as set out in the legally bindingInterinstitutional roadmapAgreement of 2020 on16 ownDecember resources1a,2020 and the 2021 Communication on the nextCommission generationCommunication of"An ownadjusted resourcespackage for the Union budget. A BEFIT-based own resource should link thenext financinggeneration of the Union budget to the benefits enjoyed by companies operating in the internal market and create a strong and stable resource over time. Under a BEFIT-based own resource, Member States should transferresources", part of their corporate income tax revenues to the Union budget. The roadmap providedrevenues forgenerated inthrough the Interinstitutional Agreementapplication foreseesof athis newDirective ownmay resourcebe linkedallocated to corporate taxation as part ofthe ageneral basketbudget of new revenue sourcesthe and,Union, in thataccordance respect,with the BEFIT initiative constitutes an excellentapplicable startingprocedures pointunder forCouncil aDecision new(EU, ownEuratom) resource.2020/20531a. / 1a Interinstitutional Agreement between the European Parliament, the Council of the European Union and the European Commission on budgetaryDecision discipline,(EU, onEuratom) cooperation2020/2053 inof budgetary14 mattersDecember and2020 on sound financial management, as well asthe onsystem newof own resources, includingresources aof roadmapthe towardsEuropean theUnion introductionand ofrepealing newDecision own2014/335/EU, resourcesEuratom (OJ L 433I,424, 22.12.2020,15.12.2020, p. 28,1; ELI: http://data.europa.eu/eli/agree_interinstit/2020/1222/oj).http://data.europa.eu/eli/dec/2020/2053/oj).

Change 7

ChangedArticle 1 – paragraph 2 – point e a (new): (ea) extending the concept of a permanent establishment.establishment, to include a significant economic presence through which a business is wholly or partly carried on.

Change 8

RemovedArticle 1 – paragraph 3: 3. A company or a permanent establishment which is subject to this Directive shall cease to be subject to the national corporate tax law establishing a corporate income tax base in all Member States where it is established in respect of all matters regulated by this Directive, unless otherwise stated in this Directive.

AddedArticle 2 – paragraph 8: 8. The Commission shall be empowered to adopt delegated acts in accordance with Article 74 to amend Annexes I and II strictly to reflect changes to the laws of the Member States concerning company forms and corporate taxes.

RemovedArticle 2 – paragraph 1 – point a: (a) they belong to a domestic group or to a multinational enterprise group (‘MNE group’) which prepares consolidated financial statements and had annual combined revenues amounting to: / - from 1 July 2028 to 30 June 2035: EUR 750 000 000 or more in at least two of the last four fiscal years; / - from 1 July 2035: EUR 40 000 000 or more in at least two of the last four fiscal years.

AddedArticle 3 a (new): Article 3a / Significant economic presence / 1. For the purposes of corporate tax, a permanent establishment shall be deemed to exist if a significant economic presence exists through which a business is wholly or partly carried on. / 2. Paragraph 1 shall be in addition to, and shall not affect or limit the application of, any other test under Union or national law for determining the existence of a permanent establishment in a Member State for the purposes of corporate tax, whether specifically in relation to the supply of digital services or otherwise. / 3. A significant economic presence shall be considered to exist in a Member State in a tax period if total revenues derived by a BEFIT group from that Member State exceed EUR 1 000 000. / 4. The Commission shall, by means of implementing acts, lay down a detailed methodology for the sourcing rules to define the revenues. Those implementing acts shall be adopted in accordance with the examination procedure referred to in Article 73. / 5. The Commission may issue recommendations to support adaptations to the double tax conventions of Member States with non-Union jurisdictions, in order to ensure that the concept of a permanent establishment, including a significant economic presence, and the related profit attribution rules are applied in a manner consistent with internationally agreed standards.

RemovedArticle 2 – paragraph 2: 2. By way of derogation from paragraph 1, this Directive shall not apply to companies or permanent establishments with an ultimate parent entity outside the Union where the combined revenues of the group in the Union either do not exceed 3% of the total revenues for the group based on its consolidated financial statements or the amount of EUR 40 million in at least two of the last four fiscal years. This shall be without prejudice to the right of opting in under paragraph 7.

AddedArticle 5 – paragraph 1 – point a: (a) the company is either the ultimate parent entity of the group or any other company of the group in which the ultimate parent entity holds, directly or indirectly, at least 50% of the ownership rights or of the rights giving entitlement to profit;

RemovedArticle 2 – paragraph 3: 3. Where two or more groups merge to form a single group, the threshold of EUR 750 000 000 referred to in paragraph 1, point (a), first indent, shall be deemed to be met for any fiscal year prior to the merger if the sum of the combined revenues of the merging groups for that fiscal year, as included in each of their consolidated financial statements, is EUR 750 000 000 or more. The companies and permanent establishments members of that newly formed group shall become subject to this Directive if that threshold was met in at least two of the last four fiscal years. As from 1 July 2035, the threshold of reference is EUR 40 000 000 as referred to in paragraph 1, point (a), second indent.

AddedArticle 5 – paragraph 1 – point b: (b) the head office of the permanent establishment is either the ultimate parent entity of the group or any other member (company or entity) of the group in which the ultimate parent entity holds, directly or indirectly, at least 50% of the ownership rights or of the rights giving entitlement to profit.

Change 9

ChangedArticle 27 – paragraph 4:4 4.a Where(new): a4a. companyWhere thatit is not a memberreasonably ofpracticable ato groupdetermine (thethe ‘target’)financial isaccounting acquirednet byincome anotheror companyloss orof a groupconstituent (theentity ‘acquiringbased entity’)on andthe eitheracceptable thefinancial targetaccounting standard or theauthorised acquiringfinancial entityaccounting didstandard notused havein the preparation of the consolidated financial statements in any of the fourultimate fiscalparent yearsentity, immediatelythe precedingfinancial theaccounting fiscalnet yearincome ofor theloss acquisition,of the thresholdconstituent ofentity annualfor combinedthe revenuesfiscal ofyear EURmay 750be 000determined 000using referredanother toacceptable infinancial paragraphaccounting 1standard shallor bean deemedauthorised tofinancial beaccounting metstandard, forprovided thatthat: year/ if(a) the sumfinancial accounts of the revenuesconstituent includedentity inare maintained on the financialbasis statementsof orthat consolidatedaccounting financialstandard; statements/ of(b) the targetinformation andcontained in the acquiringfinancial entityaccounts foris thatreliable; fiscaland year/ is(c) permanent differences in excess of EUR 7501 000 000 or more.that Thearise acquiringfrom entitythe shallapplication becomeof subjecta toparticular thisprinciple Directiveor ifstandard thatto thresholditems wasof metincome inor atexpense leastor twotransactions, ofwhere thethat fourprinciple fiscalor yearsstandard immediatelydiffers precedingfrom the fiscalfinancial yearstandard used in whichthe thispreparation Directiveof startedthe toconsolidated applyfinancial tostatements of the acquiringultimate entity.parent Asentity, fromare 1adjusted Julyto 2035,comply thewith thresholdthe oftreatment referencerequired isfor EURthat 40item 000under 000the asaccounting referredstandard toused in paragraphthe 1,preparation pointof (a),the secondconsolidated indent.financial statements.

Change 10

RemovedArticle 2 – paragraph 5 – introductory part: 5. Where there is a demerger of a group into two or more groups (the ‘demerged groups’), the threshold of EUR 750 000 000 referred to in paragraph 1, point (a), shall be deemed to be met by each of the demerged groups where:

AddedArticle 13 a (new): Article 13a / Royalties limitation rule / The financial accounting net income or loss of a BEFIT group member shall be adjusted to include any amounts of royalty costs and licence fee payments for which the corresponding income derived by the recipient BEFIT group member is subject to an effective tax rate below 9%, unless the recipient entity carries out substantive economic activity supported by staff, equipment, assets and premises, as evidenced by relevant facts and circumstances.

RemovedArticle 2 – paragraph 5 – point b: (b) in the second to fourth fiscal years ending after the demerger, each of the demerged groups has annual combined revenues of EUR 750 000 000 or more in at least two of those fiscal years. From 1 July 2035, the threshold of reference is EUR 40 000 000 as referred to in paragraph 1, point (a), second indent.

RemovedArticle 2 – paragraph 7: 7. Member States shall ensure that companies which are resident for tax purposes in a Member State and fulfil the conditions laid down in paragraph 1, point (b), including their permanent establishments located in other Member States, as well as permanent establishments, located in Member States, of third-country entities which fulfil the conditions of paragraph 1, point (c), may choose to be covered by this Directive if they belong to an MNE group or domestic group which prepares consolidated financial statements but does not fulfil the conditions laid down in paragraph 1, point (a), first indent, regarding the threshold of EUR 750 000 000 or paragraph 1, point (a), second indent, regarding the threshold of EUR 40 000 000.

RemovedArticle 3 – paragraph 10 – point b: (b) if the ultimate parent entity is not located in a Member State or, in absence of such, the intermediate parent entity located in a Member State that has been appointed by the BEFIT group to fulfil the obligations in relation to the BEFIT group information return set out in Article 57 on behalf of the BEFIT group.

RemovedArticle 3 – paragraph 15: (15) ‘economic owner’ means the person who receives substantially the most benefits and bears the most risks attached to a fixed asset, regardless of whether that person is the legal owner. A taxpayer who has the right to possess, use and dispose of a fixed asset and bears the risk of its loss or destruction shall in any event be considered the economic owner;

RemovedArticle 4 a (new): Article 4a / Significant economic presence / 1. For the purposes of corporate tax, a permanent establishment shall be deemed to exist if a significant economic presence exists through which a business is wholly or partly carried on. / 2. Paragraph 1 shall be in addition to, and shall not affect or limit the application of, any other test under Union or national law for determining the existence of a permanent establishment in a Member State for the purposes of corporate tax, whether specifically in relation to the supply of digital services or otherwise. / 3. A significant economic presence shall be considered to exist in a Member State in a tax period if total revenues derived by a BEFIT group from that Member State exceed EUR 1 000 000. / 4. The Commission shall, by means of implementing acts, lay down a detailed methodology for the sourcing rules to define the revenues. Those implementing acts shall be adopted in accordance with the examination procedure.

RemovedArticle 5 – paragraph 1 – point a: (a) the company is either the ultimate parent entity of the group, the intermediate parent entity of the group located in a Member State or any other company of the group, in which the ultimate parent entity holds, directly or indirectly, at least 50% of the ownership rights or of the rights giving entitlement to profit;

RemovedArticle 5 – paragraph 1 – point b: (b) the head office of the permanent establishment is either the ultimate parent entity of the group, the intermediate parent entity of the group located in a Member State or any other member (company or entity) of the group in which the ultimate parent entity holds, directly or indirectly, at least 50% of the ownership rights or of the rights giving entitlement to profit.

RemovedArticle 8 – paragraph 1: With the exception of financial assets held for trading, as referred to in Article 11(1), and investments made for the benefit of life insurance policyholders bearing the investment risk in the context of a unit-linked/index-linked life insurance policy, as referred to in Article 14, the financial accounting net income or loss of a BEFIT group member shall be adjusted to exclude 95% of the amount of dividends or other distributions received or accrued during the fiscal year, provided that at the date of distribution, the ownership interest is held by the BEFIT group member for more than one year and this interest carries right to more than 10% of the profits, capital, reserves or voting rights, and the dividends or other distributions have been subject to an effective tax rate not below 9%.

RemovedArticle 13 – paragraph 1: 1. A BEFIT group member shall adjust its financial accounting net income or loss to include the amount of exceeding borrowing costs, which is not deductible for tax purposes in accordance with paragraph 1a. / (deleted)

RemovedArticle 13 – paragraph 1 a (new): 1a. For the purpose of this Article, ‘exceeding borrowing costs’ means the amount by which the deductible borrowing costs of a taxpayer exceed taxable interest revenues and other economically equivalent taxable revenues that the taxpayer receives pursuant to national law. / Exceeding borrowing costs shall be deductible up to 75 % in the tax period in which they are incurred. If such amount is higher than 20 % of the taxpayer's earnings before interest, tax, depreciation and amortisation (EBITDA), the deduction shall be limited to 20 % of the taxpayer’s EBITDA. / Article 4(2), Article 4(3), Article 4(4), point (b), Article 4(5), Article 4(7) and Article 4(8) of Council Directive (EU) 2016/11641a shall apply to a BEFIT group. / 1a Council Directive (EU) 2016/1164 of 12 July 2016 laying down rules against tax avoidance practices that directly affect the functioning of the internal market (OJ L 193, 19.7.2016, p. 1).

RemovedArticle 13 a (new): Article 13a / Royalties limitation rule / The financial accounting net income or loss of a BEFIT group member shall be adjusted to include any amounts of royalty costs and licence fee payments for which the corresponding income derived by the recipient BEFIT group member is subject to an effective tax rate below 9%.

Article 16 a (new): Article 16a / Entertainment costs / The financial accounting net income or loss of a BEFIT group member shall be adjusted to include 50% of the amount of expenses accrued for entertainment costs.

Change 11

RemovedArticle 21 a (new): Article 21a / Controlled foreign companies / 1. The financial accounting net income or loss of a BEFIT group member shall be adjusted to include the non-distributed income of an entity or permanent establishment treated as a controlled foreign company as referred to in Article 7(1) of Council Directive (EU) 2016/1164, which is derived from the following categories: / (i) interest or any other income generated by financial assets; / (ii) royalties or any other income generated from intellectual property; / (iii) dividends and income from the disposal of shares; / (iv) income from financial leasing; / (v) income from insurance, banking and other financial activities; / (vi) income from invoicing companies that earn sales and services income from goods and services purchased from and sold to associated enterprises, and add no or little economic value. / Paragraph 1 shall not apply where the controlled foreign company carries out a substantive economic activity supported by staff, equipment, assets and premises, as evidenced by relevant facts and circumstances. / Where the controlled foreign company is resident or situated in a third country that is not an EEA Member State, Member States may decide to refrain from applying this paragraph. / 2. The income to be included in the tax base shall be calculated in accordance with Article 8 of Council Directive (EU) 2016/1164.

AddedArticle 20 – paragraph 1 – introductory part: The financial accounting net income or loss of a BEFIT group member shall be adjusted in accordance with Article 16(1), point (e), of Directive (EU) 2022/2523.

RemovedArticle 22 – paragraph 1: 1. The financial accounting net income or loss of a BEFIT group member shall be adjusted to exclude in the fiscal year of acquisition any fixed tangible asset that has a book value before depreciation which is below EUR 1 000.

AddedArticle 20 – paragraph 1 – point a: deleted

RemovedArticle 22 – paragraph 2 – point a: (a) all buildings as well as any other type of immovable property and structure in use for the business, with the exception of industrial buildings and structures: 40 years;

AddedArticle 20 – paragraph 1 – point b: deleted

AddedArticle 21 a (new): Article 21a / Controlled foreign companies / 1. The financial accounting net income or loss of a BEFIT group member shall be adjusted to include the non-distributed income of an entity or permanent establishment treated as a controlled foreign company as referred to in Article 7(1) of Directive (EU) 2016/1164, which is derived from the following categories: / (i) interest or any other income generated by financial assets; / (ii) royalties or any other income generated from intellectual property; / (iii) dividends and income from the disposal of shares; / (iv) income from financial leasing; / (v) income from insurance, banking and other financial activities; / (vi) income from invoicing companies that earn sales and services income from goods and services purchased from and sold to associated enterprises, and add no or little economic value. / The first subparagraph shall not apply where the controlled foreign company carries out a substantive economic activity supported by staff, equipment, assets and premises, as evidenced by relevant facts and circumstances. / Where the controlled foreign company is resident or situated in a third country that is not a member of the EEA, Member States may decide to refrain from applying this paragraph. / 2. The income to be included in the tax base shall be calculated in accordance with Article 8 of Directive (EU) 2016/1164.

AddedArticle 22 – paragraph 1: 1. The financial accounting net income or loss of a BEFIT group member shall be adjusted to exclude in the fiscal year of acquisition any fixed tangible asset that has a book value before depreciation which is below EUR 7500.

AddedArticle 22 – paragraph 2 – point a: (a) all buildings as well as any other type of immovable property and structure in use for the business, with the exception of industrial buildings and structures: 30 years;

Article 22 – paragraph 2 – point a a (new): (aa) industrial buildings and structures: 25 years;

Article 22 – paragraph 2 – point b: (b) all other fixed tangible assets: their useful life as assessed in accordance with the acceptable accounting standard in the Union referred to in Article 7, but with a minimum of 10 years;

Change 12

RemovedArticle 22 – paragraph 2 – point c: (c) fixed intangible assets, including acquired goodwill: the period for which the asset enjoys legal protection or for which the right has been granted and, where that period cannot be determined, 15 years.

AddedArticle 22 a (new): Article 22a / Accelerated depreciation rules / 1. By way of derogation from Article 22, fixed tangible assets acquired by BEFIT group members in the following categories shall be subject to accelerated depreciation by Member States: / a) assets that contribute directly to the Union’s climate and social goals, in particular the enhancement of clean technology, energy efficiency and digitalisation; / b) assets that contribute directly to the attainment of the UN 2030 Sustainable Development Goals; / c) assets that contribute directly to the enhancement of the Union's defence, notably its ability to prevent and respond to emerging threats and crises, in accordance with the Preparedness Union Strategy. / 2. The Commission shall, by means of implementing act, lay down the necessary framework and criteria to operationalise paragraph 1, including the categories of assets eligible for accelerated depreciation. Every 5 years, the Commission shall conduct an assessment of the accelerated depreciation regime in paragraph 1, analysing, in particular whether the measures: / a) are fit for purpose, / b) are a cost-effective way to achieve their policy objectives, / c) have any negative or unexpected implications. / Following the assessment referred to in the first subparagraph, the Commission shall update the implementing act every 5 years, where deemed necessary. Implementing acts under this Article shall be adopted in accordance with the examination procedure referred to in Article 73. /…

RemovedArticle 22 – paragraph 5 a (new): 5a. The Commission is empowered to adopt delegated acts to supplement this Directive by laying down temporary rules regarding accelerated depreciation for the cost of eligible assets and improvements to existing assets which qualify as environmentally sustainable within the meaning of Regulation 2020/852 on the establishment of a framework to facilitate sustainable investment1a. Those delegated acts shall be adopted in accordance with the examination procedure referred to in Article 74(2). / 1a Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment, and amending Regulation (EU) 2019/2088 (OJ L 198, 22.6.2020, p. 13; ELI: http://data.europa.eu/eli/reg/2020/852/oj).

Article 23 – paragraph 5 a (new): 5a. Member States shall not grant further entitlements to depreciate to a BEFIT group member other than those specified in this Section.

Article 25 – paragraph 1: 1. Acquisition costs, construction costs or improvement costs, together with the date of entry into use after acquisition, construction or improvement, shall be recorded in a fixed asset register within the BEFIT group for each fixed asset separately.

Change 13

ChangedArticle 25 – paragraph 3: 3. The fixed asset register shall be kept in a manner that provides sufficient information, including depreciation data, to calculate the preliminary tax result. A copy of the fixed asset register shall be kept by the BEFIT group for five5 years from the date that the depreciation of such asset ceased. The fixed asset register shall include at least the following information:

Change 14

AddedArticle 38: Where a company or a permanent establishment enters a BEFIT group, any unrelieved losses incurred up to five years before the entry date, in accordance with the corporate tax law of the Member State of its tax residence or location respectively, shall be deducted from its share of the BEFIT tax base as determined in accordance with Chapter III.

AddedArticle 41 – paragraph 1 – subparagraph 1: Notwithstanding Article 9, where, as a result of a disposition of shares, a BEFIT group member leaves the BEFIT group and during that or the previous fiscal year, this BEFIT group member acquired, in an intra-BEFIT group transaction, one or more fixed assets, the amount corresponding to the gain or loss arising from the intra-BEFIT group disposition of these fixed assets shall be included in the financial accounting net income or loss of the BEFIT group member which owned the assets prior to the intra-BEFIT group disposition.

Article 41 – paragraph 1 – subparagraph 2: The first subparagraph shall not apply if the BEFIT group member demonstrates that the intra-BEFIT group transaction was carried out for valid commercial reasons within the meaning of Article 15(1), point (a), of Directive 2009/133/EC.

Change 15

ChangedArticle 42 – paragraph 2 – point b: (b) a negative amount, the loss shall be set off against the taxable income of the ultimate parent entity and shall be carried forward for a maximum of five5 years and shall be set off against the next positive BEFIT tax base. The deduction shall be in proportion to the holding of the ultimate parent entity in its qualifying subsidiaries as referred to in Article 3(1) and in full for permanent establishments. The reduction of the tax base of the resident taxpayer shall not result in a negative amount.

Change 16

RemovedArticle 45 – paragraph 3 – point a: (a) low-risk zone: where the expense incurred, or the income earned, by a BEFIT group member from intra-BEFIT group transactions increase in a fiscal year by less than 5 % compared to the average expense or income of the previous three fiscal years from intra-BEFIT group transactions;

AddedArticle 43 – paragraph 1 a (new): 1a. The Commission shall provide clear and harmonised criteria for determining beneficial ownership. Those criteria shall aim to ensure the consistent application of the exemption system, reduce legal uncertainty, and prevent abuse. The criteria shall be developed in consultation with Member States and aligned, where appropriate, with international standards.

RemovedArticle 45 – paragraph 3 – point b: (b) high-risk zone: where the expense incurred, or the income earned, by a BEFIT group member from intra-BEFIT group transactions increase in a fiscal year by 5 % or more compared to the average expense or income of the previous three fiscal years from intra-BEFIT group transactions.

AddedArticle 45 – paragraph 1 – subparagraph 1: For each fiscal year between 1 July 2028 and 30 June 2033 at the latest (the ‘transition period’), the BEFIT tax base shall be allocated to the BEFIT group members in accordance with the baseline allocation percentage.

Change 17

ChangedArticle 45 – paragraph 31 a– (new):subparagraph 3a.2: TheFor 5groups %that benchmarkbecome referredsubject to in paragraphthis 3Directive isafter raisedthe toend 10of %the forfirst fiscal years duringyear whichwhen thethis indicesDirective ofstarts consumerto pricesapply, increasethe bytransition 4%period orreferred moreto in the Memberfirst Statesubparagraph ofshall thebe BEFITterminated groupby member.30 June 2033 at the latest.

Change 18

ChangedArticle 45 – paragraph 43 – point b:a: (b)(a) high-risklow-risk zone: the competent authorities ofwhere the Member States concerned shallexpense presumeincurred, thator the pricing of intra-BEFIT groupincome transactionsearned, ofby a specific BEFIT group member does not comply with the arm’s length principle and thefrom partintra-BEFIT ofgroup thetransactions increase which goes beyond 5 %, as referred to in paragraph 3, or 10 %,a asfiscal referredyear toby inless paragraphthan 3a,15% shallcompared notto bethe recognizedaverage forexpense theor purposeincome of computing the baselineprevious allocationthree percentagefiscal ofyears thatfrom BEFITintra-BEFIT group member.transactions;

Change 19

ChangedArticle 45 – paragraph 9:3 9.– Thepoint Commissionb: shall(b) carryhigh-risk outzone: awhere comprehensivethe reviewexpense ofincurred, or the transitionincome ruleearned, andby shalla submitBEFIT agroup reportmember tofrom theintra-BEFIT Europeangroup Parliamenttransactions andincrease toin thea Councilfiscal year by the15% endor ofmore compared to the thirdaverage fiscalexpense yearor duringincome of the transitionprevious periodthree referredfiscal toyears infrom paragraphintra-BEFIT 1.group transactions.

Change 20

RemovedArticle 45 a (new): Article 45a / Allocation rule based on tangible factors / 1. As of 1 July 2035, the BEFIT tax base shall be allocated to the BEFIT group member in jurisdiction ‘A’ of a BEFIT group in each tax year on the basis of a formula that gives equal weight to the factors of sales, labour and assets according to Articles 45b to 45i: / 2. The consolidated tax base of a BEFIT group shall be shared only where it is positive. / 3. The calculations for sharing the consolidated tax base shall be done at the end of the tax year of the BEFIT group. / 4. A period of 15 days or more in a calendar month shall be considered a whole month. / 5. When determining the apportioned share of a BEFIT group member, equal weight shall be given to the factors of sales, labour and assets.

AddedArticle 45 – paragraph 5: 5. Notwithstanding Article 13(2), the exceeding borrowing costs as referred to in Article 2 of Council Directive (EU) 2016/1164 which arise from a transaction between BEFIT group members shall not be recognized for the purpose of computing the baseline allocation percentage of the BEFIT group member which incurs such costs. Member States shall take appropriate measures to encourage undertakings to reduce those risks.

RemovedArticle 45 b (new): Article 45b / Composition of the labour factor / 1. The labour factor shall consist, as to one half, of the total amount of the payroll of a BEFIT group member as its numerator and the total amount of the payroll of the BEFIT group as its denominator, and, as to the other half, of the number of employees of a BEFIT group member as its numerator and the number of employees of the BEFIT group as its denominator. Where an individual employee is included in the labour factor of a BEFIT group member, the payroll relating to that employee shall be allocated to the labour factor of the same BEFIT group member. / 2. The number of employees shall be counted at the end of the tax year. / 3. The definition of an employee shall be determined by the national law of the Member State where the employment is exercised.

AddedArticle 45 – paragraph 9: deleted

RemovedArticle 45 c (new): Article 45c / Allocation of employees and payroll / 1. Employees shall be included in the labour factor of the group member from which they receive remuneration. / 2. By way of derogation from paragraph 1, where employees physically exercise their employment under the control and responsibility of an entity other than that from which they receive remuneration, those employees as well as the amount of payroll related to them shall be included in the labour factor of the former entity. This rule shall only apply where all of the following conditions are met: / (a) the employment lasts for an uninterrupted period of at least three months; / (b) those employees represent at least 5% of the overall number of employees of the group member from which they receive remuneration. / 3. Employees shall include persons who, although not employed directly by a BEFIT group member, perform tasks similar to those performed by employees. / 4. Payroll shall include all costs of salaries, wages, bonuses and all other employee compensation, including related pension and social security costs borne by the employer. / 5. Payroll costs shall be valued at the amount of expenses that are treated as deductible by the employer in a tax year.

AddedArticle 45 – paragraph 10: 10. The rules laid down in paragraphs 1 to 8 shall continue to apply until the entry into force of any amendment proposed pursuant to Article 77(1b).

RemovedArticle 45 d (new): Article 45d / Composition of the asset factor / 1. The asset factor shall consist of the average value of all fixed tangible assets owned, rented or leased by a BEFIT group member as its numerator and the average value of all fixed tangible assets owned, rented or leased by the BEFIT group as its denominator. / 2. In the five years that follow a taxpayer joining an existing or new BEFIT group, its asset factor shall also include the total amount of costs incurred for research, development, marketing and advertising by the taxpayer over the six years that preceded its joining the group.