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Spengel, Christoph --- "Commentary" [2013] ELECD 1162; in Lang, Michael; Pistone, Pasquale; Schuch, Josef; Staringer, Claus; Storck, Alfred (eds), "Corporate Income Taxation in Europe" (Edward Elgar Publishing, 2013) 303

Book Title: Corporate Income Taxation in Europe

Editor(s): Lang, Michael; Pistone, Pasquale; Schuch, Josef; Staringer, Claus; Storck, Alfred

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781782545415

Section Title: Commentary

Author(s): Spengel, Christoph

Number of pages: 8

Abstract/Description:

Article 81 of the proposal for a CCCTB Directive (hereafter: CCCTB Directive) introduces special provisions for the deductibility of interest paid by a member of a CCCTB group to an associated enterprise resident in a third country. Ignoring the scope and consequences of Article 81 for the moment, the necessity of harmonized provisions for interest deductibility at the borderline of the EU has to be pointed out first. The main reason for such a provision is to secure Member States’ tax revenues with regard to debt-financing. Since not all Member States have implemented thin capitalization rules or fat capitalization rules or earnings stripping rules, as the case may be, members of a CCCTB group could avoid domestic limitations of interest deductibility by rearranging financing arrangements within their group. An example is provided in Figure 8.1. X-GmbH (Germany), Z-GmbH (Austria) and Y-Corp. (third country) are members of the same group of companies. First suppose that X-GmbH and Z-GmbH do not form a CCCTB group. If X-GmbH has been granted a loan from Y-Corp., the deductibility of interest payments would be considered under German fat capitalization rules. From this it follows, broadly speaking, that interest is only deductible up to an amount of 30 per cent of the EBITDA of X-GmbH. Now suppose that X-GmbH and Z-GmbH opt for a CCCTB group and rearrange intra- group financing in a way that Z-GmbH takes the loan from Y-Corp and forwards the loan to X-GmbH.