EU Tax Policy: Priorities of German Business for the New Mandate

With the introduction of the global minimum tax, corporate taxation is undergoing a fundamental transformation. Since major economies such as the U.S. and China have not adopted the global minimum tax regulations, it remains uncertain whether Europe can achieve a level playing field. The EU must revise its regulatory framework accordingly and optimize its corporate tax system to prevent legal uncertainty and mitigate high compliance costs.

Priorities of German Business - Reducing Bureaucracy

The EU must take concrete measures to alleviate the bureaucratic burden on businesses regarding tax compliance obligations. The multitude of highly complex regulations results in significant additional effort, weakens the competitiveness of companies in Europe compared to other nations, and ties up resources that could be more effectively used for innovation.

New Challenges in Remote Work Abroad

A unified European solution is particularly necessary with regard to remote work abroad. The workplace is evolving rapidly, and remote work has increasingly become a standard practice for many employees and companies. This trend, accelerated by the COVID-19 pandemic, is also gaining importance in an international context, especially in attracting global talent.

Remote work abroad gives rise to several tax implications, including potential registration and declaration obligations in foreign jurisdictions and the prevention of double taxation. To provide legal certainty for businesses and employees, internationally coordinated and streamlined solutions are essential. The BDI therefore proposes establishing clear criteria for the creation of permanent establishments and simplifying procedures for payroll tax:

• Short-term activities abroad: No permanent establishment should be triggered for activities abroad lasting up to 120 workdays or 183 days of stay abroad.
• Long-term activities: Internationally coordinated criteria for determining permanent establishment status should be established.
• Payroll tax: No payroll tax obligations for employers abroad, provided that a defined threshold of up to 120 mobile workdays is not exceeded.

These proposals aim to mitigate tax risks and establish clear rules for cross-border remote work.

BEFIT: A Unified Framework for Multinational Companies on Corporate Taxation

With the proposed directive BEFIT (“Business in Europe: Framework for Income Taxation”), the European Commission aims to introduce a unified corporate tax base for large multinational corporations in the EU, with the goal of reducing bureaucratic and compliance costs. The rules would be mandatory for companies that have achieved consolidated annual revenues of at least €750 million in two of the last four years. This initiative is intended to support cross-border business activities and reduce tax compliance costs.

However, the proposal for a unified corporate tax base faces challenges due to the high additional bureaucratic requirements of individual national adjustments to the tax base. Moreover, BEFIT is based on a consolidated tax base that is not aligned with the global minimum tax rules.

Harmonization of the Withholding Tax Procedure

The EU should harmonize and streamline the procedures for withholding tax on license income. A centralized identification number could help avoid duplicative procedures and simplify processes. The new European Commission must take steps to improve in these areas in order to provide meaningful relief and ensure the EU's competitiveness.

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