The Head Office Taxation proposal: Helping SMEs to grow across borders

On 12 September 2023, the Commission adopted a proposal for a Head Office Taxation System which would allow SMEs operating cross-border through permanent establishments the option to interact with only one tax administration – that of its Head Office.

Compliance with business taxation rules can be complex. If SMEs wish to operate cross-border, they become taxable in more than one Member State as soon as their activity abroad creates a permanent establishment, which requires compliance with different tax systems and rules.

If agreed by Member States, the Commission's proposal will increase tax certainty and reduce compliance costs, which will help to foster investment and cross-border expansion in the EU.