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Taxation and Customs Union

Business in Europe: Framework for Income Taxation (BEFIT)

On 12 September 2023, the European Commission adopted the Business in Europe: Framework for Taxation (BEFIT) proposal which lays down a new, single set of rules to determine the tax base of groups of companies in the EU.



To answer some of the most frequently asked questions about BEFIT, we have prepared a recorded webinar.

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Currently, large cross-border groups must comply with up to 27 different national tax systems in the EU, making it difficult and costly for them to do business across the Union. This complexity creates an uneven playing field and increases tax uncertainty and tax compliance costs for businesses operating in more than one Member State and discourages cross-border investments. It also puts EU businesses at a competitive disadvantage compared to businesses operating in markets of a comparable size elsewhere in the world.

The new proposal sets out a new framework of tax rules to help all companies in a group to determine their tax base. A One-Stop-Shop will allow the group to file an information return with the tax bases of all the group members with the tax administration of one Member State. Those tax bases will then be aggregated at EU group level and allocated to each company in the group. Finally, Member States will apply their own adjustments and corporate tax rate to the allocated tax base of the company established in that country.

The new, simpler rules of BEFIT could reduce businesses' current tax compliance costs by up to 65%.

The new rules will be mandatory for groups operating in the EU with an annual combined revenue of at least €750 million. For groups headquartered in third countries, their EU group members would need to have raised at least €50 million of annual combined revenues in at least two of the last four fiscal years or at least 5% of the total revenues of the group. This ensures that the requirements of the proposal are proportionate to its benefits.

In addition, smaller groups may choose to opt in as long as they prepare consolidated financial statements. This optional scope could be of particular interest to SME groups that operate cross-border, as they may have less resources to dedicate to compliance with multiple national corporate tax systems.

BEFIT will reduce tax compliance costs for large businesses, primarily those who operate in more than one Member State and make it easier for national authorities to determine which taxes are rightly due.

How will the new system work?

  • befit factsheet

    All members of the same group (the ‘BEFIT group’) calculate their tax base in accordance with a common set of rules applied to their already prepared financial accounting statements.

  • hot factsheet

    The tax bases of all members of the group are aggregated into one single tax base, with losses automatically set off against cross-border profits.

  • hot factsheet

    A team of Member State authority representatives (the ‘BEFIT team’) assesses and agrees on the content and treatment of the BEFIT Information Return.

  • hot factsheet

    Each Member State where the multinational group is present are allocated a percentage of the aggregated tax base, calculated on the basis of the average of the taxable results in the previous three fiscal years.

  • befit factsheet

    Each Member State can then adjust their allocated tax base according to their own national rules, calculate the profits, and tax at their national corporate tax rate.

The BEFIT proposal builds on the OECD/G20 international tax agreement on a global minimum level of taxation, and the EU Directive on minimum effective taxation (‘Pillar 2’) which enters into application on 31 December 2023.

Smaller groups, including cross-border SME groups, could choose to opt in as long as they prepare consolidated financial statements.

Next steps

The Commission’s proposal must be agreed unanimously by all EU Member States in the Council before it can become law.

Legislative Documents

Proposal for a Council Directive on Business in Europe: Framework for Income Taxation (BEFIT)
Impact Assessment - BEFIT
Summary of Impact Assessment Report - BEFIT

More information

Press release

Questions and Answers on BEFIT and transfer pricing