TaxCorporate TaxEC declares tax coordination centres illegal

EC declares tax coordination centres illegal

The European Commission has made it clear that it will not countenance the creation of certain special tax regimes within the European Union for so-called 'coordination centres'.

Link: Momentum builds for OECD tax reforms

These coordination centres provide services including banking, marketing, insurance and logistics to companies within an international group.

The EC has declared illegal, tax breaks made available to coordination centres within the Basque Country province of Biscaye, in Spain, even though the system was abolished by the Spanish government earlier this year.

Biscaye centres had been allowed to calculate tax using the ‘cost-plus’ system where the profits generated for a group, (by shouldering certain work), are calculated by examining its costs and adding on a margin.

Brussels claimed the Biscaye system allowed the centres to ignore certain financial costs, artificially lowering their tax burden, allowing the Commission to brand the calculations as illegal state aid.

Brussels’ competition directorate has also been examining the operation of coordination centres in Belgium, France, Germany and Luxembourg.

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