Global Daily Tax News, EU Committee Supports SME Head Office Tax Initiative, (Jan 24, 2024)

The European Economic and Social Committee (EESC) has endorsed the SME Relief Communication put forward by the European Commission, which would simplify tax administration for small- and medium-sized enterprises operating in multiple member states.

Announced in September last year, the Communication set out plans to introduce a Head Office Tax System for SMEs (HOT).

This would give SMEs operating cross-border through permanent establishments the option to interact with only one tax administration – that of the Head Office – instead of having to comply with multiple tax systems.

Presenting the plans, the Commission said, "This proposal will increase tax certainty and fairness, reduce compliance costs and distortions in the market that influence business decisions, while minimising the risk of double and over taxation and tax disputes. The expected decrease in compliance costs should, in particular, foster investment and cross-border expansion in the EU. SMEs operating in different Member States will be able to fully maximize the freedom of establishment and the free movement of capital without being hindered by unnecessary tax related obstacles."

The EESC has adopted a decision in support of the plans. It urged no delays in the adoption of the proposal, and said the HOT system should increase and improve cooperation between tax authorities in Member States.

The EESC urged the Commission to work closely with member states and organizations representing small- and medium-sized businesses after the adoption of the proposal.