1. The impacts of CCCTB implementation on the budget revenues of the Czech Republic 15th March, 2016, Praha Danuše Nerudová

2. page 2 to map current situation – i.e. situation of applying separate entity approach to quantify the differences in situation when CCCTB will be introduced – i.e. applying the allocation formula for sharing the tax base to quantify budgetary impacts for the Czech Rep. under different scenarios Aim

3. page 3 EC has worked on CCCTB for more than 10 years CCCTB directive proposal on 16th March 2011 fair tax competition elimination of TP problems decrease in compliance costs of taxation mechanism for sharing the tax base Introduction

4. page 4 unitary approach vs separate accounting unitary approach – formulary apportionment separate accounting – subsidiary has to deal with its parent at AL CCCTB – group taxation & consolidation → sharing the tax base Theoretical Background

5. page 5 Theoretical Background

6. page 6 Theoretical Background

7. page 7 Theoretical Background

8. page 8 4 studies researching the impact of CCCTB introduction on budgets of EU MS Fuest, Hemmelgarn and Ramb (2006) -EU 15, 2 th. German parents, 6 th. foreign subsidiaries, obligatory implementation -20 % decrease in German TB -74 % decrease in Dutch TB -112 % increase in Austrian TB Review of the literature

9. page 9 Van der Horst, Betterndorf and Rojas-Ramagisa (2007) -EU 17, obligatory implementation, aimed at welfare connected with implementation -assumption – every parent has its subsidiary in all EU 17; no cross-border loss offsetting -0.82 % increase in German TB -0.70 % decrease in Italian TB Review of the literature

10. page 10 Devereux and Loretz (2008) - two scenarios, 50 th. companies, EU 25, 50% rule for ownership, no special allocation rules for special industries - impact from -17 % to 60 % Review of the literature

11. page 11 Cline, Neubig, Philips, Sanger and Walsh (2010) - three scenarios, 200 th. companies, EU 27, based on old CCCTB rules - obligatory implementation – DK ↓8.3%, DE ↑ 6.0%, CZ ↓ 3.0% - voluntary implementation - DE ↓7.7%, UK ↑ 2.6%, CZ ↓ 3.1% -obligatory in Eurozone NL ↓8.5%, FR ↑ 5.7% Review of the literature

12. page 12 - Amadeus database - Bankscope databse - EU 28 - two tier test - at least 50.01% ownership in the controlled company and more than 75.01 % of the voting rights - comparative analysis of national consolidation and group taxation regimes (full consolidation, pooling, intra-group loss transfer and no scheme available) - calculation of the division of the group tax bases among the EU Member States, where subsidiaries are situated Methodology

13. page 13 - 2 764 parent comp. resident in CZ - 2 440 subsidiaries of Czech parents - missing data → regression → imputation → multiple imputation → multiple imputation with independent variables - sensitivity analysis Methodology

14. page 14 Methodology

15. page 15 Methodology

16. page 16 Methodology

17. page 17 1 – the best, 4 – the worst, based on data from NACE 46 only Methodology

18. page 18 Results – current situation

19. page 19 Results – current situation

20. page 20 Results – current situation

21. page 21 Results – current situation

22. page 22 Results – CCCTB implementation in EU28

23. page 23 Results – comparative analysis -Increase by 1.22% for CZ -Increase by 1.18 %for SK -Increase by 0.05% for ES -Decrease by 1.36% for Germany -Decrease for EE, HU and Poland

24. page 24 Results – CCCTB not implemented in CZ Effective average tax rate in EU in 2014 (ZEW)

25. page 25 Results – CCCTB not implemented in CZ Tax bases and potential outflow

26. page 26 Results – CCCTB not implemented in CZ

27. page 27 Results – CCCTB not implemented in CZ

28. page 28 Conclusions I Obligatory implementation in EU28 -Increase by 1.22% for CZ -Increase by 1.18 %for SK -Increase by 0.05% for ES -Decrease by 1.36% for Germany -Decrease for EE, HU and Poland Implementation in EU except CZ -Decrease in TTB by 12.26% - i.e. decrease in revenues from CIT by 3. 59% in CZ

29. page 29 Action Plan July 2015 Re-launching of CCCTB Instrument for combating tax avoidance 2 stage implementation Interim period

30. page 30 Types of loss relief Domestic loss reliefCross-border loss relief Within one company (“permanent establishment”) Automatically available in all 25 member states Available in most cases Belgium, Czech Republic, Netherlands, Austria, Portugal, Slovenia, Slovakia, Finland, Sweden, United Kingdom, Spain, Ireland, Italy, Cyprus, Latvia, Lithuania, Malta Within a group of companies (“parent and subsidiary”) Available under specific rules in most member states Denmark, Germany, Spain, France, Ireland, Italy, Cyprus, Malta, Latvia, Luxembourg, Netherlands, Austria, Poland, Slovenia, Finland, Sweden, United Kingdom In principle not available, with very few exceptions Denmark, France, Italy, Austria

31. page 31 Cross-border loss relief Member stateMethod of cross-border relief DenmarkSystem of consolidated profits FranceSystem of consolidated profits ItalySystem of consolidated profits AustriaDeduction (Reintegration)

32. page 32 Cross-border loss relief - alternatives Alternatives Tax year of lossDeduction of loss in the year of loss Subsequent tax years Alternative 1 definitive loss transfer future profits are not taken into account Alternative 2 temporary loss transfer recapture of deducted loss Alternative 3 current taxation of the result of subsidiary taking into account of results of loss- making entity for a certain period

33. page 33 Conclusions II NACENo. of ParentsNo. of Subs Sum of TBSubs in EU and their TB categorized according to NACE of Czech Parent in ths. EUR – CZ parents and EU Subs %ths. EURBECZDEEEESHUITNLPLSISK A39420.091 663 B560.437 505 7 836 -330.771 C2323077.41130 206 110 25011 48116 12-1.943 471.59872207 758 D193313.92244 699 245 368 - 668.73 8 E16290.7413 006 12 955 51 F1311710.488 484 8 565 -80.661 G40755022.32392 361 341 3864 114 103 555.3724 46 203 H36511.2021 080 21 084 -3.61846 I30550.101 813 J53662.5444 575 44 540 35 K1K1 2517037.18653 5764 292621 78225 406 -7419.78 12 669-3 153 L2243593.0753 965 53 8977 61 M2834955.3593 968 93 671 3 294 N41510.234 005 3 996 9 O284.2073 767 P22350.03557 Q16220.142 376 R11190.5910 347 S570.0025 Sum in ths. EUR1 5972 476100%1 757 9804 2921 655 87741 0081610312-2-7 7511 07712 88950 457 % 100%0.244194.19202.33270.00090.00590.0007-0.0001- 0.44090.06130.73322.8702

34. page 34 Conclusions II decrease by 0.7843 % i.e. by EUR 13 896 ths.

35. Thank you for your attention !! 15 th March 2016, Praha Danuše Nerudová Department of Accounting and Taxes danuse.nerudova@mendelu.cz www.mendelu.cz