Common tax rules for companies operating in more than one EU country will make it easier and cheaper for them to do business in the single market.
National tax systems in the EU differ so much that it can be complicated and expensive for companies to expand in the single market - which allows people, goods, services and capital to move freely throughout the bloc.
The Commission has put forward a single set of tax rules for companies operating in more than one EU country. The rules would give such companies the option of filing a single or "consolidated" tax return for all their earnings within the EU.
The change would increase the EU's competitiveness and help drive economic and job growth.
The Commission estimates the common rules would save businesses around €2bn. An additional €1bn would be saved if the simpler tax rules encouraged just 5% of the EU's small businesses to expand beyond their domestic markets.
The EU would also become a more attractive market for foreign businesses looking to set up operations here as they could also take advantage of the rules.
How it works
Corporate tax rates in the EU will not change. EU countries will continue to decide on their own corporate tax rates.
When calculating their taxes, companies would have a choice of using the different national systems or the single set of rules.
For example, a company may have operations in four EU countries - three with profits and one with a loss.
The company would be able to file one tax return instead of four. It would add up its profits, subtract its losses and use the common rules to calculate deductions and exemptions - arriving at a single taxable sum.
Each of the four countries would collect taxes on a portion of the taxable sum - based on their national rates. The portion would be calculated through a formula set out by the rules.
For the proposal to become law, the EU's governments must agree to it after consultation with the European Parliament.