The European Parliament adopted a legislative resolution of 13 November 2025 on the proposal for a Council directive on Business in Europe: Framework for Income Taxation (BEFIT). The resolution was adopted with 370 votes in favour, 160 against and 107 abstentions. In its resolution the Members of the European Parliament amongst other propose a few notable changes to the Commission’s BEFIT blueprint.
The addition of a significant economic presence clause
While broadly backing the key elements of the Commission proposal, MEPs also add a ‘significant economic presence clause’ which states that companies having more than EUR 1 million in revenues in a Member State will be considered to be permanently established there. The purpose of this clause is to help in the identification of which Member States are to be considered for the apportionment of tax that a multinational needs to pay in the EU. According to the European Parliament this would especially ensure that digital companies pay taxes in the jurisdictions where they are effectively making profits, whether by providing services or selling products, irrespective of whether they have an important physical presence there.
Introduction of a royalties limitation rule
To guarantee a minimal level of taxation of royalties, MEPs propose introducing a royalties limitation rule for companies forming part of a ‘BEFIT group’. If a company in the group pays royalties or licence fees to another group company in the EU that is taxed at less than 9%, the paying company must add those payments back to its own taxable income — unless the receiving company carries out substantive economic activity supported by staff, equipment, and offices. MEPs also propose introducing a similar rule to prevent companies from shifting profits to subsidiaries in non-EU low tax jurisdictions that lack real economic activity.
Faster tax write-offs for certain assets
Another amendment adopted provides for faster tax write-offs for certain assets that support EU climate, social, digital, or defence goals. This would help spur investment, achieve a sustainable transition and enhance the EU's ability to prevent and respond to emerging threats and crises.
Limitation of loss settlement
To reduce abuse of potential losses, if a subsidiary’s loss creates a negative taxable amount, the parent company can use this to reduce its own taxable income, but only for up to five years and shall be set off against the next positive tax base. The eventual tax deductions cannot reduce the company’s taxable income to below zero.
Way forward
The position as adopted by the European parliament will now be transmitted to the Member States which must then adopt the final text, taking account of Parliament’s position.
The text of the European Parliament legislative resolution of 13 November 2025 on the proposal for a Council directive on Business in Europe: Framework for Income Taxation (BEFIT) (COM(2023)0532 – C9-0341/2023 – 2023/0321(CNS)) can be found here.
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