The HOT Initiative: Towards administrative simplification for SMEs?

UEL has published a position paper on the proposal for the “HOT” directive establishing a head office tax system for SMEs (hereinafter the “HOT Initiative”) in response to the European Commission’s public consultation. 

The aim of the European Commission’s initiative is to provide SMEs with a single (and optional) set of tax rules for determining the tax base of activities they carry out in another Member State through a permanent establishment. 

The HOT initiative thus aims to reduce compliance costs and eliminate the complexity for SMEs of dealing with multiple tax systems and administrations within the EU. 

UEL and the business sectors it represents generally support the initiative’s objective. Indeed, the complexity of the tax framework and the administrative burden are among the main obstacles encountered by SMEs wishing to develop their activities abroad. 

However, UEL believes that the HOT Initiative may not achieve its objectives, given its current characteristics and relatively narrow scope. Further work and amendments would therefore be required to create an effective, coherent and competitive framework for SMEs within the EU. 

Find our full position below and on the European Commission website here.