Irish corporate tax take faces new hit as EU revives plan to divi-up some income between member states

It means EU-based firms earning more than €750m per year will have to file a single tax return in the country where their head office is located, with losses in one country automatically offset against profits.

Smaller firms can opt in to the rules if they wish to.

The new common tax base – if agreed by all 27 EU governments – will include stricter rules on transfer pricing, or how much companies within a group charge each other for goods, services and intangible assets such as patents. The EU says the current rules enable profit shifting.

While firms will not yet see a shift of taxing rights to other EU countries, the rules pave the way for what the European Commission called “a permanent allocation method that can be based on a formulary apportionment using substantive factors”.

It is unclear when that will happen, or whether it will require new legal proposals.

Until then, a “transitional allocation rule” would apply, where a portion of aggregate group taxes are calculated based on the previous three fiscal years.

The move comes ahead of the implementation of new global tax rules that are still being fine-tuned by the Organisation for Economic Cooperation and Development (OECD).

Those rules include a 15pc minimum tax, which has already been incorporated into EU law, and a shift in taxing rights for the 100 most profitable companies in the world, based on where they make their sales.

“Tax rates will remain nationally determined, of course above the 15pc threshold that was decided globally,” said economy commissioner Paolo Gentiloni.

“Today’s proposals aim to make it easier for businesses, large and small, to operate in the EU, reducing tax compliance costs and freeing up resources for them to invest and create jobs.

“Our proposals will also facilitate tax authorities’ efforts to ensure that companies pay what is rightly due.”

The Commission said the new rules are consistent with the OECD agreement.

Around 1,600 firms in Ireland are likely to be affected.

The European Commission estimates the new common base could reduce tax compliance costs for businesses operating in the EU by up to 65pc.

Tax compliance costs for EU-based firms are around €55bn a year, with the bulk being paid by SMEs.

The EU has tried to introduce a so-called common consolidated corporate tax base twice before – once in 2011 and again in 2016. Both proposals failed to garner unanimous support from EU governments.