European union directives tax guide 2018 pwc portugal. It requires member states to exempt from taxation profits received by parent companies from their subsidiaries in other member states. The council in may 2014 agreed to split the proposal and to address the two issues separately. The council approved an amendment to an eu directive with the aim of preventing tax avoidance and aggressive tax planning by corporate groups. Aug 31, 2015 last month, dennis weber started a debate on recent bepsrelated changes to european tax directives with his post on the general antiabuse rule in the parent subsidiary.
Participation exemption rules amended a law published in greeces official gazette on 7 april 2014 makes several changes to the participation exemption that. Antiabuse and the eu parentsubsidiary directive ashurst. Brussels, 9 december 2014 parent subsidiary directive. Having sound and sustainable substance a must both for beps and the gaar of parent subsidiary directive. Furthermore, the proposal builds upon recently adopted tax projects. The scope of application of the parent subsidiary directive is determined in article 11 of the directive. The council of the european union has on 9 december 2014 formally adopted an amendment to the parentsubsidiary directive 201196eu introducing a general antiabuse clause in the directive. The amending directive deals with imputing tax paid by subsidiaries of these direct subsidiary companies. With the adoption of a new general antiabuse rule in the eu parent subsidiary directive 201196, the eu legislator has reinforced the position of eu member states in countering abusive practices. This proposal is a cornerstone in our campaign to clamp down on corporate tax avoidance.
The parent subsidiary directive was originally conceived to prevent the double taxation of samegroup companies based in different member states. The new common antiabuse rule in the eu parentsubsidiary. Parent companies and their subsidiaries in the european union. Eudtg newsalert 20 june 2014 amendment parent subsidiary. The objectives of the proposal are to address perceived tax avoidance. Psd on the basis of a commission proposal issued in november 20. Parentsubsidiary directive strategizing multinational tax. Eu tax alert july 2014 edition 2 the eu tax alert is an email newsletter to inform you of recent developments in the eu that are of interest for tax professionals. The adopted text provides for a mandatory limitation of the exemption of payments. Parentsubsidiary directive archives offshore news flash. As from 1st january 2016, eu directive 201486eu of 8th july 2014 amending directive 201196eu on the common system of taxation applicable in the case of parent companies and. I would like to follow up on this with a short discussion of the second antiavoidance measure introduced last year through directive 201486eu, which specifically targets hybrid financial instruments and the issue of double.
Member states must impute against the tax payable by the parent company any tax on profits paid by successive subsidiaries downstream of the direct. Commissioner moscovici welcomes the adoption of measures against tax evasion and aggressive tax planning. The eu commission proposed to amend the directive with the twofold objective of tackling hybrid loan mismatches and introducing a general antiabuse rule in november 20. Changes proposed to parentsubsidiary directive to tackle tax avoidance the european council has released a proposed change to one of the suggested changes in the european commissions draft amended parentsubsidiary directive psd that was published on 25 november 20, to tackle corporate tax. On 19 january 2017, the advocate general of the court of justice of the european union cjeu ms juliane kokott decided that the french rule transposing the antiabuse clause of the parent subsidiary directive was not compatible with eu law in the case of eqiom and enka c616. The council has given its political backing to the antiabuse clause of the parent subsidiary directive and to the mandatory exchange of information between eu tax authorities. European commission tax avoidance double nontaxation aggressive tax planning parentsubsidiary directive. Due to an amendment of the eu parent subsidiary directive, the eu member states must include a common minimum antiabuse provision in their legislation by 31 december 2015 at the latest. Council directive 201486eu of 8 july 2014 amending directive. European commission press release details page european commission statement brussels, 2 april 2014 the european parliaments today gave strong backing to the commissions proposal to revise the parent subsidiary directive see ip1149. Member states are obliged to put the psd into practice through their national laws, so that companies based in the eus single market of 27 member states can operate on an equal footing.
Last month, dennis weber started a debate on recent bepsrelated changes to european tax directives with his post on the general antiabuse rule in the parentsubsidiary. Parent companies and their subsidiaries in the european. Insurance company, or an investment entity described in subparagraph a6a. The ec parentsubsidiary directive 90435eec applies to profit distributions among companies in the european union. This should include the situation where a parent company and its subsidiary are in the same member state and the permanent establishment is in another. Due to an amendment of the eu parentsubsidiary directive, the eu member states must include a common minimum antiabuse provision in their legislation by 31 december 2015 at the latest. Hybrid mismatch arrangements, which exploit differences in the tax treatment of dividends and interest as well as differences in the classification of financial instruments between two or more countries, have been found to be a widely used tool in aggressive tax planning since multinational companies using hybrid financial instruments could benefit from the double dip phenomenon. Validating eu tax competition wirtschaftsuniversitat wien. A antiabuse rule has been proposed by the eu economic and financial affairs council for inclusion in the eu parent subsidiary directive psd, following implementation of hybrid mismatch rules as summarized in my post of 24 june 2014. Requirements to benefit from wht exemption for dividend. Amendments to the directive the parent subsidiary directive 201196eu, adopted in november 2011, is intended to ensure that profits made by crossborder groups are not taxed twice.
The revision of the parent subsidiary directive forms part of this action plan. Brussels, 9 december 2014 parentsubsidiary directive. This should include the situation where a parent company and its subsidiary. The taxation of hybrid instruments became of the great importance as it created possibilities for development of schemes inside crossborder groups, which are somewhere in between of tax avoidance and tax evasion. The european union eu parentsubsidiary directive psd1 provides for tax exemption of. Following the vote, eu tax commissioner algirdas semeta said. Eu member states are expected to amend their national law promptly. Profit distributions connected with a permanent establishment rule each member state in which a permanent establishment is situated must apply the parentsubsidiary directive to profit distributions received by the permanent establishments of companies of other member states that come. For additional information regarding the political agreement reached at the ecofin 20 june 2014 meeting, see ey global tax alert eu adopts linking rule for hybrid loans under parentsubsidiary directive, dated 20 june 2014. Eu parent subsidiary directive psd 1 provides for tax exemption for crossborder dividends paid between related companies located in different member states. Pdf the general antiabuse rule of the parentsubsidiary directive. The subsidiarys legal form is listed in the annex to the eu parentsubsidiary directive. Amendments to the eu parent subsidiary directive impact.
In 2014 and 2015 the european council adopted two amendments to the psd. The european commission welcomes two breakthrough agreements reached by the council today towards combating corporate tax avoidance and aggressive tax planning. For additional information regarding the political agreement reached at the ecofin 20 june 2014 meeting, see ey global tax alert eu adopts linking rule for hybrid loans under parent subsidiary directive, dated 20 june 2014. In this study, the authors propose that the 2014 amendment to the eu parentsubsidiary directive which introduces a new minimum antiabuse rule effectively sets a standard definition of abuse under eu law that would only curb wholly artificial arrangements and likely fosters tax avoidance, in spite of the express intent of the directive to allow member states to adopt. About this study this highlevel impact study seeks to establish whether it is. As a result, it may be able to apply the antiabuse element of the parentsubsidiary directive, and deny the company the usual tax exemption for dividends.
Hence in theory a dutch holding company may pass the test for one eu country while another eu country will not allow the benefits according to the same ps directive. Ecofin adopts amendment to parentsubsidiary directive for hybrid financing arrangements on 8 july 2014, the european unions council of economic and finance ministers ecofin adopted the text for amending the parent subsidiary directive 201196eu the directive to prevent double non. This tax exemption is the result of spains implementation of the eu parentsubsidiary directive directive 201196eu, as amended by the council directive 201486eu of 8 july 2014. Parentsubsidiary directive strategizing multinational. Ecofin held a meeting in luxembourg on 20 june 2014 where the council agreed to a proposal for a council directive amending the parentsubsidiary directive 201196eu, in order to prevent the double nontaxation of corporate groups as a result of hybrid loan arrangements. Directive is unlawful under the laws of the third country where the subsidiary is established. Before the parentsubsidiary directive can be studied, it is essential to have notions on international double taxation, the double taxation of dividends and all kinds of efforts to avoid both of. The general antiabuse rule of the parentsubsidiary directive.
The common minimum antiabuse provision is contained in art. Issue 238 november 12, 2014 euro tax flash from kpmgs eu tax centre ecofin progress on eu financial transaction tax and proposed gaar in the parentsubsidiary directive ecofin ftt enhanced cooperation tax avoidance parent subsidiary directive on november 7, 2014 the council of the eu ecofin considered. The provisions were amended by directive 2003 123ec dated december 22, 2003. Jan 27, 2015 commissioner moscovici welcomes the adoption of measures against tax evasion and aggressive tax planning. Commissioner moscovici welcomes the adoption of measures. The greek parent company holds more than 10% of the capital of the distributing company for at least 24 consecutive months.
Brussels, 27 january 2015 with the councils adoption of the antiabuse clause of the parent subsidiary directive today, the european union is living up to its pledge of tackling tax evasion and aggressive tax planning. This document is an excerpt from the eurlex website. Each member state applies the directive to distributions of profits received by companies of that state which come from their. I would like to follow up on this with a short discussion of the second antiavoidance measure introduced last year through directive 2014 86eu, which specifically targets hybrid financial instruments. On 1 december 2016, a bill was published in the official belgian gazette implementing into belgian tax law two amendments to the parentsubsidiary directive the first amendment to the parentsubsidiary directive aims at tackling situations which would result in double nontaxation by introducing a rule against hybrid instruments. The scope of application of the parentsubsidiary directive is determined in article 11 of the directive. European commission press release details page european commission statement brussels, 2 april 2014 the european parliaments today gave strong backing to the commissions proposal to revise the parentsubsidiary directive see ip1149. On 8 july 2014 the european unions council of economic and finance ministers ecofin adopted the text for amending the parent subsidiary directive 201196eu the directive to prevent doublenon taxation via the use of hybrid financing arrangements. On 19 january 2017, the advocate general of the court of justice of the european union cjeu ms juliane kokott decided that the french rule transposing the antiabuse clause of the parentsubsidiary directive was not compatible with eu law in the case of eqiom and enka c616. Eu parent subsidiary directive strategizing multinational. In this study, the authors propose that the 2014 amendment to the eu parentsubsidiary directive which introduces a new minimum antiabuse rule effectively sets a standard definition of abuse under eu law that would only curb wholly artificial arrangements and likely fosters tax avoidance, in spite of the express intent of the directive to allow member states to adopt stricter. The directive will enter into force 20 days after the publication, therefore on 20 december 2011.
The previous amendments to the parentsubsidiary directive. Ecofin ftt enhanced cooperation tax avoidance parent subsidiary directive automatic exchange of information patent box beps on december 9, 2014 the council of the eu ecofin discussed the status of the proposal for a directive on a financial transaction tax ftt for those member states participating under the. Implementing the revised parent subsidiary directive across the eu a striking example of the eus efforts to accelerate the implementation of antibase erosion and profit shifting beps measures is the amended parent subsidiary directive psd. Council agrees to add antiabuse clause against corporate tax avoidance. Council directive 201196eu of 30 november 2011 on the. The decision of the court of justice of the european union is now eagerly awaited. Amendments to the eu parent subsidiary directive impact on. European union directives tax guide 2017 pwc portugal. Ecofin held a meeting in luxembourg on 20 june 2014 where the council agreed to a proposal for a council directive amending the parent subsidiary directive 201196eu, in order to prevent the double nontaxation of corporate groups as a result of hybrid loan arrangements. Nothing in this directive shall prevent the member state of the parent company from considering a subsidiary to be fiscally transparent on the basis of that member states assessment of the legal characteristics of that subsidiary arising from the law under which it is constituted and therefore from taxing the parent company on its share of. With the adoption of a new general antiabuse rule in the eu parentsubsidiary directive 201196, the eu legislator has reinforced the position of eu member states in countering abusive practices. Proposed amendment to eu parent subsidiary directive on 25 november 20, the european commission announced a proposal the proposal to amend the eu parent subsidiary directive the psd. One revision aims in particular at addressing unintended double nontaxation by excluding hybrid loans from the parent subsidiary directive. Council agrees to add antiabuse clause against corporate tax avoidance the council approved an amendment to an eu directive with the aim of preventing tax avoidance and aggressive tax planning by corporate groups.
Jun 20, 2014 20 june 2014 on 20 june 2014, in the context of the fight against tax fraud and evasion and aggressive tax planning beps in the eu, the eu28 finance ministers reached final agreement on amending and updating the eus parent subsidiary directive 201196eu. Amendments to the parentsubsidiary directive implemented. In the 2011 directive it is stated that the eu member states shall bring the directive into force by transposing legislation as of 18 january. Announced by the council of the european union on 8 july 2014, 1164714 or. The proposed amendment to the eus parentsubsidiary directive 201196eu would prevent double nontaxation by providing that the member state of the parent company would only refrain from taxing profits from the subsidiary to the extent that such profits were not deductible by the latter.
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