The EU Council on December 9 announced an agreement to add an antiabuse provision to the parent-subsidiary directive to stop multinational tax avoidance.
The antiabuse rule will be a minimum standard; countries may adopt stricter national laws if they choose.
Under the common standard, tax exemptions for profit distributions will not be granted if an arrangement is not “genuine” and has been put in place “for the main purpose or one of the main purposes” of obtaining a tax advantage which defeats the object or purpose of the parent-subsidiary directive.
An arrangement is “genuine” if it is put into place for valid commercial reasons which reflect economic reality.
The parent-subsidiary directive, adopted July 1990, requires EU states to exempt from taxation dividends and other profit distributions received by parent companies from subsidiaries located in other member states.
This scheme, designed to prevent double taxation, has unintentionally permitted double nontaxation as companies exploit differences in tax laws.
The member states also agreed to take into consideration the new antiabuse provision when drafting possible antiabuse provisions to be included in the interests and royalties directive. They also said they would try to inform each other when they apply the antiabuse provision.
Laws necessary to comply with the new directive must be put in force by December 31, 2015.
See,
- EU release: Parent-subsidiary directive: Council agrees to add anti-abuse clause against corporate tax avoidance
- Proposal for a Council Directive amending Directive 2011/96/EU on the common system of taxation applicable in the case of parent companies and subsidiaries of different Member States -Political agreement
See also:
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Well, finally!