December 9, 2014

UPDATED DECEMBER 10, 2014

On December 9, 2014 the Council of the European Union issued a press release announcing that it approved an amendment to the Parent Subsidiary Directive with the aim of preventing tax avoidance and aggressive tax planning by corporate groups. To this end, it agreed that it would introduce a binding anti-abuse clause as a "de minimis" rule in the EU's parent-subsidiary directive.

The anti-abuse clause is aimed at preventing misuses of the directive and ensuring a greater consistency in its application in different member states. It requires governments to refrain from granting the benefits of the parent-subsidiary directive to an arrangement, or a series of arrangements, that are not "genuine" and have been put in place to obtain a tax advantage, while not reflecting economic reality.

According to the press release it is expected that the amending directive will be adopted at a forthcoming Council session without further discussion.

According to the press release, member states will have until December 31, 2015 to transpose the second amendment of the directive by introducing an anti-abuse rule into national law. The same deadline applies for transposition of the amendments to tackle hybrid loan mismatches.

Based on the information available we expect the text of the directive amending the Parent Subsidiary Directive (Directive 2011/96 EU) to read as follows:

“Article 1

Directive 2011/96/EU is amended as follows:

1. In Article 1, paragraph 2 is replaced by the following paragraphs:

“2. Member States shall not grant the benefits of this Directive to an arrangement or a series of arrangements that, having been put into place for the main purpose or one of the main purposes of obtaining a tax advantage which defeats the object or purpose of this Directive, are not genuine having regard to all relevant facts and circumstances.

An arrangement may comprise more than one step or part.

3. For the purposes of paragraph 2, an arrangement or a series of arrangements shall be regarded as not genuine to the extent that they are not put into place for valid commercial reasons which reflect economic reality.

4. This Directive shall not preclude the application of domestic or agreement-based provisions required for the prevention of tax evasion, tax fraud or abuse.”

Article 2

1. Member States shall bring into force the laws, regulations and administrative provisions necessary to comply with this Directive by [31 December 2015] at the latest. They shall forthwith communicate to the Commission the text of those provisions.

When Member States adopt those provisions, they shall contain a reference to this Directive or be accompanied by such a reference on the occasion of their official publication. Member States shall determine how such reference is to be made.

2. Member States shall communicate to the Commission the text of the main provisions of national law which they adopt in the field covered by this Directive.

Article 3

 This Directive shall enter into force on the twentieth day following that of its publication in the Official Journal of the European Union.

Article 4

 This Directive is addressed to the Member States.

Done at Brussels,

For the Council 

The President”

For further information, click here to be forwarded to the press release as issued by the Council of the European Union.

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