Amendment Of The EU Parent-Subsidiary Directive

As expected, at its meeting on 27 January 2015 the Council of the European Union adopted a directive amending the EU parent-subsidiary directive (2011/96/EU) by adding an anti-abuse clause aimed at preventing the parent-subsidiary directive from being misused for the purposes of tax avoidance, and achieving consistency in its application in different member states.

The parent-subsidiary directive is intended to ensure that profits made by cross-border groups are not taxed twice. It requires member states to exempt from taxation profits received by parent companies from their subsidiaries in other member states.

The anti-abuse clause will allow member states to deny the benefits of the directive to so-called "artificial" arrangements – that is, arrangements that have been put into place in order to obtain a tax advantage without reflecting economic reality. It takes the form of a "de minimis" rule, allowing member states to apply stricter national rules as long as