Implementation Of The Parent-Subsidiary Directive

The conditions for implementation of the parent-subsidiary Directive of July 23, 1990 by the Member States of the European Union have recently been clarified by the European Court of Justice, in a decision dated October 17, 1996.

Since the entry into force of the parent-subsidiary Directive (January 1, 1992), an EU parent company holding 25% in the share capital of an EU subsidiary benefits from an exemption of withholding tax on the dividends distributed by the subsidiary.

However, the Member States have the possibility of not applying the Directive, where the shares in the EU subsidiary are not held at a level of 25% of the share capital during an uninterrupted period of at least two years.