EU CLOSES TAX LOOPHOLE CONCERNING HYBRID INSTRUMENTS
By Matt Watts
The EU has announced that it would change the
parent-subsidiary directive, to prevent groups benefiting from
double non-taxation in the case of intragroup cross-border hybrid
arrangements, where the receipt is by the parent company of the
group.
The EU's proposal is that the member state of the
parent company will be allowed to not tax profit distributions from
the subsidiary only to the extent that such distributions are not
tax deductible for the subsidiary. Member states have until 31
December 2015 to enact this into national law.
The parent-subsidiary directive is intended to ensure that
profits made by cross-border groups are not taxed twice. So that
such groups are thereby not put at a disadvantage compared to
domestic groups. It requires member states to exempt from taxation
profits received by parent companies from their subsidiaries in
other member states.
