EU Member States agree to amend the EU PSD to tackle hybrid loan arrangements


On 20 June 2014, the EU’s Council of Economic and Finance (ECOFIN) Ministers took place in Luxembourg. ECOFIN agreed amongst others on the amendments to the Parent-Subsidiary directive (PSD) and adopted conclusions on the report of the Code of Conduct Group on Business Taxation.

Proposed amendments on the Parent – Subsidiary directive

The ECOFIN agreed upon an amendment to EU tax rules aimed at preventing the double non-taxation of corporate groups deriving from hybrid loan arrangements. This will close a loophole that currently allows corporate groups to exploit mismatches between national tax rules so as to avoid paying taxes on some types of profits distributed within the group. The amendment to the PSD will prevent double non-taxation by providing that the member state of the parent company would only refrain from taxing profits from the subsidiary to the extent that such profits are not deductible by the latter.


Following the political agreement in ECOFIN, the hybrid loans part of the PSD will be adopted at a forthcoming Council session, after linguistic and legal finalisation of the text. Member States will have until 31 December 2015 to transpose it into national law.

More information can be found here.


Amongst others, ECOFIN also invited the Code of Conduct Group to assess or consider all patent boxes in the EU, including those already assessed or considered before, by the end of 2014, ensuring consistency with the principle of equal treatment, also against the background of international developments, including those in relation to the OECD BEPS initiative.

The complete press release from the EU council can be found here.