EU PSD – Council adopts anti-abuse clause

Written by Philippe Vanclooster 29 January 2015


In a press release of 27 January 2015, the Council has disclosed its amendments to the EU Parent-Subsidiary Directive (PSD) (2011/96/EU).

Objective of the amendments

The Council amended the PSD, adding a binding anti-abuse clause to prevent tax avoidance and aggressive tax planning by corporate groups. The aim is to stop the PSD from being misused for tax avoidance and to achieve greater consistency in its application in different Member States. The anti-abuse clause will prevent Member States from granting the benefits of the Directive to arrangements that are not ‘genuine’, i.e. that have been put into place to obtain a tax advantage without reflecting economic reality.

The clause is formulated as a ‘de minimis’ rule, meaning that Member States can apply stricter national rules, as long as they meet minimum EU requirements.

History of the Parent-Subsidiary Directive

The PSD, adopted in November 2011, is intended to ensure that profits made by cross-border groups are not taxed twice. It requires Member States to exempt from tax, profits received by parent companies from their subsidiaries in other Member States.

In November 2013, the Commission proposed to amend the Directive with the two-fold objective of tackling hybrid loan mismatches and introducing a general anti-abuse rule. In May 2014, the Council decided to split the proposal and to address these two issues separately. In July 2014, as a first step, it adopted provisions to prevent corporate groups from using hybrid loan arrangements to benefit from double-non taxation under the Directive. Meanwhile work continued on the anti-abuse clause, and agreement was reached in December 2014.

Deadline for the Member States

Member States will have until 31 December 2015 to introduce an anti-abuse rule into national law. The same deadline applies for transposition of the July 2014 amendments to tackle hybrid loan mismatches.

Work in the OECD

The issue of corporate tax avoidance is a high political priority, both at EU level and internationally. The OECD work on base erosion and profit shifting (BEPS) has been endorsed as the way forward at recent G20 and G8 meetings.

In December 2014, the European Council highlighted ‘an urgent need to advance efforts in the fight against tax avoidance and aggressive tax planning, both at the global and EU levels’.

More information can be found in the text of the draft amending Directive on the anti-abuse clause by following the link.