European Parliament’s draft report to the revised Parent Subsidiary Directive


On 28 January 2014, the European Parliament provided its draft report and draft amendments to the European Commission’s proposal for revision of the Parent-Subsidiary Directive.

1. Background

On 25 November 2013, the European Commission has proposed certain amendments to the EU Parent-Subsidiary Directive in order to significantly reduce tax fraud/evasion and aggressive tax planning/base erosion and profit shifting (BEPS) in the European Union. In short, the main amendments in the proposal addressed (i) hybrid loans and (ii) introduced a general anti-abuse rule (GAAR) to be implemented into the Directive.

The European Parliament has now published its draft report and amendments to this proposal of the European Commission (as part of the legislative process).

2. European Parliament’s amendments

The European Parliament strongly supports the introduction of an obligatory GAAR. In addition, it also strengthened the requirements with regard to hybrid loans (subject-to-tax clause). In order to qualify for the exception of income at parent company level, the income should be taxed at 75% at subsidiary level.

Furthermore, in its draft report, the European Parliament extends the conditions to qualify for the status of parent company, i.e. maintain a minimum holding of 15% (currently 10%) for an uninterrupted period of at least two years (currently one year).

3. Observations

The European Parliament’s Economic Committee is currently discussing the changes (to be voted by the Committee on 18 March). Therefore, the proposed amendments are still draft and subject to the further legislative process (currently still in the consultation procedure). Therefore, it is uncertain whether the suggested amendments will make it in the final counsel directive (if any) but it does give flavour in which direction the European Parliament is willing to move with this.